<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 26, 1998
REGISTRATION NO. 333-45619
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
BROADCOM CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
CALIFORNIA 3674 33-0480482
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF
INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>
16251 LAGUNA CANYON ROAD
IRVINE, CALIFORNIA 92618
(714) 450-8700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
HENRY T. NICHOLAS, III
CO-CHAIRMAN AND CHIEF EXECUTIVE OFFICER
BROADCOM CORPORATION
16251 LAGUNA CANYON ROAD
IRVINE, CALIFORNIA 92618
(714) 450-8700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
BRUCE R. HALLETT, ESQ. LARRY W. SONSINI, ESQ.
ELLEN S. BANCROFT, ESQ. JAMES N. STRAWBRIDGE, ESQ.
LEE J. LESLIE, ESQ. JOSE F. MACIAS, ESQ.
BROBECK PHLEGER & HARRISON LLP WILSON SONSINI GOODRICH & ROSATI
4675 MACARTHUR COURT, SUITE 1000 PROFESSIONAL CORPORATION
NEWPORT BEACH, CALIFORNIA 92660 650 PAGE MILL ROAD
(714) 752-7535 PALO ALTO, CALIFORNIA 94304-1050
(650) 493-9300
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
------------------------
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable in connection with the sale and
distribution of the securities being registered. All amounts are estimated
except the Securities and Exchange Commission and NASD registration fees. All of
the expenses below will be paid by the Company.
<TABLE>
<CAPTION>
ITEM
-------------------------------------------------------------------
<S> <C>
Registration fee................................................... $ 15,895
NASD filing fee.................................................... 5,888
Nasdaq National Market listing fee................................. *
Blue sky fees and expenses......................................... *
Printing and engraving expenses.................................... *
Legal fees and expenses............................................ *
Accounting fees and expenses....................................... *
Transfer Agent and Registrar fees.................................. *
Miscellaneous...................................................... *
-------
Total.................................................... $ *
=======
</TABLE>
- ------------
* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Articles of Incorporation limit the personal liability of its
directors for monetary damages to the fullest extent permitted by the California
General Corporation Law (the "California Law"). Under the California Law, a
director's liability to a company or its shareholders may not be limited (1) for
acts or omissions that involve intentional misconduct or a knowing and culpable
violation of law, (ii) for acts or omissions that a director believes to be
contrary to the best interest of the Company or its shareholders or that involve
the absence of good faith on the part of the director, (iii) for any transaction
from which a director derived an improper personal benefit, (iv) for acts or
omissions that show a reckless disregard for the director's duty to the Company
or its shareholders in circumstances in which the director was aware, or should
have been aware, in the ordinary course of performing a director's duties, of a
risk of a serious injury to the Company or its shareholders, (v) for acts or
omissions that constitute an unexcused pattern of inattention that amounts to an
abdication of the director's duty to the Company or its shareholders, (vi) under
Section 310 of the California Law concerning contacts or transactions between
the Company and a director, or (vii) under Section 316 of the California Law
concerning directors' liability for improper dividends, loans and guarantees.
The limitation of liability does not affect the availability of injunctions and
other equitable remedies available to the Company's shareholders for any
violation by a director of the director's fiduciary duty to the Company or its
shareholders.
The Company's Articles of Incorporation also include an authorization for
the Company to indemnify its "agents" (as defined in Section 317 of the
California Law), through bylaw provisions, by agreement or otherwise, to the
fullest extent permitted by law. Pursuant to this provision, the Company's
Bylaws provide for indemnification of the Company's directors, officers and
employees. In addition, the Company, at its discretion, may provide
indemnification to persons whom the Company is not obligated to indemnify. The
Bylaws also allow the Company to enter into indemnity agreements with individual
directors, officers, employees and other agents. These indemnity agreements have
been entered into with all directors and executive officers and provide the
maximum indemnification permitted by law. These agreements, together with the
Company's Bylaws and Articles of Incorporation, may require the Company, among
other things, to
II-1
<PAGE> 3
indemnify these directors or executive officers (other than for liability
resulting from willful misconduct of a culpable nature), to advance expenses to
them as they are incurred, provided that they undertake to repay the amount
advanced if it is ultimately determined by a court that they are not entitled to
indemnification, and to obtain directors' and officers' insurance if available
on reasonable terms. Section 317 of the California Law and the Company's Bylaws
make provision for the indemnification of officers, directors and other
corporate agents in terms sufficiently broad to indemnify such persons, under
certain circumstances, for liabilities (including reimbursement of expense
incurred) arising under the Securities Act.
The Company, with the approval of the Board of Directors, intends to obtain
directors' and officers' liability insurance prior to the effectiveness of this
offering.
There is no pending litigation or proceeding involving any director,
officer, employee or agent of the Company in which indemnification will be
required or permitted. Moreover, the Company is not aware of any threatened
litigation or proceeding that might result in a claim for such indemnification.
The Company believes that the foregoing indemnification provisions and
agreements are necessary to attract and retain qualified persons as directors
and executive officers.
The Underwriting Agreement (Exhibit 1.1 hereto) provides for
indemnification by the Underwriters of the Company and its officers and
directors, and by the Company of the Underwriters, for certain liabilities
arising under the Securities Act or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following is a summary of transactions by the Registrant since January
1, 1995 involving sales of the Registrant's securities that were not registered
under the Securities Act:
1. In March 1995, the Registrant issued and sold 500,000 shares of Series C
Preferred Stock to Scientific-Atlanta, Inc. at a price per share of $2.00. Each
share of Series C Preferred Stock will convert into three shares of Class B
Common Stock upon consummation of this offering.
2. In February 1996, the Registrant issued and sold an aggregate of 493,839
shares of Series D Preferred Stock to 22 accredited individual investors and
strategic partners at a price per share of $6.00. Each share of Series D
Preferred Stock will convert into three shares of Class B Common Stock upon
consummation of this offering.
3. In June 1997, the Registrant issued and sold 60,000 shares of Class B
Common Stock to the Regents of the University of New Mexico ("UNM") in
connection with a License Agreement between UNM and the Registrant. The shares
were issued as part of the Registrant's consideration to UNM in return for a
license grant.
4. In September 1997, the Registrant issued and sold 1,500,000 shares of
Series E Preferred Stock to General Instrument Corporation at a price per share
of $15.15. This transaction was undertaken in connection with a Development,
Supply and License Agreement between General Instrument and the Registrant. Each
share of Series E Preferred Stock will convert into 1.5 shares of Class B Common
Stock upon consummation of this offering.
5. In October 1997, the Registrant issued and sold 225,000 shares of Class
B Common Stock to Irell & Manella LLP at a price per share of $4.67, or an
aggregate purchase price of $1,050,000.
6. From time to time since the implementation of the 1994 Plan, the
Registrant issued nonqualified stock options to purchase Common Stock at
exercise prices ranging from $0.07 to $10.00 per share to eligible officers,
directors, consultants and employes of the Registrant as described in the
Prospectus. Such optionees did not pay any cash consideration for these options.
Such options did not involve a "sale" of securities; and, therefore,
registration was not required. During the period referred to above, the
Registrant issued 5,589,771 shares of Class B Common Stock upon the exercise of
options under the 1994 Plan.
The sale and issuance of securities set forth above were deemed to be
exempt from registration under the Securities Act by virtue of Section 4(2)
thereof or Rule 701 adopted thereunder. The recipients of the
II-2
<PAGE> 4
securities in each of the transactions set forth in above represented their
intention to acquire such securities for investment only and not with a view to
or for sale in connection with any distribution thereof, and appropriate legends
were affixed to the share certificates and instruments used in such
transactions. All recipients received adequate information about the Registrant
at the time of the acquisition of such securities or had access, through
employment or other relationships with the Registrant, to such information.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) The following Exhibits are attached hereto and incorporated herein by
reference.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- ------------------------------------------------------------------------------
<S> <C>
1.1* Form of Underwriting Agreement.
3.1* Amended and Restated Articles of Incorporation of the Registrant.
3.2* Bylaws of the Registrant.
4.1* Specimen certificate representing shares of Class A Common Stock of the
Registrant.
5.1* Form of Opinion of Brobeck Phleger & Harrison LLP.
10.1 Form of Indemnification Agreement for Directors of the Registrant.
10.2 Form of Indemnification Agreement for Officers of the Registrant.
10.3 1994 Amended and Restated Stock Option Plan, together with form of Stock
Option Agreement, form of Stock Purchase Agreement, form of promissory note
and form of stock pledge agreement.
10.4* 1998 Stock Incentive Plan, together with form of Stock Option Agreement and
form of Stock Issuance Agreement.
10.5 1998 Employee Stock Purchase Plan.
10.6 Loan and Security Agreement dated March 23, 1995 between the Registrant and
Silicon Valley Bank, as amended.
10.7 Standard Form Office Lease dated April 30, 1995 between the Registrant and
Laguna Canyon, Inc., as amended.
10.8+ Development, Supply and License Agreement dated September 29, 1997 between the
Registrant and General Instrument Corporation, formerly known as NextLevel
Systems, Inc.
10.9 Stock Purchase Agreement dated February 3, 1998 between the Registrant and
Cisco Systems, Inc.
10.10 Registration Rights Agreement dated February 26, 1996 among the Registrant and
certain of its shareholders, as amended.
11.1** Statement Regarding Computation of Earnings Per Share (contained in Note 1 of
Notes to Financial Statements).
23.1** Consent of Independent Auditors.
23.2* Consent of Brobeck Phleger & Harrison LLP (contained in Exhibit 5.1).
24.1** Power of Attorney (contained on signature page on page II-5).
27.1** Financial Data Schedule.
</TABLE>
- ------------
* To be filed by Amendment.
** Previously filed.
+ Registrant has sought confidential treatment pursuant to Rule 406 of portions
of the referenced exhibit.
II-3
<PAGE> 5
(b) FINANCIAL STATEMENT SCHEDULES
(1) Report of Independent Auditors on Financial Statement Schedule
(2) Schedule II--Valuation and qualifying accounts
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes to provide to the Underwriters at the
closing specified in the Underwriting Agreements certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit, or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus as filed as
part of this Registration Statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the Registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
part of this Registration Statement as of the time it was declared
effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Irvine,
State of California, on the 26th day of February, 1998.
BROADCOM CORPORATION
By: /s/ HENRY T. NICHOLAS
------------------------------------
Henry T. Nicholas, III
Co-Chairman, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to Registration Statement on Form S-1 has been signed by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ----------------------------- ------------------
<C> <C> <S>
/s/ HENRY T. NICHOLAS, III Co-Chairman, President and February 26, 1998
- --------------------------------------------- Chief Executive Officer
Henry T. Nicholas, III (principal executive officer)
/s/ HENRY SAMUELI Co-Chairman, Vice President February 26, 1998
- --------------------------------------------- of Engineering and
Henry Samueli Chief Technical Officer
/s/ WILLIAM J. RUEHLE Vice President, Chief February 26, 1998
- --------------------------------------------- Financial Officer and
William J. Ruehle Secretary
(principal financial and
accounting officer)
*/s/ ALAN E. ROSS Director February 26, 1998
- ---------------------------------------------
Alan E. Ross
*/s/ WERNER F. WOLFEN Director February 26, 1998
- ---------------------------------------------
Werner F. Wolfen
*/s/ MYRON S. EICHEN Director February 26, 1998
- ---------------------------------------------
Myron S. Eichen
</TABLE>
*By: /s/ HENRY T. NICHOLAS
-------------------------------
Henry T. Nicholas, III
Attorney-in-Fact
II-5
<PAGE> 7
REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE
Board of Directors
Broadcom Corporation
We have audited the financial statements of Broadcom Corporation as of
December 31, 1996 and 1997, and for each of the three years in the period ended
December 31, 1997, and have issued our report thereon dated January 16, 1998,
except for Notes 1 and 9, as to which the date is February 4, 1998 (included
elsewhere in this Registration Statement). Our audits also included the
financial statement schedule listed in Item 16(b) of this Registration
Statement. This schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Orange County, California
January 16, 1998, except for
Notes 1 and 9, as to which
the date is February 4, 1998
S-1
<PAGE> 8
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
BROADCOM CORPORATION
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING OF COSTS AND OTHER END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ---------------------------------------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995:
Deducted from asset accounts:
Allowance for doubtful accounts.... $ 50,000 $ 40,000 $ -- $ 50,000 $ 40,000
Reserve for excess and obsolete
inventory........................ -- 55,000 -- -- 55,000
------- --------- --- ------- ---------
Total......................... $ 50,000 $ 95,000 $ -- $ 50,000 $ 95,000
======= ========= === ======= =========
Year ended December 31, 1996:
Deducted from asset accounts:
Allowance for doubtful accounts.... $ 40,000 $ 84,000 $ -- $ 24,000 $ 100,000
Reserve for excess and obsolete
inventory........................ 55,000 1,055,000 -- 361,000 749,000
------- --------- --- ------- ---------
Total......................... $ 95,000 $1,139,000 $ -- $385,000 $ 849,000
======= ========= === ======= =========
Year ended December 31, 1997:
Deducted from asset accounts:
Allowance for doubtful accounts.... $100,000 $ -- $ -- $ -- $ 100,000
Reserve for excess and obsolete
inventory........................ 749,000 1,028,000 -- 91,000 1,686,000
------- --------- --- ------- ---------
Total......................... $849,000 $1,028,000 $ -- $ 91,000 $1,786,000
======= ========= === ======= =========
</TABLE>
S-2
<PAGE> 9
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NO. DESCRIPTION NO. PAGE
------- ------------------------------------------------------------- ----------------
<S> <C> <C>
1.1* Form of Underwriting Agreement...............................
3.1* Amended and Restated Articles of Incorporation of the
Registrant...................................................
3.2* Bylaws of the Registrant.....................................
4.1* Specimen certificate representing shares of Class A Common
Stock of the Registrant......................................
5.1* Form of Opinion of Brobeck Phleger & Harrison LLP............
10.1 Form of Indemnification Agreement for Directors of the
Registrant...................................................
10.2 Form of Indemnification Agreement for Officers of the
Registrant...................................................
10.3 1994 Amended and Restated Stock Option Plan, together with
form of Stock Option Agreement, form of Stock Purchase
Agreement, form of promissory note and form of stock pledge
agreement....................................................
10.4* 1998 Stock Incentive Plan, together with form of Stock Option
Agreement and form of Stock Issuance Agreement...............
10.5 1998 Employee Stock Purchase Plan............................
10.6 Loan and Security Agreement dated March 23, 1995 between the
Registrant and Silicon Valley Bank, as amended...............
10.7 Standard Form Office Lease dated April 30, 1995 between the
Registrant and Laguna Canyon, Inc., as amended...............
10.8+ Development, Supply and License Agreement dated September 29,
1997 between the Registrant and General Instrument
Corporation, formerly known as NextLevel Systems, Inc. ......
10.9 Stock Purchase Agreement dated February 3, 1998 between the
Registrant and Cisco Systems, Inc. ..........................
10.10 Registration Rights Agreement dated February 26, 1996 among
the Registrant and certain of its shareholders, as amended...
11.1** Statement Regarding Computation of Earnings Per Share
(contained in Note 1 of Notes to Financial Statements).......
23.1** Consent of Independent Auditors..............................
23.2* Consent of Brobeck Phleger & Harrison LLP (contained in
Exhibit 5.1).................................................
24.1** Power of Attorney (contained on signature page on page
II-5)........................................................
27.1** Financial Data Schedule......................................
</TABLE>
- ------------
* To be filed by Amendment.
** Previously filed.
+ Registrant has sought confidential treatment pursuant to Rule 406 of portions
of the referenced exhibit.
<PAGE> 1
EXHIBIT 10.1
INDEMNIFICATION AGREEMENT
THIS AGREEMENT (the "Agreement"), is made and entered into
this ___ day of February, 1998, between Broadcom Corporation, a California
corporation (the "Corporation"), and ____________________ ("Director").
WHEREAS, Director, a member of the Board of Directors of the
Corporation, performs a valuable service in such capacity for the Corporation;
WHEREAS, the Articles of Incorporation and Bylaws of the Corporation
authorize and permit contracts between the Corporation and a member of its
Board of Directors with respect to indemnification of such directors;
WHEREAS, in accordance with the authorization as provided by the
California General Corporation Law, as amended ("Code"), the Corporation may
purchase and maintain a policy or policies of Directors and Officers Liability
Insurance ("D & O Insurance"), covering certain liabilities which may be
incurred by Director in his or her performance as a director of the
Corporation; and
WHEREAS, as a result of developments affecting the terms, scope and
availability of D & O Insurance there exists general uncertainty as to the
extent of protection afforded members of the Board of Directors by such D & O
Insurance and by statutory and bylaw indemnification provisions.
NOW, THEREFORE, in consideration of Director's service as a
director, the parties hereto agree as follows:
1. Indemnity of Director. The Corporation hereby agrees to hold
harmless and indemnify Director to the fullest extent authorized by the
provisions of the Code, as it may be amended from time to time.
2. Additional Indemnity. Subject only to the limitations set
forth in Section 3 hereof, the Corporation hereby further agrees to hold
harmless and indemnify Director:
a. against any and all expenses (including attorneys' fees),
witness fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by Director in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of the Corporation) to
which Director is, was, or at any time becomes a party, or is threatened to be
made a party, by reason of the fact that Director is, was, or at any time
becomes a director, officer, employee or agent of the Corporation, or is or was
serving or at any time serves at the request of the Corporation as a
<PAGE> 2
director, officer, employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise; and
b. otherwise to the fullest extent as may be provided to
Director by the Corporation under the Articles of Incorporation of the
Corporation and the Code.
3. Limitations on Additional Indemnity.
a. No indemnity pursuant to Section 2 hereof shall be paid
by the Corporation for any of the following:
(i) except to the extent the aggregate of losses to be
indemnified thereunder exceeds the sum of such losses for which the Director is
indemnified pursuant to Section 1 hereof or pursuant to any D & O Insurance
purchased and maintained by the Corporation;
(ii) in respect to remuneration paid to Director if it
shall be determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(iii) on account of Director's acts or omissions that
involve intentional misconduct or a knowing and culpable violation of law;
(iv) on account of any action, claim or proceeding
(other than a proceeding referred to in Section 8(b) hereof) initiated by
Director unless such action, claim or proceeding was authorized in the specific
case by action of the Board of Directors;
(v) on account of Director's conduct which is the
subject of an action, suit or proceeding described in Section 7(c)(ii) hereof;
or
(vi) if a final decision by a Court having
jurisdiction in the matter shall determine that such indemnification is not
lawful (and, in this respect, both the Corporation and Director have been
advised that the Securities and Exchange Commission believes that
indemnification for liabilities arising under the federal securities laws is
against public policy and is, therefore, unenforceable and that claims for
indemnification should be submitted to appropriate courts for adjudication).
b. In addition to those limitations set forth above in
paragraph (a) of this Section 3, no indemnity pursuant to Section 2 hereof in an
action by or in the right of the Corporation shall be paid by the Corporation
for any of the following:
2
<PAGE> 3
(i) on account of acts or omissions that Director
believes to be contrary to the best interests of the Corporation or its
shareholders or that involve the absence of good faith on the part of Director;
(ii) with respect to any transaction from which
Director derived an improper personal benefit;
(iii) on account of acts or omissions that show a
reckless disregard for Director's duty to the Corporation or its shareholders in
circumstances in which Director was aware, or should have been aware, in the
ordinary course of performing a director's duties, of a risk of serious injury
to the Corporation or its shareholders;
(iv) on account of acts or omissions that constitute
an unexcused pattern of inattention that amounts to an abdication of Director's
duty to the corporation or its shareholders;
(v) to the extent prohibited by Section 310 of the
California Corporations Code, "Contracts In Which Director Has Material
Financial Interest";
(vi) to the extent prohibited by Section 316 of the
California Corporations Code, "Corporate Actions Subjecting Directors To Joint
And Several Liability" (for prohibited distributions, loans and guarantees);
(vii) in respect of any claim, issue or matter as to
which Director shall have been adjudged to be liable to the Corporation in the
performance of Director's duty to the Corporation and its shareholders, unless
and only to the extent that the court in which such proceeding is or was pending
shall determine upon application that, in view of all the circumstances of the
case, Director is fairly and reasonably entitled to indemnity for expenses and
then only to the extent that the court shall determine;
(viii) of amounts paid in settling or otherwise
disposing of a pending action without court approval; or
(ix) of expenses incurred in defending a pending
action which is settled or otherwise disposed of without court approval.
4. Contribution. If the indemnification provided in Sections 1
and 2 hereof is unavailable by reason of a Court decision described in
subsection 3(a)(vi) hereof based on grounds other than any of those set forth in
subsections 3(a)(ii) through (v) hereof or in subsections 3(b)(i) through (vi)
hereof, then in respect of any threatened, pending or completed action, suit or
3
<PAGE> 4
proceeding in which the Corporation is jointly liable with Director (or would
be if joined in such action, suit or proceeding), the Corporation shall
contribute to the amount of expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred and paid
or payable by Director in such proportion as is appropriate to reflect (i) the
relative benefits received by the Corporation on the one hand and Director on
the other hand from the transaction from which such action, suit or proceeding
arose, and (ii) the relative fault of the Corporation on the one hand and of
Director on the other in connection with the events which resulted in such
expenses, judgments, fines or settlement amounts, as well as any other relevant
equitable considerations. The relative fault of the Corporation on the one
hand and of Director on the other shall be determined by reference to, among
other things, the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent the circumstances resulting in such
expenses, judgments, fines or settlement amounts. The Corporation agrees that
it would not be just and equitable if contribution pursuant to this Section 4
were determined by pro rata allocation or any other method of allocation which
does not take account of the foregoing equitable considerations.
5. Continuation of Obligations. All agreements and obligations
of the Corporation contained herein shall continue during the period Director is
a director, officer, employee or agent of the Corporation (or is or was serving
at the request of the Corporation as a director, officer employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise) and shall continue thereafter so long as Director shall be
subject to any possible claim or threatened, pending or completed action, suit
or proceeding, whether civil, criminal or investigative, by reason of the fact
that Director was a director of the Corporation or serving in any other capacity
referred to herein.
6. Notification and Defense of Claim. Not later than thirty
(30) days after receipt by Director of notice of the commencement of any action,
suit or proceeding, Director will, if a claim in respect thereof is to be made
against the Corporation under this Agreement, notify the Corporation of the
commencement thereof; but the omission so to notify the Corporation will not
relieve it from any liability which it may have to Director otherwise than under
this Agreement. With respect to any such action, suit or proceeding as to which
Director notifies the Corporation of the commencement thereof:
a. the Corporation will be entitled to participate therein
at its own expense;
b. except as otherwise provided below, to the extent that it
may wish, the Corporation jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Director. After notice from the Corporation to Director of its
election so as to assume the defense thereof, the Corporation will not be liable
to Director under this Agreement for any legal or other expenses subsequently
incurred by
4
<PAGE> 5
Director in connection with the defense thereof other than reasonable costs of
investigation or as otherwise provided below. Director shall have the right to
employ its counsel in such action, suit or proceeding but the fees and expenses
of such counsel incurred after notice from the Corporation of its assumption of
the defense thereof shall be at the expense of Director unless (i) the
employment of counsel by Director has been authorized by the Corporation, (ii)
Director shall have reasonably concluded that there may be a conflict of
interest between the Corporation and Director in the conduct of the defense of
such action or (iii) the Corporation shall not in fact have employed counsel to
assume the defense of such action, in each of which cases the fees and expenses
of Director's separate counsel shall be at the expense of the Corporation. The
Corporation shall not be entitled to assume the defense of any action, suit or
proceeding brought by or on behalf of the Corporation or as to which Director
shall have made the conclusion provided for in (ii) above; and
c. the Corporation shall not be liable to indemnify Director
under this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Corporation shall be permitted to
settle any action except that it shall not settle any action or claim in any
manner which would impose any penalty or limitation on Director without
Director's written consent. Neither the Corporation nor Director will
unreasonably withhold its consent to any proposed settlement.
7. Advancement and Repayment of Expenses.
a. In the event that Director employs his own counsel
pursuant to Section 6(b)(i) through (iii) above, the Corporation shall advance
to Director, prior to any final disposition of any threatened or pending action,
suit or proceeding, whether civil, criminal, administrative or investigative,
any and all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding within ten (10)
days after receiving copies of invoices presented to Director for such expenses;
and
b. Director agrees that Director will reimburse the
Corporation for all reasonable expenses paid by the Corporation in defending any
civil or criminal action, suit or proceeding against Director in the event and
only to the extent it shall be ultimately determined by a final judicial
decision (from which there is no right of appeal) that Director is not entitled,
under applicable law, the Bylaws, this Agreement or otherwise, to be indemnified
by the Corporation for such expenses.
c. Notwithstanding the foregoing, the Corporation shall not
be required to advance such expenses to Director if Director (i) commences any
action, suit or proceeding as a plaintiff unless such advance is specifically
approved by a majority of the Board of Directors or (ii) is a party to an
action, suit or proceeding brought by the Corporation and approved by a majority
of the Board which alleges willful misappropriation of corporate assets by
Director, disclosure of
5
<PAGE> 6
confidential information in violation of Director's fiduciary or contractual
obligations to the Corporation, or any other willful and deliberate breach in
bad faith of Director's duty to the Corporation or its shareholders.
8. Enforcement. In the event Director is required to bring any
action to enforce rights or to collect moneys due under this Agreement and is
successful in such action, the Corporation shall reimburse Director for all of
Director's reasonable fees and expenses in bringing and pursuing such action.
9. Subrogation. In the event of payment under this Agreement,
the Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Director, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
10. Non-Exclusivity of Rights. The rights conferred on Director
by this Agreement shall not be exclusive of any other right which Director may
have or hereafter acquire under any statute, provision of the Corporation's
Certificate of Incorporation or Bylaws, agreement, vote of stockholders or
directors, or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office.
11. Survival of Rights. The rights conferred on Director by
this Agreement shall continue after Director has ceased to be a director,
officer, employee or other agent of the Corporation and shall inure to the
benefit of Director's heirs, executors and administrators.
12. Severability. Each of the provisions of this Agreement is
a separate and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid or unenforceable for any reason,
such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof.
13. Governing Law. This Agreement shall be interpreted and
enforced in accordance with the laws of the State of California.
14. Binding Effect. This Agreement shall be binding upon
Director and upon the Corporation, its successors and assigns, and shall inure
to the benefit of Director, his heirs, personal representatives and assigns and
to the benefit of the Corporation, its successors and assigns.
15. Amendment and Termination. No amendment, modification,
termination or cancellation of this Agreement shall be effective unless in
writing signed by both parties hereto.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on and as of the day and year first above written.
BROADCOM CORPORATION
By
------------------------------------
Henry T. Nicholas
President and Chief Executive Officer
DIRECTOR
---------------------------------------
7
<PAGE> 1
EXHIBIT 10.2
INDEMNIFICATION AGREEMENT
THIS AGREEMENT (the "Agreement"), is made and entered into
this ___ day of February, 1998, between Broadcom Corporation, a California
corporation (the "Corporation"), and ____________________ ("Officer").
WHEREAS, Officer, an officer of the Corporation, performs a
valuable service in such capacity for the Corporation;
WHEREAS, the Articles of Incorporation and Bylaws of the
Corporation authorize and permit contracts between the Corporation and an
officer of its Board of Directors with respect to indemnification of such
officers;
WHEREAS, in accordance with the authorization as provided by
the California General Corporation Law, as amended ("Code"), the Corporation
may purchase and maintain a policy or policies of Directors and Officers
Liability Insurance ("D & O Insurance"), covering certain liabilities which may
be incurred by Officer in his or her performance as an officer of the
Corporation; and
WHEREAS, as a result of developments affecting the terms,
scope and availability of D & O Insurance there exists general uncertainty as
to the extent of protection afforded members of the Board of Directors by such
D & O Insurance and by statutory and bylaw indemnification provisions.
NOW, THEREFORE, in consideration of Officer's service as an
officer, the parties hereto agree as follows:
1. Indemnity of Officer. The Corporation hereby agrees to hold
harmless and indemnify Officer to the fullest extent authorized by the
provisions of the Code, as it may be amended from time to time.
2. Additional Indemnity. Subject only to the limitations set
forth in Section 3 hereof, the Corporation hereby further agrees to hold
harmless and indemnify Officer:
a. against any and all expenses (including attorneys' fees),
witness fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by Officer in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (including an action by or in the right of the Corporation) to
which Officer is, was, or at any time becomes a party, or is threatened to be
made a party, by reason of the fact that Officer is, was, or at any time becomes
an officer, director, employee or agent
<PAGE> 2
of the Corporation, or is or was serving or at any time serves at the request
of the Corporation as an officer, director, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise; and
b. otherwise to the fullest extent as may be provided to
Officer by the Corporation under the Articles of Incorporation of the
Corporation and the Code.
3. Limitations on Additional Indemnity.
a. No indemnity pursuant to Section 2 hereof shall be paid
by the Corporation for any of the following:
(i) except to the extent the aggregate of losses to be
indemnified thereunder exceeds the sum of such losses for which the Officer is
indemnified pursuant to Section 1 hereof or pursuant to any D & O Insurance
purchased and maintained by the Corporation;
(ii) in respect to remuneration paid to Officer if it
shall be determined by a final judgment or other final adjudication that such
remuneration was in violation of law;
(iii) on account of Officer's acts or omissions that
involve intentional misconduct or a knowing and culpable violation of law;
(iv) on account of any action, claim or proceeding
(other than a proceeding referred to in Section 8(b) hereof) initiated by
Officer unless such action, claim or proceeding was authorized in the specific
case by action of the Board of Directors;
(v) on account of Officer's conduct which is the
subject of an action, suit or proceeding described in Section 7(c)(ii) hereof;
or
(vi) if a final decision by a Court having
jurisdiction in the matter shall determine that such indemnification is not
lawful (and, in this respect, both the Corporation and Officer have been advised
that the Securities and Exchange Commission believes that indemnification for
liabilities arising under the federal securities laws is against public policy
and is, therefore, unenforceable and that claims for indemnification should be
submitted to appropriate courts for adjudication).
2
<PAGE> 3
b. In addition to those limitations set forth above in
paragraph (a) of this Section 3, no indemnity pursuant to Section 2 hereof in an
action by or in the right of the Corporation shall be paid by the Corporation
for any of the following:
(i) on account of acts or omissions that Officer
believes to be contrary to the best interests of the Corporation or its
shareholders or that involve the absence of good faith on the part of Officer;
(ii) with respect to any transaction from which
Officer derived an improper personal benefit;
(iii) on account of acts or omissions that show a
reckless disregard for Officer's duty to the Corporation or its shareholders in
circumstances in which Officer was aware, or should have been aware, in the
ordinary course of performing an officer's duties, of a risk of serious injury
to the Corporation or its shareholders;
(iv) on account of acts or omissions that constitute
an unexcused pattern of inattention that amounts to an abdication of Officer's
duty to the corporation or its shareholders;
(v) in respect of any claim, issue or matter as to
which Officer shall have been adjudged to be liable to the Corporation in the
performance of Officer's duty to the Corporation and its shareholders, unless
and only to the extent that the court in which such proceeding is or was pending
shall determine upon application that, in view of all the circumstances of the
case, Officer is fairly and reasonably entitled to indemnity for expenses and
then only to the extent that the court shall determine;
(vi) of amounts paid in settling or otherwise
disposing of a pending action without court approval; or
(vii) of expenses incurred in defending a pending
action which is settled or otherwise disposed of without court approval.
4. Contribution. If the indemnification provided in Sections 1
and 2 hereof is unavailable by reason of a Court decision described in
subsection 3(a)(vi) hereof based on grounds other than any of those set forth in
subsections 3(a)(ii) through (v) hereof or in subsections 3(b)(i) through (iv)
hereof, then in respect of any threatened, pending or completed action, suit or
proceeding in which the Corporation is jointly liable with Officer (or would be
if joined in such action, suit or proceeding), the Corporation shall contribute
to the amount of expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred
3
<PAGE> 4
and paid or payable by Officer in such proportion as is appropriate to reflect
(i) the relative benefits received by the Corporation on the one hand and
Officer on the other hand from the transaction from which such action, suit or
proceeding arose, and (ii) the relative fault of the Corporation on the one
hand and of Officer on the other in connection with the events which resulted
in such expenses, judgments, fines or settlement amounts, as well as any other
relevant equitable considerations. The relative fault of the Corporation on
the one hand and of Officer on the other shall be determined by reference to,
among other things, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent the circumstances resulting
in such expenses, judgments, fines or settlement amounts. The Corporation
agrees that it would not be just and equitable if contribution pursuant to this
Section 4 were determined by pro rata allocation or any other method of
allocation which does not take account of the foregoing equitable
considerations.
5. Continuation of Obligations. All agreements and obligations
of the Corporation contained herein shall continue during the period Officer is
an officer, director, employee or agent of the Corporation (or is or was serving
at the request of the Corporation as an officer, director, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise) and shall continue thereafter so long as Officer shall be
subject to any possible claim or threatened, pending or completed action, suit
or proceeding, whether civil, criminal or investigative, by reason of the fact
that Officer was an officer of the Corporation or serving in any other capacity
referred to herein.
6. Notification and Defense of Claim. Not later than thirty
(30) days after receipt by Officer of notice of the commencement of any action,
suit or proceeding, Officer will, if a claim in respect thereof is to be made
against the Corporation under this Agreement, notify the Corporation of the
commencement thereof; but the omission so to notify the Corporation will not
relieve it from any liability which it may have to Officer otherwise than under
this Agreement. With respect to any such action, suit or proceeding as to which
Officer notifies the Corporation of the commencement thereof:
a. the Corporation will be entitled to participate therein
at its own expense;
b. except as otherwise provided below, to the extent that it
may wish, the Corporation jointly with any other indemnifying party similarly
notified will be entitled to assume the defense thereof, with counsel reasonably
satisfactory to Officer. After notice from the Corporation to Officer of its
election so as to assume the defense thereof, the Corporation will not be liable
to Officer under this Agreement for any legal or other expenses subsequently
incurred by Officer in connection with the defense thereof other than reasonable
costs of investigation or as otherwise provided below. Officer shall have the
right to employ its counsel in such action, suit or proceeding but the fees and
expenses of such counsel incurred after notice from the Corporation of
4
<PAGE> 5
its assumption of the defense thereof shall be at the expense of Officer unless
(i) the employment of counsel by Officer has been authorized by the
Corporation, (ii) Officer shall have reasonably concluded that there may be a
conflict of interest between the Corporation and Officer in the conduct of the
defense of such action or (iii) the Corporation shall not in fact have employed
counsel to assume the defense of such action, in each of which cases the fees
and expenses of Officer's separate counsel shall be at the expense of the
Corporation. The Corporation shall not be entitled to assume the defense of
any action, suit or proceeding brought by or on behalf of the Corporation or as
to which Officer shall have made the conclusion provided for in (ii) above; and
c. the Corporation shall not be liable to indemnify Officer
under this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Corporation shall be permitted to
settle any action except that it shall not settle any action or claim in any
manner which would impose any penalty or limitation on Officer without Officer's
written consent. Neither the Corporation nor Officer will unreasonably withhold
its consent to any proposed settlement.
7. Advancement and Repayment of Expenses.
a. In the event that Officer employs his own counsel
pursuant to Section 6(b)(i) through (iii) above, the Corporation shall advance
to Officer, prior to any final disposition of any threatened or pending action,
suit or proceeding, whether civil, criminal, administrative or investigative,
any and all reasonable expenses (including legal fees and expenses) incurred in
investigating or defending any such action, suit or proceeding within ten (10)
days after receiving copies of invoices presented to Officer for such expenses;
and
b. Officer agrees that Officer will reimburse the
Corporation for all reasonable expenses paid by the Corporation in defending any
civil or criminal action, suit or proceeding against Officer in the event and
only to the extent it shall be ultimately determined by a final judicial
decision (from which there is no right of appeal) that Officer is not entitled,
under applicable law, the Bylaws, this Agreement or otherwise, to be indemnified
by the Corporation for such expenses.
c. Notwithstanding the foregoing, the Corporation shall not
be required to advance such expenses to Officer if Officer (i) commences any
action, suit or proceeding as a plaintiff unless such advance is specifically
approved by a majority of the Board of Directors or (ii) is a party to an
action, suit or proceeding brought by the Corporation and approved by a majority
of the Board which alleges willful misappropriation of corporate assets by
Officer, disclosure of confidential information in violation of Officer's
fiduciary or contractual obligations to the Corporation, or any other willful
and deliberate breach in bad faith of Officer's duty to the Corporation or its
shareholders.
5
<PAGE> 6
8. Enforcement. In the event Officer is required to bring any
action to enforce rights or to collect moneys due under this Agreement and is
successful in such action, the Corporation shall reimburse Officer for all of
Officer's reasonable fees and expenses in bringing and pursuing such action.
9. Subrogation. In the event of payment under this Agreement,
the Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Officer, who shall execute all documents required and
shall do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
10. Non-Exclusivity of Rights. The rights conferred on Officer
by this Agreement shall not be exclusive of any other right which Officer may
have or hereafter acquire under any statute, provision of the Corporation's
Certificate of Incorporation or Bylaws, agreement, vote of stockholders or
Officers, or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office.
11. Survival of Rights. The rights conferred on Officer by this
Agreement shall continue after Officer has ceased to be an officer, director,
employee or other agent of the Corporation and shall inure to the benefit of
Officer's heirs, executors and administrators.
12. Severability. Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid or unenforceable for any reason,
such invalidity or unenforceability shall not affect the validity or
enforceability of the other provisions hereof.
13. Governing Law. This Agreement shall be interpreted and
enforced in accordance with the laws of the State of California.
14. Binding Effect. This Agreement shall be binding upon
Officer and upon the Corporation, its successors and assigns, and shall inure to
the benefit of Officer, his heirs, personal representatives and assigns and to
the benefit of the Corporation, its successors and assigns.
15. Amendment and Termination. No amendment, modification,
termination or cancellation of this Agreement shall be effective unless in
writing signed by both parties hereto.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on and as of the day and year first above written.
BROADCOM CORPORATION
By
-------------------------------------
Henry T. Nicholas
President and Chief Executive Officer
OFFICER
----------------------------------------
7
<PAGE> 1
EXHIBIT 10.3
BROADCOM CORPORATION
AMENDED AND RESTATED 1994 STOCK OPTION PLAN
I. PURPOSES OF THE PLAN
This Amended and Restated 1994 Stock Option Plan is intended
to promote the interests of Broadcom Corporation, a California corporation, by
providing a method whereby eligible individuals who provide valuable services
to the Corporation (or any Parent or Subsidiary) may be offered incentives and
rewards which will encourage them to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation and continue
to render services to the Corporation (or any Parent or Subsidiary).
II. DEFINITIONS
For the purposes of this Plan, the following definitions shall
be in effect:
A. BOARD shall mean the Corporation's Board of
Directors.
B. CODE shall mean the Internal Revenue Code of 1986, as
amended.
C. COMMITTEE shall mean a committee of two (2) or more
Board members appointed by the Board to exercise one or more administrative
functions under the Plan.
D. COMMON STOCK shall mean the Corporation's common
stock.
E. CORPORATE TRANSACTION shall mean either of the
following shareholder-approved transactions to which the Corporation is a
party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to
a person or persons different from the persons holding those
securities immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of
all or substantially all of the Corporation's assets in complete
liquidation or dissolution of the Corporation.
F. CORPORATION shall mean Broadcom Corporation, a
California corporation.
<PAGE> 2
G. DISABILITY shall mean the inability of an individual
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment and shall be determined by the Plan
Administrator on the basis of such medical evidence as the Plan Administrator
deems warranted under the circumstances. Disability shall be deemed to
constitute PERMANENT DISABILITY in the event that such Disability is expected
to result in death or has lasted or can be expected to last for a continuous
period of not less than twelve (12) months.
H. EMPLOYEE shall mean an individual who is in the
employ of the Corporation or any Parent or Subsidiary, subject to the control
and direction of the employer entity as to both the work to be performed and
the manner and method of performance.
I. EXCHANGE ACT shall mean the Securities Exchange Act
of 1934, as amended.
J. EXERCISE DATE shall mean the date on which the
Corporation shall have received written notice of the option exercise.
K. FAIR MARKET VALUE per share of Common Stock on any
relevant date under the Plan shall be the value determined in accordance with
the following provisions:
(i) If the Common Stock is not at the time listed
or admitted to trading on any Stock Exchange but is traded on the
Nasdaq National Market, the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
such price is reported by the National Association of Securities
Dealers through the Nasdaq National Market or any successor system.
If there is no closing selling price for the Common Stock on the date
in question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed or
admitted to trading on any Stock Exchange, then the Fair Market Value
shall be the closing selling price per share of Common Stock on the
date in question on the Stock Exchange determined by the Plan
Administrator to be the primary market for the Common Stock, as such
price is officially quoted in the composite tape of transactions on
such exchange. If there is no closing selling price for the Common
Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such
quotation exists.
2.
<PAGE> 3
(iii) If the Common Stock is at the time neither
listed nor admitted to trading on any Stock Exchange nor traded on
the Nasdaq National Market, then such Fair Market Value shall be
determined by the Plan Administrator after taking into account such
factors as the Plan Administrator shall deem appropriate.
L. INCENTIVE OPTION shall mean a stock option which
satisfies the requirements of Code Section 422.
M. NON-STATUTORY OPTION shall mean a stock option not
intended to meet the requirements of Code Section 422.
N. PARENT shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations ending with the Corporation,
provided each corporation in the unbroken chain (other than the Corporation)
owns, at the time of the determination, stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
O. PLAN shall mean the Corporation's Amended and
Restated 1994 Stock Option Plan, as set forth in this document.
P. PLAN ADMINISTRATOR shall mean either the Board or the
Committee, to the extent the Committee is at the time responsible for the
administration of the Plan in accordance with Article III.
Q. SERVICE shall mean the provision of services to the
Corporation or any Parent or Subsidiary by an individual in the capacity of an
Employee, a non-employee member of the board of directors or a consultant.
R. STOCK EXCHANGE shall mean either the American Stock
Exchange or the New York Stock Exchange.
S. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each such corporation (other than the last corporation)
in the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
T. 10% SHAREHOLDER shall mean the owner of stock (as
determined under Code Section 424(d)) possessing ten percent (10%) or more of
the total combined voting power of all classes of stock of the Corporation or
any Parent or Subsidiary.
3.
<PAGE> 4
III. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by the Board.
However, any or all administrative functions otherwise exercisable by the Board
may be delegated to the Committee. Members of the Committee shall serve for
such period of time as the Board may determine and shall be subject to removal
by the Board at any time. The Board may also at any time terminate the
functions of the Committee and reassume all powers and authority previously
delegated to the Committee.
B. The Plan Administrator shall have full power and
authority (subject to the provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for proper administration of the Plan
and to make such determinations under, and issue such interpretations of, the
Plan and any outstanding options as it may deem necessary or advisable.
Decisions of the Plan Administrator shall be final and binding on all parties
who have an interest in the Plan or any outstanding option.
IV. ELIGIBILITY FOR OPTION GRANTS
A. The persons eligible to receive option grants under
the Plan are as follows:
(i) Employees,
(ii) non-employee members of the Board or the
non-employee members of the board of directors of any Parent or
Subsidiary, and
(iii) consultants who provide valuable services to
the Corporation (or any Parent or Subsidiary).
B. The Plan Administrator shall have full authority to
determine which eligible individuals are to receive option grants under the
Plan, the number of shares to be covered by each such grant, the status of the
granted option as either an Incentive Option or a Non- Statutory Option, the
time or times at which each option is to become exercisable, the vesting
schedule (if any) applicable to the option shares and the maximum term for
which the option is to remain outstanding.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
the Corporation's authorized but unissued or reacquired Common Stock. The
maximum number of shares which may be issued over the term of the Plan shall
not exceed thirteen million (13,000,000) shares, subject to adjustment from
time to time in accordance with the provisions of this Article V.
4.
<PAGE> 5
B. Shares subject to outstanding options shall be
available for subsequent option grants under the Plan to the extent (i) the
options expire or terminate for any reason prior to exercise in full or (ii)
the options are cancelled in accordance with the cancellation- regrant
provisions of Article IX of the Plan. All shares issued under the Plan,
whether or not those shares are subsequently repurchased by the Corporation
pursuant to its repurchase rights under the Plan, shall reduce on a
share-for-share basis the number of shares of Common Stock available for
subsequent option grants.
C. In the event any change is made to the Common Stock
issuable under the Plan by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration, appropriate adjustments shall be made to (i) the
maximum number and/or class of securities issuable under the Plan and (ii) the
number and/or class of securities and the exercise price per share in effect
under each outstanding option in order to prevent the dilution or enlargement
of benefits thereunder. The adjustments determined by the Plan Administrator
shall be final, binding and conclusive. In no event shall any such adjustments
be made in connection with the conversion of one or more outstanding shares of
the Corporation's preferred stock into shares of the Common Stock.
VI. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Plan shall be authorized by
action of the Plan Administrator and may, at the Plan Administrator's
discretion, be either Incentive Options or Non-Statutory Options. Each granted
option shall be evidenced by one or more instruments in the form approved by
the Plan Administrator, provided, however, that each such instrument shall
comply with the terms and conditions specified below. Each instrument
evidencing an Incentive Option shall, in addition, be subject to the applicable
provisions of Article VII.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed
by the Plan Administrator. In no event, however, shall the exercise price per
share be less than eighty-five percent (85%) of the Fair Market Value per share
of Common Stock on the date of the option grant.
2. If the individual to whom the option is
granted is a 10% Shareholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the grant date.
3. The exercise price shall become immediately
due upon exercise of the option and shall, subject to the provisions of Article
X and the agreement evidencing the grant, be payable in cash or check made
payable to the Corporation. Should the Corporation's outstanding
5.
<PAGE> 6
Common Stock be registered under Section 12(g) of the Exchange Act at the time
the option is exercised, then the exercise price may also be paid as follows:
(i) in shares of Common Stock held by the
optionee for the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and valued at
Fair Market Value on the Exercise Date, or
(ii) to the extent exercised for vested shares,
through a special sale and remittance procedure pursuant to which the
optionee shall concurrently provide irrevocable written instructions
(a) to a Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the Corporation,
out of the sale proceeds available on the settlement date, sufficient
funds to cover the aggregate exercise price payable for the purchased
shares plus all applicable Federal, state and local income and
employment taxes required to be withheld by the Corporation by reason
of such purchase and (b) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm
in order to complete the sale transaction.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made
on the Exercise Date.
B. TERM AND EXERCISE OF OPTIONS. Each option granted
under the Plan shall be exercisable at such time or times, during such period
and for such number of shares as shall be determined by the Plan Administrator
and set forth in the stock option agreement. However, no option shall have a
term in excess of ten (10) years measured from the grant date. The option
shall be exercisable during the optionee's lifetime only by the optionee and
shall not be assignable or transferable other than by will or by the laws of
descent and distribution following the optionee's death.
C. EFFECT OF TERMINATION OF SERVICE.
1. Except to the extent otherwise provided
pursuant to subsection C.2 below, the following provisions shall govern the
exercise period applicable to any options held by the optionee at the time of
cessation of Service or death:
(i) Should the optionee cease to remain in
Service for any reason other than death or Disability, then the
period during which each outstanding option held by such optionee is
to remain exercisable shall be limited to the three (3)-month period
following the date of such cessation of Service.
6.
<PAGE> 7
(ii) Should such Service terminate by reason of
Disability, then the period during which each outstanding option held
by the optionee is to remain exercisable shall be limited to the six
(6)-month period following the date of such cessation of Service.
However, should such Disability be deemed to constitute Permanent
Disability, then the period during which each outstanding option held
by the optionee is to remain exercisable shall be extended by an
additional six (6) months so that the exercise period shall be
limited to the twelve (12)-month period following the date of the
optionee's cessation of Service by reason of such Permanent
Disability.
(iii) Should the optionee die while holding one or
more outstanding options, then the period during which each such
option is to remain exercisable shall be limited to the twelve
(12)-month period following the date of the optionee's death. During
such limited period, the option may be exercised by the personal
representative of the optionee's estate or by the person or persons
to whom the option is transferred pursuant to the optionee's will or
in accordance with the laws of descent and distribution.
(iv) Under no circumstances, however, shall any
such option be exercisable after the specified expiration date of the
option term.
(v) During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more
than the number of vested shares for which the option is exercisable
on the date of the optionee's cessation of Service. Upon the
expiration of the applicable exercise period or (if earlier) upon the
expiration of the option term, the option shall terminate and cease
to be exercisable for any vested shares for which the option has not
been exercised. However, the option shall, immediately upon the
optionee's cessation of Service, terminate and cease to be
outstanding with respect to any option shares for which the option is
not at that time exercisable or in which the optionee is not
otherwise at that time vested.
2. The Plan Administrator shall have complete
discretion, exercisable either at the time the option is granted or at any time
while the option remains outstanding,
- to extend the period of time for which the
option is to remain exercisable following Optionee's cessation of
Service or death from the limited period in effect under subsection
C.1 of this Article VI to such greater period of time as the Plan
Administrator shall deem appropriate; provided, that in no event
shall such option be exercisable after the specified expiration date
of the option term; and/or
7.
<PAGE> 8
- to permit one or more options held by
Optionee under this Article Two to be exercised, during the limited
post-Service exercise period applicable under this paragraph C., not
only with respect to the number of vested shares of Common Stock for
which each such option is exercisable at the time of Optionee's
cessation of Service but also with respect to one or more subsequent
installments of vested shares for which the option would otherwise
have become exercisable had such cessation of Service not occurred.
D. SHAREHOLDER RIGHTS. An optionee shall have no
shareholder rights with respect to the shares subject to the option until such
individual shall have exercised the option and paid the exercise price.
E. UNVESTED SHARES. The Plan Administrator shall have
the discretion to authorize the issuance of unvested shares of Common Stock
under the Plan. Should the optionee cease Service while holding such unvested
shares, the Corporation shall have the right to repurchase, at the exercise
price paid per share, all or (at the discretion of the Corporation and with the
consent of the optionee) any of those unvested shares. The terms and
conditions upon which such repurchase right shall be exercisable (including the
period and procedure for exercise and the appropriate vesting schedule for the
purchased shares) shall be established by the Plan Administrator and set forth
in the agreement evidencing such repurchase right. In no event, however, may
the Plan Administrator impose a vesting schedule upon any option granted under
the Plan or any shares of Common Stock subject to the option which is more
restrictive than twenty percent (20%) per year vesting, beginning one (1) year
after the grant date. All outstanding repurchase rights under the Plan shall
terminate automatically upon the occurrence of any Corporate Transaction,
except to the extent the repurchase rights are expressly assigned to the
successor corporation (or parent thereof) in connection with the Corporate
Transaction.
F. FIRST REFUSAL RIGHTS. Until such time as the
Corporation's outstanding shares of Common Stock are first registered under
Section 12(g) of the Exchange Act, the Corporation shall have the right of
first refusal with respect to any proposed sale or other disposition by the
optionee (or any successor in interest by reason of purchase, gift or other
transfer) of any shares of Common Stock issued under the Plan. Such right of
first refusal shall be exercisable in accordance with the terms and conditions
established by the Plan Administrator and set forth in the agreement evidencing
such right.
VII. INCENTIVE OPTIONS
The terms and conditions specified below shall be applicable
to all Incentive Options granted under the Plan. Except as modified by the
provisions of this Article VII, all the provisions of the Plan shall be
applicable to Incentive Options. Incentive Options may only be granted to
individuals who are Employees. Options which are specifically designated as
Non-Statutory shall not be subject to such terms and conditions.
8.
<PAGE> 9
A. EXERCISE PRICE. The exercise price per share of the
Common Stock subject to an Incentive Option shall in no event be less than one
hundred percent (100%) of the Fair Market Value per share of Common Stock on
the date of grant.
B. DOLLAR LIMITATION. The aggregate Fair Market Value
of the Common Stock (determined as of the respective date or dates of grant)
for which one (1) or more options granted to any Employee under this Plan (or
any other option plan of the Corporation or any Parent or Subsidiary) may for
the first time become exercisable as Incentive Options during any one (1)
calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two (2) or more such options
which become exercisable for the first time in the same calendar year, the
foregoing limitation on the exercisability of such options as Incentive Options
shall be applied on the basis of the order in which such options are granted.
Should the applicable One Hundred Thousand Dollar ($100,000) limitation in fact
be exceeded in any calendar year, then the option shall nevertheless become
exercisable for the excess number of shares in such calendar year as a Non-
Statutory Option.
C. 10% SHAREHOLDER. If any individual to whom an
Incentive Option is granted is a 10% Shareholder, then the option term shall
not exceed five (5) years measured from the grant date.
VIII. CORPORATE TRANSACTION
A. Upon the occurrence of a Corporate Transaction, each
option at the time outstanding under the Plan shall terminate and cease to be
exercisable, except to the extent assumed by the successor corporation or
parent thereof.
B. Each outstanding option which is assumed in
connection with a Corporate Transaction or is otherwise to remain outstanding
shall be appropriately adjusted, immediately after such Corporate Transaction,
to apply and pertain to the number and class of securities which would have
been issuable to the optionee in the consummation of such Corporate
Transaction, had the option been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to (i) the class and
number of securities available for issuance under the Plan following the
consummation of such Corporate Transaction and (ii) the exercise price payable
per share, provided the aggregate exercise price payable for such securities
shall remain the same.
C. The grant of options under this Plan shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
IX. CANCELLATION AND REGRANT OF OPTIONS
9.
<PAGE> 10
The Plan Administrator shall have the authority to effect, at
any time and from time to time, with the consent of the affected option
holders, the cancellation of any or all outstanding options under the Plan and
to grant in substitution therefor new options under the Plan covering the same
or different numbers of shares of Common Stock but with an exercise price per
share not less than (i) one hundred percent (100%) of the Fair Market Value per
share of Common Stock on the new grant date in the case of a grant of an
Incentive Option, (ii) one hundred ten percent (110%) of such Fair Market Value
in the case of an option grant to a 10% Shareholder or (iii) eighty-five
percent (85%) of such Fair Market Value in the case of all other grants.
X. LOANS
A. The Plan Administrator may assist any optionee in the
exercise of one or more options granted to the optionee by:
(i) authorizing the extension of a loan from the
Corporation to the optionee, or
(ii) permitting the optionee to pay the exercise
price in installments over a period of years.
B. The terms of any loan or installment method of
payment (including the interest rate and terms of repayment) shall be
established by the Plan Administrator in its sole discretion. Loans or
installment payments may be authorized with or without security or collateral.
However, any loan made to a consultant or other non-employee advisor must be
secured by property other than the purchased shares of Common Stock. In all
events, the maximum credit available to each optionee may not exceed the sum of
(i) the aggregate exercise price payable for the purchased shares plus (ii) any
Federal, state and local income and employment tax liability incurred by the
optionee in connection with such exercise.
XI. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon the optionee any right
to continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary) or of the optionee, which rights are hereby expressly reserved by
each, to terminate the optionee's Service at any time for any reason, with or
without cause.
XII. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects whatsoever.
However, no such amendment or modification shall, without the consent of the
holders, adversely affect their rights and obligations under their
10.
<PAGE> 11
outstanding options. In addition, the Board shall not, without the approval of
the Corporation's shareholders, (i) increase the maximum number of shares
issuable under the Plan, except for permissible adjustments under Article V,
(ii) materially modify the eligibility requirements for option grants or (iii)
otherwise materially increase the benefits accruing to option holders.
B. Options may be granted under this Plan to purchase
shares of Common Stock in excess of the number of shares then available for
issuance under the Plan, provided an amendment sufficiently increasing the
number of shares of Common Stock available for issuance under the Plan is
approved by the Corporation's shareholders within twelve (12) months after the
date the excess grants are first made.
XIII. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan shall become effective when adopted by the
Board, but no option granted under the Plan shall become exercisable unless and
until the Plan shall have been approved by the Corporation's shareholders. If
such shareholder approval is not obtained within twelve (12) months after the
date of the Board's adoption of the Plan, then all options previously granted
under the Plan shall terminate and no further options shall be granted.
Subject to such limitation, the Plan Administrator may grant options under the
Plan at any time after the effective date and before the date fixed herein for
termination of the Plan.
B. The Plan shall terminate upon the earliest of (i) the
expiration of the ten (10)-year period measured from the date the Plan is
adopted by the Board, (ii) the date on which all shares available for issuance
under the Plan shall have been issued or (iii) the termination of all
outstanding options under Article VIII. Upon such plan termination, each
option and unvested share issuance outstanding under the Plan shall continue to
have full force and effect in accordance with the provisions of the agreements
evidencing that option or share issuance.
XIV. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares pursuant to options granted under the Plan shall be used for general
corporate purposes.
XV. WITHHOLDING
The Corporation's obligation to deliver shares upon the
exercise of any options granted under the Plan shall be subject to the
satisfaction by the optionee of all applicable Federal, state and local income
and employment tax withholding requirements.
XVI. REGULATORY APPROVALS
The implementation of the Plan, the granting of any option
hereunder and the issuance of Common Stock upon the exercise of any option
shall be subject to the Corporation's
11.
<PAGE> 12
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the options granted under it and the Common
Stock issued pursuant to it.
XVII. FINANCIAL REPORTS
The Corporation shall deliver a balance sheet and an income
statements at least annually to each individual holding an outstanding option
under the Plan, unless such individual is a key employee whose duties in
connection with the Corporation assure such individual access to equivalent
information.
12.
<PAGE> 13
BROADCOM CORPORATION
STOCK OPTION AGREEMENT
RECITALS
I. The Board has adopted the Plan for the purpose of attracting
and retaining the services of selected Employees (including officers and
directors), non-employee members of the Board and consultants who contribute to
the financial success of the Corporation or any Parent or Subsidiary.
A. Optionee is an individual who is to render valuable services
to the Corporation or any Parent or Subsidiary, and this Agreement is executed
pursuant to, and is intended to carry out the purposes of, the Plan in
connection with the Corporation's grant of a stock option to Optionee.
II. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and
conditions set forth in this Agreement, the Corporation hereby grants to
Optionee, as of the Grant Date, a stock option to purchase up to the number of
Option Shares specified in the Grant Notice. The Option Shares shall be
purchasable from time to time during the option term at the Exercise Price.
2. OPTION TERM. This option shall have a maximum term
of ten (10) years measured from the Grant Date and shall accordingly expire at
the close of business on the Expiration Date, unless sooner terminated in
accordance with Paragraph 5, 6 or 17.
3. LIMITED TRANSFERABILITY. This option shall be
neither transferable nor assignable by Optionee other than by will or by the
laws of descent and distribution following Optionee's death and may be
exercised, during Optionee's lifetime, only by Optionee.
4. DATES OF EXERCISE. This option shall become
exercisable for the Option Shares in one or more installments as specified in
the Grant Notice. As the option becomes exercisable for one or more such
installments, those installments shall accumulate and the option shall remain
exercisable for the accumulated installments until the Expiration Date or
sooner termination of the option term under Paragraph 5 or 6.
<PAGE> 14
5. CESSATION OF SERVICE. The option term specified in
Paragraph 2 shall terminate (and this option shall cease to be outstanding)
prior to the Expiration Date should any of the following provisions become
applicable:
(a) Should Optionee cease to remain in Service
for any reason (other than death or Disability) while this option is
outstanding, then the period for exercising this option shall be reduced to a
three (3)-month period commencing with the date of such cessation of Service,
but in no event shall this option be exercisable at any time after the
Expiration Date. Upon the expiration of such three (3)-month period or (if
earlier) upon the Expiration Date, this option shall terminate and cease to be
outstanding.
(b) Should Optionee die while this option is
outstanding, then the personal representative of Optionee's estate or the
person or persons to whom the option is transferred pursuant to Optionee's will
or in accordance with the laws of descent and distribution shall have the right
to exercise this option. Such right shall lapse and this option shall cease to
be outstanding upon the earlier of (i) the expiration of the twelve (12)- month
period measured from the date of Optionee's death or (ii) the Expiration Date.
(c) Should Optionee cease Service by reason of
Disability while this option is outstanding, then Optionee shall have a period
of six (6) months (commencing with the date of such cessation of Service)
during which to exercise this option. However, should such Disability be
deemed to constitute Permanent Disability, then the period during which this
option is to remain exercisable shall be extended by an additional six (6)
months so that the exercise period shall be limited to the twelve (12)-month
period following the date of Optionee's cessation of Service by reason of such
Permanent Disability. In no event shall this option be exercisable at any time
after the Expiration Date. Upon the expiration of the applicable six (6) or
twelve (12)-month period or (if earlier) upon the Expiration Date, this option
shall terminate and cease to be outstanding.
Note: Exercise of this option on a date later than three (3)
months following cessation of Service due to Disability will
result in loss of favorable Incentive Option treatment, unless
such Disability constitutes Permanent Disability. In the
event that Incentive Option treatment is not available, this
option will be taxed as a Non-Statutory Option upon exercise.
(d) During the limited period of post-Service
exercisability applicable under subparagraph (a), (b) or (c) above, this option
may not be exercised in the aggregate for more than the lesser of (i) the
number of Option Shares for which the option is, at the time of Optionee's
cessation of Service, exercisable in accordance with the exercise schedule
specified in the Grant Notice or (ii) the number of Option Shares in which
Optionee is, at the time of his/her cessation of Service, vested in accordance
with the vesting schedule specified in the Grant Notice. To the extent
Optionee is not vested in the Option Shares at the time of his/her cessation of
Service, this option shall immediately terminate and cease to be outstanding
with respect to those shares.
2.
<PAGE> 15
6. SPECIAL TERMINATION OF OPTION.
(a) Upon the occurrence of a Corporate
Transaction, this option shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation or parent thereof.
(b) This Agreement shall not in any way affect
the right of the Corporation to adjust, reclassify, reorganize or otherwise
make changes in its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
7. ADJUSTMENT IN OPTION SHARES.
(a) In the event any change is made to the
outstanding Common Stock by reason of any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration, appropriate adjustments shall be made to (i) the
total number and/or class of securities subject to this option and (ii) the
Exercise Price in order to reflect such change and thereby preclude a dilution
or enlargement of benefits hereunder.
(b) If this option is to be assumed in connection
with a Corporate Transaction or is otherwise to remain outstanding, then this
option shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply and pertain to the number and class of securities which
would have been issuable to Optionee in the consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price payable per share, provided the aggregate Exercise Price payable
hereunder shall remain the same.
8. PRIVILEGE OF STOCK OWNERSHIP. The holder of this
option shall not have any shareholder rights with respect to the Option Shares
until such individual shall have exercised the option and paid the Exercise
Price.
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect
to all or any part of the Option Shares for which this option is at the time
exercisable, Optionee (or in the case of exercise after Optionee's death,
Optionee's executor, administrator, heir or legatee, as the case may be) must
take the following actions:
(i) Execute and deliver to the
Secretary of the Corporation a stock purchase agreement (the "Purchase
Agreement") in substantially the form of Exhibit B to the Grant
Notice.
3.
<PAGE> 16
(ii) Pay the aggregate Exercise
Price for the purchased shares in one or more of the following
alternative forms:
(A) full payment in cash or check
made payable to the Corporation; or
(B) full payment through the
delivery of the Optionee's full recourse promissory note (the
"Note") payable to the Corporation's order, provided Optionee
is an Employee at the time of delivery.
Any Note delivered in payment of the Exercise Price
shall be subject to the following terms and conditions: (i) the Note
shall not have a maximum term in excess of five (5) years, subject to
full and immediate acceleration upon the Optionee's cessation of
Service, and (ii) the Note shall bear interest at the minimum per
annum rate, compounded semi- annually, required by the Federal tax
laws in order to avoid the imputation of interest income to the
Corporation and compensation income to the Optionee. Optionee shall
pledge all of the shares acquired upon exercise of the Option to the
Corporation as security for payment of the Note and shall also deliver
to the Corporation a duly-executed assignment separate from
certificate with respect to the pledged shares. The shares shall be
released from pledge only as the balance of the Note is paid down.
Alternatively, the shares may be released from pledge for immediate
sale by Optionee, provided the sale proceeds are applied to the
payment of principal and accrued interest on the Note until the Note
is paid in full.
Should the outstanding Common Stock be registered
under Section 12(g) of the Securities Exchange Act of 1934, as
amended, at the time the option is exercised, then the Exercise Price
may also be paid as follows:
(C) in shares of Common Stock held
by Optionee for the requisite period necessary to avoid a
charge to the Corporation's earnings for financial reporting
purposes and valued at Fair Market Value on the Exercise Date;
or
(D) to the extent exercised for
vested Option Shares, through a special sale and remittance
procedure pursuant to which Optionee shall concurrently
provide irrevocable written instructions (a) to a
Corporation-designated brokerage firm to effect the immediate
sale of the purchased shares and remit to the Corporation, out
of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate Exercise Price payable
for the purchased shares plus all applicable Federal,
4.
<PAGE> 17
state and local income and employment taxes required to be
withheld by the Corporation by reason of such purchase and (b)
to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to
complete the sale transaction.
(iii) Furnish to the Corporation
appropriate documentation that the person or persons exercising the
option (if other than Optionee) have the right to exercise this
option.
Except to the extent the sale and remittance procedure is
utilized in connection with the exercise of the option, payment of the Exercise
Price must accompany the Purchase Agreement delivered to the Corporation.
(b) As soon after the Exercise Date as practical,
the Corporation shall mail or deliver to or on behalf of Optionee (or the other
person or persons exercising this option) a certificate or certificates
representing the shares purchased under this Agreement, with the appropriate
legends affixed thereto.
(c) In no event may this option be exercised for
any fractional shares.
10. REPURCHASE RIGHTS. OPTIONEE HEREBY AGREES THAT ALL
OPTION SHARES ACQUIRED UPON THE EXERCISE OF THIS OPTION SHALL BE SUBJECT TO
CERTAIN RIGHTS OF THE CORPORATION AND ITS ASSIGNS TO REPURCHASE SUCH SHARES IN
ACCORDANCE WITH THE TERMS AND CONDITIONS SPECIFIED IN THE PURCHASE AGREEMENT.
11. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance
of the Option Shares upon such exercise shall be subject to compliance by the
Corporation and Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange on which the
Common Stock may be listed at the time of such exercise and issuance.
(b) In connection with the exercise of this
option, Optionee shall execute and deliver to the Corporation such written
representations as may be requested by the Corporation in order for it to
comply with the applicable requirements of Federal and state securities laws.
12. SUCCESSORS AND ASSIGNS. Except to the extent
otherwise provided in Paragraph 3 or 6, the provisions of this Agreement shall
inure to the benefit of, and be binding upon, the successors, administrators,
heirs, legal representatives and assigns of Optionee and the successors and
assigns of the Corporation.
5.
<PAGE> 18
13. LIABILITY OF CORPORATION. The inability of the
Corporation to obtain approval from any regulatory body having authority deemed
by the Corporation to be necessary to the lawful issuance and sale of any
Common Stock pursuant to this option shall relieve the Corporation of any
liability with respect to the non-issuance or sale of the Common Stock as to
which such approval shall not have been obtained. The Corporation, however,
shall use its best efforts to obtain all such approvals.
14. NOTICES. Any notice required to be given or
delivered to the Corporation under the terms of this Agreement shall be in
writing and addressed to the Corporation in care of the Corporate Secretary at
its principal corporate offices. Any notice required to be given or delivered
to Optionee shall be in writing and addressed to Optionee at the address
indicated below Optionee's signature line on the Grant Notice. All notices
shall be deemed to have been given or delivered upon personal delivery or upon
deposit in the U.S. mail, postage prepaid and properly addressed to the party
to be notified.
15. CONSTRUCTION. This Agreement and the option
evidenced hereby are made and granted pursuant to the Plan and are in all
respects limited by and subject to the express terms and provisions of the
Plan. All decisions of the Plan Administrator with respect to any question or
issue arising under the Plan or this Agreement shall be conclusive and binding
on all persons having an interest in this option.
16. GOVERNING LAW. The interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
California without resort to that State's conflict-of-laws rules.
17. SHAREHOLDER APPROVAL.
(a) The grant of this option is subject to
approval of the Plan by the Corporation's shareholders within twelve (12)
months after the adoption of the Plan by the Board. Notwithstanding any
provision of this Agreement to the contrary, this option may not be exercised
in whole or in part until such shareholder approval is obtained. In the event
that such shareholder approval is not obtained, then this option shall
terminate in its entirety and Optionee shall have no further rights to acquire
any Option Shares hereunder.
(b) If the Option Shares covered by this
Agreement exceed, as of the Grant Date, the number of shares of Common Stock
which may without shareholder approval be issued under the Plan, then this
option shall be void with respect to such excess shares, unless shareholder
approval of an amendment sufficiently increasing the number of shares of Common
Stock issuable under the Plan is obtained in accordance with the provisions of
Article XII of the Plan.
6.
<PAGE> 19
18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION.
In the event this option is designated an Incentive Option in the Grant Notice,
the following terms and conditions shall also apply to the grant:
(a) This option shall cease to qualify for
favorable tax treatment as an Incentive Option if (and to the extent) this
option is exercised for one or more Option Shares: (i) more than three (3)
months after the date Optionee ceases to be an Employee for any reason other
than death or Permanent Disability or (ii) more than twelve (12) months after
the date Optionee ceases to be an Employee by reason of Permanent Disability.
(b) Should this option be designated as
immediately exercisable in the Grant Notice, then this option shall not become
exercisable in the calendar year in which granted if (and to the extent) the
aggregate Fair Market Value (determined at the Grant Date) of the Common Stock
for which this option would otherwise first become exercisable in such calendar
year would, when added to the aggregate value (determined as of the respective
date or dates of grant) of the Common Stock and any other securities for which
one or more other Incentive Options granted to Optionee prior to the Grant Date
(whether under the Plan or any other option plan of the Corporation or any
Parent or Subsidiary) first become exercisable during the same calendar year,
exceed One Hundred Thousand Dollars ($100,000) in the aggregate. To the extent
the exercisability of this option is deferred by reason of the foregoing
limitation, the deferred portion will become exercisable in the first calendar
year or years thereafter in which the One Hundred Thousand Dollar ($100,000)
limitation of this Paragraph 18(b) would not be contravened, but such deferral
shall in all events end immediately prior to the effective date of a Corporate
Transaction in which this option is not to be assumed, whereupon the option
shall become exercisable as a Non-Statutory Option for the balance of the
Option Shares.
(c) Should this option be designated as
exercisable in installments in the Grant Notice, then no installment under this
option (whether annual or monthly) shall qualify for favorable tax treatment as
an Incentive Option if (and to the extent) the aggregate Fair Market Value
(determined at the Grant Date) of the Common Stock for which such installment
first becomes exercisable hereunder would, when added to the aggregate value
(determined as of the respective date or dates of grant) of any earlier
installments of the Common Stock and any other securities for which this option
or any other Incentive Options granted to Optionee prior to the Grant Date
(whether under the Plan or any other option plan of the Corporation or any
Parent or Subsidiary) first become exercisable during the same calendar year,
exceed One Hundred Thousand Dollars ($100,000) in the aggregate. Should such
One Hundred Thousand Dollar ($100,000) limitation be exceeded in any calendar
year, this option shall nevertheless become exercisable for the excess shares
in such calendar year as a Non-Statutory Option.
(d) Should Optionee hold, in addition to this
option, one or more other options to purchase Common Stock which become
exercisable for the first time in the same calendar
7.
<PAGE> 20
year as this option, then the foregoing limitations on the exercisability of
such options as Incentive Options shall be applied on the basis of the order in
which such options are granted.
19. WITHHOLDING TAXES. Optionee hereby agrees to make
appropriate arrangements with the Corporation or Parent or Subsidiary employing
Optionee for the satisfaction of all Federal, state and local income and
employment tax withholding requirements applicable to the exercise of this
option.
8.
<PAGE> 21
APPENDIX
DEFINITIONS
A. BOARD shall mean the Corporation's Board of Directors.
B. CODE shall mean the Internal Revenue Code of 1986, as amended.
C. COMMON STOCK shall mean the Corporation's common stock.
D. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
E. CORPORATION shall mean Broadcom Corporation, a California
corporation.
F. DISABILITY shall mean the inability of Optionee to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment and shall be determined by the Plan Administrator
on the basis of such medical evidence as the Plan Administrator deems warranted
under the circumstances. Disability shall be deemed to constitute Permanent
Disability in the event that such Disability is expected to result in death or
has lasted or can be expected to last for a continuous period of not less than
twelve (12) months.
G. EMPLOYEE shall mean an individual who is in the employ of the
Corporation or any Parent or Subsidiary, subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
H. EXERCISE DATE shall mean the date on which the option shall
have been exercised in accordance with Paragraph 9 of this Stock Option
Agreement.
I. EXERCISE PRICE shall mean the exercise price per share as
specified in the Grant Notice.
A-1.
<PAGE> 22
J. EXPIRATION DATE shall mean the date on which the option
expires as set forth in the Grant Notice.
K. FAIR MARKET VALUE per share of Common Stock on any relevant
date shall be the value determined in accordance with the following provisions:
(i) If the Common Stock is not at the time listed or
admitted to trading on any Stock Exchange but is traded on the Nasdaq
National Market, the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question, as the price
is reported by the National Association of Securities Dealers through
the Nasdaq National Market or any successor system. If there is no
closing selling price for the Common Stock on the date in question,
then the Fair Market Value shall be the closing selling price on the
last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed or admitted
to trading on any Stock Exchange, then the Fair Market Value shall be
the closing selling price per share of Common Stock on the date in
question on the Stock Exchange determined by the Plan Administrator to
be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such
exchange. If there is no closing selling price for the Common Stock
on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such
quotation exists.
(iii) If the Common Stock is at the time neither listed nor
admitted to trading on any Stock Exchange nor traded on the Nasdaq
National Market, then such Fair Market Value shall be determined by
the Plan Administrator after taking into account such factors as the
Plan Administrator shall deem appropriate.
L. GRANT DATE shall mean the date of grant of the stock option as
set forth in the Grant Notice.
M. GRANT NOTICE shall mean the notice of grant of stock option
accompanying this Agreement, pursuant to which Optionee has been informed of
the basic terms of the option evidenced hereby.
N. INCENTIVE OPTION shall mean a stock option which satisfies the
requirements of Code Section 422.
O. NON-STATUTORY OPTION shall mean a stock option not intended to
meet the requirements of Code Section 422.
A-2.
<PAGE> 23
P. OPTION SHARES shall mean the number of shares of Common Stock
subject to the option.
Q. PARENT shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
R. PLAN shall mean the Corporation's 1994 Stock Option Plan.
S. PLAN ADMINISTRATOR shall mean either the Board or a committee
of Board members, to the extent the committee is at the time responsible for
the administration of the Plan in accordance with Article III of the Plan.
T. SERVICE shall mean the provision of services to the
Corporation or any Parent or Subsidiary by an individual in the capacity of an
Employee, a non-employee member of the board of directors or a consultant.
U. STOCK EXCHANGE shall mean the American Stock Exchange or the
New York Stock Exchange.
V. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each such corporation (other than the last corporation)
in the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
A-3.
<PAGE> 24
BROADCOM CORPORATION
STOCK PURCHASE AGREEMENT
AGREEMENT made as of this ____ day of _______________, 19__,
by and among Broadcom Corporation, a __________ corporation (the
"Corporation"), _____________________________________________________, the
holder of a stock option ("Optionee") under the Corporation's 1994 Stock Option
Plan (the "Plan"), and ____________________________, Optionee's spouse.
All capitalized terms in this Agreement shall have the meaning
assigned to them in this Agreement or in the attached Appendix, unless
otherwise indicated.
A. EXERCISE OF OPTION
1. EXERCISE. Optionee hereby purchases _____________
shares of Common Stock (the "Purchased Shares") pursuant to that certain option
(the "Option") granted Optionee on ____________________, 199__ (the "Grant
Date") to purchase up to _______________ shares of Common Stock under the Plan
at the exercise price of $______ per share (the "Exercise Price").
2. PAYMENT. Concurrently with the delivery of this
Agreement to the Corporate Secretary, Optionee shall pay the Exercise Price for
the Purchased Shares in accordance with the provisions of the Option Agreement
and shall deliver whatever additional documents may be required by the Option
Agreement as a condition for exercise, together with a duly-executed blank
Assignment Separate from Certificate (in the form attached hereto as Exhibit I)
with respect to the Purchased Shares.
3. DELIVERY OF CERTIFICATES. The certificates
representing the Purchased Shares hereunder which are subject to the Repurchase
Right shall be held in escrow by the Corporate Secretary in accordance with the
provisions of Article G.
4. SHAREHOLDER RIGHTS. Until such time as the
Corporation actually exercises its Repurchase Right, First Refusal Right or
Special Purchase Right under this Agreement, Optionee (or any successor in
interest) shall have all the rights of a shareholder (including voting,
dividend and liquidation rights) with respect to the Purchased Shares,
including the Purchased Shares held in escrow under Article G, subject,
however, to the transfer restrictions of Article D.
B. SECURITIES LAW COMPLIANCE
1. EXEMPTION FROM REGISTRATION. The Purchased Shares
have not been registered under the 1933 Act and are accordingly being issued to
Optionee in reliance upon the
<PAGE> 25
exemption from such registration provided by Rule 701 of the SEC for stock
issuances under compensatory benefit plans such as the Plan. Optionee hereby
acknowledges receipt of a copy of the Plan in the form of Exhibit C to the
Grant Notice.
2. RESTRICTED SECURITIES.
(a) Optionee hereby confirms that Optionee has
been informed that the Purchased Shares are restricted securities under the
1933 Act and may not be resold or transferred unless the Purchased Shares are
first registered under the Federal securities laws or unless an exemption from
such registration is available. Accordingly, Optionee hereby acknowledges that
Optionee is prepared to hold the Purchased Shares for an indefinite period and
that Optionee is aware that Rule 144 of the SEC issued under the 1933 Act is
not presently available to exempt the resale of the Purchased Shares from the
registration requirements of the 1933 Act.
(b) Upon the expiration of the ninety (90)-day
period immediately following the date on which the Corporation first becomes
subject to the reporting requirements of the Exchange Act, the Purchased
Shares, to the extent vested under Article E, may be sold (without
registration) pursuant to the applicable requirements of Rule 144. If Optionee
is at the time of such sale an affiliate of the Corporation for purposes of
Rule 144 or was such an affiliate during the preceding three (3) months, then
the sale must comply with all the requirements of Rule 144 (including the
volume limitation on the number of shares sold, the broker/market-maker sale
requirement and the requisite notice to the SEC); however, the two (2)-year
holding period requirement of Rule 144 will not be applicable. If Optionee is
not at the time of the sale an affiliate of the Corporation nor was such an
affiliate during the preceding three (3) months, then none of the requirements
of Rule 144 (other than the broker/market-maker sale requirement for Purchased
Shares held for less than three (3) years following payment in cash of the
Exercise Price therefor) will be applicable to the sale.
(c) Should the Corporation not become subject to
the reporting requirements of the Exchange Act, then Optionee may, provided he
or she is not at the time an affiliate of the Corporation (nor was such an
affiliate during the preceding three (3) months), sell the Purchased Shares
(without registration) pursuant to paragraph (k) of Rule 144 after the
Purchased Shares have been held for a period of three (3) years following the
payment of the Exercise Price for such shares.
3. DISPOSITION OF SHARES. Optionee hereby agrees that
Optionee shall make no disposition of the Purchased Shares (other than a
permitted transfer under paragraph D.1) unless and until there is compliance
with all of the following requirements:
(i) Optionee shall have provided the Corporation
with a written summary of the terms and conditions of the proposed
disposition.
2.
<PAGE> 26
(ii) Optionee shall have complied with all
requirements of this Agreement applicable to the disposition of the
Purchased Shares.
(iii) Optionee shall have provided the
Corporation with written assurances, in form and substance
satisfactory to the Corporation, that (a) the proposed disposition
does not require registration of the Purchased Shares under the 1933
Act or (b) all appropriate action necessary for compliance with the
registration requirements of the 1933 Act or of any exemption from
registration available under the 1933 Act (including Rule 144) has
been taken.
(iv) Optionee shall have provided the Corporation
with written assurances, in form and substance satisfactory to the
Corporation, that the proposed disposition will not result in the
contravention of any transfer restrictions applicable to the Purchased
Shares pursuant to the provisions of the Rules of the California
Corporations Commissioner identified in paragraph B.5.
The Corporation shall not be required (i) to transfer on its
books any Purchased Shares which have been sold or transferred in violation of
the provisions of this Agreement or (ii) to treat as the owner of the Purchased
Shares, or otherwise to accord voting, dividend or liquidation rights to, any
transferee to whom the Purchased Shares have been transferred in contravention
of this Agreement.
4. RESTRICTIVE LEGENDS. In order to reflect the
restrictions imposed by this Agreement upon the disposition of the Purchased
Shares, the stock certificates for the Purchased Shares shall be endorsed with
restrictive legends, including one or more of the following legends:
(i) "The shares represented by this certificate
have not been registered under the Securities Act of 1933. The shares
may not be sold or offered for sale in the absence of (a) an effective
registration statement for the shares under such Act, (b) a 'no
action' letter of the Securities and Exchange Commission with respect
to such sale or offer or (c) satisfactory assurances to the
Corporation that registration under such Act is not required with
respect to such sale or offer."
(ii) "It is unlawful to consummate a sale or
transfer of this security, or any interest therein, or to receive any
consideration therefor, without the prior written consent of the
Commissioner of Corporations of the State of California, except as
permitted in the Commissioner's Rules."
(iii) "The shares represented by this certificate
are unvested and accordingly may not be sold, assigned, transferred,
encumbered, or in any manner disposed of except in conformity with the
terms of a written agreement dated ________
3.
<PAGE> 27
___, 199__ between the Corporation and the registered holder of the
shares (or the predecessor in interest to the shares). Such agreement
grants certain repurchase rights and rights of first refusal to the
Corporation (or its assignees) upon the sale, assignment, transfer,
encumbrance or other disposition of the shares or upon termination of
service with the Corporation. A copy of such agreement is maintained
at the Corporation's principal corporate offices."
5. RECEIPT OF COMMISSIONER RULES. Optionee hereby
acknowledges receipt of a copy of Section 260.141.11 of the Rules of the
California Corporations Commissioner, a copy of which is attached as Exhibit II
to this Agreement.
C. SPECIAL TAX ELECTION
1. SECTION 83(B) ELECTION FOR EXERCISE OF NON-STATUTORY
STOCK OPTION. If the Purchased Shares are acquired hereunder pursuant to the
exercise of a Non-Statutory Option, as specified in the Grant Notice, then
Optionee understands that under Code Section 83, the excess of the Fair Market
Value of the Purchased Shares on the date any forfeiture restrictions
applicable to such shares lapse over the Exercise Price paid for such shares
will be reportable as ordinary income on the lapse date. For this purpose, the
term "forfeiture restrictions" includes the right of the Corporation to
repurchase the Purchased Shares pursuant to the Repurchase Right provided under
Article E. Optionee understands that he/she may elect under Code Section 83(b)
to be taxed at the time the Purchased Shares are acquired hereunder, rather
than when and as such Purchased Shares cease to be subject to such forfeiture
restrictions. Such election must be filed with the Internal Revenue Service
within thirty (30) days after the date of this Agreement. Even if the Fair
Market Value of the Purchased Shares on the date of this Agreement equals the
Exercise Price paid (and thus no tax is payable), the election must be made to
avoid adverse tax consequences in the future. THE FORM FOR MAKING THIS
ELECTION IS ATTACHED AS EXHIBIT III HERETO. OPTIONEE UNDERSTANDS THAT FAILURE
TO MAKE THIS FILING WITHIN THE APPLICABLE THIRTY (30)-DAY PERIOD WILL RESULT IN
THE RECOGNITION OF ORDINARY INCOME BY OPTIONEE AS THE FORFEITURE RESTRICTIONS
LAPSE.
2. CONDITIONAL SECTION 83(B) ELECTION FOR EXERCISE OF
INCENTIVE OPTION. If the Purchased Shares are acquired hereunder pursuant to
the exercise of an Incentive Option under the Federal tax laws, as specified in
the Grant Notice, then the following tax principles shall be applicable to the
Purchased Shares:
(i) For regular tax purposes, no taxable income
will be recognized at the time the Option is exercised.
(ii) The excess of (a) the Fair Market Value of
the Purchased Shares on the date the Option is exercised or (if later)
on the date any forfeiture
4.
<PAGE> 28
restrictions applicable to the Purchased Shares lapse over (b) the
Exercise Price paid for the Purchased Shares will be includible in
Optionee's taxable income for alternative minimum tax purposes.
(iii) If Optionee makes a disqualifying disposition
of the Purchased Shares, then Optionee will recognize ordinary income
in the year of such disposition equal in amount to the excess of (a)
the Fair Market Value of the Purchased Shares on the date the Option
is exercised or (if later) on the date any forfeiture restrictions
applicable to the Purchased Shares lapse over (b) the Exercise Price
paid for the Purchased Shares. Any additional gain recognized upon
the disqualifying disposition will be either short-term or long-term
capital gain depending upon the period for which the Purchased Shares
are held prior to the disposition.
(iv) For purposes of the foregoing, the term
"forfeiture restrictions" will include the right of the Corporation to
repurchase the Purchased Shares pursuant to the Repurchase Right under
Article E. The term "disqualifying disposition" means any sale or
other disposition(1) of the Purchased Shares within two (2) years
after the Grant Date or within one (1) year after the exercise date of
the Option.
(v) In the absence of final Treasury Regulations
relating to Incentive Options, it is not certain whether Optionee may,
in connection with the exercise of the Option for any Purchased Shares
at the time subject to forfeiture restrictions, file a protective
election under Code Section 83(b) which would limit (a) Optionee's
alternative minimum taxable income upon exercise and (b) Optionee's
ordinary income upon a disqualifying disposition to the excess of the
Fair Market Value of the Purchased Shares on the date the Option is
exercised over the Exercise Price paid for the Purchased Shares. The
appropriate form for making such a protective election is attached as
Exhibit III to this Agreement and must be filed with the Internal
Revenue Service within thirty (30) days after the date of this
Agreement. However, such election if properly filed will only be
allowed to the extent the final Treasury Regulations permit such a
protective election.
3. FILING RESPONSIBILITY. OPTIONEE ACKNOWLEDGES THAT IT
IS OPTIONEE'S SOLE RESPONSIBILITY, AND NOT THE CORPORATION'S, TO
- ----------
(1) Generally, a disposition of shares purchased under an Incentive Option
includes any transfer of legal title, including a transfer by sale, exchange
or gift, but does not include a transfer to the Optionee's spouse, a
transfer into joint ownership with right of survivorship if Optionee remains
one of the joint owners, a pledge, a transfer by bequest or inheritance or
certain tax free exchanges permitted under the Code.
5.
<PAGE> 29
FILE A TIMELY ELECTION UNDER SECTION 83(b), EVEN IF OPTIONEE REQUESTS THE
CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER BEHALF.
D. TRANSFER RESTRICTIONS
1. RESTRICTION ON TRANSFER. Optionee shall not
transfer, assign, encumber or otherwise dispose of any of the Purchased Shares
which are subject to the Repurchase Right under Article E. In addition,
Purchased Shares which are released from the Repurchase Right shall not be
transferred, assigned, encumbered or otherwise made the subject of disposition
in contravention of the First Refusal Right under Article F or the market
stand-off provisions of paragraph D.3. Such restrictions on transfer, however,
shall not be applicable to (i) a gratuitous transfer of the Purchased Shares,
provided and only if Optionee obtains the Corporation's prior written consent
to such transfer, (ii) a transfer of title to the Purchased Shares effected
pursuant to Optionee's will or the laws of intestate succession or (iii) a
transfer to the Corporation in pledge as security for any purchase-money
indebtedness incurred by Optionee in connection with the acquisition of the
Purchased Shares.
2. TRANSFEREE OBLIGATIONS. Each person (other than the
Corporation) to whom the Purchased Shares are transferred by means of one of
the permitted transfers specified in paragraph D.1 must, as a condition
precedent to the validity of such transfer, acknowledge in writing to the
Corporation that such person is bound by the provisions of this Agreement and
that the transferred shares are subject to (i) both the Repurchase Right and
the First Refusal Right granted hereunder and (ii) the market stand-off
provisions of paragraph D.3, to the same extent such shares would be so subject
if retained by Optionee.
3. MARKET STAND-OFF.
(a) In connection with any underwritten public
offering by the Corporation of its equity securities pursuant to an effective
registration statement filed under the 1933 Act, including the Corporation's
initial public offering, Owner shall not sell, make any short sale of, loan,
hypothecate, pledge, grant any option for the purchase of, or otherwise dispose
or transfer for value or otherwise agree to engage in any of the foregoing
transactions with respect to, any Purchased Shares without the prior written
consent of the Corporation or its underwriters. Such limitations shall be in
effect for such period of time from and after the effective date of the final
prospectus for the offering as may be requested by the Corporation or such
underwriters; provided, however, that in no event shall such period exceed one
hundred eighty (180) days. The limitations of this paragraph D.3 shall in all
events terminate two (2) years after the effective date of the Corporation's
initial public offering.
6.
<PAGE> 30
(b) Owner shall be subject to the market
stand-off provisions of this paragraph D.3 provided and only if the officers
and directors of the Corporation are also subject to similar arrangements.
(c) In the event of any stock split, stock
dividend, recapitalization, combination of shares, exchange of shares or other
change affecting the Corporation's outstanding Common Stock effected as a class
without the Corporation's receipt of consideration, then any new, substituted
or additional securities distributed with respect to the Purchased Shares shall
be immediately subject to the provisions of this paragraph D.3, to the same
extent the Purchased Shares are at such time covered by such provisions.
(d) In order to enforce the limitations of this
paragraph D.3, the Corporation may impose stop-transfer instructions with
respect to the Purchased Shares until the end of the applicable stand-off
period.
E. REPURCHASE RIGHT
1. GRANT. The Corporation is hereby granted the right
(the "Repurchase Right"), exercisable at any time during the sixty (60)-day
period following the date Optionee ceases for any reason to remain in Service
or (if later) during the sixty (60)-day period following the execution date of
this Agreement, to repurchase at the Exercise Price all or (at the discretion
of the Corporation and with the consent of Optionee) any portion of the
Purchased Shares in which Optionee is not, at the time of his or her cessation
of Service, vested in accordance with the vesting provisions of paragraph E.3
(such shares to be hereinafter called the "Unvested Shares").
2. EXERCISE OF THE REPURCHASE RIGHT. The Repurchase
Right shall be exercisable by written notice delivered to each Owner of the
Unvested Shares prior to the expiration of the applicable sixty (60)-day period
specified in paragraph E.1. The notice shall indicate the number of Unvested
Shares to be repurchased and the date on which the repurchase is to be
effected, such date to be not more than thirty (30) days after the date of
notice. To the extent one or more certificates representing Unvested Shares
may have been previously delivered out of escrow to Owner, Owner shall, prior
to the close of business on the date specified for the repurchase, deliver to
the Corporate Secretary the certificates representing the Unvested Shares to be
repurchased, each certificate to be properly endorsed for transfer. The
Corporation shall, concurrently with the receipt of such stock certificates
(either from escrow in accordance with paragraph G.3 or from Owner as herein
provided), pay to Owner in cash or cash equivalents (including the cancellation
of any purchase-money indebtedness), an amount equal to the Exercise Price
previously paid for the Unvested Shares which are to be repurchased from Owner.
3. TERMINATION OF THE REPURCHASE RIGHT. The Repurchase
Right shall terminate with respect to any Unvested Shares for which it is not
timely exercised under paragraph
7.
<PAGE> 31
E.2. In addition, the Repurchase Right shall terminate, and cease to be
exercisable, with respect to any and all Purchased Shares in which Optionee
vests in accordance with the vesting schedule specified in the Grant Notice.
All Purchased Shares as to which the Repurchase Right lapses shall, however,
continue to be subject to (i) the First Refusal Right of the Corporation and
its assignees under Article F, (ii) the market stand-off provisions of
paragraph D.3 and (iii) the Special Purchase Right under Article H.
4. AGGREGATE VESTING LIMITATION. If the Option is
exercised in more than one increment so that Optionee is a party to one or more
other Stock Purchase Agreements ("Prior Purchase Agreements") which are
executed prior to the date of this Agreement, then the total number of
Purchased Shares as to which Optionee shall be deemed to have a fully-vested
interest under this Agreement and all Prior Purchase Agreements shall not
exceed in the aggregate the number of Purchased Shares in which Optionee would
otherwise at the time be vested, in accordance with the vesting provisions of
paragraph E.3, had all the Purchased Shares been acquired exclusively under
this Agreement.
5. FRACTIONAL SHARES. No fractional shares shall be
repurchased by the Corporation. Accordingly, should the Repurchase Right
extend to a fractional share (in accordance with the vesting provisions of
paragraph E.3) at the time Optionee ceases Service, then such fractional share
shall be added to any fractional share in which Optionee is at such time vested
in order to make one whole vested share no longer subject to the Repurchase
Right.
6. ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the
event of any stock split, stock dividend, recapitalization, combination of
shares, exchange of shares or other change affecting the outstanding Common
Stock as a class effected without the Corporation's receipt of consideration,
any new, substituted or additional securities or other property (including
money paid other than as a regular cash dividend) which is by reason of any
such transaction distributed with respect to the Purchased Shares shall be
immediately subject to the Repurchase Right, but only to the extent the
Purchased Shares are at the time covered by such right. Appropriate
adjustments to reflect the distribution of such securities or property shall be
made to the number and/or class of Purchased Shares subject to this Agreement
and to the price per share to be paid upon the exercise of the Repurchase Right
in order to reflect the effect of any such transaction upon the Corporation's
capital structure; provided, however, that the aggregate price shall remain the
same.
7. CORPORATE TRANSACTION.
(a) Immediately prior to the consummation of a
Corporate Transaction, the Repurchase Right shall automatically lapse in its
entirety, except to the extent the Repurchase Right is to be assigned to the
successor corporation (or its parent company) in connection with such Corporate
Transaction.
8.
<PAGE> 32
(b) To the extent the Repurchase Right remains in
effect following a Corporate Transaction, the right shall apply to the new
capital stock or other property (including cash paid other than as a regular
cash dividend) received in exchange for the Purchased Shares in consummation of
the Corporate Transaction, but only to the extent the Purchased Shares are at
the time covered by such right. Appropriate adjustments shall be made to the
price per share payable upon exercise of the Repurchase Right to reflect the
effect of the Corporate Transaction upon the Corporation's capital structure;
provided, however, that the aggregate price shall remain the same.
F. RIGHT OF FIRST REFUSAL
1. GRANT. The Corporation is hereby granted the right
of first refusal (the "First Refusal Right"), exercisable in connection with
any proposed transfer of the Purchased Shares in which Optionee has vested in
accordance with the vesting provisions of Article E. For purposes of this
Article F, the term "transfer" shall include any sale, assignment, pledge,
encumbrance or other disposition of the Purchased Shares intended to be made by
Owner, but shall not include any of the permitted transfers under paragraph
D.1.
2. NOTICE OF INTENDED DISPOSITION. In the event any
Owner of the Purchased Shares desires to accept a bona fide third- party offer
for the transfer of any or all of such shares (the Purchased Shares subject to
such offer to be hereinafter called the "Target Shares"), Owner shall promptly
(i) deliver to the Corporate Secretary written notice (the "Disposition
Notice") of the terms and conditions of the offer, including the purchase price
and the identity of the third-party offeror, and (ii) provide satisfactory
proof that the disposition of the Target Shares to such third-party offeror
would not be in contravention of the provisions set forth in Articles B and D.
3. EXERCISE OF RIGHT. The Corporation (or its
assignees) shall, for a period of twenty-five (25) days following receipt of
the Disposition Notice, have the right to repurchase any or all of the Target
Shares subject to the Disposition Notice upon the same terms and conditions as
those specified therein or upon such other terms and conditions (not materially
different from those specified in the Disposition Notice) to which Owner
consents. Such right shall be exercisable by delivery of written notice (the
"Exercise Notice") to Owner prior to the expiration of the twenty-five (25)-day
exercise period. If such right is exercised with respect to all the Target
Shares, then the Corporation (or its assignees) shall effect the repurchase of
such shares, including payment of the purchase price, not more than five (5)
business days after delivery of the Exercise Notice; and at such time Owner
shall deliver to the Corporation the certificates representing the Target
Shares to be repurchased, each certificate to be properly endorsed for
transfer. To the extent any of the Target Shares are at the time held in
escrow under Article G, the certificates for such shares shall automatically be
released from escrow and delivered to the Corporation for purchase.
Should the purchase price specified in the Disposition Notice
be payable in property other than cash or evidences of indebtedness, the
Corporation (or its assignees) shall have the right
9.
<PAGE> 33
to pay the purchase price in the form of cash equal in amount to the value of
such property. If Owner and the Corporation (or its assignees) cannot agree on
such cash value within ten (10) days after the Corporation's receipt of the
Disposition Notice, the valuation shall be made by an appraiser of recognized
standing selected by Owner and the Corporation (or its assignees) or, if they
cannot agree on an appraiser within twenty (20) days after the Corporation's
receipt of the Disposition Notice, each shall select an appraiser of recognized
standing and the two (2) appraisers shall designate a third appraiser of
recognized standing, whose appraisal shall be determinative of such value. The
cost of such appraisal shall be shared equally by Owner and the Corporation.
The closing shall then be held on the later of (i) the fifth business day
following delivery of the Exercise Notice or (ii) the fifth business day after
such cash valuation shall have been made.
4. NON-EXERCISE OF RIGHT. In the event the Exercise
Notice is not given to Owner within twenty-five (25) days following the date of
the Corporation's receipt of the Disposition Notice, Owner shall have a period
of thirty (30) days thereafter in which to sell or otherwise dispose of the
Target Shares to the third-party offeror identified in the Disposition Notice
upon terms and conditions (including the purchase price) no more favorable to
such third-party offeror than those specified in the Disposition Notice;
provided, however, that any such sale or disposition must not be effected in
contravention of the provisions of Article B. To the extent any of the Target
Shares are at the time held in escrow under Article G, the certificates for
such shares shall automatically be released from escrow and surrendered to
Owner. The third-party offeror shall acquire the Target Shares free and clear
of the Repurchase Right under Article E and the First Refusal Right hereunder,
but the acquired shares shall remain subject to (i) the securities law
restrictions of paragraph B.2(a) and (ii) the market stand- off provisions of
paragraph D.3. In the event Owner does not effect such sale or disposition of
the Target Shares within the specified thirty (30)-day period, the First
Refusal Right shall continue to be applicable to any subsequent disposition of
the Target Shares by Owner until such right lapses in accordance with paragraph
F.7.
5. PARTIAL EXERCISE OF RIGHT. In the event the
Corporation (or its assignees) makes a timely exercise of the First Refusal
Right with respect to a portion, but not all, of the Target Shares specified in
the Disposition Notice, Owner shall have the option, exercisable by written
notice to the Corporation delivered within five (5) days after Owner's receipt
of the Exercise Notice, to effect the sale of the Target Shares pursuant to
either of the following alternatives:
(i) sale or other disposition of all the Target
Shares to the third-party offeror identified in the Disposition
Notice, but in full compliance with the requirements of paragraph F.4,
as if the Corporation did not exercise the First Refusal Right
hereunder; or
(ii) sale to the Corporation (or its assignees) of
the portion of the Target Shares which the Corporation (or its
assignees) has elected to purchase, such sale to be effected in
substantial conformity with the provisions of paragraph F.3.
10.
<PAGE> 34
Failure of Owner to deliver timely notification to the
Corporation under this paragraph F.5 shall be deemed to be an election by Owner
to sell the Target Shares pursuant to alternative (i) above.
6. RECAPITALIZATION/REORGANIZATION.
(a) In the event of any stock split, stock
dividend, recapitalization, combination of shares, exchange of shares or other
transaction affecting the outstanding Common Stock as a class effected without
the Corporation's receipt of consideration, any new, substituted or additional
securities or other property which is by reason of such transaction distributed
with respect to the Purchased Shares shall be immediately subject to the First
Refusal Right hereunder, but only to the extent the Purchased Shares are at the
time covered by such right.
(b) In the event of a Reorganization, the First
Refusal Right shall remain in full force and effect and shall apply to the new
capital stock or other property received in exchange for the Purchased Shares
in consummation of the Reorganization, but only to the extent the Purchased
Shares are at the time covered by such right.
7. LAPSE. The First Refusal Right under this Article F
shall lapse and cease to have effect upon the earliest to occur of (i) the
first date on which shares of the Common Stock are held of record by more than
five hundred (500) persons, (ii) a determination is made by the Board that a
public market exists for the outstanding shares of Common Stock or (iii) a firm
commitment underwritten public offering, pursuant to an effective registration
statement under the 1933 Act, covering the offer and sale of the Common Stock
in the aggregate amount of at least ten million dollars ($10,000,000).
However, the market stand-off provisions of paragraph D.3 shall continue to
remain in full force and effect following the lapse of the First Refusal Right
hereunder.
G. ESCROW
1. DEPOSIT. Upon issuance, the certificates for the
Purchased Shares shall be deposited in escrow with the Corporate Secretary to
be held in accordance with the provisions of this Article G. Each deposited
certificate shall be accompanied by a duly-executed Assignment Separate from
Certificate in the form of Exhibit I. The deposited certificates, together
with any other assets or securities from time to time deposited with the
Corporate Secretary pursuant to the requirements of this Agreement, shall
remain in escrow until such time or times as the certificates (or other assets
and securities) are to be released or otherwise surrendered for cancellation in
accordance with paragraph G.3. Upon delivery of the certificates (or other
assets and securities) to the Corporate Secretary, Owner shall be issued an
instrument of deposit acknowledging the number of Purchased Shares (or other
assets and securities) delivered in escrow.
11.
<PAGE> 35
2. RECAPITALIZATION. In the event of any stock split,
stock dividend, recapitalization, combination of shares, exchange of shares, or
other change affecting the Corporation's outstanding Common Stock as a class
effected without the Corporation's receipt of consideration or in the event of
a Corporate Transaction or Reorganization, any new, substituted or additional
securities or other property which is by reason of such transaction distributed
with respect to the Purchased Shares shall be immediately delivered to the
Corporate Secretary to be held in escrow under this Article G, but only to the
extent the Purchased Shares are at the time subject to the escrow requirements
of paragraph G.1. However, all regular cash dividends on the Purchased Shares
(or other securities at the time held in escrow) shall be paid directly to
Owner and shall not be held in escrow.
3. RELEASE/SURRENDER. The Purchased Shares, together
with any other assets or securities held in escrow hereunder, shall be subject
to the following terms and conditions relating to their release from escrow or
their surrender to the Corporation for repurchase and cancellation:
(i) Should the Corporation (or its assignees)
elect to exercise the Repurchase Right with respect to any Purchased
Shares, then the escrowed certificates for such Purchased Shares
(together with any other assets or securities attributable thereto)
shall be delivered to the Corporation concurrently with the payment to
Owner, in cash or cash equivalent (including the cancellation of any
purchase-money indebtedness), of an amount equal to the aggregate
Exercise Price for such Purchased Shares, and Owner shall cease to
have any further rights or claims with respect to such Purchased
Shares (or other assets or securities attributable to such Purchased
Shares).
(ii) Should the Corporation (or its assignees)
elect to exercise its First Refusal Right with respect to any vested
Target Shares held at the time in escrow hereunder, then the escrowed
certificates for such Target Shares (together with any other assets or
securities attributable thereto) shall, concurrently with the payment
of the paragraph F.3 purchase price for such Target Shares to Owner,
be surrendered to the Corporation, and Owner shall cease to have any
further rights or claims with respect to such Target Shares (or other
assets or securities attributable thereto).
(iii) Should the Corporation (or its assignees)
elect not to exercise its First Refusal Right with respect to any
Target Shares held at the time in escrow hereunder, then the escrowed
certificates for such Target Shares (together with any other assets or
securities attributable thereto) shall be surrendered to Owner for
disposition in accordance with provisions of paragraph F.4.
12.
<PAGE> 36
(iv) As the interest of Optionee in the Purchased
Shares (or any other assets or securities attributable thereto) vests
in accordance with the provisions of Article E, the certificates for
such vested shares (as well as all other vested assets and securities)
shall be released from escrow upon Owner's request, but not more
frequently than once every six (6) months.
(v) All purchased shares in which Optionee is
vested (and any other vested assets and securities attributable
thereto) shall be released within thirty (30) days after the earliest
to occur of (a) Optionee's cessation of Service, (b) the termination
of the Repurchase Right in accordance with the applicable provisions
of Article E or (c) the termination of the First Refusal Right in
accordance with paragraph F.7.
(vi) All Purchased Shares (or other assets or
securities) released from escrow in accordance with the provisions of
subparagraph (iv) or (v) above shall nevertheless remain subject to
(a) the First Refusal Right, to the extent such right has not
otherwise lapsed pursuant to paragraph F.7, (b) the market stand-off
provisions of paragraph D.3 until such provisions terminate in
accordance therewith and (c) the Special Purchase Right, to the extent
such right has not otherwise lapsed pursuant to paragraph H.4.
H. MARITAL DISSOLUTION OR LEGAL SEPARATION
1. GRANT. In connection with the dissolution of
Optionee's marriage or the legal separation of Optionee and Optionee's spouse,
the Corporation shall have the right (the "Special Purchase Right"),
exercisable at any time during the thirty (30)-day period following the
Corporation's receipt of the required Dissolution Notice under paragraph H.2,
to purchase from Optionee's spouse, in accordance with the provisions of
paragraph H.3, all or any portion of the Purchased Shares which would otherwise
be awarded to such spouse in settlement of any community property or other
marital property rights such spouse may have in such shares.
2. NOTICE OF DECREE OR AGREEMENT. Optionee shall
promptly provide the Corporate Secretary with written notice (the "Dissolution
Notice") of (i) the entry of any judicial decree or order resolving the
property rights of Optionee and Optionee's spouse in connection with their
marital dissolution or legal separation or (ii) the execution of any contract
or agreement relating to the distribution or division of such property rights.
The Dissolution Notice shall be accompanied by a copy of the actual decree of
dissolution or settlement agreement between Optionee and Optionee's spouse
which provides for the award to the spouse of one or more Purchased Shares in
settlement of any community property or other marital property rights such
spouse may have in such shares.
13.
<PAGE> 37
3. EXERCISE OF SPECIAL PURCHASE RIGHT. The Special
Purchase Right shall be exercisable by delivery of written notice (the
"Purchase Notice") to Optionee and Optionee's spouse within thirty (30) days
after the Corporation's receipt of the Dissolution Notice. The Purchase Notice
shall indicate the number of shares to be purchased by the Corporation, the
date such purchase is to be effected (such date to be not less than five (5)
business days, nor more than ten (10) business days, after the date of the
Purchase Notice) and the Fair Market Value to be paid for such Purchased
Shares. Optionee (or Optionee's spouse, to the extent such spouse has physical
possession of the Purchased Shares) shall, prior to the close of business on
the date specified for the purchase, deliver to the Corporate Secretary the
certificates representing the shares to be purchased, each certificate to be
properly endorsed for transfer. To the extent any of the shares to be
purchased by the Corporation are at the time held in escrow under Article G,
the certificates for such shares shall be promptly delivered out of escrow to
the Corporation. The Corporation shall, concurrently with the receipt of the
stock certificates, pay to Optionee's spouse (in cash or cash equivalents) an
amount equal to the Fair Market Value specified for such shares in the Purchase
Notice.
If Optionee's spouse does not agree with the Fair Market Value
specified for the shares in the Purchase Notice, then the spouse shall promptly
notify the Corporation in writing of such disagreement and the fair market
value of such shares shall thereupon be determined by an appraiser of
recognized standing selected by the Corporation and the spouse. If they cannot
agree on an appraiser within twenty (20) days after the date of the Purchase
Notice, each shall select an appraiser of recognized standing, and the two (2)
appraisers shall designate a third appraiser of recognized standing whose
appraisal shall be determinative of such value. The cost of the appraisal
shall be shared equally by the Corporation and Optionee's spouse. The closing
shall then be held on the fifth business day following the completion of such
appraisal; provided, however, that if the appraised value is more than
twenty-five percent (25%) greater than the Fair Market Value specified for the
shares in the Purchase Notice, the Corporation shall have the right,
exercisable prior to the expiration of such five (5) business-day period, to
rescind the exercise of the Special Purchase Right and thereby revoke its
election to purchase the shares awarded to the spouse.
4. LAPSE. The Special Purchase Right under this Article
H shall lapse and cease to have effect upon the earlier to occur of (i) the
first date on which the First Refusal Right lapses or (ii) the expiration of
the thirty (30)-day exercise period specified in paragraph H.3, to the extent
the Special Purchase Right is not timely exercised in accordance with such
paragraph.
I. GENERAL PROVISIONS
1. ASSIGNMENT. The Corporation may assign its
Repurchase Right, its First Refusal Right and/or its Special Purchase Right to
any person or entity selected by the Board, including (without limitation) one
or more shareholders of the Corporation.
14.
<PAGE> 38
If the assignee of the Repurchase Right is other than (i) a
wholly owned subsidiary of the Corporation or (ii) the parent corporation
owning one hundred percent (100%) of the Corporation's outstanding capital
stock, then such assignee must make a cash payment to the Corporation, upon the
assignment of the Repurchase Right, in an amount equal to the excess (if any)
of (i) the Fair Market Value of the Purchased Shares at the time subject to the
assigned Repurchase Right over (ii) the aggregate repurchase price payable for
the Purchased Shares thereunder.
2. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this
Agreement or in the Plan shall confer upon Optionee any right to continue in
Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation (or any Parent or Subsidiary)
or Optionee, which rights are hereby expressly reserved by each, to terminate
Optionee's Service at any time for any reason whatsoever, with or without
cause.
3. NOTICES. Any notice required in connection with (i)
the Repurchase Right, the Special Purchase Right or the First Refusal Right or
(ii) the disposition of any Purchased Shares covered thereby shall be given in
writing and shall be deemed effective upon personal delivery or upon deposit in
the United States mail, registered or certified, postage prepaid and addressed
to the party entitled to such notice at the address indicated below such
party's signature line on this Agreement or at such other address as such party
may designate by ten (10) days advance written notice under this paragraph I.3
to all other parties to this Agreement.
4. NO WAIVER. The failure of the Corporation (or its
assignees) in any instance to exercise the Repurchase Right, or the failure of
the Corporation (or its assignees) in any instance to exercise the First
Refusal Right, or the failure of the Corporation (or its assignees) in any
instance to exercise the Special Purchase Right shall not constitute a waiver
of any other repurchase rights and/or rights of first refusal that may
subsequently arise under the provisions of this Agreement or any other
agreement between the Corporation and Optionee or Optionee's spouse. No waiver
of any breach or condition of this Agreement shall be deemed to be a waiver of
any other or subsequent breach or condition, whether of like or different
nature.
5. CANCELLATION OF SHARES. If the Corporation (or its
assignees) shall make available, at the time and place and in the amount and
form provided in this Agreement, the consideration for the Purchased Shares to
be repurchased in accordance with the provisions of this Agreement, then from
and after such time, the person from whom such shares are to be repurchased
shall no longer have any rights as a holder of such shares (other than the
right to receive payment of such consideration in accordance with this
Agreement). Such shares shall be deemed purchased in accordance with the
applicable provisions hereof, and the Corporation (or its assignees) shall be
deemed the owner and holder of such shares, whether or not the certificates
therefor have been delivered as required by this Agreement.
J. MISCELLANEOUS PROVISIONS
15.
<PAGE> 39
1. OPTIONEE UNDERTAKING. Optionee hereby agrees to take
whatever additional action and execute whatever additional documents the
Corporation may deem necessary or advisable in order to carry out or effect one
or more of the obligations or restrictions imposed on either Optionee or the
Purchased Shares pursuant to the express provisions of this Agreement.
2. AGREEMENT IS ENTIRE CONTRACT. This Agreement
constitutes the entire contract between the parties hereto with regard to the
subject matter hereof. This Agreement is made pursuant to the provisions of
the Plan and shall in all respects be construed in conformity with the express
terms and provisions of the Plan.
3. GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of California without
resort to that State's conflict-of-laws rules.
4. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
5. SUCCESSORS AND ASSIGNS. The provisions of this
Agreement shall inure to the benefit of, and be binding upon, the Corporation
and its successors and assigns and Optionee and Optionee's legal
representatives, heirs, legatees, distributees, assigns and transferees by
operation of law, whether or not any such person shall have become a party to
this Agreement and have agreed in writing to join herein and be bound by the
terms and conditions hereof.
6. POWER OF ATTORNEY. Optionee's spouse hereby appoints
Optionee his or her true and lawful attorney in fact, for him or her and in his
or her name, place and stead, and for his or her use and benefit, to agree to
any amendment or modification of this Agreement and to execute such further
instruments and take such further actions as may reasonably be necessary to
carry out the intent of this Agreement. Optionee's spouse further gives and
grants unto Optionee as his or her attorney in fact full power and authority to
do and perform every act necessary and proper to be done in the exercise of any
of the foregoing powers as fully as he or she might or could do if personally
present, with full power of substitution and revocation, hereby ratifying and
confirming all that Optionee shall lawfully do and cause to be done by virtue
of this power of attorney.
16.
<PAGE> 40
IN WITNESS WHEREOF, the parties have executed this Agreement
on the day and year first indicated above.
BROADCOM CORPORATION
By:____________________________________
Title:_________________________________
Address:_______________________________
_______________________________________
_______________________________________
OPTIONEE
Address:_______________________________
_______________________________________
The undersigned spouse of Optionee has read and hereby
approves the foregoing Stock Purchase Agreement. In consideration of the
Corporation's granting Optionee the right to acquire the Purchased Shares in
accordance with the terms of such Agreement, the undersigned hereby agrees to
be irrevocably bound by all the terms and provisions of such Agreement,
including (without limitation) the right of the Corporation (or its assignees)
to purchase any and all interest or right the undersigned may otherwise have in
such shares pursuant to community property laws or other marital property
rights.
_______________________________________
OPTIONEE
Address:_______________________________
_______________________________________
17.
<PAGE> 41
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED ______________________ hereby sell(s),
assign(s) and transfer(s) unto Broadcom Corporation (the "Corporation"),
_______________________ (________) shares of the Common Stock of the
Corporation standing in his or her name on the books of the Corporation
represented by Certificate No. ___________________ herewith and do hereby
irrevocably constitute and appoint __________________ ____________ Attorney to
transfer the said stock on the books of the Corporation with full power of
substitution in the premises. Dated: ________________
Signature_______________________________
INSTRUCTION: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enable the Corporation to
exercise its Repurchase Right set forth in the Agreement without requiring
additional signatures on the part of Optionee.
<PAGE> 42
EXHIBIT II
SECTION 260.141.11
TITLE 10, CALIFORNIA ADMINISTRATIVE CODE
260.141.11 Restriction on Transfer. (a) The issuer of any
security upon which a restriction on transfer has been imposed pursuant to
Sections 260.102.6, 260.141.10 or 260.534 shall cause a copy of this section to
be delivered to each issuee or transferee of such security at the time the
certificate evidencing the security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to
consummate a sale or transfer of such security, or any interest therein,
without the prior written consent of the Commissioner (until this condition is
removed pursuant to Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section
25102 of the Code or Section 260.105.14 of these
rules;
(4) to the transferor's ancestors, descendants or spouse,
or any custodian or trustee for the account of the transferor or the
transferor's ancestors, descendants, or spouse; or to a transferee by a trustee
or custodian for the account of the transferee or the transferee's ancestors,
descendants or spouse;
(5) to holders of securities of the same class of the
same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code
(either acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this state to the knowledge of
the broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8) to a broker-dealer licensed under the Code in a
principal transaction, or as an underwriter or member of an underwriting
syndicate or selling group;
(9) if the interest sold or transferred is a pledge or
other lien given by the purchaser to the seller upon a sale of the security for
which the Commissioner's written consent is obtained or under this rule not
required;
II-1.
<PAGE> 43
(10) by way of a sale qualified under Sections 25111,
25112, 25113 or 25121 of the Code, of the securities to be transferred,
provided that no order under Section 25140 or Subdivision (a) of Section 25143
is in effect with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111,
25112 or 25113 of the Code, provided that no order under Section 25140 or
Subdivision (a) of Section 25143 is in effect with respect to such
qualification;
(13) between residents of foreign states, territories or
countries who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed
Property Law or to the administrator of the unclaimed property law of another
state; or
(15) by the State Controller pursuant to the Unclaimed
Property Law or by the administrator of the unclaimed property law of another
state if, in either such case, such person (i) discloses to potential
purchasers at the sale that transfer of the securities is restricted under this
rule, (ii) delivers to each purchaser a copy of this rule, and (iii) advises
the Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such
transfer does not involve a change in the beneficial ownership of the
securities;
(17) by way of an offer and sale of outstanding securities
in an issuer transaction that is subject to the qualification requirement of
Section 25110 of the Code but exempt from that qualification requirement by
subdivision (f) of Section 25102; provided that any such transfer is on the
condition that any certificate evidencing the security issued to such
transferee shall contain the legend required by this section.
(c) The certificates representing all such securities
subject to such a restriction on transfer, whether upon initial issuance or
upon any transfer thereof, shall bear on their face a legend, prominently
stamped or printed thereon in capital letters of not less than 10-point size,
reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
II-2.
<PAGE> 44
EXHIBIT III
SECTION 83(b) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is
____________ shares of the common stock of Broadcom Corporation
(3) The property was issued on _____________, 199__.
(4) The taxable year in which the election is being made is the calendar
year 199__.
(5) The property is subject to a repurchase right pursuant to which the
issuer has the right to acquire the property at the original purchase
price if for any reason taxpayer's employment with the issuer is
terminated. The issuer's repurchase right lapses in a series of
annual and monthly installments over a four (4)-year period ending on
____________, 199__.
(6) The fair market value at the time of transfer (determined without
regard to any restriction other than a restriction which by its terms
will never lapse) is $_____________ per share.
(7) The amount paid for such property is $____________ per share.
(8) A copy of this statement was furnished to Broadcom Corporation for
whom taxpayer rendered the services underlying the transfer of
property.
(9) This statement is executed on _______________________, 199__.
_______________________________ _____________________________________
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within
thirty (30) days after the execution date of the Stock Purchase Agreement.
This filing should be made by registered or certified mail, return receipt
requested. Optionee must retain two (2) copies of the completed form for
filing with his or her Federal and state tax returns for the current tax year
and an additional copy for his or her records.
III-1.
<PAGE> 45
The property described in the above Section 83(b) election is comprised of
shares of common stock acquired pursuant to the exercise of an incentive stock
option under Section 422 of the Internal Revenue Code (the "Code").
Accordingly, it is the intent of the Taxpayer to utilize this election to
achieve the following tax results:
1. The purpose of this election is to have the
alternative minimum taxable income attributable to the purchased shares
measured by the amount by which the fair market value of such shares at the
time of their transfer to the Taxpayer exceeds the purchase price paid for the
shares. In the absence of this election, such alternative minimum taxable
income would be measured by the spread between the fair market value of the
purchased shares and the purchase price which exists on the various lapse dates
in effect for the forfeiture restrictions applicable to such shares. The
election is to be effective to the full extent permitted under the Code.
2. Section 421(a)(1) of the Code expressly excludes from
income any excess of the fair market value of the purchased shares over the
amount paid for such shares. Accordingly, this election is also intended to be
effective in the event there is a "disqualifying disposition" of the shares,
within the meaning of Section 421(b) of the Code, which would otherwise render
the provisions of Section 83(a) of the Code applicable at that time.
Consequently, the Taxpayer hereby elects to have the amount of disqualifying
disposition income measured by the excess of the fair market value of the
purchased shares on the date of transfer to the Taxpayer over the amount paid
for such shares. Since Section 421(a) presently applies to the shares which
are the subject of this Section 83(b) election, no taxable income is actually
recognized for regular tax purposes at this time, and no income taxes are
payable, by the Taxpayer as a result of this election.
THIS PAGE 2 IS TO BE ATTACHED TO ANY SECTION 83(b) ELECTION FILED IN CONNECTION
WITH THE EXERCISE OF AN INCENTIVE STOCK OPTION UNDER THE FEDERAL TAX LAWS.
III-2.
<PAGE> 46
APPENDIX
DEFINITIONS
A. BOARD shall mean the Corporation's Board of Directors.
B. CODE shall mean the Internal Revenue Code of 1986, as amended.
C. COMMON STOCK shall mean the Corporation's common stock.
D. CORPORATE TRANSACTION shall mean one or more of the following
shareholder-approved transactions:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities are transferred to a
person or persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
E. EXCHANGE ACT shall mean the Securities Exchange Act of 1934,
as amended.
F. FAIR MARKET VALUE of a share of Common Stock on any relevant
date, prior to the initial public offering of the Common Stock, shall be
determined by the Plan Administrator after taking into account such factors as
it shall deem appropriate.
G. GRANT NOTICE shall mean the notice of grant of stock option
pursuant to which Optionee has been informed of the basic terms of the Option.
H. INCENTIVE OPTION shall mean a stock option granted under the
Plan which satisfies the requirements of Code Section 422.
I. 1933 ACT shall mean the Securities Act of 1933, as amended.
J. NON-STATUTORY OPTION shall mean an option not intended to meet
the requirements of Code Section 422.
K. OPTION AGREEMENT shall mean the agreement between the
Corporation and Optionee evidencing the Option.
A-1
<PAGE> 47
L. OWNER shall mean Optionee and all subsequent holders of the
Purchased Shares who derive their chain of ownership through a permitted
transfer from Optionee in accordance with paragraph D.1.
M. PARENT shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
N. REORGANIZATION shall mean any of the following transactions:
(i) a merger or consolidation in which the Corporation is
not the surviving entity,
(ii) a sale, transfer or other disposition of all or
substantially all of the Corporation's assets,
(iii) a reverse merger in which the Corporation is the
surviving entity but in which the Corporation's outstanding voting
securities are transferred in whole or in part to a person or persons
other than those who held such securities immediately prior to the
merger, or
(iv) any transaction effected primarily to change the
state in which the Corporation is incorporated or to create a holding
company structure.
O. SEC shall mean the Securities and Exchange Commission.
P. SERVICE shall mean the provision of services to the
Corporation or any Parent or Subsidiary by an individual in the capacity of an
employee, subject to the control and direction of the employer entity as to
both the work to be performed and the manner and method of performance, a
non-employee member of the board of directors or a consultant.
Q. SUBSIDIARY shall mean any corporation (other than the
Corporation) in an unbroken chain of corporations beginning with the
Corporation, provided each such corporation (other than the last corporation)
in the unbroken chain owns, at the time of the determination, stock possessing
fifty percent (50%) or more of the total combined voting power of all classes
of stock in one of the other corporations in such chain.
A-2
<PAGE> 48
BROADCOM CORPORATION
NOTE SECURED BY STOCK PLEDGE AGREEMENT
$___________________ _____________, 199_
_______________, California
FOR VALUE RECEIVED, the undersigned Maker promises to pay to
the order of Broadcom Corporation (the "Corporation"), at its corporate offices
at _____________________________________, the principal sum of
_____________________________________________________ Dollars
($_______________), together with all accrued interest thereon, upon the terms
and conditions specified below.
1. INTEREST. Interest shall accrue on the unpaid
balance outstanding from time to time under this Note at the rate of ___ % per
annum, compounded semi-annually, and shall be payable annually in arrears.
2. PRINCIPAL. The entire principal balance of this
Note, together with all accrued and unpaid interest, shall become due and
payable in one lump sum on _____________, 199__.
3. PAYMENT. Payment shall be made in lawful tender of
the United States and shall be applied first to the payment of all accrued and
unpaid interest and then to the payment of principal. Prepayment of the
principal balance of this Note, together with all accrued and unpaid interest,
may be made in whole or in part at any time without penalty.
4. EVENTS OF ACCELERATION. The entire unpaid principal
balance of this Note, together with all accrued and unpaid interest, shall
become immediately due and payable prior to the specified due date of this Note
upon the occurrence of one or more of the following events:
A. the failure of the Maker to pay when due the
accrued interest on this Note and the continuation of such default for
more than thirty (30) days; or
B. the expiration of the thirty (30)-day period
following the date the Maker ceases for any reason to remain in the
Corporation's employ; or
C. the insolvency of the Maker, the commission
of any act of bankruptcy by the Maker, the execution by the Maker of a
general assignment for the benefit of creditors, the filing by or
against the Maker of any petition in bankruptcy or any petition for
relief under the provisions of the Federal bankruptcy act or any other
state or Federal law for the relief of debtors and the continuation of
such petition without dismissal for a period of thirty (30) days or
more, the appointment of a receiver or trustee to take possession of
any property or assets of the Maker or the attachment of or execution
against any property or assets of the Maker; or
D. the occurrence of any event of default under
the Stock Pledge Agreement securing this Note or any obligation
secured thereby.
<PAGE> 49
5. EMPLOYMENT. For purposes of applying the provisions
of this Note, the Maker shall be considered to remain in the Corporation's
employ for so long as the Maker renders services as a full-time employee of the
Corporation, any successor entity or one or more of the Corporation's fifty
percent (50%)-or-more owned (directly or indirectly) subsidiaries.
6. SECURITY. The proceeds of the loan evidenced by this
Note shall be applied solely to the payment of the purchase price of __________
shares of the Corporation's common stock and payment of this Note shall be
secured by a pledge of those shares with the Corporation pursuant to the Stock
Pledge Agreement to be executed this date by the Maker. The Maker, however,
shall remain personally liable for payment of this Note and assets of the
Maker, in addition to the collateral under the Stock Pledge Agreement, may be
applied to the satisfaction of the Maker's obligations hereunder.
7. COLLECTION. If action is instituted to collect this
Note, the Maker promises to pay all costs and expenses (including reasonable
attorney fees) incurred in connection with such action.
8. WAIVER. A waiver of any term of this Note, the Stock
Pledge Agreement or of any of the obligations secured thereby must be made in
writing and signed by a duly-authorized officer of the Corporation and any such
waiver shall be limited to its express terms. No delay by the Corporation in
acting with respect to the terms of this Note or the Stock Pledge Agreement
shall constitute a waiver of any breach, default, or failure of a condition
under this Note, the Stock Pledge Agreement or the obligations secured thereby.
The Maker waives presentment, demand, notice of dishonor,
notice of default or delinquency, notice of acceleration, notice of protest and
nonpayment, notice of costs, expenses or losses and interest thereon, notice of
interest on interest and diligence in taking any action to collect any sums
owing under this Note or in proceeding against any of the rights or interests
in or to properties securing payment of this Note.
9. CONFLICTING AGREEMENTS. In the event of any
inconsistencies between the terms of this Note and the terms of any other
document related to the loan evidenced by the Note, the terms of this Note
shall prevail.
10. GOVERNING LAW. This Note shall be construed in
accordance with the laws of the State of ___________________.
_____________________________
MAKER:
2.
<PAGE> 50
BROADCOM CORPORATION
STOCK PLEDGE AGREEMENT
AGREEMENT made as of this ________ day of _________, 199_ by
and between Broadcom Corporation, a California corporation (the "Corporation")
and __________________ ("Pledgor").
RECITALS
A. In connection with the purchase of __________ shares
of the Corporation's Common Stock (the "Purchased Shares") on the date of this
Agreement from the Corporation, Pledgor has issued that certain promissory note
(the "Note") dated ___________, 199__ payable to the order of the Corporation
in the principal amount of ____________________________________________ Dollars
($____________).
B. Such Note is secured by the Purchased Shares
and other collateral upon the terms set forth in this Agreement.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF SECURITY INTEREST. Pledgor hereby
grants the Corporation a security interest in, and assigns, transfers to and
pledges with the Corporation, the following securities and other property
(collectively, the "Collateral"):
(i) the Purchased Shares
delivered to and deposited with the Corporation as collateral for the
Note;
(ii) any and all new, additional
or different securities or other property subsequently distributed
with respect to the Purchased Shares which are to be delivered to and
deposited with the Corporation pursuant to the requirements of
Paragraph 3 of this Agreement;
(iii) any and all other property
and money which is delivered to or comes into the possession of the
Corporation pursuant to the terms of this Agreement; and
(iv) the proceeds of any sale,
exchange or disposition of the property and securities described in
subparagraphs (i), (ii) or (iii) above.
<PAGE> 51
2. WARRANTIES. Pledgor hereby warrants that
Pledgor is the owner of the Collateral and has the right to pledge the
Collateral and that the Collateral is free from all liens, adverse claims and
other security interests (other than those created hereby).
3. DUTY TO DELIVER. Any new, additional or
different securities or other property (other than regular cash dividends)
which may now or hereafter become distributable with respect to the Collateral
by reason of (i) any stock split, stock dividend, recapitalization, combination
of shares, exchange of shares or other change affecting the Common Stock as a
class without the Corporation's receipt of consideration or (ii) any merger,
consolidation or other reorganization affecting the capital structure of the
Corporation shall, upon receipt by Pledgor be promptly delivered to and
deposited with the Corporation as part of the Collateral hereunder. Any such
securities shall be accompanied by one or more properly-endorsed stock power
assignments.
4. PAYMENT OF TAXES AND OTHER CHARGES. Pledgor
shall pay, prior to the delinquency date, all taxes, liens, assessments and
other charges against the Collateral, and in the event of Pledgor's failure to
do so, the Corporation may at its election pay any or all of such taxes and
other charges without contesting the validity or legality thereof. The
payments so made shall become part of the indebtedness secured hereunder and
until paid shall bear interest at the minimum per annum rate, compounded
semi-annually, required to avoid the imputation of interest income to the
Corporation and compensation income to Pledgor under the Federal tax laws.
5. SHAREHOLDER RIGHTS. So long as there exists
no event of default under Paragraph 10 of this Agreement, Pledgor may exercise
all shareholder voting rights and be entitled to receive any and all regular
cash dividends paid on the Collateral and all proxy statements and other
shareholder materials pertaining to the Collateral.
6. RIGHTS AND POWERS OF CORPORATION. The
Corporation may, without obligation to do so, exercise at any time and from
time to time one or more of the following rights and powers with respect to any
or all of the Collateral:
(i) subject to the applicable
limitations of Paragraph 9, accept in its discretion other property of
Pledgor in exchange for all or part of the Collateral and release
Collateral to Pledgor to the extent necessary to effect such exchange,
and in such event the other property received in the exchange shall
become part of the Collateral hereunder;
(ii) perform such acts as are
necessary to preserve and protect the Collateral and the rights,
powers and remedies granted with respect to such Collateral by this
Agreement; and
(iii) transfer record ownership of
the Collateral to the Corporation or its nominee and receive, endorse
and give
2.
<PAGE> 52
receipt for, or collect by legal proceedings or otherwise, dividends
or other distributions made or paid with respect to the Collateral,
provided and only if there exists at the time an outstanding event of
default under Paragraph 10 of this Agreement. Any cash sums which the
Corporation may so receive shall be applied to the payment of the Note
and any other indebtedness secured hereunder, in such order of
application as the Corporation deems appropriate. Any remaining cash
shall be paid over to Pledgor.
Any action by the Corporation pursuant to the provisions of
this Paragraph 6 may be taken without notice to Pledgor. Expenses reasonably
incurred in connection with such action shall be payable by Pledgor and form
part of the indebtedness secured hereunder as provided in Paragraph 12.
7. CARE OF COLLATERAL. The Corporation shall
exercise reasonable care in the custody and preservation of the Collateral.
However, the Corporation shall have no obligation to (i) initiate any action
with respect to, or otherwise inform Pledgor of, any conversion, call, exchange
right, preemptive right, subscription right, purchase offer or other right or
privilege relating to or affecting the Collateral, (ii) preserve the rights of
Pledgor against adverse claims or protect the Collateral against the
possibility of a decline in market value or (iii) take any action with respect
to the Collateral requested by Pledgor unless the request is made in writing
and the Corporation determines that the requested action will not unreasonably
jeopardize the value of the Collateral as security for the Note and other
indebtedness secured hereunder.
Subject to the limitations of Paragraph 9, the Corporation may
at any time release and deliver all or part of the Collateral to Pledgor, and
the receipt thereof by Pledgor shall constitute a complete and full acquittance
for the Collateral so released and delivered. The Corporation shall
accordingly be discharged from any further liability or responsibility for the
Collateral, and the released Collateral shall no longer be subject to the
provisions of this Agreement.
8. TRANSFER OF COLLATERAL. In connection with
the transfer or assignment of the Note (whether by negotiation, discount or
otherwise), the Corporation may transfer all or any part of the Collateral, and
the transferee shall thereupon succeed to all the rights, powers and remedies
granted the Corporation hereunder with respect to the Collateral so
transferred. Upon such transfer, the Corporation shall be fully discharged from
all liability and responsibility for the transferred Collateral.
9. RELEASE OF COLLATERAL. Provided all
indebtedness secured hereunder (other than payments not yet due and payable
under the Note) shall at the time have been paid in full and there does not
otherwise exist any event of default under Paragraph 10, the Purchased Shares,
together with any additional Collateral which may hereafter be pledged and
deposited hereunder, shall be released from pledge and returned to Pledgor in
accordance with the following provisions:
3.
<PAGE> 53
(i) Upon payment or prepayment
of principal under the Note, together with payment of all accrued
interest to date, one or more of the Purchased Shares held as
Collateral hereunder shall (subject to the applicable limitations of
Paragraphs 9(iii) and 9(v) below) be released to Pledgor within thirty
(30) days after such payment or prepayment. The number of the shares
to be so released shall be equal to the number obtained by multiplying
(i) the total number of Purchased Shares held under this Agreement at
the time of the payment or prepayment, by (ii) a fraction, the
numerator of which shall be the amount of the principal paid or
prepaid and the denominator of which shall be the unpaid principal
balance of the Note immediately prior to such payment or prepayment.
In no event, however, shall any fractional shares be released.
(ii) Any additional Collateral
which may hereafter be pledged and deposited with the Corporation
(pursuant to the requirements of Paragraph 3) with respect to the
Purchased Shares shall be released at the same time the particular
shares of Common Stock to which the additional Collateral relates are
to be released in accordance with the applicable provisions of
Paragraph 9(i).
(iii) Under no circumstances,
however, shall any Purchased Shares or any other Collateral be
released if previously applied to the payment of any indebtedness
secured hereunder. In addition, in no event shall any Purchased
Shares or other Collateral be released pursuant to the provisions of
Paragraph 9(i) or 9(ii) if, and to the extent, the fair market value
of the Common Stock and all other Collateral which would otherwise
remain in pledge hereunder after such release were effected would be
less than the unpaid principal and accrued interest under the Note.
(iv) For all valuation purposes
under this Agreement, the fair market value per share of Common Stock
on any relevant date shall be determined in accordance with the
following provisions:
(A) If the Common Stock is at the
time traded on the Nasdaq National Market, the fair market value shall
be the closing selling price per share of Common Stock on the date in
question, as such prices are reported by the National Association of
Securities Dealers on its Nasdaq system or any successor system. If
there is no reported closing selling price for the Common Stock on the
date in question, then the closing selling price on the last preceding
date for which such quotation exists shall be determinative of fair
market value.
(B) If the Common Stock is at the
time listed on the American Stock Exchange or the New York Stock
Exchange, then the fair market value shall be the closing selling
price per share of
4.
<PAGE> 54
Common Stock on the date in question on the securities exchange
serving as the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such
exchange. If there is no reported sale of Common Stock on such
exchange on the date in question, then the fair market value shall be
the closing selling price on the exchange on the last preceding date
for which such quotation exists.
(C) If the Common Stock is at the
time neither listed on any securities exchange nor traded on the
Nasdaq National Market, the fair market value shall be determined by
the Corporation's Board of Directors after taking into account such
factors as the Board shall deem appropriate.
(v) In the event the Collateral
becomes in whole or in part comprised of "margin securities" within
the meaning of Section 207.2(i) of Regulation G of the Federal Reserve
Board, then no Collateral shall thereafter be substituted for any
Collateral under the provisions of Paragraph 6(i) or be released under
Paragraph 9(i) or (ii), unless there is compliance with each of the
following additional requirements:
(A) The substitution or release
must not increase the amount by which the indebtedness secured
hereunder at the time of such substitution or release exceeds the
maximum loan value (as defined below) of the Collateral immediately
prior to such substitution or release.
(B) The substitution or release
must not cause the amount of indebtedness secured hereunder at the
time of such substitution or release to exceed the maximum loan value
of the Collateral remaining after such substitution or release is
effected.
(C) For purposes of this Paragraph
9(v), the maximum loan value of each item of Collateral shall be
determined on the day the substitution or release is to be effected
and shall, in the case of the shares of Common Stock and any
additional Collateral (other than margin securities), equal the good
faith loan value thereof (as defined in Section 207.2(e)(1) of
Regulation G) and shall, in the case of all margin securities (other
than the Common Stock), equal fifty percent (50%) of the current
market value of such securities.
10. EVENTS OF DEFAULT. The occurrence of one or
more of the following events shall constitute an event of default under this
Agreement:
(i) the failure of Pledgor to
pay, when due under the Note, any installment of principal or accrued
interest; or
5.
<PAGE> 55
(ii) the occurrence of any other
acceleration event specified in the Note; or
(iii) the failure of Pledgor to
perform any obligation imposed upon Pledgor by reason of this
Agreement; or
(iv) the breach of any warranty of
Pledgor contained in this Agreement.
Upon the occurrence of any such event of default, the
Corporation may, at its election, declare the Note and all other indebtedness
secured hereunder to become immediately due and payable and may exercise any or
all of the rights and remedies granted to a secured party under the provisions
of the California Uniform Commercial Code (as now or hereafter in effect),
including (without limitation) the power to dispose of the Collateral by public
or private sale or to accept the Collateral in full payment of the Note and all
other indebtedness secured hereunder.
Any proceeds realized from the disposition of the Collateral
pursuant to the foregoing power of sale shall be applied first to the payment
of expenses incurred by the Corporation in connection with the disposition,
then to the payment of the Note and finally to any other indebtedness secured
hereunder. Any surplus proceeds shall be paid over to Pledgor. However, in
the event such proceeds prove insufficient to satisfy all obligations of
Pledgor under the Note, then Pledgor shall remain personally liable for the
resulting deficiency.
11. OTHER REMEDIES. The rights, powers and
remedies granted to the Corporation pursuant to the provisions of this
Agreement shall be in addition to all rights, powers and remedies granted to
the Corporation under any statute or rule of law. Any forbearance, failure or
delay by the Corporation in exercising any right, power or remedy under this
Agreement shall not be deemed to be a waiver of such right, power or remedy.
Any single or partial exercise of any right, power or remedy under this
Agreement shall not preclude the further exercise thereof, and every right,
power and remedy of the Corporation under this Agreement shall continue in full
force and effect unless such right, power or remedy is specifically waived by
an instrument executed by the Corporation.
12. COSTS AND EXPENSES. All costs and expenses
(including reasonable attorneys fees) incurred by the Corporation in the
exercise or enforcement of any right, power or remedy granted it under this
Agreement shall become part of the indebtedness secured hereunder and shall
constitute a personal liability of Pledgor payable immediately upon demand and
bearing interest until paid at the minimum per annum rate, compounded
semi-annually, required to avoid the imputation of interest income to the
Corporation and compensation income to Pledgor under the Federal tax laws.
13. APPLICABLE LAW. This Agreement shall be
governed by and construed in accordance with the laws of the State of
California without resort to that State's conflict-of-laws rules.
6.
<PAGE> 56
14. SUCCESSORS. This Agreement shall be binding
upon the Corporation and its successors and assigns and upon Pledgor and the
executors, heirs and legatees of Pledgor's estate.
15. SEVERABILITY. If any provision of this
Agreement is held to be invalid under applicable law, then such provision shall
be ineffective only to the extent of such invalidity, and neither the remainder
of such provision nor any other provisions of this Agreement shall be affected
thereby.
IN WITNESS WHEREOF, this Agreement has been executed by
Pledgor and the Corporation on this ___ day of ___________________, 199__.
BROADCOM CORPORATION
________________________________
PLEDGOR
By: _____________________________
Address: ________________________
Title:___________________________
_________________________________
Dated: __________________, 199__
Dated: __________________, 199__
7.
<PAGE> 1
EXHIBIT 10.5
BROADCOM CORPORATION
1998 EMPLOYEE STOCK PURCHASE PLAN
I. PURPOSE OF THE PLAN
This Employee Stock Purchase Plan is intended to promote the interests
of Broadcom Corporation by providing eligible employees with the opportunity to
acquire a proprietary interest in the Corporation through participation in a
payroll-deduction based employee stock purchase plan designed to qualify under
Section 423 of the Code.
Capitalized terms herein shall have the meanings assigned to such terms
in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
The Plan Administrator shall have full authority to interpret and
construe any provision of the Plan and to adopt such rules and regulations for
administering the Plan as it may deem necessary in order to comply with the
requirements of Code Section 423. Decisions of the Plan Administrator shall be
final and binding on all parties having an interest in the Plan.
III. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares of Common Stock
purchased on the open market. The maximum number of shares of Common Stock which
may be issued over the term of the Plan shall not exceed Seven Hundred Fifty
Thousand (750,000) shares.
B. Should any change be made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, then appropriate adjustments shall
be made to (i) the maximum number and class of securities issuable under the
Plan, (ii) the maximum number and class of securities purchasable per
Participant on any one Purchase Date, (iii) the maximum number and class of
securities purchasable in the aggregate on any one Purchase Date and (iv) the
number and class of securities and the price per share in effect under each
outstanding purchase right in order to prevent the dilution or enlargement of
benefits thereunder.
<PAGE> 2
IV. OFFERING PERIODS
A. Shares of Common Stock shall be offered for purchase under the Plan
through a series of successive offering periods until such time as (i) the
maximum number of shares of Common Stock available for issuance under the Plan
shall have been purchased or (ii) the Plan shall have been sooner terminated.
B. Each offering period shall be of such duration (not to exceed
twenty-four (24) months) as determined by the Plan Administrator prior to the
start date of such offering period. However, the initial offering period shall
commence at the Effective Time and terminate on the last business day in April
2000. The next offering period shall commence on the first business day in May
2000, and subsequent offering periods shall commence as designated by the Plan
Administrator.
C. Each offering period shall be comprised of a series of one or more
successive Purchase Intervals. Purchase Intervals shall run from the first
business day in May each year to the last business day in October of the same
year and from the first business day in November each year to the last business
day in April of the following year. However, the first Purchase Interval in
effect under the initial offering period shall commence at the Effective Time
and terminate on the last business day in October 1998.
D. Should the Fair Market Value per share of Common Stock on any
Purchase Date within an offering period be less than the Fair Market Value per
share of Common Stock on the start date of that offering period, then that
offering period shall automatically terminate immediately after the purchase of
shares of Common Stock on such Purchase Date, and a new offering period shall
commence on the next business day following such Purchase Date. The new offering
period shall have a duration of twenty (24) months, unless a shorter duration is
established by the Plan Administrator within five (5) business days following
the start date of that offering period.
V. ELIGIBILITY
A. Each individual who is an Eligible Employee on the start date of any
offering period under the Plan may enter that offering period on such start date
or on any subsequent Quarterly Entry Date within that offering period, provided
he or she remains an Eligible Employee.
B. Each individual who first becomes an Eligible Employee after the
start date of an offering period may enter that offering period on any
subsequent Quarterly Entry Date within that offering period on which he or she
is an Eligible Employee.
C. The date an individual enters an offering period shall be designated
his or her Entry Date for purposes of that offering period.
2.
<PAGE> 3
D. To participate in the Plan for a particular offering period, the
Eligible Employee must complete the enrollment forms prescribed by the Plan
Administrator (including a stock purchase agreement and a payroll deduction
authorization) and file such forms with the Plan Administrator (or its
designate) on or before his or her scheduled Entry Date.
VI. PAYROLL DEDUCTIONS
A. The payroll deduction authorized by the Participant for purposes of
acquiring shares of Common Stock during an offering period may be any multiple
of one percent (1%) of the Cash Earnings paid to the Participant during each
Purchase Interval within that offering period, up to a maximum of fifteen
percent (15%). The deduction rate so authorized shall continue in effect
throughout the offering period, except to the extent such rate is changed in
accordance with the following guidelines:
(i) The Participant may, at any time during the offering period,
reduce his or her rate of payroll deduction to become effective as soon
as possible after filing the appropriate form with the Plan
Administrator. The Participant may not, however, effect more than one
(1) such reduction per Purchase Interval.
(ii) The Participant may, prior to the commencement of any new
Purchase Interval within the offering period, increase the rate of his
or her payroll deduction by filing the appropriate form with the Plan
Administrator. The new rate (which may not exceed the fifteen percent
(15%) maximum) shall become effective on the start date of the first
Purchase Interval following the filing of such form.
B. Payroll deductions shall begin on the first pay day following the
Participant's Entry Date into the offering period and shall (unless sooner
terminated by the Participant) continue through the pay day ending with or
immediately prior to the last day of that offering period. The amounts so
collected shall be credited to the Participant's book account under the Plan,
but no interest shall be paid on the balance from time to time outstanding in
such account. The amounts collected from the Participant shall not be required
to be held in any segregated account or trust fund and may be commingled with
the general assets of the Corporation and used for general corporate purposes.
C. Payroll deductions shall automatically cease upon the termination of
the Participant's purchase right in accordance with the provisions of the Plan.
D. The Participant's acquisition of Common Stock under the Plan on any
Purchase Date shall neither limit nor require the Participant's acquisition of
Common Stock on any subsequent Purchase Date, whether within the same or a
different offering period.
3.
<PAGE> 4
VII. PURCHASE RIGHTS
A. GRANT OF PURCHASE RIGHT. A Participant shall be granted a separate
purchase right for each offering period in which he or she participates. The
purchase right shall be granted on the Participant's Entry Date into the
offering period and shall provide the Participant with the right to purchase
shares of Common Stock, in a series of successive installments over the
remainder of such offering period, upon the terms set forth below. The
Participant shall execute a stock purchase agreement embodying such terms and
such other provisions (not inconsistent with the Plan) as the Plan Administrator
may deem advisable.
Under no circumstances shall purchase rights be granted under the Plan
to any Eligible Employee if such individual would, immediately after the grant,
own (within the meaning of Code Section 424(d)) or hold outstanding options or
other rights to purchase, stock possessing five percent (5%) or more of the
total combined voting power or value of all classes of stock of the Corporation
or any Corporate Affiliate.
B. EXERCISE OF THE PURCHASE RIGHT. Each purchase right shall be
automatically exercised in installments on each successive Purchase Date within
the offering period, and shares of Common Stock shall accordingly be purchased
on behalf of each Participant on each such Purchase Date. The purchase shall be
effected by applying the Participant's payroll deductions for the Purchase
Interval ending on such Purchase Date to the purchase of whole shares of Common
Stock at the purchase price in effect for the Participant for that Purchase
Date.
C. PURCHASE PRICE. The purchase price per share at which Common Stock
will be purchased on the Participant's behalf on each Purchase Date within the
offering period shall be equal to eighty-five percent (85%) of the lower of (i)
the Fair Market Value per share of Common Stock on the Participant's Entry Date
into that offering period or (ii) the Fair Market Value per share of Common
Stock on that Purchase Date.
D. NUMBER OF PURCHASABLE SHARES. The number of shares of Common Stock
purchasable by a Participant on each Purchase Date during the offering period
shall be the number of whole shares obtained by dividing the amount collected
from the Participant through payroll deductions during the Purchase Interval
ending with that Purchase Date by the purchase price in effect for the
Participant for that Purchase Date. However, the maximum number of shares of
Common Stock purchasable per Participant on any one Purchase Date shall not
exceed One Thousand Five Hundred (1,500) shares, subject to periodic adjustments
in the event of certain changes in the Corporation's capitalization. In
addition, the maximum aggregate number of shares of Common Stock purchasable in
the aggregate by all Participants on any one Purchase Date shall not exceed One
Hundred Fifty Thousand (150,000) shares, subject to periodic adjustments in the
event of certain changes in the Corporation's capitalization.
4.
<PAGE> 5
E. EXCESS PAYROLL DEDUCTIONS. Any payroll deductions not applied to the
purchase of shares of Common Stock on any Purchase Date because they are not
sufficient to purchase a whole share of Common Stock shall be held for the
purchase of Common Stock on the next Purchase Date. However, any payroll
deductions not applied to the purchase of Common Stock by reason of the
limitation on the maximum number of shares purchasable per Participant or in the
aggregate on the Purchase Date shall be promptly refunded.
F. TERMINATION OF PURCHASE RIGHT. The following provisions shall govern
the termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the next scheduled
Purchase Date in the offering period, terminate his or her outstanding
purchase right by filing the appropriate form with the Plan
Administrator (or its designate), and no further payroll deductions
shall be collected from the Participant with respect to the terminated
purchase right. Any payroll deductions collected during the Purchase
Interval in which such termination occurs shall, at the Participant's
election, be immediately refunded or held for the purchase of shares on
the next Purchase Date. If no such election is made at the time such
purchase right is terminated, then the payroll deductions collected
with respect to the terminated right shall be refunded as soon as
possible.
(ii) The termination of such purchase right shall be irrevocable,
and the Participant may not subsequently rejoin the offering period for
which the terminated purchase right was granted. In order to resume
participation in any subsequent offering period, such individual must
re-enroll in the Plan (by making a timely filing of the prescribed
enrollment forms) on or before his or her scheduled Entry Date into
that offering period.
(iii) Should the Participant cease to remain an Eligible Employee
for any reason (including death, disability or change in status) while
his or her purchase right remains outstanding, then that purchase right
shall immediately terminate, and all of the Participant's payroll
deductions for the Purchase Interval in which the purchase right so
terminates shall be immediately refunded. However, should the
Participant cease to remain in active service by reason of an approved
unpaid leave of absence, then the Participant shall have the right,
exercisable up until the last business day of the Purchase Interval in
which such leave commences, to (a) withdraw all the payroll deductions
collected to date on his or her behalf for that Purchase Interval or
(b) have such funds held for the purchase of shares on his or her
behalf on the next scheduled Purchase Date. In no event, however, shall
any further payroll deductions be collected on the Participant's behalf
during such leave. Upon the Participant's return to active service (i)
within ninety (90) days following the commencement of such leave or
(ii) the expiration of any longer period for which
5.
<PAGE> 6
such Participant's right to reemployment with the Corporation is
guaranteed by either statute or contract, his or her payroll deductions
under the Plan shall automatically resume at the rate in effect at the
time the leave began, unless the Participant withdraws from the Plan
prior to his or her return.
G. CHANGE IN CONTROL. Each outstanding purchase right shall
automatically be exercised, immediately prior to the effective date of any
Change in Control, by applying the payroll deductions of each Participant for
the Purchase Interval in which such Change in Control occurs to the purchase of
whole shares of Common Stock at a purchase price per share equal to eighty-five
percent (85%) of the lower of (i) the Fair Market Value per share of Common
Stock on the Participant's Entry Date into the offering period in which such
Change in Control occurs or (ii) the Fair Market Value per share of Common Stock
immediately prior to the effective date of such Change in Control. However, the
applicable limitation on the number of shares of Common Stock purchasable per
Participant shall continue to apply to any such purchase, but not the limitation
applicable to the maximum number of shares of Common Stock purchasable in the
aggregate.
The Corporation shall use its best efforts to provide at least ten
(10)-days prior written notice of the occurrence of any Change in Control, and
Participants shall, following the receipt of such notice, have the right to
terminate their outstanding purchase rights prior to the effective date of the
Change in Control.
H. PRORATION OF PURCHASE RIGHTS. Should the total number of shares of
Common Stock to be purchased pursuant to outstanding purchase rights on any
particular date exceed the number of shares then available for issuance under
the Plan, the Plan Administrator shall make a pro-rata allocation of the
available shares on a uniform and nondiscriminatory basis, and the payroll
deductions of each Participant, to the extent in excess of the aggregate
purchase price payable for the Common Stock pro-rated to such individual, shall
be refunded.
I. ASSIGNABILITY. The purchase right shall be exercisable only by the
Participant and shall not be assignable or transferable by the Participant.
J. SHAREHOLDER RIGHTS. A Participant shall have no shareholder rights
with respect to the shares subject to his or her outstanding purchase right
until the shares are purchased on the Participant's behalf in accordance with
the provisions of the Plan and the Participant has become a holder of record of
the purchased shares.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire Common
Stock pursuant to any purchase right outstanding under this Plan if and to the
extent such accrual, when aggregated with (i) rights to purchase Common Stock
accrued under any other purchase right granted under this Plan and (ii) similar
rights accrued under other employee stock purchase plans (within the
6.
<PAGE> 7
meaning of Code Section 423) of the Corporation or any Corporate Affiliate,
would otherwise permit such Participant to purchase more than Twenty-Five
Thousand Dollars ($25,000) worth of stock of the Corporation or any Corporate
Affiliate (determined on the basis of the Fair Market Value per share on the
date or dates such rights are granted) for each calendar year such rights are at
any time outstanding.
B. For purposes of applying such accrual limitations to the purchase
rights granted under the Plan, the following provisions shall be in effect:
(i) The right to acquire Common Stock under each outstanding
purchase right shall accrue in a series of installments on each
successive Purchase Date during the offering period on which such right
remains outstanding.
(ii) No right to acquire Common Stock under any outstanding
purchase right shall accrue to the extent the Participant has already
accrued in the same calendar year the right to acquire Common Stock
under one (1) or more other purchase rights at a rate equal to
Twenty-Five Thousand Dollars ($25,000) worth of Common Stock
(determined on the basis of the Fair Market Value per share on the date
or dates of grant) for each calendar year such rights were at any time
outstanding.
C. If by reason of such accrual limitations, any purchase right of a
Participant does not accrue for a particular Purchase Interval, then the payroll
deductions which the Participant made during that Purchase Interval with respect
to such purchase right shall be promptly refunded.
D. In the event there is any conflict between the provisions of this
Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article shall be controlling.
IX. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan was adopted by the Board on February 3, 1998 and shall
become effective at the Effective Time, provided no purchase rights granted
under the Plan shall be exercised, and no shares of Common Stock shall be issued
hereunder, until (i) the Plan shall have been approved by the shareholders of
the Corporation and (ii) the Corporation shall have complied with all applicable
requirements of the 1933 Act (including the registration of the shares of Common
Stock issuable under the Plan on a Form S-8 registration statement filed with
the Securities and Exchange Commission), all applicable listing requirements of
any stock exchange (or the Nasdaq National Market, if applicable) on which the
Common Stock is listed for trading and all other applicable requirements
established by law or regulation. In the event such shareholder approval is not
obtained, or such compliance is not effected, within twelve (12) months after
the date on which
7.
<PAGE> 8
the Plan is adopted by the Board, the Plan shall terminate and have no further
force or effect, and all sums collected from Participants during the initial
offering period hereunder shall be refunded.
B. Unless sooner terminated by the Board, the Plan shall terminate upon
the earliest of (i) the last business day in April 2008, (ii) the date on which
all shares available for issuance under the Plan shall have been sold pursuant
to purchase rights exercised under the Plan or (iii) the date on which all
purchase rights are exercised in connection with a Change in Control. No further
purchase rights shall be granted or exercised, and no further payroll deductions
shall be collected, under the Plan following such termination.
X. AMENDMENT OF THE PLAN
The Board may alter, amend, suspend or discontinue the Plan at any time
to become effective immediately following the close of any Purchase Interval.
However, the Board may not, without the approval of the Corporation's
shareholders, (i) increase the number of shares of Common Stock issuable under
the Plan or the maximum number of shares purchasable per Participant on any one
Purchase Date, except for permissible adjustments in the event of certain
changes in the Corporation's capitalization, (ii) alter the purchase price
formula so as to reduce the purchase price payable for the shares of Common
Stock purchasable under the Plan or (iii) modify eligibility requirements for
participation in the Plan.
XI. GENERAL PROVISIONS
A. All costs and expenses incurred in the administration of the Plan
shall be paid by the Corporation; however, each Plan Participant shall bear all
costs and expenses incurred by such individual in the sale or other disposition
of any shares purchased under the Plan.
B. Nothing in the Plan shall confer upon the Participant any right to
continue in the employ of the Corporation or any Corporate Affiliate for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Corporation (or any Corporate Affiliate employing such person)
or of the Participant, which rights are hereby expressly reserved by each, to
terminate such person's employment at any time for any reason, with or without
cause.
C. The provisions of the Plan shall be governed by the laws of the
State of California without resort to that State's conflict-of-laws rules.
8.
<PAGE> 9
SCHEDULE A
CORPORATIONS PARTICIPATING IN
EMPLOYEE STOCK PURCHASE PLAN
AS OF THE EFFECTIVE TIME
Broadcom Corporation
<PAGE> 10
APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. CASH EARNINGS shall mean the (i) base salary payable to a
Participant by one or more Participating Companies during such individual's
period of participation in one or more offering periods under the Plan plus (ii)
all overtime payments, bonuses, commissions, current profit-sharing
distributions and other incentive-type payments. Such Cash Earnings shall be
calculated before deduction of (A) any income or employment tax withholdings or
(B) any pre-tax contributions made by the Participant to any Code Section 401(k)
salary deferral plan or any Code Section 125 cafeteria benefit program now or
hereafter established by the Corporation or any Corporate Affiliate. However,
Cash Earnings shall NOT include any contributions (other than Code Section
401(k) or Code Section 125 contributions) made on the Participant's behalf by
the Corporation or any Corporate Affiliate to any employee benefit or welfare
plan now or hereafter established.
C. CHANGE IN CONTROL shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Corporation in complete
liquidation or dissolution of the Corporation, or
(iii) the acquisition, directly or indirectly by any person or
related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common
control with, the Corporation), of beneficial ownership (within the
meaning of Rule 13d-3 of the 1934 Act) of securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities pursuant to a tender or exchange
offer made directly to the Corporation's shareholders.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. COMMON STOCK shall mean the Corporation's Class A common stock.
A-1.
<PAGE> 11
F. CORPORATE AFFILIATE shall mean any parent or subsidiary corporation
of the Corporation (as determined in accordance with Code Section 424), whether
now existing or subsequently established.
G. CORPORATION shall mean Broadcom Corporation, a California
corporation, and any corporate successor to all or substantially all of the
assets or voting stock of Broadcom Corporation which shall by appropriate action
adopt the Plan.
H. EFFECTIVE TIME shall mean the time at which the Underwriting
Agreement is executed and the Common Stock priced for the initial public
offering. Any Corporate Affiliate which becomes a Participating Corporation
after such Effective Time shall designate a subsequent Effective Time with
respect to its employee-Participants.
I. ELIGIBLE EMPLOYEE shall mean any person who is employed by a
Participating Corporation on a basis under which he or she is regularly expected
to render more than twenty (20) hours of service per week for more than five (5)
months per calendar year for earnings considered wages under Code Section
3401(a).
J. ENTRY DATE shall mean the date an Eligible Employee first commences
participation in the offering period in effect under the Plan. The earliest
Entry Date under the Plan shall be the Effective Time.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question, as such price is
reported by the National Association of Securities Dealers on the
Nasdaq National Market. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape
of transactions on such exchange. If there is no closing selling price
for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists.
A-2.
<PAGE> 12
(iii) For purposes of the initial offering period which begins at
the Effective Time, the Fair Market Value shall be deemed to be equal
to the price per share at which the Common Stock is sold in the initial
public offering pursuant to the Underwriting Agreement.
L. 1933 ACT shall mean the Securities Act of 1933, as amended.
M. PARTICIPANT shall mean any Eligible Employee of a Participating
Corporation who is actively participating in the Plan.
N. PARTICIPATING CORPORATION shall mean the Corporation and such
Corporate Affiliate or Affiliates as may be authorized from time to time by the
Board to extend the benefits of the Plan to their Eligible Employees. The
Participating Corporations in the Plan are listed in attached Schedule A.
O. PLAN shall mean the Corporation's 1998 Employee Stock Purchase Plan,
as set forth in this document.
P. PLAN ADMINISTRATOR shall mean the committee of two (2) or more Board
members appointed by the Board to administer the Plan.
Q. PURCHASE DATE shall mean the last business day of each Purchase
Interval. The initial Purchase Date shall be October 31, 1998.
R. PURCHASE INTERVAL shall mean each successive six (6)-month period
within the offering period at the end of which there shall be purchased shares
of Common Stock on behalf of each Participant.
S. QUARTERLY ENTRY DATE shall mean the first business day in February,
May, August and November each year on which an Eligible Employee may first enter
an offering period.
T. STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.
U. UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
A-3.
<PAGE> 1
EXHIBIT 10.6
- --------------------------------------------------------------------------------
[LOGO] SILICON VALLEY BANK
LOAN AND SECURITY AGREEMENT
BORROWER: BROADCOM CORPORATION
ADDRESS: 10920 WILSHIRE BOULEVARD, 14TH FLOOR
LOS ANGELES, CALIFORNIA 90024
DATE: MARCH 23, 1995
THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK ("Silicon"), whose address is 3000 Lakeside Drive, Santa
Clara, California 95054-2895 and the borrower named above (the "Borrower"),
whose chief executive office is located at the above address ("Borrower's
Address").
1. LOANS.
1.1 LOANS. Silicon, in its reasonable discretion, will make loans to the
Borrower (the "Loans") in amounts determined by Silicon in its reasonable
discretion up to the amount (the "Credit Limit") shown on the Schedule to this
Agreement (the "Schedule"), provided no Event of Default and no event which,
with notice or passage of time or both, would constitute an Event of Default has
occurred. The Borrower is responsible for monitoring the total amount of Loans
and other Obligations outstanding from time to time, and Borrower shall not
permit the same, at any time, to exceed the Credit Limit. If at any time the
total of all outstanding Loans and all other Obligations exceeds the Credit
Limit, the Borrower shall immediately pay the amount of the excess to Silicon,
without notice or demand.
1.2 INTEREST. All Loans and all other monetary Obligations shall bear interest
at the rate shown on the Schedule hereto. Interest shall be payable monthly, on
the due date shown on the monthly billing from Silicon to the Borrower. Silicon
may, in its discretion, charge interest to Borrower's deposit accounts
maintained with Silicon.
1.3 FEES. The Borrower shall pay to Silicon a loan origination fee in the
amount shown on the Schedule hereto concurrently herewith. This fee is in
addition to all interest and other sums payable to Silicon and is not
refundable.
2. GRANT OF SECURITY INTEREST.
2.1 OBLIGATIONS. The term "Obligations" as used in this Agreement means the
following: the obligation to pay all Loans and all interest thereon when due,
and to pay and perform when due all other present and future indebtedness,
liabilities, obligations, guarantees, covenants, agreements, warranties and
representations of the Borrower to Silicon, whether joint or several, monetary
or non-monetary, and whether created pursuant to this Agreement or any other
present or future agreement or otherwise. Silicon may, in its discretion,
require that Borrower pay monetary Obligations in cash to Silicon, or charge
them to Borrower's Loan account, in which event they will bear interest at the
same rate applicable to the Loans. Silicon may also, in its discretion, charge
any monetary Obligations to Borrower's deposit accounts maintained with Silicon.
2.2 COLLATERAL. As security for all Obligations, the Borrower hereby grants
Silicon a continuing security interest in all of the Borrower's interest in the
types of property described below, whether now owned or hereafter acquired, and
wherever located (collectively, the "Collateral"): (a) All accounts, contract
rights, chattel paper, letters of credit, documents, securities, money, and
instruments, and all other obligations now or in the future owing to the
Borrower; (b) All inventory, goods, merchandise, materials, raw materials, work
in process, finished goods, farm products, advertising, packaging and shipping
materials, supplies, and all other tangible personal property which is held for
sale or lease or furnished under contracts of service or consumed in the
Borrower's business, and all warehouse receipts and other documents; and (c) All
equipment, including without limitation all machinery, fixtures, trade fixtures,
vehicles, furnishings, furniture, materials, tools, machine tools, office
equipment, computers and peripheral devices, appliances, apparatus, parts, dies,
and jigs; (d) All general intangibles including, but not limited to, deposit
accounts, goodwill, names, trade names, trademarks and the goodwill of the
business symbolized thereby, trade secrets, drawings, blueprints, customer
lists, patents, patent applications, copyrights, security deposits, loan
commitment fees, federal, state and local tax refunds and claims, all rights in
all litigation presently or
-1-
<PAGE> 2
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
hereafter pending for any cause or claim (whether in contract, tort or
otherwise), and all judgments now or hereafter arising therefrom, all claims of
Borrower against Silicon, all rights to purchase or sell real or personal
property, all rights as a licensor or licensee of any kind, all royalties,
licenses, processes, telephone numbers, proprietary information, purchase
orders, and all insurance policies and claims (including without limitation
credit, liability, property and other insurance), and all other rights,
privileges and franchises of every kind; (e) All books and records, whether
stored on computers or otherwise maintained; and (f) All substitutions,
additions and accessions to any of the foregoing, and all products, proceeds and
insurance proceeds of the foregoing, and all guaranties of and security for the
foregoing; and all books and records relating to any of the foregoing. Silicon's
security interest in any present or future technology (including patents, trade
secrets, and other technology) shall be subject to any licenses or rights now or
in the future granted by the Borrower to any third parties in the ordinary
course of Borrower's business; provided that if the Borrower proposes to sell,
license or grant any other rights with respect to any technology in a
transaction that, in substance, conveys a major part of the economic value of
that technology, Silicon shall first be requested to release its security
interest in the same, and Silicon may withhold such release in its discretion.
3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE BORROWER.
The Borrower represents and warrants to Silicon as follows, and the Borrower
covenants that the following representations will continue to be true, and that
the Borrower will comply with all of the following covenants:
3.1 CORPORATE EXISTENCE AND AUTHORITY. The Borrower, if a corporation, is and
will continue to be, duly authorized, validly existing and in good standing
under the laws of the jurisdiction of its incorporation. The Borrower is and
will continue to be qualified and licensed to do business in all jurisdictions
in which any failure to do so would have a material adverse effect on the
Borrower. The execution, delivery and performance by the Borrower of this
Agreement, and all other documents contemplated hereby have been duly and
validly authorized, are enforceable against the Borrower in accordance with
their terms, and do not violate any law or any provision of, and are not grounds
for acceleration under, any agreement or instrument which is binding upon the
Borrower.
3.2 NAME; TRADE NAMES AND STYLES. The name of the Borrower set forth in the
heading to this Agreement is its correct name. Listed on the Schedule hereto are
all prior names of the Borrower and all of Borrower's present and prior trade
names. The Borrower shall give Silicon 15 days' prior written notice before
changing its name or doing business under any other name. The Borrower has
complied, and will in the future comply, with all laws relating to the conduct
of business under a fictitious business name.
3.3 PLACE OF BUSINESS; LOCATION OF COLLATERAL. The address set forth in the
heading to this Agreement is the Borrower's chief executive office. In addition,
the Borrower has places of business and Collateral is located only at the
locations set forth on the Schedule to this Agreement. The Borrower will give
Silicon at least 15 days prior written notice before changing its chief
executive office or locating the Collateral at any other location.
3.4 TITLE TO COLLATERAL; PERMITTED LIENS. The Borrower is now, and will at all
times in the future be, the sole owner of all the Collateral, except for items
of equipment which are leased by the Borrower. The Collateral now is and will
remain free and clear of any and all liens, charges, security interests,
encumbrances and adverse claims, except for the following ("Permitted Liens"):
(i) purchase money security interests in specific items of equipment; (ii)
leases of specific items of equipment; (iii) liens for taxes not yet payable;
(iv) additional security interests and liens consented to in writing by Silicon
in its reasonable discretion, which consent shall not be unreasonably withheld;
and (v) security interests being terminated substantially concurrently with this
Agreement. Silicon will have the right to require, as a condition to its consent
under subparagraph (iv) above, that the holder of the additional security
interest or lien sign an intercreditor agreement on Silicon's then standard
form, acknowledge that the security interest is subordinate to the security
interest in favor of Silicon, and agree not to take any action to enforce its
subordinate security interest so long as any Obligations remain outstanding, and
that the Borrower agree that any uncured default in any obligation secured by
the subordinate security interest shall also constitute an Event of Default
under this Agreement. Silicon now has, and will continue to have, a perfected
and enforceable security interest in all of the Collateral, subject only to the
Permitted Liens, and the Borrower will at all times defend Silicon and the
Collateral against all claims of others. None of the Collateral now is or will
be affixed to any real property in such a manner, or with such intent, as to
become a fixture.
3.5 MAINTENANCE OF COLLATERAL. The Borrower will maintain the Collateral in good
working condition, and the Borrower will not use the Collateral for any unlawful
purpose. The Borrower will immediately advise Silicon in writing of any material
loss or damage to the Collateral.
3.6 BOOKS AND RECORDS. The Borrower has maintained and will maintain at the
Borrower's Address complete and accurate books and records, comprising an
accounting system in accordance with generally accepted accounting principles.
3.7 FINANCIAL CONDITION AND STATEMENTS. All financial statements now or in the
future delivered to Silicon have been, and will be, prepared in conformity with
generally accepted accounting principles and now and in the future will
completely and accurately reflect the financial condition of the Borrower, at
the times and for the periods therein stated. Since the last
-2-
<PAGE> 3
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
date covered by any such statement, there has been no material adverse change in
the financial condition or business of the Borrower. The Borrower is now and
will continue to be solvent. The Borrower will provide Silicon: (i) within 30
days after the end of each month, a monthly financial statement prepared by the
Borrower, and a Compliance Certificate in such form as Silicon shall reasonably
specify, signed by the Chief Financial Officer of the Borrower, certifying that
as of the end of such month the Borrower was in full compliance with all of the
terms and conditions of this Agreement, and setting forth calculations showing
compliance with the financial covenants set forth on the Schedule and such other
information as Silicon shall reasonably request; and (ii) within 120 days
following the end of the Borrower's fiscal year, complete annual financial
statements, certified by independent certified public accountants acceptable to
Silicon and accompanied by the unqualified report thereon by said independent
certified public accountants.
3.8 TAX RETURNS AND PAYMENTS; PENSION CONTRIBUTIONS. The Borrower has timely
filed, and will timely file, all tax returns and reports required by foreign,
federal, state and local law, and the Borrower has timely paid, and will timely
pay, all foreign, federal, state and local taxes, assessments, deposits and
contributions now or in the future owed by the Borrower. The Borrower may,
however, defer payment of any contested taxes, provided that the Borrower (i) in
good faith contests the Borrower's obligation to pay the taxes by appropriate
proceedings promptly and diligently instituted and conducted, (ii) notifies
Silicon in writing of the commencement of, and any material development in, the
proceedings, and (iii) posts bonds or takes any other steps required to keep the
contested taxes from becoming a lien upon any of the Collateral. The Borrower is
unaware of any claims or adjustments proposed for any of the Borrower's prior
tax years which could result in additional taxes becoming due and payable by the
Borrower. The Borrower has paid, and shall continue to pay all amounts necessary
to fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and the Borrower has not and will not
withdraw from participation in, permit partial or complete termination of, or
permit the occurrence of any other event with respect to, any such plan which
could result in any liability of the Borrower, including, without limitation,
any liability to the Pension Benefit Guaranty Corporation or its successors or
any other governmental agency.
3.9 COMPLIANCE WITH LAW. The Borrower has complied, and will comply, in all
material respects, with all provisions of all foreign, federal, state and local
laws and regulations relating to the Borrower, including, but not limited to,
those relating to the Borrower's ownership of real or personal property, conduct
and licensing of the Borrower's business, and environmental matters.
3.10 LITIGATION. Except as disclosed in the Schedule, there is no claim, suit,
litigation, proceeding or investigation pending or (to best of the Borrower's
knowledge) threatened by or against or affecting the Borrower in any court or
before any governmental agency (or any basis therefor known to the Borrower)
which may result, either separately or in the aggregate, in any material adverse
change in the financial condition or business of the Borrower, or in any
material impairment in the ability of the Borrower to carry on its business in
substantially the same manner as it is now being conducted. The Borrower will
promptly inform Silicon in writing of any claim, proceeding, litigation or
investigation in the future threatened or instituted by or against the Borrower
involving amounts in excess of $250,000.
3.11 USE OF PROCEEDS. All proceeds of all Loans shall be used solely for lawful
business purposes.
4. ADDITIONAL DUTIES OF THE BORROWER.
4.1 FINANCIAL AND OTHER COVENANTS. The Borrower shall at all times comply with
the financial and other covenants set forth in the Schedule to this Agreement.
4.2 OVERADVANCE; PROCEEDS OF ACCOUNTS. If for any reason the total of all
outstanding Loans and all other Obligations exceeds the Credit Limit, without
limiting Silicon's other remedies, and whether or not Silicon declares an Event
of Default, Borrower shall remit to Silicon all checks and other proceeds of
Borrower's accounts and general intangibles, in the same form as received by
Borrower, within one day after Borrower's receipt of the same, to be applied to
the Obligations in such order as Silicon shall determine in its discretion.
4.3 INSURANCE. The Borrower shall, at all times insure all of the tangible
personal property Collateral and carry such other business insurance, with
insurers reasonably acceptable to Silicon, in such form and amounts as Silicon
may reasonably require. All such insurance policies shall name Silicon as an
additional loss payee, and shall contain a lenders loss payee endorsement in
form reasonably acceptable to Silicon. Upon receipt of the proceeds of any such
insurance, Silicon shall apply such proceeds in reduction of the Obligations as
Silicon shall determine in its sole and absolute discretion, except that,
provided no Event of Default has occurred, Silicon shall release to the Borrower
insurance proceeds with respect to equipment totaling less than $100,000, which
shall be utilized by the Borrower for the replacement of the equipment with
respect to which the insurance proceeds were paid. Silicon may require
reasonable assurance that the insurance proceeds so released will be so used. If
the Borrower fails to provide or pay for any insurance, Silicon may, but is not
obligated to, obtain the same at the Borrower's expense. The Borrower shall
promptly deliver to Silicon copies of all reports made to insurance companies.
4.4 REPORTS. The Borrower shall provide Silicon with such written reports with
respect to the Borrower (including without limitation budgets, sales
projections, operating plans and other financial documentation), as Silicon
shall from time to time reasonably specify.
-3-
<PAGE> 4
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
4.5 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At all reasonable times, and upon
one business day notice, Silicon, or its agents, shall have the right to inspect
the Collateral, and the right to audit and copy the Borrower's accounting books
and records and Borrower's books and records relating to the Collateral. Silicon
shall take reasonable steps to keep confidential all information obtained in any
such inspection or audit, but Silicon shall have the right to disclose any such
information to its auditors, regulatory agencies, and attorneys, and pursuant to
any subpoena or other legal process. The foregoing audits shall be at Silicon's
expense, except that the Borrower shall reimburse Silicon for its reasonable out
of pocket costs for semi-annual accounts receivable audits by third parties
retained by Silicon, and Silicon may debit Borrower's deposit accounts with
Silicon for the cost of such semi-annual accounts receivable audits (in which
event Silicon shall send notification thereof to the Borrower). Notwithstanding
the foregoing, after the occurrence of an Event of Default all audits shall be
at the Borrower's expense.
4.6 NEGATIVE COVENANTS. Except as may be permitted in the Schedule hereto, the
Borrower shall not, without Silicon's prior written consent, do any of the
following: (i) merge or consolidate with another corporation, except that the
Borrower may merge or consolidate with another corporation if the Borrower is
the surviving corporation in the merger and the aggregate value of the assets
acquired in the merger do not exceed 25% of Borrower's Tangible Net Worth (as
defined in the Schedule) as of the end of the month prior to the effective date
of the merger, and the assets of the corporation acquired in the merger are not
subject to any liens or encumbrances, except Permitted Liens; (ii) acquire any
assets outside the ordinary course of business for an aggregate purchase price
exceeding 25% of Borrower's Tangible Net Worth (as defined in the Schedule) as
of the end of the month prior to the effective date of the acquisition; (iii)
enter into any other transaction outside the ordinary course of business (except
as permitted by the other provisions of this Section); (iv) sell or transfer any
Collateral, except for the sale of finished inventory in the ordinary course of
the Borrower's business, and except for the sale of obsolete or unneeded
equipment in the ordinary course of business; (v) make any loans of any money or
any other assets; (vi) incur any debts, outside the ordinary course of business,
which would have a material, adverse effect on the Borrower or on the prospect
of repayment of the Obligations; (vii) guarantee or otherwise become liable with
respect to the obligations of another party or entity; (viii) pay or declare any
dividends on the Borrower's stock (except for dividends payable solely in stock
of the Borrower); (ix) redeem, retire, purchase or otherwise acquire, directly
or indirectly, any of the Borrower's stock; (x) make any change in the
Borrower's capital structure which has a material adverse effect on the Borrower
or on the prospect of repayment of the Obligations; or (xi) dissolve or elect to
dissolve. Transactions permitted by the foregoing provisions of this Section are
only permitted if no Event of Default and no event which (with notice or passage
of time or both) would constitute an Event of Default would occur as a result of
such transaction.
4.7 LITIGATION COOPERATION. Should any third-party suit or proceeding be
instituted by or against Silicon with respect to any Collateral or in any manner
relating to the Borrower, the Borrower shall, without expense to Silicon, make
available the Borrower and its officers, employees and agents and the Borrower's
books and records to the extent that Silicon may deem them reasonably necessary
in order to prosecute or defend any such suit or proceeding.
4.8 VERIFICATION. Silicon may, from time to time, following prior notification
to Borrower, verify directly with the respective account debtors the validity,
amount and other matters relating to the Borrower's accounts, by means of mail,
telephone or otherwise, either in the name of the Borrower or Silicon or such
other name as Silicon may reasonably choose, provided that no prior notification
to Borrower shall be required following an Event of Default.
4.9 EXECUTE ADDITIONAL DOCUMENTATION. The Borrower agrees, at its expense, on
request by Silicon, to execute all documents in form satisfactory to Silicon, as
Silicon, may deem reasonably necessary or useful in order to perfect and
maintain Silicon's perfected security interest in the Collateral, and in order
to fully consummate all of the transactions contemplated by this Agreement.
5. TERM.
5.1 MATURITY DATE. This Agreement shall continue in effect until the maturity
date set forth on the Schedule hereto (the "Maturity Date").
5.2 EARLY TERMINATION. This Agreement may be terminated, without penalty, prior
to the Maturity Date as follows: (i) by the Borrower, effective three business
days after written notice of termination is given to Silicon; or (ii) by Silicon
at any time after the occurrence of an Event of Default, without notice,
effective immediately.
5.3 PAYMENT OF OBLIGATIONS. On the Maturity Date or on any earlier effective
date of termination, the Borrower shall pay and perform in full all Obligations,
whether evidenced by installment notes or otherwise, and whether or not all or
any part of such Obligations are otherwise then due and payable. Without
limiting the generality of the foregoing, if on the Maturity Date, or on any
earlier effective date of termination, there are any outstanding letters of
credit issued by Silicon or issued by another institution based upon an
application, guarantee, indemnity or similar agreement on the part of Silicon,
then on such date Borrower shall provide to Silicon cash collateral in an amount
equal to the face amount of all such letters of credit plus all interest, fees
and cost due or to become due in connection therewith, to secure all of the
Obligations relating to said letters of credit, pursuant to Silicon's then
-4-
<PAGE> 5
standard form cash pledge agreement. Notwithstanding any termination of this
Agreement, all of Silicon's security interests in all of the Collateral and all
of the terms and provisions of this Agreement shall continue in full force and
effect until all Obligations have been paid and performed in full; provided
that, without limiting the fact that Loans are subject to the reasonable
discretion of Silicon, Silicon may, in its sole discretion, refuse to make any
further Loans after termination. No termination shall in any way affect or
impair any right or remedy of Silicon, nor shall any such termination relieve
the Borrower of any Obligation to Silicon, until all of the Obligations have
been paid and performed in full. Upon payment and performance in full of all the
Obligations, Silicon shall promptly deliver to the Borrower termination
statements, requests for reconveyances and such other documents as may be
required to fully terminate any of Silicon's security interests.
6. EVENTS OF DEFAULT AND REMEDIES.
6.1 EVENTS OF DEFAULT. The occurrence of any of the following events shall
constitute an "Event of Default" under this Agreement, and the Borrower shall
give Silicon immediate written notice thereof: (a) Any warranty, representation,
statement, report or certificate made or delivered to Silicon by the Borrower or
any of the Borrower's officers, employees or agents, now or in the future, shall
be untrue or misleading in any material respect; or (b) the Borrower shall fail
to pay when due any Loan or any interest thereon or any other monetary
Obligation; or (c) the total Loans and other Obligations outstanding at any time
exceed the Credit Limit; or (d) the Borrower shall fail to comply with any of
the financial covenants set forth in the Schedule or shall fail to perform any
other non-monetary Obligation which by its nature cannot be cured; or (e) the
Borrower shall fail to pay or perform any other non-monetary Obligation, which
failure is not cured within 5 business days after the date due; or (f) Any levy,
assessment, attachment, seizure, lien or encumbrance is made on all or any part
of the Collateral which is not cured within 10 days after the occurrence of the
same; or (g) Dissolution, termination of existence, insolvency or business
failure of the Borrower; or appointment of a receiver, trustee or custodian, for
all or any part of the property of, assignment for the benefit of creditors by,
or the commencement of any proceeding by the Borrower under any reorganization,
bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, now or in the future in effect;
or (h) the commencement of any proceeding against the Borrower or any guarantor
of any of the Obligations under any reorganization, bankruptcy, insolvency,
arrangement, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction, now or in the future in effect, which is not cured by the
dismissal thereof within 30 days after the date commenced; (i) revocation or
termination of, or limitation or denial of liability upon, any guaranty of the
Obligations or any attempt to do any of the foregoing; or commencement of
proceedings by any guarantor of any of the Obligations under any bankruptcy or
insolvency law; or (j) revocation or termination of, or limitation or denial of
liability upon, any pledge of any certificate of deposit, securities or other
property or asset of any kind pledged by any third party to secure any or all of
the Obligations, or any attempt to do any of the foregoing; or commencement of
proceedings by or against any such third party under any bankruptcy or
insolvency law; or (k) the Borrower makes any payment on account of any
indebtedness or obligation which has been subordinated to the Obligations other
than as permitted in the applicable subordination agreement or if any person who
has subordinated such indebtedness or obligations terminates or in any way
limits his subordination agreement; or (l) there shall be a change in the record
or beneficial ownership of an aggregate of more than 20% of the outstanding
shares of stock of the Borrower, in one or more transactions, compared to the
ownership of outstanding shares of stock of the Borrower in effect on the date
hereof, without the prior written consent of Silicon; or (m) the Borrower shall
generally not pay its debts as they become due; or the Borrower shall conceal,
remove or transfer any part of its property, with intent to hinder, delay or
defraud its creditors, or make or suffer any transfer of any of its property
which may be fraudulent under any bankruptcy, fraudulent conveyance or similar
law. Silicon may cease making any Loans hereunder during any of the above cure
periods, and thereafter if an Event of Default has occurred.
6.2 REMEDIES. Upon the occurrence of any Event of Default, and at any time
thereafter, Silicon, at its option, and without notice or demand of any kind
(all of which are hereby expressly waived by the Borrower), may do any one or
more of the following: (a) Cease making Loans or otherwise extending credit to
the Borrower under this Agreement or any other document or agreement; (b)
Accelerate and declare all or any part of the Obligations to be immediately due,
payable, and performable, notwithstanding any deferred or installment payments
allowed by any instrument evidencing or relating to any Obligation; (c) Take
possession of any or all of the Collateral wherever it may be found, and for
that purpose the Borrower hereby authorizes Silicon without judicial process to
enter onto any of the Borrower's premises without interference to search for,
take possession of, keep, store, or remove any of the Collateral, and remain on
the premises or cause a custodian to remain on the premises in exclusive control
thereof without charge for so long as Silicon deems it reasonably necessary in
order to complete the enforcement of its rights under this Agreement or any
other agreement; provided, however, that should Silicon seek to take possession
of any or all of the Collateral by Court process, the Borrower hereby
irrevocably waives: (i) any bond and any surety or security relating thereto
required by any statute, court rule or otherwise as an incident to such
possession; (ii) any demand for possession prior to the commencement of any suit
or action to recover possession thereof; and (iii) any requirement that Silicon
retain possession of and not dispose of any such Collateral until after trial or
final judgment; (d) Require the Borrower to assemble any or all of
-5-
<PAGE> 6
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
the Collateral and make it available to Silicon at places designated by Silicon
which are reasonably convenient to Silicon and the Borrower, and to remove the
Collateral to such locations as Silicon may deem advisable; (e) Require Borrower
to deliver to Silicon, in kind, all checks and other payments received with
respect to all accounts and general intangibles, together with any necessary
indorsements, within one day after the date received by the Borrower; (f)
Complete the processing, manufacturing or repair of any Collateral prior to a
disposition thereof and, for such purpose and for the purpose of removal,
Silicon shall have the right to use the Borrower's premises, vehicles, hoists,
lifts, cranes, equipment and all other property without charge; (g) Sell, lease
or otherwise dispose of any of the Collateral in its condition at the time
Silicon obtains possession of it or after further manufacturing, processing or
repair, at any one or more public and/or private sales, in lots or in bulk, for
cash, exchange or other property, or on credit, and to adjourn any such sale
from time to time without notice other than oral announcement at the time
scheduled for sale. Silicon shall have the right to conduct such disposition on
the Borrower's premises without charge, for such time or times as Silicon deems
reasonable, or on Silicon's premises, or elsewhere and the Collateral need not
be located at the place of disposition. Silicon may directly or through any
affiliated company purchase or lease any Collateral at any such public
disposition, and if permissible under applicable law, at any private
disposition. Any sale or other disposition of Collateral shall not relieve the
Borrower of any liability the Borrower may have if any Collateral is defective
as to title or physical condition or otherwise at the time of sale; (h) Demand
payment of, and collect any accounts and general intangibles comprising
Collateral and, in connection therewith, the Borrower irrevocably authorizes
Silicon to endorse or sign the Borrower's name on all collections, receipts,
instruments and other documents, to take possession of and open mail addressed
to the Borrower and remove therefrom payments made with respect to any item of
the Collateral or proceeds thereof, and, in Silicon's sole discretion, to grant
extensions of time to pay, compromise claims and settle accounts and the like
for less than face value; (i) Offset against any sums in any of Borrower's
general, special or other deposit accounts with Silicon; and (j) Demand and
receive possession of any of the Borrower's federal and state income tax returns
and the books and records utilized in the preparation thereof or referring
thereto. All reasonable attorneys' fees, expenses, costs, liabilities and
obligations incurred by Silicon with respect to the foregoing shall be added to
and become part of the Obligations, shall be due on demand, and shall bear
interest at a rate equal to the highest interest rate applicable to any of the
Obligations. Without limiting any of Silicon's rights and remedies, from and
after the occurrence of any Event of Default, the interest rate applicable to
the Obligations shall be increased by an additional four percent per annum.
6.3 STANDARDS FOR DETERMINING COMMERCIAL REASONABLENESS. The Borrower and
Silicon agree that a sale or other disposition (collectively, "sale") of any
Collateral which complies with the following standards will conclusively be
deemed to be commercially reasonable: (i) Notice of the sale is given to the
Borrower at least seven days prior to the sale, and, in the case of a public
sale, notice of the sale is published at least seven days before the sale in a
newspaper of general circulation in the county where the sale is to be
conducted; (ii) Notice of the sale describes the collateral in general,
non-specific terms; (iii) The sale is conducted at a place designated by
Silicon, with or without the Collateral being present; (iv) The sale commences
at any time between 8:00 a.m. and 6:00 p.m.; (v) Payment of the purchase price
in cash or by cashier's check or wire transfer is required; (vi) With respect to
any sale of any of the Collateral, Silicon may (but is not obligated to) direct
any prospective purchaser to ascertain directly from the Borrower any and all
information concerning the same. Silicon may employ other methods of noticing
and selling the Collateral, in its discretion, if they are commercially
reasonable.
6.4 POWER OF ATTORNEY. Upon the occurrence of any Event of Default, without
limiting Silicon's other rights and remedies, the Borrower grants to Silicon an
irrevocable power of attorney coupled with an interest, authorizing and
permitting Silicon (acting through any of its employees, attorneys or agents) at
any time, at its option, but without obligation, with or without notice to the
Borrower, and at the Borrower's expense, to do any or all of the following, in
the Borrower's name or otherwise: (a) Execute on behalf of the Borrower any
documents that Silicon may, in its sole and absolute discretion, deem advisable
in order to perfect and maintain Silicon's security interest in the Collateral,
or in order to exercise a right of the Borrower or Silicon, or in order to fully
consummate all the transactions contemplated under this Agreement, and all other
present and future agreements; (b) Execute on behalf of the Borrower any
document exercising, transferring or assigning any option to purchase, sell or
otherwise dispose of or to lease (as lessor or lessee) any real or personal
property which is part of Silicon's Collateral or in which Silicon has an
interest; (c) Execute on behalf of the Borrower, any invoices relating to any
account, any draft against any account debtor and any notice to any account
debtor, any proof of claim in bankruptcy, any Notice of Lien, claim of
mechanic's, materialman's or other lien, or assignment or satisfaction of
mechanic's, materialman's or other lien; (d) Take control in any manner of any
cash or non-cash items of payment or proceeds of Collateral; endorse the name of
the Borrower upon any instruments, or documents, evidence of payment or
Collateral that may come into Silicon's possession; (e) Endorse all checks and
other forms of remittances received by Silicon; (f) Pay, contest or settle any
lien, charge, encumbrance, security interest and adverse claim in or to any of
the Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; (g) Grant extensions of time to pay, compromise
claims and settle accounts and general intangibles for less than face value and
-6-
<PAGE> 7
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
execute all releases and other documents in connection therewith; (h) Pay any
sums required on account of the Borrower's taxes or to secure the release of any
liens therefor, or both; (i) Settle and adjust, and give releases of, any
insurance claim that relates to any of the Collateral and obtain payment
therefor; (j) Instruct any third party having custody or control of any books or
records belonging to, or relating to, the Borrower to give Silicon the same
rights of access and other rights with respect thereto as Silicon has under this
Agreement; and (k) Take any action or pay any sum required of the Borrower
pursuant to this Agreement and any other present or future agreements. Silicon
shall exercise the foregoing powers in a commercially reasonable manner. Any and
all reasonable sums paid and any and all reasonable costs, expenses,
liabilities, obligations and attorneys' fees incurred by Silicon with respect to
the foregoing shall be added to and become part of the Obligations, shall be
payable on demand, and shall bear interest at a rate equal to the highest
interest rate applicable to any of the Obligations. In no event shall Silicon's
rights under the foregoing power of attorney or any of Silicon's other rights
under this Agreement be deemed to indicate that Silicon is in control of the
business, management or properties of the Borrower.
6.5 APPLICATION OF PROCEEDS. All proceeds realized as the result of any sale of
the Collateral shall be applied by Silicon first to the costs, expenses,
liabilities, obligations and attorneys' fees incurred by Silicon in the exercise
of its rights under this Agreement, second to the interest due upon any of the
Obligations, and third to the principal of the Obligations, in such order as
Silicon shall determine in its sole discretion. Any surplus shall be paid to the
Borrower or other persons legally entitled thereto; the Borrower shall remain
liable to Silicon for any deficiency. If, Silicon, in its sole discretion,
directly or indirectly enters into a deferred payment or other credit
transaction with any purchaser at any sale or other disposition of Collateral,
Silicon shall have the option, exercisable at any time, in its sole discretion,
of either reducing the Obligations by the principal amount of purchase price or
deferring the reduction of the Obligations until the actual receipt by Silicon
of the cash therefor.
6.6 REMEDIES CUMULATIVE. In addition to the rights and remedies set forth in
this Agreement, Silicon shall have all the other rights and remedies accorded a
secured party under the California Uniform Commercial Code and under all other
applicable laws, and under any other instrument or agreement now or in the
future entered into between Silicon and the Borrower, and all of such rights and
remedies are cumulative and none is exclusive. Exercise or partial exercise by
Silicon of one or more of its rights or remedies shall not be deemed an
election, nor bar Silicon from subsequent exercise or partial exercise of any
other rights or remedies. The failure or delay of Silicon to exercise any rights
or remedies shall not operate as a waiver thereof, but all rights and remedies
shall continue in full force and effect until all of the Obligations have been
fully paid and performed.
7. GENERAL PROVISIONS.
7.1 NOTICES. All notices to be given under this Agreement shall be in writing
and shall be given either personally or by regular first-class mail, or
certified mail return receipt requested, addressed to Silicon or the Borrower at
the addresses shown in the heading to this Agreement, or at any other address
designated in writing by one party to the other party. All notices shall be
deemed to have been given upon delivery in the case of notices personally
delivered to the Borrower or to Silicon, or at the expiration of two business
days following the deposit thereof in the United States mail, with postage
prepaid.
7.2 SEVERABILITY. Should any provision of this Agreement be held by any court
of competent jurisdiction to be void or unenforceable, such defect shall not
affect the remainder of this Agreement, which shall continue in full force and
effect.
7.3 INTEGRATION. This Agreement and such other written agreements, documents
and instruments as may be executed in connection herewith are the final, entire
and complete agreement between the Borrower and Silicon and supersede all prior
and contemporaneous negotiations and oral representations and agreements, all of
which are merged and integrated in this Agreement. There are no oral
understandings, representations or agreements between the parties which are not
set forth in this Agreement or in other written agreements signed by the parties
in connection herewith.
7.4 WAIVERS. The failure of Silicon at any time or times to require the
Borrower to strictly comply with any of the provisions of this Agreement or any
other present or future agreement between the Borrower and Silicon shall not
waive or diminish any right of Silicon later to demand and receive strict
compliance therewith. Any waiver of any default shall not waive or affect any
other default, whether prior or subsequent thereto. None of the provisions of
this Agreement or any other agreement now or in the future executed by the
Borrower and delivered to Silicon shall be deemed to have been waived by any act
or knowledge of Silicon or its agents or employees, but only by a specific
written waiver signed by an officer of Silicon and delivered to the Borrower.
The Borrower waives demand, protest, notice of protest and notice of default or
dishonor, notice of payment and nonpayment, release, compromise, settlement,
extension or renewal of any commercial paper, instrument, account, general
intangible, document or guaranty at any time held by Silicon on which the
Borrower is or may in any way be liable, and notice of any action taken by
Silicon, unless expressly required by this Agreement.
7.5 NO LIABILITY FOR ORDINARY NEGLIGENCE. Neither Silicon, nor any of its
directors, officers, employees, agents, attorneys or any other person affiliated
with or representing Silicon shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by the
Borrower or any other party through the ordinary negligence of
-7-
<PAGE> 8
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
Silicon, or any of its directors, officers, employees, agents, attorneys or any
other person affiliated with or representing Silicon.
7.6 AMENDMENT. The terms and provisions of this Agreement may not be waived or
amended, except in a writing executed by the Borrower and a duly authorized
officer of Silicon.
7.7 TIME OF ESSENCE. Time is of the essence in the performance by the Borrower
of each and every obligation under this Agreement.
7.8 ATTORNEYS FEES AND COSTS. The Borrower shall reimburse Silicon for all
reasonable attorneys' fees and all filing, recording, search, title insurance,
appraisal, audit, and other reasonable costs incurred by Silicon, pursuant to,
or in connection with, or relating to this Agreement (whether or not a lawsuit
is filed), including, but not limited to, any reasonable attorneys' fees and
costs Silicon incurs in order to do the following: prepare and negotiate this
Agreement and the
documents relating to this Agreement; obtain legal advice in connection with
this Agreement; enforce, or seek to enforce, any of its rights; prosecute
actions against, or defend actions by, account debtors; commence, intervene in,
or defend any action or proceeding; initiate any complaint to be relieved of the
automatic stay in bankruptcy; file or prosecute any probate claim, bankruptcy
claim, third-party claim, or other claim; examine, audit, copy, and inspect any
of the Collateral or any of the Borrower's books and records; protect, obtain
possession of, lease, dispose of, or otherwise enforce Silicon's security
interest in, the Collateral; and otherwise represent Silicon in any litigation
relating to the Borrower. In satisfying Borrower's obligation hereunder to
reimburse Silicon for attorneys fees, Borrower may, for convenience, issue
checks directly to Silicon's attorneys, Levy, Small & Lallas, but Borrower
acknowledges and agrees that Levy, Small & Lallas is representing only Silicon
and not Borrower in connection with this Agreement. If either Silicon or the
Borrower files any lawsuit against the other predicated on a breach of this
Agreement, the prevailing party in such action shall be entitled to recover its
reasonable costs and attorneys' fees, including (but not limited to) reasonable
attorneys' fees and costs incurred in the enforcement of, execution upon or
defense of any order, decree, award or judgment. All attorneys' fees and costs
to which Silicon may be entitled pursuant to this Paragraph shall immediately
become part of the Borrower's Obligations, shall be due on demand, and shall
bear interest at a rate equal to the highest interest rate applicable to any of
the Obligations.
7.9 BENEFIT OF AGREEMENT. The provisions of this Agreement shall be binding
upon and inure to the benefit of the respective successors, assigns, heirs,
beneficiaries and representatives of the parties hereto; provided, however, that
the Borrower may not assign or transfer any of its rights under this Agreement
without the prior written consent of Silicon, and any prohibited assignment
shall be void. No consent by Silicon to any assignment shall release the
Borrower from its liability for the Obligations.
7.10 JOINT AND SEVERAL LIABILITY. If the Borrower consists of more than one
person, their liability shall be joint and several, and the compromise of any
claim with, or the release of, any Borrower shall not constitute a compromise
with, or a release of, any other Borrower.
7.11 PARAGRAPH HEADINGS; CONSTRUCTION. Paragraph headings are only used in this
Agreement for convenience. The Borrower acknowledges that the headings may not
describe completely the subject matter of the applicable paragraph, and the
headings shall not be used in any manner to construe, limit, define or interpret
any term or provision of this Agreement. This Agreement has been fully reviewed
and negotiated between the parties and no uncertainty or ambiguity in any term
or provision of this Agreement shall be construed strictly against Silicon or
the Borrower under any rule of construction or otherwise.
7.12 MUTUAL WAIVER OF JURY TRIAL. THE BORROWER AND SILICON EACH HEREBY WAIVE THE
RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF,
OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN SILICON AND THE BORROWER, OR ANY CONDUCT, ACTS
OR OMISSIONS OF SILICON OR THE BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH SILICON OR THE
BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR
OTHERWISE.
7.13 GOVERNING LAW; JURISDICTION; VENUE. This Agreement and all acts and
transactions hereunder and all rights and obligations of Silicon and the
Borrower shall be governed by, and in accordance with, the laws of the State of
California. Any undefined term used in this Agreement that is defined in the
California Uniform Commercial Code shall have the meaning assigned to that term
in the California Uniform Commercial Code. As a material part of the
consideration to Silicon to enter into this Agreement, the Borrower (i) agrees
that all actions and proceedings relating directly or indirectly hereto shall,
at Silicon's option, be litigated in courts located within California, and that
the exclusive venue therefor shall be Orange County; (ii) consents to the
jurisdiction and venue of any such court and consents to service of process in
any such action or proceeding by personal delivery or any other method permitted
by law; and (iii) waives any and all rights the Borrower may have to object to
the jurisdiction of any such court, or to transfer or change the venue of any
such action or proceeding.
BORROWER:
BROADCOM CORPORATION
-8-
<PAGE> 9
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
BY_______________________________
PRESIDENT OR VICE PRESIDENT
BY_______________________________
SECRETARY OR ASS'T SECRETARY
SILICON:
SILICON VALLEY BANK
BY_______________________________
TITLE______________________________
-9-
<PAGE> 10
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
[LOGO] SILICON VALLEY BANK
AMENDMENT TO LOAN AGREEMENT
BORROWER: BROADCOM CORPORATION
ADDRESS: 16251 LAGUNA CANYON ROAD
IRVINE, CALIFORNIA 92718
DATE: APRIL 6, 1997
THIS AMENDMENT TO LOAN AGREEMENT is entered into between SILICON VALLEY
BANK ("Silicon") and the borrower named above (the "Borrower"), with reference
to the following facts:
Silicon entered into that certain Loan and Security Agreement with the
Borrower dated March 23, 1995 (the "Original Loan Agreement"), as amended by
that Amendment to Loan Agreement dated September 8, 1995, as amended by that
Amendment to Loan Agreement dated November 17, 1995, and as amended by that
Amendment to Loan Agreement dated April 9, 1996 (the Original Loan Agreement as
so amended and as otherwise amended from time to time is referred to herein as
the "Loan Agreement"). The parties desire to amend the Loan Agreement as herein
set forth effective as of the date hereof. (Capitalized terms used but not
defined in this Amendment, shall have the meanings set forth in the Loan
Agreement.)
1. AMENDED SCHEDULE. The Schedule to the Loan Agreement is hereby deleted
and replaced with the Schedule to the Loan Agreement as attached hereto.
2. MODIFIED SECTION 4.5. Section 4.5 of the Loan Agreement is hereby
amended to read as follows:
"4.5 ACCESS TO COLLATERAL, BOOKS AND RECORDS. At all reasonable times,
and upon one business day notice, Silicon, or its agents, shall have the right
to inspect the Collateral, and the right to audit and copy the Borrower's
accounting books and records and Borrower's books and records relating to the
Collateral. Silicon shall take reasonable steps to keep confidential all
information obtained in any such inspection or audit, but Silicon shall have the
right to disclose any such information to its auditors, regulatory agencies, and
attorneys, and pursuant to any subpoena or other legal process. The foregoing
audits shall be at Silicon's expense, except that the Borrower shall reimburse
Silicon for its reasonable costs for semi-annual accounts receivable audits at
all times that there have been any Accounts Loans (as defined in the Schedule)
outstanding, and Silicon may debit Borrower's deposit accounts with Silicon for
the cost of such semi-annual accounts receivable audits (in which event Silicon
shall send notification thereof to the Borrower); at times that there have been
no Accounts Loans outstanding, then such audits shall be on an annual basis.
Notwithstanding the foregoing, after the occurrence of an Event of Default all
audits shall be at the Borrower's expense."
3. FEE. Borrower shall pay to Silicon a fee of $22,500 in connection with
this Amendment, which fee shall be in addition to all interest and all other
amounts payable under the Loan Agreement and which shall not be refundable.
4. GENERAL PROVISIONS. This Amendment, the Loan Agreement, all prior
written amendments to the Loan Agreement signed by Silicon and the Borrowers or
any of them, and the other written documents and agreements between Silicon and
the Borrowers or any of them set forth in full all of the representations and
agreements of the parties with respect to the subject matter hereof and
supersede all prior discussions, representations, agreements and understandings
between the parties with respect to the subject hereof. Except as herein
expressly amended, all of the terms and provisions of the Loan Agreement, and
all other documents and agreements between Silicon and the Borrowers or any of
them shall continue in full force and effect and the same are hereby ratified
and confirmed.
BROADCOM CORPORATION SILICON VALLEY BANK
BY_______________________________ BY_______________________________
PRESIDENT OR VICE PRESIDENT
TITLE__________________________
BY_______________________________
SECRETARY OR ASS'T SECRETARY
-1-
<PAGE> 11
SILICON VALLEY BANK LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
[LOGO] SILICON VALLEY BANK
AMENDMENT TO LOAN AGREEMENT
BORROWER: BROADCOM CORPORATION
ADDRESS: 16251 LAGUNA CANYON ROAD
IRVINE, CALIFORNIA 92718
DATE: JUNE 11, 1997
THIS AMENDMENT TO LOAN AGREEMENT is entered into between SILICON VALLEY
BANK ("Silicon") and the borrower named above (the "Borrower"), with reference
to the following facts:
Silicon entered into that certain Loan and Security Agreement with the
Borrower dated March 23, 1995 (the "Original Loan Agreement"), as amended by
that Amendment to Loan Agreement dated September 8, 1995, as amended by that
Amendment to Loan Agreement dated November 17, 1995, as amended by that
Amendment to Loan Agreement dated April 9, 1996, and as amended by that
Amendment to Loan Agreement dated April 6, 1997 (the Original Loan Agreement as
so amended and as otherwise amended from time to time is referred to herein as
the "Loan Agreement"). The parties desire to amend the Loan Agreement as herein
set forth effective as of the date hereof. (Capitalized terms used but not
defined in this Amendment, shall have the meanings set forth in the Loan
Agreement.)
1. AMENDED SCHEDULE. The Schedule to the Loan Agreement is hereby deleted
and replaced with the Schedule to the Loan Agreement as attached hereto.
2. GENERAL PROVISIONS. This Amendment, the Loan Agreement, all prior
written amendments to the Loan Agreement signed by Silicon and the Borrowers or
any of them, and the other written documents and agreements between Silicon and
the Borrowers or any of them set forth in full all of the representations and
agreements of the parties with respect to the subject matter hereof and
supersede all prior discussions, representations, agreements and understandings
between the parties with respect to the subject hereof. Except as herein
expressly amended, all of the terms and provisions of the Loan Agreement, and
all other documents and agreements between Silicon and the Borrowers or any of
them shall continue in full force and effect and the same are hereby ratified
and confirmed.
BROADCOM CORPORATION SILICON VALLEY BANK
BY_______________________________ BY_______________________________
PRESIDENT OR VICE PRESIDENT
TITLE____________________________
BY_______________________________
SECRETARY OR ASS'T SECRETARY
-1-
<PAGE> 12
SILICON LOAN DOCUMENTS
- --------------------------------------------------------------------------------
SCHEDULE TO LOAN AND SECURITY AGREEMENT -.S.
<PAGE> 13
- --------------------------------------------------------------------------------
[LOGO] SILICON VALLEY BANK
SCHEDULE TO
LOAN AND SECURITY AGREEMENT
BORROWER: BROADCOM CORPORATION
ADDRESS: 16251 LAGUNA CANYON ROAD
IRVINE, CALIFORNIA 92718
DATE: JUNE 11, 1997
THIS SCHEDULE IS AN INTEGRAL PART OF THE LOAN AND SECURITY AGREEMENT
BETWEEN SILICON VALLEY BANK ("SILICON") AND THE ABOVE-NAMED BORROWER
("BORROWER").
CREDIT LIMIT
(SECTION 1.1): AN AMOUNT NOT TO EXCEED:
(A) THE TERM LOAN (AS DEFINED BELOW);
PLUS
(B) THE LESSER OF (THE "ACCOUNTS LOANS"): (I)
$3,000,000 AT ANY ONE TIME OUTSTANDING; OR (II)
80% OF THE NET AMOUNT OF BORROWER'S ACCOUNTS,
WHICH SILICON IN ITS DISCRETION DEEMS ELIGIBLE
FOR BORROWING. "NET AMOUNT" OF AN ACCOUNT MEANS
THE GROSS AMOUNT OF THE ACCOUNT, MINUS ALL
APPLICABLE SALES, USE, EXCISE AND OTHER SIMILAR
TAXES AND MINUS ALL DISCOUNTS, CREDITS AND
ALLOWANCES OF ANY NATURE GRANTED OR CLAIMED.
LOANS THAT ARE MADE BASED ON BORROWER'S
ELIGIBLE ACCOUNTS AS DESCRIBED HEREIN ARE
REFERRED TO AS THE "ACCOUNTS LOANS."
WITHOUT LIMITING THE FACT THAT THE
DETERMINATION OF WHICH ACCOUNTS ARE ELIGIBLE
FOR BORROWING IS A MATTER OF SILICON'S
DISCRETION, THE FOLLOWING WILL NOT BE DEEMED
ELIGIBLE FOR BORROWING: ACCOUNTS OUTSTANDING
FOR MORE THAN 90 DAYS FROM THE INVOICE DATE,
ACCOUNTS SUBJECT TO ANY CONTINGENCIES, ACCOUNTS
OWING FROM THE UNITED STATES OR ANY DEPARTMENT,
AGENCY OR INSTRUMENTALITY OF THE UNITED STATES
OR ANY STATE, CITY OR MUNICIPALITY, ACCOUNTS
OWING FROM AN ACCOUNT DEBTOR OUTSIDE THE UNITED
STATES (UNLESS PRE-APPROVED BY SILICON IN ITS
DISCRETION, OR BACKED BY A LETTER OF CREDIT
SATISFACTORY TO SILICON, OR FCIA INSURED
SATISFACTORY TO SILICON)*, ACCOUNTS OWING FROM
ONE ACCOUNT DEBTOR TO THE EXTENT THEY EXCEED
25% OF THE TOTAL ELIGIBLE ACCOUNTS
OUTSTANDING**, ACCOUNTS OWING FROM AN AFFILIATE
OF BORROWER, AND ACCOUNTS OWING FROM AN ACCOUNT
DEBTOR TO WHOM BORROWER IS OR MAY BE LIABLE FOR
GOODS PURCHASED FROM SUCH ACCOUNT DEBTOR OR
OTHERWISE. IN ADDITION, IF MORE THAN 50% OF THE
ACCOUNTS OWING FROM AN
<PAGE> 14
SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
ACCOUNT DEBTOR ARE OUTSTANDING MORE THAN 90
DAYS FROM THE INVOICE DATE OR ARE OTHERWISE NOT
ELIGIBLE ACCOUNTS, THEN ALL ACCOUNTS OWING FROM
THAT ACCOUNT DEBTOR WILL BE DEEMED INELIGIBLE
FOR BORROWING.
* (ACCOUNTS OWING FROM GENERAL INSTRUMENTS
SHALL NOT BE DEEMED INELIGIBLE BY VIRTUE OF THE
LOCATION OF THE ACCOUNT DEBTOR OUTSIDE OF THE
UNITED STATES)
** (PROVIDED THAT THE PERCENTAGE APPLICABLE TO
GENERAL INSTRUMENTS, SCIENTIFIC ATLANTA,
HEWLETT PACKARD, MOTOROLA OR ROCKWELL SHALL BE
50%)
TERM LOAN (A) SUBJECT TO AND UPON THE TERMS AND
CONDITIONS OF THIS AGREEMENT, SILICON AGREES TO
MAKE A TERM LOAN (THE "TERM LOAN") TO BORROWER
SUBSTANTIALLY CONCURRENTLY UPON ENTERING INTO
THE AMENDMENT TO THE LOAN AGREEMENT DATED JUNE
11, 1997 BETWEEN THE BORROWER AND SILICON IN AN
AGGREGATE, OUTSTANDING AMOUNT NOT TO EXCEED
$3,000,000, PROVIDED IN NO EVENT SHALL THE
AMOUNT OF THE TERM LOAN EXCEED 100% OF THE NET
PURCHASE PRICE OF EQUIPMENT AND ASSOCIATED
SOFTWARE BEING PURCHASED BY BORROWER OR
EQUIPMENT AND ASSOCIATED SOFTWARE THAT THE
BORROWER HAS PURCHASED NO EARLIER THAN 12
MONTHS PRIOR TO THE DATE OF THE TERM LOAN,
WHICH ARE OTHERWISE ACCEPTABLE TO SILICON IN
ITS DISCRETION (THE "EQUIPMENT BORROWING
BASE"). THE "NET PURCHASE PRICE" OF EQUIPMENT
MEANS THE PURCHASE PRICE THEREOF, AS SHOWN ON
THE APPLICABLE INVOICE, NET OF ALL CHARGES FOR
TAXES, FREIGHT, DELIVERY, INSTALLATION,
INSURANCE, SET-UP, TRAINING, MANUALS, FEES,
SERVICE CHARGES AND OTHER SIMILAR ITEMS. TO
SUPPORT SILICON'S MAKING OF THE TERM LOAN,
BORROWER SHALL DELIVER TO SILICON, EVIDENCE, IN
FORM AND SUBSTANCE SATISFACTORY TO SILICON (THE
"TERM LOAN EVIDENCE"), OF THE EQUIPMENT
PURCHASES THAT ARE THE SUBJECT OF THE EQUIPMENT
BORROWING BASE.
(B) UPON THE BORROWER'S WRITTEN ELECTION TO
SILICON ON THE MAKING OF THE TERM LOAN,
INTEREST SHALL ACCRUE AT EITHER THE PRIME RATE
OPTION (AS DEFINED BELOW) OR THE FIXED RATE
OPTION (AS DEFINED BELOW); IF BORROWER FAILS TO
NOTIFY THE SILICON ON OR BEFORE THE MAKING OF
THE TERM LOAN OF SUCH INTEREST RATE ELECTION,
THEN THE INTEREST RATE SHALL BE DEEMED TO BE
THE PRIME RATE OPTION. SUCH INTEREST SHALL BE
PAYABLE MONTHLY FOR EACH MONTH WHILE THE TERM
LOAN IS OUTSTANDING. AS USED HEREIN THE TERM
"FIXED RATE OPTION" SHALL MEAN THE TREASURY
BILL RATE (AS DEFINED BELOW) IN EFFECT AS OF
THE DATE OF THE MAKING OF THE TERM LOAN ON A
PER ANNUM BASIS PLUS THREE AND ONE- HALF
PERCENT (3.50%). THE TERM "PRIME RATE OPTION"
SHALL MEAN A PER ANNUM INTEREST RATE EQUAL TO
ONE-HALF OF ONE PERCENT (0.50%) ABOVE THE
PRIME RATE (AS DEFINED BELOW).
"PRIME RATE" MEANS THE VARIABLE RATE OF INTEREST, PER ANNUM, MOST RECENTLY
ANNOUNCED BY SILICON, AS ITS "PRIME RATE," WHETHER OR NOT SUCH ANNOUNCED RATE IS
THE LOWEST RATE AVAILABLE FROM SILICON.
-2-
<PAGE> 15
SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
"TREASURY BILL RATE" MEANS THE INTEREST RATE PER ANNUM EQUAL TO THE MOST RECENT
WEEKLY AVERAGE YIELD ON ACTIVELY TRADED U.S. TREASURY OBLIGATIONS HAVING A FINAL
MATURITY OF THREE YEARS AS DETERMINED BY REFERENCE TO THE WEEK ENDING FIGURES
PUBLISHED IN THE MOST RECENT FEDERAL RESERVE STATISTICAL RELEASE WHICH SHALL
BECOME AVAILABLE AT LEAST TWO BUSINESS DAYS PRIOR TO THE DATE AS OF WHICH SUCH
YIELD IS TO BE DETERMINED, OR IF A STATISTICAL RELEASE IS NOT THEN PUBLISHED,
THE ARITHMETIC AVERAGE (ROUNDED TO THE NEAREST .01%) OF THE PER ANNUM YIELDS TO
MATURITY FOR EACH BUSINESS DAY DURING THE WEEK ENDING AT LEAST TWO BUSINESS DAYS
PRIOR TO THE DATE SUCH DETERMINATION IS MADE, OF ALL ISSUES OF ACTIVELY TRADED
MARKETABLE UNITED STATES TREASURY FIXED INTEREST RATE SECURITIES WITH A CONSTANT
MATURITY EQUAL TO, OR NOT MORE THAN 30 DAYS LONGER OR 30 DAYS SHORTER THAN THREE
YEARS (EXCLUDING ALL SUCH SECURITIES WHICH CAN BE SURRENDERED AT THE OPTION OF
THE HOLDER AT THE FACE VALUE OF PAYMENT OF ANY FEDERAL ESTATE TAX, OR WHICH
PROVIDE FOR TAX BENEFITS TO THE HOLDER).
(D) IN THE EVENT THE PRIME RATE IS CHANGED FROM
TIME TO TIME HEREAFTER, THE APPLICABLE RATE OF
INTEREST HEREUNDER SHALL BE INCREASED OR
DECREASED EFFECTIVE AS OF 12:01 A.M. ON THE DAY
THE PRIME RATE IS CHANGED, BY AN AMOUNT EQUAL
TO SUCH CHANGE IN THE PRIME RATE. ALL INTEREST
CHARGEABLE UNDER THE LOAN DOCUMENTS SHALL BE
COMPUTED ON THE BASIS OF A THREE HUNDRED SIXTY
(360) DAY YEAR FOR THE ACTUAL NUMBER OF DAYS
ELAPSED.
(E) THE TERM LOAN WILL BE PAYABLE IN THIRTY-SIX
(36) EQUAL MONTHLY INSTALLMENTS OF PRINCIPAL,
PLUS ALL ACCRUED INTEREST, WITH THE FIRST OF
SUCH PAYMENTS DUE ON JULY 1, 1997, AND
CONTINUING WITH EACH SUCCEEDING PAYMENT DUE AND
PAYABLE ON THE FIRST DAY OF EACH MONTH
THEREAFTER FOR THE FOLLOWING THIRTY-FOUR (34)
CONSECUTIVE MONTHS, AND WITH THE REMAINING
AMOUNT OF THE TERM LOAN AND ALL OBLIGATIONS
RELATING THERETO TO BE FULLY DUE AND PAYABLE IN
A FINAL PAYMENT NO LATER THAN JUNE 1, 2000. ANY
PORTION OF THE TERM LOAN, ONCE REPAID, MAY NOT
BE REBORROWED.
(F) IN THE EVENT ANY PRINCIPAL OF THE TERM LOAN
IS PREPAID PRIOR TO THE DATES DUE UNDER THE
SCHEDULE OF PRINCIPAL PAYMENTS SET FORTH ABOVE
AND BORROWER HAS ELECTED THE FIXED RATE OPTION
ONLY, BORROWER SHALL ALSO PAY SILICON A
PREPAYMENT FEE IN AN AMOUNT EQUAL TO THE
FOLLOWING PERCENTAGE OF THE AMOUNT PREPAID OR
REQUIRED TO BE PREPAID, BASED ON THE DATE THE
PREPAYMENT OCCURS OR THE DATE PREPAYMENT IS DUE
AS A RESULT OF AN EVENT OF DEFAULT OR
TERMINATION OF THIS AGREEMENT:
ON OR BEFORE 7/1/98: 3%
AFTER 7/1/98 AND ON OR BEFORE 7/1/99: 2%
AFTER 7/1/99 AND ON OR BEFORE 6/1/2000: 1%
LETTER OF CREDIT SUBLIMIT SILICON, IN ITS REASONABLE DISCRETION, WILL
FROM TIME TO TIME DURING THE TERM OF THIS
AGREEMENT ISSUE LETTERS OF CREDIT FOR THE
ACCOUNT OF THE BORROWER ("LETTERS OF CREDIT"),
IN AN AGGREGATE AMOUNT AT ANY ONE TIME
OUTSTANDING NOT TO EXCEED $500,000, UPON THE
REQUEST OF THE BORROWER, PROVIDED THAT, ON THE
DATE THE LETTERS OF CREDIT ARE TO BE ISSUED,
BORROWER HAS AVAILABLE TO IT LOANS IN AN AMOUNT
EQUAL TO OR GREATER THAN THE FACE AMOUNT OF THE
LETTERS OF CREDIT TO BE ISSUED. PRIOR TO
-3-
<PAGE> 16
SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
THE ISSUANCE OF ANY LETTERS OF CREDIT, BORROWER
SHALL EXECUTE AND DELIVER TO SILICON
APPLICATIONS FOR LETTERS OF CREDIT AND SUCH
OTHER DOCUMENTATION AS SILICON SHALL SPECIFY
(THE "LETTER OF CREDIT DOCUMENTATION"). FEES
FOR THE LETTERS OF CREDIT SHALL BE AS PROVIDED
IN THE LETTER OF CREDIT DOCUMENTATION. LETTERS
OF CREDIT MAY HAVE A MATURITY DATE UP TO TWELVE
MONTHS BEYOND THE MATURITY DATE IN EFFECT FROM
TIME TO TIME, PROVIDED THAT IF, ON THE MATURITY
DATE, OR ON ANY EARLIER EFFECTIVE DATE OF
TERMINATION, THERE ARE ANY OUTSTANDING LETTERS
OF CREDIT ISSUED BY SILICON OR ISSUED BY
ANOTHER INSTITUTION BASED UPON AN APPLICATION,
GUARANTEE, INDEMNITY OR SIMILAR AGREEMENT ON
THE PART OF SILICON, THEN ON SUCH DATE BORROWER
SHALL PROVIDE TO SILICON CASH COLLATERAL IN AN
AMOUNT EQUAL TO THE FACE AMOUNT OF ALL SUCH
LETTERS OF CREDIT PLUS ALL INTEREST, FEES AND
COST DUE OR TO BECOME DUE IN CONNECTION
THEREWITH, TO SECURE ALL OF THE OBLIGATIONS
RELATING TO SAID LETTERS OF CREDIT, PURSUANT TO
SILICON'S THEN STANDARD FORM CASH PLEDGE
AGREEMENT. THE CREDIT LIMIT SHALL BE REDUCED BY
THE AMOUNT OF LETTERS OF CREDIT FROM TIME TO
TIME OUTSTANDING AND NO LETTER OF CREDIT SHALL
BE ISSUED UNLESS THERE IS SUFFICIENT
AVAILABILITY UNDER THE CREDIT LIMIT AT THE TIME
THAT ANY SUCH ISSUANCE IS PROPOSED TO BE MADE.
INTEREST RATE (SECTION 1.2): WITH RESPECT TO THE ACCOUNTS LOANS: A RATE
EQUAL TO THE PRIME RATE IN EFFECT FROM TIME TO
TIME PER ANNUM. INTEREST SHALL BE CALCULATED ON
THE BASIS OF A 360-DAY YEAR FOR THE ACTUAL
NUMBER OF DAYS ELAPSED. THE INTEREST RATE
APPLICABLE TO THE OBLIGATIONS SHALL CHANGE ON
EACH DATE THERE IS A CHANGE IN THE PRIME RATE.
WITH RESPECT TO TERM LOAN: AS SET FORTH ABOVE
IN THE TERM LOAN SECTION.
LOAN ORIGINATION FEE
(SECTION 1.3): SEE AMENDMENT OF EVEN DATE HEREWITH.
MATURITY DATE
(SECTION 5.1): APRIL 5, 1998, OTHER THAN WITH RESPECT TO
THE TERM LOAN, WHICH SHALL HAVE A MATURITY DATE
AS SET FORTH IN THE PROVISIONS ABOVE REGARDING
THE TERM LOAN.
PRIOR NAMES OF BORROWER
(SECTION 3.2): BASEBAND TECHNOLOGIES; BROADBAND TELECOM
TRADE NAMES OF BORROWER
(SECTION 3.2): NONE
OTHER LOCATIONS AND ADDRESSES
(SECTION 3.3): NONE
MATERIAL ADVERSE LITIGATION
(SECTION 3.10): NONE
-4-
<PAGE> 17
SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
NEGATIVE COVENANTS-EXCEPTIONS
(SECTION 4.6): WITHOUT SILICON'S PRIOR WRITTEN CONSENT,
BORROWER MAY DO THE FOLLOWING, PROVIDED THAT,
AFTER GIVING EFFECT THERETO, NO EVENT OF
DEFAULT HAS OCCURRED AND NO EVENT HAS OCCURRED
WHICH, WITH NOTICE OR PASSAGE OF TIME OR BOTH,
WOULD CONSTITUTE AN EVENT OF DEFAULT, AND
PROVIDED THAT THE FOLLOWING ARE DONE IN
COMPLIANCE WITH ALL APPLICABLE LAWS, RULES AND
REGULATIONS: (I) REPURCHASE SHARES OF
BORROWER'S STOCK PURSUANT TO ANY EMPLOYEE STOCK
PURCHASE OR BENEFIT PLAN, PROVIDED THAT THE
TOTAL AMOUNT PAID BY BORROWER FOR SUCH STOCK
DOES NOT EXCEED $100,000 IN ANY FISCAL YEAR.
FINANCIAL COVENANTS
(SECTION 4.1): BORROWER SHALL COMPLY WITH ALL OF THE FOLLOWING
COVENANTS. COMPLIANCE SHALL BE DETERMINED AS OF
THE END OF EACH MONTH, EXCEPT AS OTHERWISE
SPECIFICALLY PROVIDED BELOW:
QUICK ASSET RATIO: BORROWER SHALL MAINTAIN A RATIO OF "QUICK
ASSETS" TO CURRENT LIABILITIES OF NOT LESS THAN
1.25 TO 1.
TANGIBLE NET WORTH: BORROWER SHALL MAINTAIN A TANGIBLE NET WORTH
OF NOT LESS THAN $8,500,000.
DEBT TO TANGIBLE
NET WORTH RATIO: BORROWER SHALL MAINTAIN A RATIO OF TOTAL
LIABILITIES TO TANGIBLE NET WORTH OF NOT MORE
THAN .75 TO 1.
PROFITABILITY BORROWER SHALL NOT INCUR A LOSS (AFTER TAXES)
IN ANY FISCAL YEAR ("ANNUAL PROFITABILITY"),
PROVIDED THAT, DURING EACH FISCAL
YEAR, BORROWER MAY INCUR QUARTERLY LOSSES
(AFTER TAXES) AS LONG AS THE CUMULATIVE AMOUNT
OF SUCH LOSSES (INCLUDING THE OFFSET OF ANY
QUARTERLY PROFITS DURING SUCH PERIOD AGAINST
ANY LOSSES) DOES NOT EXCEED $1,000,000 AND
BORROWER OTHERWISE ATTAINS ANNUAL
PROFITABILITY.
DEBT SERVICE RATIO/
LIQUIDITY RATIO BORROWER SHALL EITHER MAINTAIN THE DEBT
SERVICE RATIO AS SET FORTH BELOW OR THE
LIQUIDITY RATIO AS SET FORTH BELOW AT ALL TIMES
THAT ANY TERM LOAN IS OUTSTANDING:
DEBT SERVICE RATIO: BORROWER SHALL MAINTAIN A
QUARTERLY DEBT SERVICE RATIO (AS REFERRED TO
BELOW) OF NOT LESS THAN 1.50 TO 1, RELATING TO
THE IMMEDIATELY PRECEDING TWO FISCAL QUARTERS
FOR THE PERIOD ENDING JUNE 30, 1997, RELATING
TO THE IMMEDIATELY PRECEDING THREE FISCAL
QUARTERS FOR THE PERIOD ENDING SEPTEMBER 30,
1997, AND RELATING TO THE IMMEDIATELY PRECEDING
FOUR FISCAL QUARTERS FOR THE PERIODS ENDING
THEREAFTER.
LIQUIDITY COVERAGE RATIO: BORROWER SHALL
MAINTAIN A LIQUIDITY COVERAGE RATIO OF 2.0 TO 1
ON A MONTHLY BASIS.
-5-
<PAGE> 18
SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
DEFINITIONS: "CURRENT ASSETS," AND "CURRENT LIABILITIES"
SHALL HAVE THE MEANINGS ASCRIBED TO THEM IN
ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES.
"TANGIBLE NET WORTH" MEANS THE EXCESS OF TOTAL
ASSETS OVER TOTAL LIABILITIES, DETERMINED IN
ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES, EXCLUDING HOWEVER ALL ASSETS WHICH
WOULD BE CLASSIFIED AS INTANGIBLE ASSETS UNDER
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES,
INCLUDING WITHOUT LIMITATION GOODWILL,
LICENSES, PATENTS, TRADEMARKS, TRADE NAMES,
COPYRIGHTS, CAPITALIZED SOFTWARE AND
ORGANIZATIONAL COSTS, LICENSES AND FRANCHISES.
"QUICK ASSETS" MEANS CASH ON HAND OR ON DEPOSIT
IN BANKS, READILY MARKETABLE SECURITIES ISSUED
BY THE UNITED STATES, READILY MARKETABLE
COMMERCIAL PAPER RATED "A-1" BY STANDARD &
POOR'S CORPORATION (OR A SIMILAR RATING BY A
SIMILAR RATING ORGANIZATION), CERTIFICATES OF
DEPOSIT AND BANKER'S ACCEPTANCES, AND ACCOUNTS
RECEIVABLE (NET OF ALLOWANCE FOR DOUBTFUL
ACCOUNTS).
"LIQUIDITY QUICK ASSETS" MEANS CASH ON HAND OR
ON DEPOSIT IN BANKS, READILY MARKETABLE
SECURITIES ISSUED BY THE UNITED STATES, READILY
MARKETABLE COMMERCIAL PAPER RATED "A-1" BY
STANDARD & POOR'S CORPORATION (OR A SIMILAR
RATING BY A SIMILAR RATING ORGANIZATION),
CERTIFICATES OF DEPOSIT AND BANKER'S
ACCEPTANCES, PLUS 50% OF THE BORROWER'S
ACCOUNTS ELIGIBLE FOR BORROWING PURSUANT TO THE
TERMS AND CONDITIONS OF THIS AGREEMENT MINUS
THE AMOUNT OF THE ACCOUNTS LOANS.
"DEBT SERVICE RATIO" MEANS THE RATIO OF (A) NET
INCOME OF BORROWER BEFORE INTEREST, TAXES,
DEPRECIATION AND OTHER NON-CASH AMORTIZATION
EXPENSES AND OTHER NON-CASH EXPENSES OF THE
BORROWER, DETERMINED IN ACCORDANCE WITH
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES,
CONSISTENTLY APPLIED, TO (B) THE AMOUNT OF
BORROWER'S OBLIGATIONS RELATING TO PAYMENT OF
INTEREST AND CURRENT MATURITIES OF PRINCIPAL ON
BORROWER'S OUTSTANDING LONG TERM INDEBTEDNESS,
DETERMINED IN ACCORDANCE WITH GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES, CONSISTENTLY
APPLIED.
"LIQUIDITY COVERAGE RATIO" MEANS THE RATIO OF
(A) LIQUIDITY QUICK ASSETS TO (B) THE AGGREGATE
AMOUNT OF BORROWER'S OBLIGATIONS RELATING TO
THE TERM LOAN.
SUBORDINATED DEBT: "LIABILITIES" FOR PURPOSES OF THE FOREGOING
COVENANTS DO NOT INCLUDE INDEBTEDNESS WHICH IS
SUBORDINATED TO THE INDEBTEDNESS TO SILICON
UNDER A SUBORDINATION AGREEMENT IN FORM
SPECIFIED BY SILICON OR BY LANGUAGE IN THE
INSTRUMENT EVIDENCING THE INDEBTEDNESS WHICH IS
ACCEPTABLE TO SILICON.
-6-
<PAGE> 19
SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
OTHER COVENANTS
(SECTION 4.1): BORROWER SHALL AT ALL TIMES COMPLY WITH ALL OF
THE FOLLOWING ADDITIONAL COVENANTS:
1. BANKING RELATIONSHIP. BORROWER SHALL AT ALL
TIMES MAINTAIN ITS PRIMARY BANKING RELATIONSHIP
WITH SILICON.
2. MONTHLY BORROWING BASE CERTIFICATE AND
LISTING. WITHIN 30 DAYS AFTER THE END OF EACH
MONTH, BORROWER SHALL PROVIDE SILICON WITH A
BORROWING BASE CERTIFICATE IN SUCH FORM AS
SILICON SHALL SPECIFY, AND AN AGED LISTING OF
BORROWER'S ACCOUNTS RECEIVABLE AND ACCOUNTS
PAYABLE.
3. INDEBTEDNESS. WITHOUT LIMITING ANY OF THE
FOREGOING TERMS OR PROVISIONS OF THIS
AGREEMENT, BORROWER SHALL NOT IN THE FUTURE
INCUR INDEBTEDNESS FOR BORROWED MONEY, EXCEPT
FOR (I) INDEBTEDNESS TO SILICON, AND (II)
INDEBTEDNESS INCURRED IN THE
-7-
<PAGE> 20
SILICON VALLEY BANK SCHEDULE TO LOAN AND SECURITY AGREEMENT
- --------------------------------------------------------------------------------
FUTURE FOR THE PURCHASE PRICE OF OR LEASE OF
EQUIPMENT IN AN AGGREGATE AMOUNT NOT EXCEEDING
$100,000 AT ANY TIME OUTSTANDING.
BORROWER:
BROADCOM CORPORATION
BY_______________________________
PRESIDENT OR VICE PRESIDENT
BY_______________________________
SECRETARY OR ASS'T SECRETARY
SILICON:
SILICON VALLEY BANK
BY_______________________________
TITLE______________________________
-8-
<PAGE> 1
EXHIBIT 10.7
FOURTH AMENDMENT TO LEASE
This FOURTH AMENDMENT TO LEASE ("Amendment") is made and entered into as
of December __, 1997 by and between MAGELLAN IRVINE OAKS LIMITED PARTNERSHIP, an
Arizona limited partnership ("Landlord"), and BROADCOM CORPORATION, a California
corporation ("Tenant").
R E C I T A L S :
A. Laguna Canyon, Inc., predecessor-in-interest to Landlord, and Tenant
entered into that certain Standard Form Office Lease (the "Office Lease") dated
April 30, 1995, concerning certain space (the "Existing Premises") consisting of
the building located at 16251 Laguna Canyon Road, Irvine, California (the
"Building"), and forming a part of Irvine Oaks Executive Park (the "Project").
The Office Lease, as the same has been amended by that certain First Amendment
to Lease ("First Amendment") dated as of July 1, 1996, that certain Second
Amendment to Lease dated September 6, 1996 ("Second Amendment"), and that
certain Third Amendment to Lease dated April 1, 1997 ("Third Amendment") are
herein referred to collectively as the "Lease."
B. The parties desire to add certain additional suites to the premises
and further amend the terms of Lease on the terms and conditions set forth in
this Amendment. All terms not specifically defined herein shall have the
meanings assigned to those terms in the Lease.
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. EXPANSION PREMISES; CONDITION OF THE PREMISES.
1.1 Expansion Premises. As of the "Expansion Premises
Commencement Date" (as that term is defined in Section 2, below) the "Premises,"
as that term is defined in the Office Lease, shall be expanded to include Suite
160, containing approximately 1,700 rentable square feet of space, in the
building situated at 16253 Laguna Canyon Road, Irvine, California (the
"Expansion Premises"), as more particularly set forth on Exhibit A attached
hereto.
1.2 Condition of the Premises. Landlord shall not be obligated to
provide any improvement work or services related to the Expansion Premises and
Tenant shall accept the Expansion Premises in their presently existing, "as is"
condition. Tenant shall construct any improvements in the Expansion Premises in
accordance with the terms of Article 8 of the Office Lease.
2. TERM. Tenant's lease of the Expansion Premises shall commence
upon Landlord's delivery of the Expansion Premises to Tenant (the "Expansion
Commencement Date").
-1-
<PAGE> 2
The term of Tenant's lease of the Expansion Premises shall be month-to-month.
Upon the termination or earlier expiration of the lease of the Expansion
Premises, Tenant shall surrender such premises to Landlord in accordance with
the terms of Section 19.1 of the Lease.
3. EXPANSION PREMISES BASE RENT. Commencing as of each Expansion
Premises Commencement Date, Tenant shall pay to Landlord monthly Rent for the
Expansion Premises (the "Expansion Premises Rent") in the following amounts.
<TABLE>
<CAPTION>
Monthly Rent per
Monthly Rent Rentable Square Foot
------------ --------------------
<S> <C>
$1,768.00 $1.04
</TABLE>
4. OPERATING EXPENSES; TAXES; UTILITIES.
4.1 Operating Expenses; Taxes. Commencing as of the Expansion
Premises Commencement Date, and continuing throughout the term of Tenant's lease
of the Expansion Premises, Tenant shall pay to Landlord, in the manner set forth
in Article 7 of the Lease, Tenant's Share of Operating Expenses and Real
Property Taxes for the Expansion Premises. The "Tenant's Share" for the
Expansion Premises is 0.94%.
4.2 Utilities; Building Direct Expenses. In addition to the costs
to be paid by Tenant pursuant to Section 4.1, above (the "Project Costs"),
commencing as of the Expansion Premises Commencement Date Tenant shall pay to
Landlord, in the same manner as the Project Costs, "Tenant's Building Share" of
Operating Costs, including utility charges, which are equitably allocated by
Landlord to the Building, and not included in Operating Costs for the Project.
"Tenant's Building Share" for the Expansion Premises is 9.94%.
4.3 Adjustment of Tenant's Share. Tenant agrees that, in the
event the rentable area of the Project shall hereafter change due to subsequent
alterations and/or modifications to the Project, Tenant's Share (as set forth in
Section 4.1, above) shall be appropriately adjusted.
5. PARKING. During the term of Tenant's lease of the Expansion Premises,
Tenant shall have the right to use up to four (4) additional unreserved parking
spaces per 1,000 rentable square feet in the Project parking areas ("Parking
Spaces"). All such use of the Project parking areas shall be in accordance with
Article 10 of the Lease. .
6. BROKERS. Landlord and Tenant hereby warrant to each other that, other
than CB Commercial Real Estate Group, Inc. ("Broker"), they have had no dealings
with any real estate broker or agent in connection with the negotiation of this
Amendment and that they know of no other real estate broker or agent who is
entitled to a commission in connection with this Amendment. Each party agrees to
indemnify and defend the other party against and hold the other party harmless
from any and all claims, demands, losses, liabilities, lawsuits, judgments, and
costs and expenses
-2-
<PAGE> 3
(including without limitation reasonable attorneys' fees) with respect to any
leasing commission or equivalent compensation alleged to be owing on account of
the indemnifying party's dealings with any other real estate broker or agent.
The terms of this Section shall survive the expiration or earlier termination of
the Term. Landlord shall pay Broker pursuant to a separate agreement.
7. NO FURTHER MODIFICATION. Except as specifically set forth in this
Amendment, all of the terms and provisions of the Lease shall remain unmodified
and in full force and effect.
IN WITNESS WHEREOF, this Amendment has been executed as of the day and
year first above written.
"LANDLORD" "TENANT"
MAGELLAN IRVINE OAKS LIMITED BROADCOM CORPORATION,
PARTNERSHIP, a California corporation
an Arizona limited partnership
By:
----------------------------
By: Its:
------------------------------- ----------------------
Its:
------------------------
-3-
<PAGE> 4
THIRD AMENDMENT TO LEASE
This THIRD AMENDMENT TO LEASE ("Amendment") is made and entered into as
of April 1, 1997 by and between MAGELLAN IRVINE OAKS LIMITED PARTNERSHIP, an
Arizona limited partnership ("Landlord"), and BROADCOM CORPORATION, a California
corporation ("Tenant").
R E C I T A L S :
A. Laguna Canyon, Inc., predecessor-in-interest to Landlord, and Tenant
entered into that certain Standard Form Office Lease (the "Office Lease") dated
April 30, 1995, concerning certain space (the "Existing Premises") consisting of
the building located at 16251 Laguna Canyon Road, Irvine, California (the
"Building"), and forming a part of Irvine Oaks Executive Park (the "Project").
The Office Lease, as the same has been amended by that certain First Amendment
to Lease ("First Amendment") dated as of July 1, 1996, and that certain Second
Amendment to Lease dated September 6, 1996 ("Second Amendment") are herein
referred to collectively as the "Lease".
B. The parties desire to extend Tenant's lease of certain premises and
to add certain additional suites to the premises and further amend the terms of
Lease on the terms and conditions set forth in this Amendment. All terms not
specifically defined herein shall have the meanings assigned to those terms in
the Lease.
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. EXPANSION PREMISES; CONDITION OF THE PREMISES.
1.1 Expansion Premises. As of each "Expansion Premises
Commencement Date" (as that term is defined in Section 2, below) the "Premises,"
as that term is defined in the Office Lease, shall be expanded to include each
of the following Suites in the building situated at 16253 Laguna Canyon Road,
Irvine, California (such Suites, collectively, the "Expansion Premises"), as
more particularly set forth on Exhibit A attached hereto:
(i) Suite 100, containing approximately 1,653 rentable square
feet of space,
(ii) Suite 110, containing approximately 1,361 rentable square
feet of space,
(iii) Suite 120, containing approximately 1,363 rentable square
feet of space, and
(iv) Suite 190, containing approximately 4,835 rentable square
feet of space.
-4-
<PAGE> 5
1.2 Condition of the Premises. Landlord shall not be obligated to
provide any improvement work or services related to the Expansion Premises and
Tenant shall accept the Expansion Premises in their presently existing, "as is"
condition. Notwithstanding the foregoing, as of the commencement of Tenant's
lease of each of the Suites contained in the Expansion Premises, Landlord hereby
agrees to grant to Tenant an improvement allowance (the "Tenant Improvement
Allowance") for the construction of improvements in such Expansion Premises by
Tenant, in the following amounts: (i) with respect to Suite 110 and 120, $4.00
per usable square foot contained in such Suites, and (ii) with respect to Suite
100 and 190, $2.50 per usable square foot contained in such Suites. Landlord
shall disburse the Tenant Improvement Allowance to Tenant in accordance with
Landlord's disbursement procedure, which procedure includes the requirement that
Tenant deliver to Landlord, within thirty (30) days after completion of the
applicable improvements, (a) invoices and full and final lien releases, as
applicable, from any contractors or sub-contractors requesting payment, (b) a
copy of applicable building permits and certificates of occupancy or its legal
equivalent allowing occupancy of the applicable space, and (c) "as-built"
drawings showing the improvements constructed (collectively, the "Disbursement
Procedure"). In no event shall Landlord have any obligation to disburse any
amounts in excess of the Tenant Improvement Allowance in connection with any
improvements in the Expansion Premises, or to disburse any portion of the Tenant
Improvement Allowance for any purpose other than the construction of
improvements in the Expansion Premises. Tenant shall construct any improvements
in the Expansion Premises in accordance with the terms of Article 8 of the
Office Lease.
2. TERM; OPTION TERM.
2.1 TERM. Tenant's lease of Suites 110 and 120 shall commence on
April 7, 1997 (the "Initial Expansion Commencement Date"). Tenant's lease of
Suite 100 shall commence on the date such suite is delivered to Tenant by
Landlord, which date is anticipated to be August 1, 1997 (the "Suite 100
Commencement Date") (but Tenant agrees that Landlord shall have no liability for
any failure to deliver possession of Suite 100 by such date, or any total
failure to deliver possession of such Suite 100, provided that Landlord shall
use reasonable efforts to remove the existing tenant of such space prior to the
anticipated Suite 100 Commencement Date). Tenant's lease of Suite 190 shall
commence on the date such suite is delivered to Tenant by Landlord, which date
is anticipated to be June 1, 1997 (the "Suite 190 Commencement Date") (but
Tenant agrees that Landlord shall have no liability for any failure to deliver
possession of Suite 190 by such date, or any total failure to deliver possession
of such Suite 190, provided that Landlord shall use reasonable efforts to remove
the existing tenant of such space prior to the anticipated Suite 190
Commencement Date). The Initial Expansion Commencement Date, the Suite 100
Commencement Date, and the Suite 190 Commencement Date are herein sometime
referred to, collectively or individually, as the "Expansion Premises
Commencement Date." The term of Tenant's lease of all of the Expansion Premises
(the "EXPANSION TERM") shall terminate on December 31, 1998. Upon the
termination or earlier expiration of the lease of the Expansion Premises, Tenant
shall surrender such premises to Landlord in accordance with the terms of
Section 19.1 of the Lease.
-5-
<PAGE> 6
2.2 OPTION TERM.
2.2.1 OPTION RIGHT. Landlord hereby grants Tenant one (1) option
to extend the expiration of the Expansion Term and the "16279 Term", as that
term is defined in Section 6.1, below, from December 31, 1998, to July 31, 2000
(the "OPTION TERM"), which option shall be exercisable only by written notice
delivered by Tenant to Landlord as provided below, provided that, as of the date
of delivery of such notice, Tenant is not in default under the Lease after
expiration of any applicable cure period. Upon the proper exercise of such
option to extend, and provided that, as of the end of the initial Expansion
Term, Tenant is not in default under this Lease, after expiration of any
applicable cure period, the Expansion Term, as it applies to the Expansion
Premises, and the 16279 Term, as it applies to the "16279 Premises", as that
term is defined in Section 6.1, below, shall be extended to expire on July 31,
2000. The rights contained in this Section 2.2 may only be exercised by Tenant
(and not any assignee, sublessee or other transferee of Tenant's interest in
this Lease) if Tenant occupies at least ninety percent (90%), in the aggregate,
of the Expansion Premises and 16279 Premises.
2.2.2 OPTION RENT. The rent payable by Tenant during the Option
Term with respect to the Expansion Premises and 16279 Premises (collectively,
the "OPTION RENT") shall be equal to the rent (including additional rent and
considering any "base year" or "expense stop" applicable thereto), including all
escalations, at which, as of the commencement of the Option Term, tenants are
leasing non-sublease, non-encumbered, non-equity space comparable in size,
location and quality to the Expansion Premises and 16279 Premises, for a term
comparable to the Option Term, which comparable space is located in the Project,
or, if there are not a sufficient number of current comparable transactions in
the Project, then in comparable buildings in the vicinity of the Project, in
either case taking into consideration the following concessions: (a) rental
abatement concessions, if any, being granted such tenants in connection with
such comparable space; and (b) tenant improvements or allowances provided or to
be provided for such comparable space, taking into account, and deducting the
value of, the existing improvements in the Expansion Premises and 16279
Premises, such value to be based upon the age, quality and layout of the
improvements and the extent to which the same can be utilized by Tenant.
2.2.3 EXERCISE OF OPTION. The option contained in this Section
2.2 shall be exercised by Tenant, if at all, only in the following manner: (i)
Tenant shall deliver written notice to Landlord not more than ten (10) months
nor less than eight (8) months prior to the expiration of the initial Expansion
Term, stating that Tenant is interested in exercising its option; (ii) Landlord,
after receipt of Tenant's notice, shall deliver notice (the "OPTION RENT
NOTICE") to Tenant not less than seven (7) months prior to the expiration of the
initial Expansion Term, setting forth the Option Rent; and (iii) if Tenant
wishes to exercise such option, Tenant shall, on or before the earlier of (A)
the date occurring six (6) months prior to the expiration of the initial
Expansion Term, and (B) the date occurring thirty (30) days after Tenant's
receipt of the Option Rent Notice, exercise the option by delivering written
notice thereof to Landlord and upon, and concurrent with, such exercise Tenant
may, at its option, object to the Option Rent contained in the Option Rent
Notice, in which case the parties shall follow the procedure, and the Option
Rent shall be determined, as set forth in Section 2.2.4, below.
-6-
<PAGE> 7
2.2.4 DETERMINATION OF OPTION RENT. In the event Tenant timely
and appropriately objects to the Option Rent, Landlord and Tenant shall attempt
to agree upon the Option Rent using their best good-faith efforts. If Landlord
and Tenant fail to reach agreement within ten (10) days following Tenant's
objection to the Option Rent, (the "OUTSIDE AGREEMENT DATE"), then each party
shall make a separate determination of the Option Rent, as the case may be,
within five (5) days, and such determinations shall be submitted to arbitration
in accordance with Sections 2.2.4.1 through 2.2.4.7, below.
2.2.4.1 Landlord and Tenant shall each appoint one
arbitrator who shall by profession be a real estate broker or appraiser who
shall have been active over the five (5) year period ending on the date of such
appointment in the leasing (or appraisal, as the case may be) of commercial
high-rise properties in the Irvine area. The determination of the arbitrators
shall be limited solely to the issue area of whether Landlord's or Tenant's
submitted Option Rent, is the closest to the actual Option Rent as determined by
the arbitrators, taking into account the requirements of Section 2.2.2 of this
Amendment. Each such arbitrator shall be appointed within fifteen (15) days
after the applicable Outside Agreement Date.
2.2.4.2 The two arbitrators so appointed shall within ten
(10) days of the date of the appointment of the last appointed arbitrator agree
upon and appoint a third arbitrator who shall be qualified under the same
criteria set forth hereinabove for qualification of the initial two arbitrators.
2.2.4.3 The three arbitrators shall within thirty (30)
days of the appointment of the third arbitrator reach a decision as to whether
the parties shall use Landlord's or Tenant's submitted Option Rent, and shall
notify Landlord and Tenant thereof.
2.2.4.4 The decision of the majority of the three
arbitrators shall be binding upon Landlord and Tenant.
2.2.4.5 If either Landlord or Tenant fails to appoint an
arbitrator within 15 days after the applicable Outside Agreement Date, the
arbitrator appointed by one of them shall reach a decision, notify Landlord and
Tenant thereof, and such arbitrator's decision shall be binding upon Landlord
and Tenant.
2.2.4.6 If the two arbitrators fail to agree upon and
appoint a third arbitrator, or both parties fail to appoint an arbitrator, then
the appointment of the third arbitrator or any arbitrator shall be dismissed and
the matter to be decided shall be forthwith submitted to arbitration under the
provisions of the American Arbitration Association, but subject to the
instruction set forth in this Section 2.2.4.
2.2.4.7 The cost of arbitration shall be paid by Landlord
and Tenant equally.
-7-
<PAGE> 8
3. EXPANSION PREMISES BASE RENT. Commencing as of each Expansion
Premises Commencement Date, Tenant shall pay to Landlord monthly Rent for the
Expansion Premises (the "Expansion Premises Rent") in the following amounts.
<TABLE>
<CAPTION>
SUITE 100
- ---------
Monthly Rent per
Date Monthly Rent Rentable Square Foot
---- ------------ --------------------
<S> <C> <C>
Suite 100 Commencement
Date through December 31, $1,653.00 $1.00
1997
January 1, 1998 through
December 31, 1998 $1,719.12 $1.04
</TABLE>
<TABLE>
<CAPTION>
SUITES 110 AND 120
- ------------------
Monthly Rent per
Date Monthly Rent Rentable Square Foot
---- ------------ --------------------
<S> <C> <C>
Initial Expansion
Commencement Date through $2,724.00 $1.00
December 31, 1997
January 1, 1998 through
December 31, 1998 $2,832.96 $1.04
</TABLE>
<TABLE>
<CAPTION>
SUITE 190
- ---------
Monthly Rent per
Date Monthly Rent Rentable Square Foot
---- ------------ --------------------
<S> <C> <C>
Suite 190 Commencement
Date through December 31, $4,835.00 $1.00
1997
January 1, 1998 through
December 31, 1998 $5,028.40 $1.04
</TABLE>
4. OPERATING EXPENSES; TAXES; UTILITIES.
4.1 Operating Expenses; Taxes. Commencing as of the Expansion
Premises Commencement Date, and continuing throughout the term of Tenant's lease
of each suite in the Expansion Premises, Tenant shall pay to Landlord, in the
manner set forth in Article 7 of the Lease, Tenant's Share of Operating Expenses
and Real Property Taxes for each suite of the Expansion Premises.
4.1.1 The "Tenant's Share" for Suite 100 is 1.22%.
-8-
<PAGE> 9
4.1.2 The "Tenant's Share" for Suite 110 is 1.01%.
4.1.3 The "Tenant's Share" for Suite 120 is 1.01%.
4.1.4 The "Tenant's Share" for Suite 190 is 3.58%.
4.2 Utilities; Building Direct Expenses. In addition to the costs
to be paid by Tenant pursuant to Section 4.1, above (the "Project Costs"),
commencing as of the Expansion Premises Commencement Date Tenant shall pay to
Landlord, in the same manner as the Project Costs, "Tenant's Building Share" of
Operating Costs, including utility charges, which are equitably allocated by
Landlord to the Building, and not included in Operating Costs for the Project.
4.2.1 "Tenant's Building Share" for Suite 100 is 9.67%.
4.2.2 "Tenant's Building Share" for Suite 110 is 7.96%.
4.2.3 "Tenant's Building Share" for Suite 120 is 7.97%.
4.2.4 "Tenant's Building Share" for Suite 190 is 28.27%.
4.3 Adjustment of Tenant's Share. Tenant agrees that, in the
event the rentable area of the Project shall hereafter change due to subsequent
alterations and/or modifications to the Project, Tenant's Share (as set forth in
Section 4.1, above) shall be appropriately adjusted.
5. PARKING. During the term of Tenant's lease of suite 100, Tenant shall
have the right to use up to six (6) additional unreserved parking spaces in the
Project parking areas ("Parking Spaces"). During the term of Tenant's lease of
suite 110, Tenant shall have the right to use up to five (5) additional Parking
Spaces. During the term of Tenant's lease of Suite 120, Tenant shall have the
right to use up to five (5) additional Parking Spaces. During the term of
Tenant's lease of Suite 190, Tenant shall have the right to use up to nineteen
(19) additional Parking Spaces. All such use of the Project parking areas shall
be subject to the terms of Article 10 of the Lease.
6. 16279 PREMISES.
6.1 Extension of Term. Tenant's lease of approximately 17,100
rentable square feet of space making up the entire building located at 16279
Laguna Canyon Road (the "16279 Premises"), is hereby extended to, and shall
expire on, December 31, 1998 (the "16279 Term").
6.2 Condition of Premises. Tenant acknowledges that it has been
occupying the 16279 Premises pursuant to the terms of the Lease, and that Tenant
shall accept the Expansion Premises in their presently existing, "as is"
condition. Notwithstanding the foregoing, as of August 1, 1997, Landlord hereby
agrees to grant to Tenant an improvement allowance (the "16279 Improvement
Allowance") for the construction of improvements in the 16279 Premises by
Tenant, in the amount of $42,750.00. Landlord shall disburse the 16279
Improvement Allowance to Tenant in accordance with the Disbursement Procedure.
In no event shall Landlord have any obligation to disburse any amounts in excess
of the 16279 Improvement Allowance in connection with any
-9-
<PAGE> 10
improvements in the 16279 Premises.
6.3 Expansion Premises Base Rent. Commencing as of August 1,
1997, Monthly Rent for the 16279 Premises shall be as follows:
<TABLE>
<CAPTION>
Date Monthly Rent Monthly Rent per Square Foot
---- ------------ ----------------------------
<S> <C> <C>
August 1, 1997 through $17,100.00 $1.00
December 31, 1997
January 1, 1998, through $17,784.00 $1.04
December 31, 1998
</TABLE>
6.4 Operating Expenses; Taxes; Utilities. Continuing throughout
the term of Tenant's lease of the 16279 Premises, Tenant shall pay to Landlord,
in the manner set forth in Article 7 of the Lease, Tenant's Share of Operating
Expenses and Real Property Taxes for the 16279 Premises, together with all other
costs relating to the 16279 Premises required to be paid by Tenant pursuant to
the terms of such Article 7.
7. BROKERS. Landlord and Tenant hereby warrant to each other that, other
than Madison Integrated Tenant Services ("Broker"), they have had no dealings
with any real estate broker or agent in connection with the negotiation of this
Amendment and that they know of no other real estate broker or agent who is
entitled to a commission in connection with this Amendment. Each party agrees to
indemnify and defend the other party against and hold the other party harmless
from any and all claims, demands, losses, liabilities, lawsuits, judgments, and
costs and expenses (including without limitation reasonable attorneys' fees)
with respect to any leasing commission or equivalent compensation alleged to be
owing on account of the indemnifying party's dealings with any other real estate
broker or agent. The terms of this Section shall survive the expiration or
earlier termination of the Term.
8. PAYMENT OF BROKER. Landlord agrees that it shall pay to Broker a
commission with respect to Tenant's lease of the Expansion Premises and the
16279 Premises. With respect to the Expansion Premises, the amount of such
commission shall be equal to five percent (5%) of the total amount of Base Rent
payable with respect to the Expansion Premises during the initial Expansion
Term. With respect to the 16279 Premises, the amount of such commission shall be
equal to five percent (5%) of the total amount of Base Rent payable with respect
to the Expansion Premises during the period commencing August 1, 1997, and
continuing throughout the initial 16279 Term. The first one-half (1/2) of all
such commission amounts, and the second one-half (1/2) of the commission amounts
owed with respect to Suite 110, Suite 120 and the 16729 Premises, shall be paid
by Landlord within thirty (30) days after the full execution and delivery of
this Amendment. The second one-half (1/2) of the commission owed with respect to
Suite 100 and Suite 190 shall be paid by Landlord within thirty (30) days after
the occupancy by Tenant of each of Suite 100 and Suite 190. Landlord agrees that
if any portion of the commission owed Broker is not paid within ninety (90) days
after the date the same is due, Tenant shall have the right, upon ten (10)
business days additional notice to Landlord, to pay the amounts due to Broker,
and to offset such amounts
-10-
<PAGE> 11
from the Base Rent otherwise due hereunder, in which event Landlord shall have
no further obligation to pay such amounts to Broker.
9. NO FURTHER MODIFICATION. Except as specifically set forth in this
Amendment, all of the terms and provisions of the Lease shall remain unmodified
and in full force and effect.
IN WITNESS WHEREOF, this Amendment has been executed as of the day and
year first above written.
"LANDLORD" "TENANT"
MAGELLAN IRVINE OAKS LIMITED BROADCOM CORPORATION,
PARTNERSHIP, a California corporation
an Arizona limited partnership
By:
------------------------------------
By: Its:
-------------------------------- ------------------------------
Its:
-------------------------
-11-
<PAGE> 12
SECOND AMENDMENT TO LEASE
This SECOND AMENDMENT TO LEASE ("Amendment") is made and entered into as
of September 6, 1996, by and between MAGELLAN IRVINE OAKS LIMITED PARTNERSHIP,
an Arizona limited partnership ("Landlord"), and BROADCOM CORPORATION, a
California corporation ("Tenant").
R E C I T A L S :
A. Laguna Canyon, Inc., predecessor-in-interest to Landlord, and Tenant
entered into that certain Standard Form Office Lease (the "Office Lease") dated
April 30, 1995, concerning certain space (the "Existing Premises") consisting of
the building located at 16251 Laguna Canyon Road, Irvine, California (the
"Building"), and forming a part of Irvine Oaks Business Park (the "Project").
The Office Lease, as the same has been amended by that certain First Amendment
to Lease ("First Amendment") dated as of July 1, 1996, is herein referred to
collectively as the "Lease".
B. The parties desire to expand the Existing Premises and amend the
terms of Lease on the terms and conditions set forth in this Amendment. All
terms not specifically defined herein shall have the meanings assigned to those
terms in the Lease.
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1. THE EXPANSION PREMISES; CONDITION OF THE PREMISES.
1.1 Expansion Premises. As of November 1, 1996 (the "Expansion
Premises Commencement Date"), the "Premises," as that term is defined in the
Office Lease, shall be expanded to include approximately 17,100 rentable square
feet of space making up the entire building located at 16279 Laguna Canyon Road
(the "Expansion Premises"), as set forth in Exhibit A attached hereto.
1.2 Condition of the Premises. Landlord shall not be obligated to
provide or pay for any improvement work or services related to the Expansion
Premises and Tenant shall accept the Expansion Premises in their presently
existing, "as is" condition. Tenant acknowledges that neither Landlord nor any
agent of Landlord has made any representation or warranty regarding the
condition of the Expansion Premises or with respect to the suitability of the
Expansion Premises for the conduct of Tenant's business. Tenant's possession of
the Expansion Premises shall conclusively establish that the Expansion Premises
are at such time in good and sanitary order, condition and repair.
-12-
<PAGE> 13
2. TERM. Tenant's lease of the Expansion Premises shall commence on
November 1, 1996 (the "Expansion Premises Commencement Date"), and shall expire
on July 31 1997 (the "Expansion Termination Date"). Tenant agrees that Tenant
shall vacate and surrender the Expansion Premises to Landlord in accordance with
the terms of Section 19.1 of the Lease, on or before the Expansion Termination
Date.
3. EXPANSION PREMISES BASE RENT. Commencing as of the Expansion Premises
Commencement Date, Tenant shall pay to Landlord Monthly Rent for the Expansion
Premises (the "Expansion Premises Rent"), in advance of the first day of each
month during the term of Tenant's lease of the Expansion Premises and in the
manner set forth in Article 4 of the Lease, in the following amounts.
<TABLE>
<CAPTION>
Date Monthly Rent Monthly Rent per Square Foot
---- ------------ ----------------------------
<S> <C> <C>
November 1, 1996 through $16,245.00 $0.95
December 31, 1996
January 1, 1997, through $17,100.00 $1.00
July 31, 1997
</TABLE>
4. OPERATING EXPENSES; TAXES; UTILITIES. Commencing as of the Expansion
Premises Commencement Date, and continuing throughout the term of Tenant's lease
of the Expansion Premises, Tenant shall pay to Landlord, in the manner set forth
in Article 7 of the Lease, Tenant's Share of Operating Expenses and Real
Property Taxes for the Expansion Premises, together with all other costs
relating to the Expansion Premises required to be paid by Tenant pursuant to the
terms of such Article 7.
5. PARKING. During the term of Tenant's lease of the Expansion Premises,
Tenant shall have the right to use up to sixty-eight (68) unreserved parking
spaces in the Project parking areas. Such use of the Project parking areas shall
be subject to the terms of Article 10 of the Lease.
6. BROKERS. Landlord and Tenant hereby warrant to each other that, other
than Matlow-Kennedy Commercial Real Estate Services and CB/Madison Integrated
Tenant Services, they have had no dealings with any real estate broker or agent
in connection with the negotiation of this Amendment and that they know of no
other real estate broker or agent who is entitled to a commission in connection
with this Amendment. Each party agrees to indemnify and defend the other party
against and hold the other party harmless from any and all claims, demands,
losses, liabilities, lawsuits, judgments, and costs and expenses (including
without limitation reasonable attorneys' fees) with respect to any leasing
commission or equivalent compensation alleged to be owing on account of the
indemnifying party's dealings with any other real estate broker or agent. The
terms of this Section shall survive the expiration or earlier termination of the
Term.
7. TERMINATION OF FIRST AMENDMENT. Tenant acknowledges that Tenant's
leases of each of the Suite 130 Premises and Suite 150 Premises set forth in the
First Amendment have terminated, and that the First Amendment is of no further
force or effect.
-13-
<PAGE> 14
8. NO FURTHER MODIFICATION. Except as specifically set forth in this
Amendment, all of the terms and provisions of the Lease shall remain unmodified
and in full force and effect.
IN WITNESS WHEREOF, this Amendment has been executed as of the day and
year first above written.
"LANDLORD" "TENANT"
MAGELLAN IRVINE OAKS LIMITED BROADCOM CORPORATION,
PARTNERSHIP, a California corporation
an Arizona limited partnership
By:
------------------------------------
By: Its:
-------------------------------- ------------------------------
Its:
-------------------------
-14-
<PAGE> 15
STANDARD FORM OFFICE LEASE
(TRIPLE NET)
THIS STANDARD FORM OFFICE LEASE dated April 30, 1995, (this "Lease") is
entered into by and between LAGUNA CANYON, INC., a California corporation
("Landlord") and BROADCOM CORPORATION, a California corporation ("Tenant").
ARTICLE 1
BASIC LEASE PROVISIONS
Each reference in this Lease to this Article 1 or any section hereof
shall mean and refer to the following terms, the application of which shall be
governed by the provisions in the remaining Articles of this Lease:
1.1 ADDRESS OF LANDLORD: Laguna Canyon, Inc.
16261 Laguna Canyon Road, Suite 100
Irvine, CA 92718
1.2 PREMISES ADDRESS: 16251 Laguna Canyon Road
Irvine, CA 92718
1.3 ADDRESS OF TENANT: PRIOR TO COMMENCEMENT
10920 WILSHIRE BLVD
LOS ANGELES, CA 90024
1.4 TENANT'S TRADE NAME: Broadcom Corporation, a California corporation
1.5 TENANT'S CONTACT: SCOTT DAVIS Telephone: (310) 445-4490
1.6 TENANT'S PERMITTED USE: General office uses and laboratory and light
manufacturing in connection therewith, provided
that such laboratory and light manufacturing
uses do not (in the aggregate) occupy more than
25% of the total rentable square footage of the
Premises
1.7 PREMISES SQUARE FOOTAGE: Projected to be 17,000 rentable square feet
1.8 ANTICIPATED COMMENCEMENT DATE: June 30, 1995
1.9 TERM: Five (5) years, one (1) month and seven (7) days
1.10 MONTHLY RENT: Projected to be Fifteen Thousand Three Hundred Dollars
($15,300) based upon a rental rate of $.90 per rentable square foot of
Premises per month. The actual amount
Page 1
<PAGE> 16
of Monthly Rent is subject to: (i) adjustment when the actual premises
square footage is determined pursuant to the provisions of Section 3.9,
and (ii) increase to reflect that portion, if any, of the Tenant
Improvement Allowance in excess of $25 per rentable square foot used to
design and construct the Tenant Improvements, with such increase to be
based upon the full amortization of such excess Tenant Improvement
Allowance over a five (5) year period at an annual interest rate of ten
percent (10%).
1.11 OTHER PERIODIC PAYMENTS: Operating Expenses, Real Property Taxes,
Utilities (see Article 7), Maintenance and Repair (see Article 9),
Insurance (see Article 11)
1.12 SECURITY DEPOSIT: Sixteen Thousand Eight Hundred Thirty Dollars
($16,830)
1.13 BROKER: Langdon Rieder Corporation
1.14 GUARANTOR(S): NONE
1.15 VEHICLE PARKING SPACES: Projected to be 68
spaces, based upon a ratio of four (4)
parking spaces per every 1,000 rentable
square feet of Premises, including 10
"reserved" spaces.
1.16 INSURANCE REQUIREMENTS: $2,000,000 Tenant's Commercial General Liability
$1,000,000 Contractor's Builder's Risk
$1,000,000 Contractor's Commercial General Liability
1.17 ADDITIONAL INSUREDS: None
EXHIBITS: A Description of Premises
B Project Site Plan
C Work Letter
D Commencement Date Memorandum
E Description of Restrictions
F Rules and Regulations
G Guaranty
H Estoppel Certificate
I & IA Sign Criteria
RIDERS: Option To Extend Term Rider
Expansion Rights Rider
Page 2
<PAGE> 17
ARTICLE 2
DEFINITIONS
2.1 DEFINITIONS. The capitalized terms set forth below, unless the
context clearly requires otherwise, shall have the following meanings in this
Lease:
"ADDITIONAL INSUREDS", if any, are designated in Section 1.18
"ADDITIONAL RENT" means any and all sums (whether or not specifically
called "Additional Rent" in this Lease) including those items listed in Section
1.11, for which Tenant is or becomes obligated to pay to Landlord under this
Lease, provided that Additional Rent shall not include Monthly Rent.
"ALTERATIONS" means any alterations, decorations, modifications,
additions or improvements made in, on, about, under or contiguous to the
Building or the Premises after the Commencement Date, including, but not limited
to, lighting, HVAC and electrical fixtures, pipes and conduits, transfer,
storage and disposal facilities, partitions, drapery, wall coverings, shelves,
cabinetwork, carpeting and other floor coverings, ceiling tiles, fixtures and
carpentry installations.
"ANTICIPATED COMMENCEMENT DATE" is defined in Section 1.9 and Section
3.2.
"APPLICABLE LAWS" means the laws, rules, regulations, ordinances,
restrictions and practices described in Section 5.2.
"APPLICABLE RATE" means the greater of ten percent (10%) per annum or
five percent (5%) in excess of the discount rate of the Federal Reserve Bank of
San Francisco in effect on the twenty-fifth (25th) day of the calendar month
immediately prior to the event giving rise to the Applicable Rate imposition;
provided, however, the Applicable Rate shall in no event exceed the maximum
interest rate permitted to be charged by applicable law.
"BANKRUPTCY CODE" is defined in Section 14.1.
"BROKER" means the person or entity identified in Section 1.13.
"BUILDING" means that certain building within which the Premises are
located.
"CASUALTY" is defined in Section 12.1.
"CC&RS" means any declaration of covenants, conditions and restrictions
encumbering the Project and described on Exhibit E, as the same may be amended
from time to time.
"CITY" means the city in which the Premises are located.
"COMMENCEMENT DATE" means the commencement date of the Term, described
in Section 3.2.
Page 3
<PAGE> 18
"COMMON AREA" means all areas and facilities within the Project
exclusive of the Premises and other portions of the Project leased (or to be
leased) exclusively to other tenants. The Common Area includes, but it not
limited to, parking areas, access and perimeter roads, sidewalks, landscaped
areas and similar areas and facilities. Tenant's use of the Common Area, and its
rights and obligations with respect thereto, are more particularly described in
Article 10.
"COUNTY" means the county in which the Premises are located.
"DESIGNATED PARKING AREA" is defined in Section 10.7.
"EVENT OF DEFAULT" means the Tenant defaults described in Section 15.1.
"GUARANTOR(S)" means the person(s) or entity(ies) identified in Section
1.14, if any.
"HAZARDOUS MATERIALS" are defined in Section 6.1.
"HVAC" means the heating, ventilating and air conditioning system
serving the Building.
"IMPOUND FUNDS" is defined in Section 11.8.
"INDEX" means the Consumer Price Index for All Urban Consumers using the
Los Angeles-Anaheim-Riverside Average (base Period 1982-4-100), as published by
the U.S. Department of Labor, Bureau of Labor Statistics or alternative thereto
as hereinafter provided. If the present base of said index figure should
hereafter be changed, then the new base shall be converted to the base now used.
In the event more than one such index is published, the index showing the
greater proportionate increase shall be used. Should publication of the above
index be discontinued, or published less frequently, or varied in the method of
calculation, or altered in some other manner, then Landlord shall adopt, as its
sole discretion, a substitute index or substitute procedure which reasonably
reflects and monitors consumer prices. In any event, the base used by any new
index shall be reconciled to the 1982-4-100 base index.
"LANDLORD'S AGENTS" means Landlord's authorized agents, representatives,
consultants, contractors, partners, subsidiaries, affiliates, directors,
officers and employees, including without limitation the Additional Insured
named in Section 1.17.
"LANDLORD'S ARCHITECT" means Datum Architects or such other architect or
architectural firm as may be from time to time designated by landlord to perform
the function of the landlord's Architect set forth in this Lease.
"LEASE" means this instrument together with all exhibits, amendments,
addenda and riders attached hereto and made a part hereof.
"MORTGAGEE" means any mortgagee of a mortgage, beneficiary of a deed of
trust or lender having a lien on or covering the Premises or any part thereof.
Page 4
<PAGE> 19
"NOTICE" means of each and every notice, communication, request, demand,
reply or advice, or duplicate thereof, in this Lease provided or permitted to be
given, made or accepted by either party to any other party, which shall be in
writing and given in accordance with the provisions of Section 21.7.
"OPERATING EXPENSES" is defined in Section 7.4.
"PLANS" means the final working drawings for the construction of the
Tenant Improvements to be prepared and approved as set forth in the Work Letter.
"PREMISES" means the premises shown in Exhibit A, and all areas
appurtenant thereto, if any, for the exclusive use of Tenant, as shown in
Exhibit A. The Premises are located within and constitute a portion of the
Building at the address set forth in Section 1.2.
"PREMISES SQUARE FOOTAGE" means the entire area included within the
premises as determined by Landlord in accordance with BOMA standards (ANSIo
Z65.1-1980). The projected Premises Quare Footage as of the execution of this
Lease is set forth in Section 1.7.
"PROJECT" means that certain real property, and all improvements
thereon, including the Building and other buildings, if any, located within the
boundaries of such property, shown on the Project Site Plan.
"PROJECT MANAGER" is defined in Section 18.1.
"PROJECT SITE PLAN" means Exhibit B.
"PUNCH LIST" is defined in Section 3.6 and in the definition of
"substantially completed."
"REA" means any . Reciprocal Easement Agreement encumbering the Project
and described in Exhibit E, as the same may be amended from time to time.
"REIT" is defined in Article 18.
"REAL PROPERTY TAXES" is defined in Section 7.5.
"RENT" means Monthly Rent and Additional Rent, collectively.
"RENT COMMENCEMENT DATE" shall mean that date which is thirty seven (37)
days following the Commencement Date.
"RESTRICTIONS" means, collectively, and CC&Rs, REA and other covenants,
conditions or restrictions affecting the Premises or any portion thereof, and
described in Exhibit E, as the same may be amended from time to time.
"RULES AND REGULATIONS" means the rules and regulations described in
Exhibit F and any modifications thereto promulgated by Landlord's Agents from
time to time, provided such
Page 5
<PAGE> 20
modifications do not unreasonably interfere with Tenant's use and enjoyment of
the Premises.
"SECURITY DEPOSIT" means the amount set forth in Section 1.12, which
shall be paid to Landlord Tenant pursuant to Section 4.6.
"STANDBY LETTER OF CREDIT" is defined in Section 4.7.
"STATEMENTS" is defined in Section 21.9.
"SUBSTANTIAL COMPLETION" and "SUBSTANTIALLY COMPLETED" means the Tenant
Improvements, or repair of the premises following a Casualty, having been fully
completed except for minor details of construction, mechanical adjustments or
decoration which do not materially interfere with Tenant's use and enjoyment of
the Premises (such minor details being referred to as "Punch List" items).
"SUBSTITUTE SPACE" is defined in Article 20.
"TENANT DELAY" means: (i) any and all delays in the construction of the
Tenant Improvements due to the fault of Tenant, including without limitation
"Tenant Delays" as defined and specified in Section 8 of the Work Letter, but
excluding any Unavoidable Delays; and (ii) Tenant's failure to deliver to
Landlord prior to the Anticipated Commencement Date, executed copies of policies
of insurance or certificates thereof as required under Section 11.7.
"TENANT IMPROVEMENTS" means those certain initial improvements, if any,
to be constructed on the Premises as provided in Section 3.6 and in the Work
Letter.
"TENANT IMPROVEMENT ALLOWANCE" is the amount, if any, specified in the
Work Letter.
"TENANT IMPROVEMENT COSTS" are defined in the Work Letter.
"TENANT'S PERSONAL PROPERTY" means Tenant's removable trade fixtures,
furniture, equipment and other personal property located in or on the Premises.
"TENANT'S SHARE" is defined in Section 7.3.
"TERM" means the term of this Lease, as provided in Section 3.2.
"TRADE NAME" is set forth in Section 1.4.
"UNAVOIDABLE DELAY" means any delays which are beyond Landlord's
reasonable control, including, but not limited to, delays due to inclement
weather, strikes, acts of God, inability to obtain labor or materials, inability
to secure government approval or permits, governmental restrictions, civil
commotion, fire, earthquake, explosion, flood, hurricane, the elements or the
public enemy,
Page 6
<PAGE> 21
action or interference of governmental authorities or agents, war, invasion,
insurrection, rebellion, riots, lockouts or any other cause whether similar or
dissimilar to the foregoing which is beyond the reasonable control of Landlord.
"WORK LETTER" means the work letter between Landlord and Tenant
regarding the construction of the Tenant Improvements, if any, in the form of
Exhibit C.
2.2 OTHER DEFINITIONS. Terms defined elsewhere in this Lease or the
exhibits, riders, schedules and attachments, unless the context clearly requires
otherwise, shall have the meanings as there given.
ARTICLE 3
PREMISES AND TERM
3.1 LEASE OF PREMISES. Subject to and upon the terms and conditions set
forth herein, Landlord hereby leases the Premises to Tenant, and Tenant hereby
leases the Premises from Landlord.
3.2 TERM AND COMMENCEMENT. Unless sooner terminated as provided herein,
the term of this Lease (the "Term") shall be for that period of years, months
and days set forth in Section 1.9, as the same may be extended in accordance
with any option or options to extend the Term granted herein, and shall commence
(the "Commencement Date") upon the earlier to occur of: (i) Tenant's occupancy
of the Premises; or (ii) the later of (a) Tenant's receipt of a copy of the
Certificate of Occupancy for the Premises, or (b) Landlord's delivery of the
Premises to Tenant with Tenant improvements substantially completed. When the
Actual commencement Date has occurred, Landlord and Tenant shall execute a
Commencement Date Memorandum in the form shown in Exhibit D. Landlord and Tenant
anticipate that the Term will commence on the "Anticipated Commencement Date"
set forth in Section 1.8, but the Anticipated Commencement Date shall in no
event affect the actual Commencement Date, which shall be determined as set
forth in this Section 3.2.
3.3 EARLY ENTRY. Tenant and its authorized agents, contractors,
subcontractors and employees shall be granted a license by Landlord to enter
upon the Premises, at Tenant's sole risk and expense, during ordinary business
hours prior to the Commencement Date, for the sole purpose of installing
Tenant's trade fixtures and equipment in the Premises; provided, however, that:
(i) the provisions of this Lease, other than with respect to the payment of
Monthly Rent, Operating Expenses and Real Property Taxes, shall apply during
such early entry, including, but not limited to, the provisions of Article 11
relating to Tenant's indemnification of Landlord; (ii) prior to any such entry,
Tenant shall pay for and provide evidence of the insurance to be provided by
Tenant pursuant to the provisions of Section 8.4 and Article 11; (iii) Tenant
shall pay all utility, service and maintenance charges for the Premises
attributable to Tenant's early entry and use of the Premises as reasonably
determined by Landlord; (iv) Tenant shall not unreasonably interfere, delay or
hinder Landlord, its agents, contractors or subcontractors in the construction
of the Tenant improvements
Page 7
<PAGE> 22
in accordance with the provisions of this Lease; and (v) Tenant shall not use
the Premises for the storage of inventory or otherwise commence the operation of
business in or from the Premises during the period of such early entry. Upon
Tenant's breach of any of the foregoing conditions, Landlord may, in addition to
exercising any of its other rights and remedies set forth herein, revoke such
license upon notice to Tenant. Early entry by Tenant in accordance with this
Section 3.3 shall not constitute occupancy of the Premises for purposes of
establishing the Commencement Date.
3.4 DELAY IN POSSESSION. If for any reason, Landlord cannot deliver
possession of the Premises to Tenant with the Tenant Improvements substantially
completed on or before the Anticipated Commencement Date, Tenant shall not be
obligated to pay Monthly Rent or Additional Rent other than as provided in
Section 3.3 and Section 3.5 until the Commencement Date has occurred. If the
Commencement Date has not occurred within one hundred eighty (180) days
following the date of this Lease (increased by any period of Tenant Delay),
Tenant at its option, by written notice to Landlord within one hundred ninety
(190) days following the date of this Lease (increased by any periods of Tenant
Delay), may terminate this Lease, in which event the parties shall be discharged
from all further obligations accruing under this Lease. If the Commencement Date
has not occurred within one hundred eighty (180) days following the Anticipated
Commencement Date (plus periods attributable to delays by Landlord or
Unavoidable Delay), Landlord may, at its option, by written notice to Tenant at
any time prior to the Commencement Date, terminate this Lease, in which event
the parties shall be discharged from all further obligations accruing hereunder.
If for any reason delivery of possession of the Premises to Tenant is delayed,
Landlord shall not be subject to any liability therefore, such failure shall not
affect the validity of this Lease or the obligations of Tenant hereunder and
Tenant's remedies for such delay shall be limited to those set forth in this
Section 3.4. Tenant understands that, notwithstanding anything to the contrary
contained herein, Landlord shall have no obligation to deliver possession of the
Premises to Tenant for so long as any of the Tenant Delays as set forth under
clause (ii) of the definition of Tenant Delays are outstanding.
3.5 TENANT DELAYS. The Commencement Date shall not be delayed or
postponed due to Tenant Delays, and the Term, Tenant's obligations to pay Rent
and all of Tenant's other obligations under this Lease shall commence upon the
date which would have been the Commencement Date but for Tenant Delays, which
date shall be determined by Landlord.
3.6 CONDITION OF PREMISES. Landlord's sole construction obligations, if
any, regarding Tenant Improvements for the Premises are set forth in the Work
Letter. The taking of possession or use of the Premises by Tenant for any
purpose other than as provided in Section 3.3 shall conclusively establish that
Tenant has inspected the Premises and accepts them as being in good and sanitary
order, condition and repair and that the Tenant Improvements have been
constructed in accordance with the plans; provided, however, within thirty (30)
days after the date on which Landlord delivers the Premises to Tenant, Tenant
shall have the right to prepare and submit to Landlord a list of defective and
incomplete items of work performed by Landlord in the Premises (the "Punch
List"). Landlord shall, in a reasonably prompt manner, repair and/or complete
the legitimate items included on the Punch List within thirty (30) days of
Landlord's receipt of the Punch List from Tenant; provided, however, if an item
on the Punch List is of such a nature that it cannot reasonably be remediated
within such 30-day period, Landlord shall not be deemed to be in breach of its
obligations under this Section 3.6 provided that Landlord commences to remediate
such Punch
Page 8
<PAGE> 23
List item within the initial 30-day period and thereafter diligently prosecutes
such remedial measures to completion. Nothing in this Section 3.6 shall limit or
expand Landlord's maintenance and repair obligations set forth in Article 9.
3.7 NO REPRESENTATIONS. Tenant acknowledges that neither Landlord nor
any of Landlord's Agents has made any representations or warranties as to the
suitability or fitness of the Premises for the conduct of Tenant's business,
including, but not limited, any representations or warranties regarding zoning
or other land use matters, or for any other purpose, and that neither Landlord
nor any of Landlord's Agents has agreed to undertake any Alterations, additions
or to construct any Tenant Improvements to the Premises except as expressly
provided in this Lease. Furthermore, Tenant does not rely on, nor does Landlord
represent, that any specific tenant, number of tenants or type of tenant shall
occupy any space in the Project during the Term.
3.8 FIXTURES AND FURNISHINGS. Intentionally omitted.
3.9 AREA CONFIRMATION. Prior to Landlord's delivery of the Premises to
Tenant, Landlord shall determine the actual premises Square Footage and notify
Tenant of same. The projected Premises Square Footage set forth in Section 1.7,
the projected Monthly Rent set forth in Section 1.10, the projected Vehicle
Parking Spaces set forth in Section 1.15, and the Tenant Improvement Allowance
set forth in the Work Letter shall all be adjusted to reflect the actual
Premises Square Footage as determined by Landlord.
ARTICLE 4
RENT AND ADJUSTMENTS
4.1 MONTHLY RENT. From and after the Rent Commencement Date, Tenant
shall pay to Landlord, for each calendar month of the Term, the Monthly Rent set
forth in Section 1.10. Monthly Rent shall be due and payable to Landlord in
lawful money of the United States, in advance, on the first (1st) day of each
calendar month of the Term, except as otherwise provided without abatement,
deduction, claim or offset, and without prior notice, invoice or demand, at
Landlord's address set forth in Section 1.1 or at such other place as Landlord
may from time to time designate. Tenant's payment of Monthly Rent for the first
(1st) full calendar month of the Term shall be delivered to landlord
concurrently with Tenant's execution of this Lease. Monthly Rent for any partial
calendar month which occurs at the beginning of the Term (calculated on a per
diem basis) shall be delivered to Landlord concurrent with payment of the
Monthly Rent for the second full calendar month of the Term.
4.2 PERIODIC ADJUSTMENTS. Intentionally omitted.
4.3 ADDITIONAL RENT. From and after the Rent Commencement Date, all
Additional Rent shall be due and payable to Landlord in lawful money of the
United States, at Landlord's address set forth in Section 1.1 or at such other
place as Landlord may from time to time designate, without abatement, deduction,
claim or offset, within ten (10) days of receipt of Landlord's invoice or
Page 9
<PAGE> 24
statement for same, or, if this Lease provides another time for the payment of
certain items of Additional Rent, then at such other time.
4.4 PRORATIONS. If the Rent Commencement Date is not the first (1st) day
of a month, or if the expiration or termination of the Term of this Lease is not
the last day of a month, a prorated installment of Monthly Rent based on a
thirty (30) day month shall be paid for the fractional calendar month during
which the Term commences, expires or terminates.
4.5 LATE PAYMENT CHARGES. Tenant acknowledges that late payment by
Tenant to Landlord of Rent under this Lease will cause Landlord to incur costs
not contemplated by this Lease, the exact amount of which is extremely difficult
or impracticable to determine. Such costs include, but are not limited to,
processing and accounting charges, late charges that may be imposed on Landlord
by the terms of any encumbrance or notes secured by any encumbrance covering the
Premises and late charges and penalties that may be imposed due to late payment
of Real Property Taxes. Therefore, if any installment of Monthly Rent or any
payment of Additional Rent due from Tenant is not received by Landlord in good
funds by the applicable due date, Tenant shall pay to Landlord a one time
additional sum equal to three percent (3%) of the amount overdue as a late
charge for each such overdue payment; provided, however, that during any
12-month period, Landlord shall provide Tenant with a ten (10)-day grace period
to cure late payment for the first two (2) delinquent payments and the late
charge set forth in this Section 4.5 shall not apply until Tenant's third (3rd)
delinquency within such 12-month period. The parties acknowledge that this late
charge represents a fair and reasonable estimate of the costs that Landlord will
incur by reason of the late payment by Tenant and that such late charge is in
addition to any interest which may accrue on such late payment pursuant to the
terms of Section 15.5. Acceptance of any late charge shall not constitute a
waiver by Landlord of Tenant's default with respect to the overdue amount, and
shall not prevent Landlord from exercising any of the other rights and remedies
available to Landlord at law, in equity or pursuant to this Lease for any other
Event of Default (as defined in Section 15.1) under this Lease. Notwithstanding
the foregoing, should any two (2) payments of Rent by personal check within any
12-month period be rejected for insufficient funds, Landlord shall have the
right, upon notice to Tenant, to require that all future payments by Tenant
under this Lease be made by cashier's check acceptable to Landlord.
4.6 SECURITY DEPOSIT. Tenant has deposited with Landlord the sum set
forth in Section 1.12 as a Security Deposit for the full and faithful
performance of every provision of this Lease to be performed by Tenant. If at
any time during the Term of this Lease the amount of Monthly Rent is increased,
Tenant shall deposit with Landlord an additional sum which is equal to the
percentage increase in Monthly Rent for that adjustment multiplied by the then
current required amount of the Security Deposit. Such supplemental deposit(s)
shall become due and payable on the date which the first payment of any such
increased Monthly Rent becomes due and payable and such deposit shall be added
to the then existing Security Deposit. The Security Deposit shall not be
assigned, transferred or encumbered by Tenant and any attempt to do so by Tenant
shall not be binding upon Landlord. Landlord may apply all or any part of the
Security Deposit to the payment of any Rent not paid when due, the repair of
damage to the Premises or Building or the payment of any other amount which
Landlord may spend or become obligated to spend by reason of an Event of
Default, or to compensate Landlord for any other loss or damage which Landlord
may suffer by reason of an Event of Default, to the full extent permitted by
law. If any portion of the Security Deposit is so
Page 10
<PAGE> 25
applied, Tenant shall, within ten (10) days after written demand therefor,
deposit cash with Landlord in an amount sufficient to restore the Security
Deposit to the amount then required pursuant to the terms of this Section 4.6.
Landlord shall not be required to keep the Security Deposit separate from its
general funds, Tenant shall not be entitled to interest on the Security Deposit,
and no trust relationship is created with respect to the Security Deposit. In
the event Landlord sells, ground leases or assigns the Project or a portion of
the Project containing the Premises, then Landlord may assign the Security
Deposit to such purchaser, ground lessor, successor or assignee without further
liability to the Tenant. The unused portion of the Security Deposit, if any,
shall be returned to Tenant within thirty (30) days of the expiration of this
Lease or any termination of this Lease not resulting from an Event of Default,
provided that Tenant has vacated the Premises in the manner required by this
Lease and provided further that Landlord may retain the Security Deposit until
such time as any amounts of Additional Rent due from Tenant have been determined
and paid in full. Tenant hereby waives the provisions of Section 1950.7(c) of
the California Civil Code and any present or future laws otherwise governing the
return of the Security Deposit to Tenant.
4.7 STANDBY LETTER OF CREDIT. Within fifteen (15) days after the
Commencement Date, Landlord shall deliver a notice to Tenant specifying the
anticipated amount, if any, of the Tenant Improvement Allowance in excess of $25
per rentable square foot used by Landlord related to the design and construction
of the Tenant Improvements. Within thirty (30) days of Tenant's receipt of such
notice, in addition to the Security Deposit, Tenant shall deposit with Landlord
a "Standby Letter of Credit" in the amount of such excess Tenant Improvement
Allowance. The Standby Letter of Credit shall: (i) be issued by a commercial
bank, (ii) have an expiration date no earlier than the thirty-first (31st)
month of the Lease Term, (iii) provide for payment of all or any part of such
amount to Landlord upon the issuer's receipt of a sight draft from Landlord
along with Landlord's certification that such specified amount is owing to
Landlord with no other conditions, and (iv) otherwise in a form and content
reasonably satisfactory to Landlord. Provided that no Event of Default by Tenant
under this Lease has previously occurred or is then currently existing, Tenant's
obligation to maintain the Standby Letter of Credit shall cease as of the first
day of the thirty first (31 st) full calendar month of the Lease Term. In the
event that an Event of Default by Tenant occurs prior to such date, then Tenant
shall promptly provide to Landlord, prior to the expiration of the original
Standby Letter of Credit a replacement Standby Letter of Credit satisfying the
requirements set forth above, except that such replacement Standby Letter of
Credit shall have an expiration date no earlier than the expiration date for the
initial Lease Term. In the event that Tenant, after using diligent efforts, is
unable to obtain a Standby Letter of Credit with the required term, Tenant shall
be permitted to submit a Standby Letter of Credit with a lesser term, provided
that such Standby Letter of Credit shall contain an "evergreen" renewal clause
which allows the Standby Letter of Credit to be drawn in full unless a
replacement Standby Letter of Credit, meeting the above requirements, is
provided to Landlord at least twenty (20) days prior to the expiration of the
existing Standby Letter of Credit. Any Standby Letter of Credit having a term
expiring prior to the date through which Tenant is to provide a Standby Letter
of Credit shall contain such an "evergreen" clause. The Standby Letter of Credit
is never required to be in an amount greater than the unamortized amount of the
excess Tenant Improvement Allowance from time to time (based upon a 60-month
amortization schedule at 10% interest per annum). In the event that an Event of
Default occurs while a Standby Letter of Credit is in effect, Landlord shall
have the right to draw funds against such Standby Letter of Credit and use such
funds in the same manner as allowed for the expenditure of funds from the
Security Deposit.
Page 11
<PAGE> 26
ARTICLE 5
USE
5.1 TENANT'S USE. Tenant shall use the Premises solely for the purposes
set forth in Section 1.6 under the Trade Name set forth in Section 1.4 and shall
not use the Premises for any other purpose. Tenant's use of the Premises shall
be subject to all of the terms and conditions of this Lease, including, but not
limited to, all the provisions of this Article 5. Tenant, at Tenant's sole cost
and expense, shall procure, maintain and make available for Landlord's
inspection throughout the Term, all governmental approvals, licenses and permits
required for the proper and lawful conduct of Tenant's permitted use of the
Premises. At Landlord's request, Tenant shall deliver copies of all such
approvals, licenses and permits to Landlord. Tenant shall not install, maintain,
use or allow in or upon the Premises any pinball machines, coin operated music
machines, or any other coin operated music machines, or any other coin operated
amusement device of any kind or character without the prior written consent of
Landlord, which consent may be withheld in Landlord's sole discretion. If Tenant
shall violate the restriction set forth in the previous sentence, Landlord may,
in addition to any other rights and remedies, enter the Premises and remove any
such machines and devices at the expense of Tenant, and Landlord shall no be
deemed guilty of any forcible entry, detainer, trespass or conversion.
5.2 COMPLIANCE WITH APPLICABLE LAWS. Landlord represents that at the
time of its initial construction that the Building complied with all Applicable
Laws then in effect. Furthermore, Landlord represents that, as of Landlord's
delivery of the Premises to Tenant, the Tenant Improvements comply with
Applicable Laws then in effect. Throughout the Term, Tenant, at Tenant's sole
cost and expense, shall comply with, and shall not use the Premises, Building,
Common Area or any other portion of the Project, or suffer or permit anything to
be done in or about the same, which will in any way conflict with: (i) any and
all present and future laws, statutes, zoning restrictions, ordinances, orders,
regulations, directions, rules and requirements of all governmental or private
authorities having jurisdiction over all or any part of the Project (including,
but not limited to, state, municipal, county and federal governments and their
departments, bureaus, boards and officials) pertaining to the use or occupancy
of, or applicable to, the Premises or privileges appurtenant to or in connection
with the enjoyment of the Premises; (ii) any and all applicable federal, state
and local laws, regulations or ordinances pertaining to air and water quality,
Hazardous Materials (as defined in Section 6.1), waste disposal, air emissions
and other environmental or health and safety matters, zoning, land use and
utility availability, which impose any duty upon Landlord or Tenant directly or
with respect to the use or occupation of the Project or any portion thereof;
(iii) the requirements of the Board of Fire Underwriters or other similar body
now or hereafter constituted relating to or affecting the condition, use or
occupancy of the Project or any portion thereof; (iv) any covenants, conditions,
easements or restrictions, including but not limited to the Restrictions, now or
hereafter affecting or encumbering the Project or any portion thereof,
regardless of when they become effective; (v) the Rules and Regulations; and
(vi) good business practices (collectively (i) through (vi) above are referred
to as "Applicable Laws"). The judgment of any court of competent jurisdiction or
the admission by Tenant in any action or proceeding against Tenant that Tenant
has violated any Applicable Laws shall be a conclusive
Page 12
<PAGE> 27
determination of that fact between Landlord and Tenant even though Landlord is
not a party to any such action or proceeding. Tenant's obligation to comply with
Applicable Laws pursuant to this Section 5.2 shall include the duty to promptly,
and at Tenant's sole cost and expense: (a) perform any necessary repairs,
improvements or alterations of whatever nature (excluding structural or
extraordinary repairs, improvements or alterations) to the Building which are
necessitated by Tenant's specific use of the Premises; and (b) perform any
necessary repairs, improvements or alterations of whatever nature (excluding
structural or extraordinary repairs, improvements or alterations, unless such
structural or extraordinary work is necessitated by Tenant's specific use of the
Premises) to the Premises necessitated by Tenant's use of the Premises. Tenant
shall not commit any, waste of the Premises, Building or Project or any public
or private nuisance or any other act or thing which might or would disturb the
quite enjoyment of any other tenant of landlord or any occupant of nearby
property. Tenant shall not install, operate or maintain in, on or about the
Premises any electrical appliances, fixtures or equipment which would, in
Landlord's reasonable opinion, overload any potion of the electrical system for
the Project. Tenant shall not place or permit to be placed any loads upon the
floors, walls, or ceilings in excess of the maximum designed load specified by
Landlord or which might damage the Premises or the Building, or place or permit
to be placed any harmful liquids in the drainage systems, and Tenant shall not
dump or store, or permit to be dumped or stored, any inventory, waste materials,
refuse or other materials or allow any such materials to remain outside the
Building except in designated enclosed trash areas. Tenant, at Tenant's expense,
shall cause the Premises to be inspected and treated for termites, rodents and
other pests and vermin as often as Landlord considers reasonably necessary, but
in no event less frequently than semi-annually, and Tenant, at Tenant's sole
cost, shall participate in any general extermination program that may be
established by Landlord for all or some of the tenants in the Project. Tenant
shall not conduct or permit any auctions, sheriff's sales or other like
activities at the Project or any portion thereof.
5.3 RESTRICTIONS. Tenant agrees that this Lease is subject and
subordinate to the Restrictions, as the same may now or hereafter exist and that
it will execute and deliver to Landlord within fifteen (15) days of Landlord's
request therefor, any further documentation or instruments which Landlord deems
necessary or desirable to evidence or effect such subordination. Without
limiting the provisions of Section 5.2, Tenant shall throughout the Term timely
comply with all of the terms, provisions, conditions and restrictions of the
Restrictions which pertain to, restrict or affect the Premises or Tenant's use
thereof, or. Tenant's use of any other area of the Project permitted hereunder,
including the payment by Tenant of any periodic or special dues or assessments
charged against the Premises or Tenant which may be allocated to the Premises or
Tenant in accordance with the provisions of the Restrictions. To the extent any
such periodic or special dues or assessments are charged against multiple
premises or multiple tenants, Landlord shall equitably allocate such amounts
among the affected premises or tenants, and Tenant shall be responsible for
payment of any such amount allocated to it or the Premises by Landlord. Tenant
shall hold Landlord, Landlord's Agents and the Premises harmless and shall
indemnify, protect and defend Landlord and Landlord's Agents from and against
any loss, expense, damage, attorneys' fees and costs or liability arising out of
or in connection with the failure of Tenant to so perform or comply with the
Restrictions. Tenant agrees that it will subordinate this Lease to any other
covenants, conditions and restrictions and any reciprocal easement agreements or
any similar agreements which Landlord may hereafter record against the Premises
or any portion thereof, provided that such subordination does not unreasonably
interfere with Tenant's use and enjoyment of the Premises.
Page 13
<PAGE> 28
5.4 LANDLORD'S RIGHT OF ENTRY. Landlord and Landlord's Agents shall have
the right to enter the Premises at all reasonable times upon 48-hours' written
notice to Tenant, except for emergencies in which case no notice shall be
required, to inspect the Premises, to take samples and conduct environmental
investigations, to post notices of nonresponsibility and similar notices and
signs indicating the availability of Premises for sale, to show the Premises to
interested parties such as prospective lenders and purchasers, to make necessary
Alterations or perform maintenance, replacement and repairs, to perform Tenant's
obligations as permitted herein when Tenant has failed to do so and, at any
reasonable time after one hundred eighty (180) days prior to the expiration of
the Term, to place upon the Premises reasonable signs indicating the
availability of Premises for lease and to show the Premises to prospective
tenants, all without being deemed to have caused an eviction of Tenant and
without any liability to Tenant or abatement of Rent. The above rights are
subject to reasonable security regulations of Tenant, and in exercising its
rights set forth herein, Landlord shall endeavor to cause the least possible
interference with Tenant's business. Landlord shall at all times have and retain
a key which unlocks all of the doors in the Premises, excluding Tenant's vaults
and safes, and Landlord and Landlord's Agents shall have the right to use any
and all means which Landlord may deem proper to open the doors in an emergency
to obtain entry to the Premises, and any entry to the Premises so obtained by
Landlord or Landlord's Agents shall not under any circumstances be deemed to be
a forcible or unlawful entry into, or a detainer of, the Premises, or an
eviction of Tenant from the Premises. Notwithstanding anything contained in this
Lease to the contrary, in the event a release of Hazardous Material occurs on or
affects the Premises, Landlord or Landlord's Agents shall have the right to
enter the Premises at any time, without prior notice, to inspect, monitor, take
emergency or long-term remedial action, discharge Tenant's obligations under the
Lease at the expense of Tenant if Tenant has failed to do so, or take any other
action as Landlord deems necessary to restore the Premises to its original
condition.
5.5 ADDITIONAL RIGHTS OF LANDLORD. Landlord further reserves to itself
and shall at any and all times have the right:
(a) To change the street address of the Premises and/or the name or
street address of the Project;
(b) To install and maintain signs in the Project at such locations as
Landlord shall deem advisable, other that within the Premises;
(c) To, without waiving any default by Tenant, decorate, remodel, alter
or otherwise repair the Premises for reoccupancy during the last six (6) months
of the Term if, during or prior to such time, Tenant has vacated the Premises,
or at any time after Tenant abandons the Premises;
(d) To grant to anyone the exclusive right to conduct any business or
render any service in the Project, provided such exclusive right shall not
operate to exclude Tenant from the use of the Premises for the purposes
expressly permitted by this Lease; and
(e) To effect such other tenancies in the Project as Landlord in the
exercise of its sole business judgment shall determine to best promote the
interests of the Project.
5.6 ROOF AND EXTERIOR WAILS. Landlord reserves the exclusive right to
the roof areas and
Page 14
<PAGE> 29
exterior walls of the Building and the Project. The foregoing to the contrary
notwithstanding, Tenant shall have the right to place unobtrusive electronic
and/or telecommunication antennae and other devices on the roof, provided that:
(i) Landlord shall approve rights over the location, aesthetics and placement of
any such devices; (ii) Tenant shall be solely responsible for the installation,
maintenance and removal of all such items; (iii) Tenant shall be fully liable
for any property damage or injury resulting from Tenant's use of the roof or the
installation, maintenance or removal of equipment thereon; (iv) Tenant shall be
solely responsible for complying with all Applicable Laws related to such
devices; and (v) at the termination or expiration of this lease, Tenant shall
remove all such devices and repair any damage to the roof caused by the
installation, and repair any maintenance or removal of such devices. Other than
as provided herein, Tenant shall not use the roof areas or exterior wails of the
Building or Project for any purposes. In the event that Tenant desires to go
upon any roof areas of the Project for maintenance purposes, Tenant shall obtain
the prior written consent of Landlord (except in the event of an emergency),
which consent may be withheld in Landlord's sole and absolute discretion.
5.7 TRENCHING. In the event that during the Lease Term Tenant acquires
additional space in other buildings in the Project, Tenant shall have the right,
subject to Landlord's consent as to size, location, and installation methods, to
install and maintain telecommunication conduits between the various buildings
occupied by Tenant, whether under this Lease or under a combination of leases.
Tenant shall: (i) be solely responsible for all costs associated with the
installation, maintenance and repair of such conduits; (ii) promptly repair any
damage caused to the Premises, Building, Common Area or Project as a result of
the installation, maintenance or repair of such underground conduits; (iii)
comply with all Applicable Laws related to such underground conduits; and (iv)
indemnify, protect, defend and hold Landlord harmless, to the full extent set
forth in Section 11.1, from any and all damages, loss, claims, liabilities, and
expenses (including attorneys fees) related to or arising out of such
underground conduits or the installation, maintenance and repair thereof. Tenant
shall not be required to remove such underground conduits at the expiration or
termination of the Lease Term, provided that Tenant shall leave such conduits in
a safe and secure condition.
5.8 QUIET ENJOYMENT. Landlord covenants that Tenant, upon performance of
the terms, conditions and covenants of this Lease, shall have quiet and peaceful
possession of the Premises as against any person or entity claiming the same by,
through or under Landlord.
ARTICLE 6
HAZARDOUS MATERIALS
6.1 DEFINITION OF HAZARDOUS MATERIALS. For purposes of this Lease, the
term "Hazardous Materials" means any hazardous or toxic substance, material or
waste which is or becomes regulated by any local governmental authority, the
State of California or the United States. Hazardous Materials include, without
limitation, the following: (i) any pollutant, oil or hazardous substance,
identified or listed pursuant to Sections 307, 311 or 502 of the Federal Water
Pollution Control Act (33 U.S.C. Sections 1317, 1321 and 1362); (ii) any
element, compound, mixture, solution or substance designated pursuant to Section
102 of the Comprehensive Environmental Response
Page 15
<PAGE> 30
Compensation and Liability Act ("CERCLA") (42 U.S.C. Section 9602); (iii) any
substance or material having the characteristics identified under or listed
pursuant to Section 3001 of the Comprehensive Recovery Act ("RCRA") (42 U.S.C.
Section 6921); (iv) any petroleum, crude oil, or any fraction of either which is
not otherwise specifically listed or designated under items (i)-(iii); (v) any
hazardous waste, extremely hazardous waste, hazardous substance or hazardous
material, as defined or listed pursuant to Sections 25115, 25117, 25122.7,
25141, 25316 or 25501 of the California Health & Safety Code; and (vi) any waste
or material, including asbestos and lead, which is listed or meets any
identification or toxicity criterion in Article 9, Article 11 or Article 15 of
Title 22 of the California Code of Regulations.
6.2 USE OF HAZARDOUS MATERIALS. Tenant shall not cause or permit any
Hazardous Materials to be brought upon, stored, used, generated, released into
the environment or disposed of on, under, from or about the Premises (which for
purposes of this Article 6 shall include, but is not limited to, subsurface soil
and ground water) by Tenant, its agents, employees, contractors or invitees.
Without limiting any other rights or remedies of Landlord under this Lease,
Tenant shall pay the cost of any cleanup worse performed on, under or about the
Premises, the Building and the Project as required by this Lease or any
Applicable Laws in connection with the removal, disposal, storage,
transportation, neutralization or other treatment of such Hazardous Materials.
The foregoing to the contrary notwithstanding, Tenant shall have the right,
without providing notice to or obtaining the consent of Landlord, to use
standard cleaning materials, solvents and office supplies typically used in
Tenant's business, provided that Tenant compiles with all Applicable Laws
related to such materials solvents, and supplies.
6.3 INCIDENT REPORTING REQUIREMENTS. Tenant and Landlord shall each
promptly notify the other of, and shall promptly provide the other with true,
correct, complete and legible copies of, all of the following environmental
items relating to the Premises which may be filed or prepared by or on behalf
of, or delivered to or served upon, Tenant or Landlord: (i) all orders, reports,
notices, listings and correspondence (even those which may be considered
confidential) of or concerning the release, investigation of, compliance, clean
up, remedial and corrective actions, and abatement of Hazardous Materials
whether or not required by Applicable Laws, including, but not limited to,
reports and notices required by or given pursuant to any Applicable Laws; and
(ii) all complaints, pleadings and other legal documents filed against Tenant or
Landlord related to Tenant's or Landlord's use, handling, storage or disposal of
Hazardous Materials. In the event of the release of any Hazardous Materials on
the Premises or to the environment by Tenant or Landlord, Tenant or Landlord
shall promptly provide the other with copies of all reports and correspondence
with or from all governmental agencies, authorities or any other persons
relating to such release.
6.4 INSPECTION; COMPLIANCE. Landlord and Landlord's Agents shall have
the right, but not the obligation, inspect, investigate, sample and/or monitor
the Premises, at any time to determine whether Tenant is complying with the
terms of this Article 6. If Tenant is not in compliance with any of the
provisions of this Article 6, Landlord and Landlord's Agents shall have the
right, but not the obligation, without limitation upon any of Landlord's other
rights and remedies under this Lease, at law or in equity, to immediately enter
upon the Premises and to discharge Tenant's obligations under this Article 6 at
Tenant's expense, notwithstanding any other provision of this Lease. Landlord
and Landlord's Agents shall endeavor to minimize interference with Tenant's
business but shall not be liable for any such interference. All sums reasonably
disbursed, deposited or incurred by
Page 16
<PAGE> 31
Landlord in connection therewith, including, but not limited to, all costs,
expenses, and actual attorneys' fees. shall be due and payable by Tenant to
Landlord as an item of Additional Rent, on demand by Landlord, together with
interest thereon at the Applicable Rate from the date of such demand until paid
by Tenant.
6.5 TENANT INDEMNIFICATION. To the fullest extent permitted by law,
Tenant hereby agrees to indemnify, hold harmless, protect and defend (with
attorneys reasonably acceptable to Landlord) Landlord and Landlord's Agents, and
any successors to all or any portion of Landlord's interest in the Premises, the
Building and the Project and their directors, officers, partners, employees,
authorized agents, affiliates, representatives and Mortgagees, from and against
any and all liabilities, losses, damages (including, but not limited to: (i)
damages for the loss or restriction on use of rentable or usable space or any
amenity of the Premises, the Building and the Project; or (ii) damages arising
from any adverse impact on marketing of space in the Premises, the Building and
the Project; or (iii) diminution in the value of the Premises, the Building or
the Project), judgments, fines, demands, claims, recoveries, deficiencies, costs
and expenses (including, but not limited to, reasonable attorneys' fees,
disbursements and court costs and all other professional or consultant's
expenses), whether foreseeable or unforeseeable, arising directly or indirectly
out of the presence, use, generation, storage, treatment, on or off-site
disposal or transportation of Hazardous Materials on, into, from, under or about
the Premises, the Building and the Project by Tenant, its agents, employees,
contractors, licensees or invitees, and specifically including the cost of any
required or necessary repair; restoration, cleanup (including, but not limited
to, the costs of investigation and removal of Hazardous Materials) or
detoxification of the Premises, the Building and the Project and the preparation
of any closure or other required plans, whether or not such action is required
or necessary during the Term or after the expiration of this Lease.
6.6 LANDLORD INDEMNIFICATION. To the fullest extent permitted by law,
Landlord hereby agrees to indemnify, hold harmless, protect and defend (with
attorneys reasonably acceptable to Tenant) Tenant and Tenant's Agents, and any
successors to all or any portion of Tenant's interest in the Premises and their
directors, officers, partners, employees, authorized agents, affiliates and
representatives, from and against any and all liabilities, losses, damages
(including, but not limited to: (i) damages for the loss or restriction on use
of rentable or usable space or any, amenity of the Premises; (ii) diminution in
the value of Tenant's leasehold interest in the Premises, judgments, fines,
demands, claims, recoveries, deficiencies, costs and expenses (including, but
not limited to, reasonable attorneys' fees, disbursements and court costs and
all other professional or consultant's expenses), whether foreseeable or
unforeseeable, arising directly, or indirectly out of the presence, use,
generation, storage, treatment, on or off-site disposal or transportation of
Hazardous Materials on, into, from, under or about the Premises, the Building
and the Project by, Landlord, its agents, employees, contractors, licensees or
invitees (excluding other tenants of the Project), and specifically, including
the cost of any, required or necessary repair, restoration, cleanup (including,
but not limited to, the costs of investigation and removal of Hazardous
Materials) or detoxification of the Premises and the preparation of any closure
or other required plans, whether or not such action is required or necessary
during the Term or after the expiration of this Lease.
ARTICLE 7
Page 17
<PAGE> 32
OPERATING EXPENSES; TAXES; UTILITIES
7.1 TENANT'S SHARE OF OPERATING EXPENSES. From and after the Rent
Commencement Date," Tenant shall pay to Landlord Tenant's Share of Operating
Expenses. Prior to the Rent Commencement Date and thereafter prior to the
commencement of each calendar year during the Term, Landlord shall give Tenant a
written estimate of Tenant's Share of Operating Expenses for the ensuing
calendar year or partial calendar year, as the case may be. Tenant shall pay, as
an item of Additional Rent, such estimated amount in equal monthly installments,
in advance, on or before the first (1st) day of each month concurrent with its
payment of Monthly Rent. If Landlord has not furnished its written estimate by
the time set forth above, Tenant shall pay monthly installments of Operating
Expenses at the rates established for the prior calendar year, if any; provided,
however, that when the new estimate is delivered to Tenant, Tenant shall at the
next monthly payment date pay Landlord any accrued deficiency based on the new
estimate, or Landlord shall credit any accrued overpayment based on such
estimate toward Tenant's next installment payment of Operating Expenses. Within
a reasonable period of time after the end of each calendar year (in no event
less than one hundred twenty (120) days after the end of each calendar year
unless sooner completed by Landlord) Landlord shall furnish Tenant a statement
showing in reasonable detail Tenant's Share of the actual Operating Expenses
incurred for the period in question. If Tenant's payments for that calendar year
are less than Tenant's Share of the actual Operating Expenses as shown by the
applicable statement, Tenant shall pay the difference to Landlord within thirty
(30) days thereafter. If Tenant shall have overpaid Landlord, Landlord shall
credit such overpayment toward Tenant's next installment payment. When the final
determination is made of Tenant's Share of the actual Operating Expenses for the
calendar year in which this Lease expires or terminates, Tenant shall, even if
this Lease has expired or terminated, pay to Landlord upon notice the excess of
Tenant's Share of such actual Operating Expenses over the estimate of Tenant's
Share of such Operating Expenses paid. Conversely, any, overpayment shall be
rebated by Landlord to Tenant. If Landlord shall determine at any time that the
estimate of Tenant's Share of Operating Expenses for the current calendar year
is or will become inadequate to meet Tenant's share of all such Operating
Expenses for any reason, Landlord shall immediately determine the approximate
amount of such inadequacy and issue a supplemental estimate as to Tenant's Share
of such Operating Expenses and Tenant shall pay any increase as reflected by
such supplemental estimate, provided that no more than one such adjustment shall
occur during any calendar year. Landlord shall keep or cause to be kept separate
and complete books of accounting covering all Operating Expenses and showing the
method of calculating Tenant's Share of Operating Expenses and shall preserve
for the Term of the Lease all material documents evidencing said Operating
Expenses for that calendar year. Tenant, at its sole cost and expense, shall
have the right, during reasonable business hours and not more frequently than
once during any calendar year, to examine and/or audit the books and documents
mentioned above evidencing such costs and expenses for any previous calendar
year. Any delay or failure by Landlord in delivering any estimate or statement
pursuant to this Section 7.1 shall not constitute a waiver of its right to
require Tenant to pay Tenant's Share of Operating Expenses pursuant hereto.
7.2 TENANT'S SHARE OF REAL PROPERTY TAXES. From and after the Rent
Commencement Date, Tenant shall pay to Landlord Tenant's Share of Real Property
Taxes. Prior to the Rent Commencement Date and thereafter prior to the
commencement of each calendar year during the Term, Landlord shall give Tenant a
written estimate of Tenant's Share of Real Property Taxes for
Page 18
<PAGE> 33
the ensuing calendar year or partial calendar year, as the case may be. Tenant
shall pay as an item of Additional Rent, such estimated amount in equal monthly
installments, in advance, on or before the first (1st) day of each month
concurrent with its payment of Monthly Rent. If Landlord has not furnished its
written estimate by the time set forth above, Tenant shall pay monthly
installments of Real Property Taxes at the rates established for the prior
calendar year, if any; provided that when the new estimate is delivered to
Tenant, Tenant shall at the next monthly payment date pay Landlord any accrued
deficiency based on the new estimate, or Landlord shall credit any accrued
overpayment based on such estimate toward Tenant's next installment payment of
Real Property Taxes. Within a reasonable period of time after the end of each
calendar year Landlord shall furnish Tenant a statement showing in reasonable
detail Tenant's Share of Real Property Taxes. If Tenant's payments for the
applicable calendar year are less than Tenant's Share of the actual Real
Property Taxes as shown by the applicable statement, Tenant shall pay the
difference to Landlord within thirty (30) days thereafter. If Tenant shall have
overpaid Landlord, Landlord shall credit such overpayment toward Tenant's next
installment payment of Real Property Taxes. When the final determination is made
of Tenant's Share of the actual Real Property Taxes for the calendar year in
which this Lease expires or terminates, Tenant shall, even if this Lease has
expired or terminated, pay to Landlord upon notice the excess of Tenant's Share
of such actual Real Property Taxes over the estimate of Tenant's Share of such
Real Property Taxes paid by Tenant. Conversely, any overpayment shall be rebated
by Landlord to Tenant. If Landlord shall determine at any time that the estimate
of Tenant's Share of Real Property Taxes for the current calendar year is or
will become inadequate to meet Tenant's Share of all such Real Property Taxes,
Landlord shall immediately determine the approximate amount of such inadequacy
and issue a supplemental estimate as to Tenant's Share of such Real Property
Taxes and Tenant shall pay any increase as reflected by such supplemental
estimate, provided that no more than one such adjustment shall occur during any
calendar year. Landlord shall keep or cause to be kept separate and complete
books of accounting covering the Real Property Taxes and showing the method of
calculating Tenant's Share of Real Property Taxes and shall preserve for the
Term of this Lease all material documents evidencing said Real Property Taxes
for that calendar year. Tenant, at its sole cost and expense, shall have the
right, during reasonable business hours and not more frequently than once during
any calendar year, to examine and/or audit the books and documents mentioned
above evidencing such Real Property Taxes for any previous calendar year. Any
delay or failure by Landlord to deliver any estimate or statement pursuant to
this Section 7.2 shall not constitute a waiver of its right to require Tenant to
pay Tenant's Share of the Real Property Taxes.
7.3 DEFINITION OF TENANT'S SHARE. The term "Tenant's Share" means that
portion of Operating Expenses or Real Property Taxes determined by multiplying
the cost of such item by a fraction, the numerator of which is the Premises
Square Footage and the denominator of which is the total rentable square footage
of the Project leased and held by lease by tenants, as of the date on which the
computation is made, provided that in no event shall the denominator of such
equation be deemed to be less than ninety-five percent (95%) of the total
rentable floor area of the Project.
7.4(a) DEFINITION OF OPERATING EXPENSES. The term "Operating Expenses"
means all costs and expenses incurred by Landlord or Landlord's Agents in
connection with the operation of the Project, including, but not limited to, the
following: repair, replacement and maintenance of the roof, (but only to the
extent that repairs, maintenance or replacements are due to the acts, negligence
or willful misconduct of Tenant or its employees, agents, representatives and
contractors), periodic
Page 19
<PAGE> 34
painting of the buildings in the Project, periodic cleaning of the exterior
windows of the buildings in the Project, landscaping services, outside pest
control, normal maintenance, repair and replacement of the HVAC through
maintenance contracts or otherwise (but not including repair, replacement or
maintenance of any specialized HVAC exclusively serving the Premises, unless
Landlord elects to maintain the same pursuant to Section 9.1), sweeping,
maintenance services, repairs to and replacement of asphalt paving [amortized
with interest at the rate of ten percent (10%) over the lesser of useful life,
ten (10) years or the period of time employed by Landlord for federal income tax
purposes], bumpers, striping, light bulbs, light standards, monument and
directional signs and lighting systems, perimeter walls, retaining walls,
sidewalks, planters, landscaping and sprinkler system in planting area, any and
all assessments levied against the Project pursuant to the Restrictions, water,
electrical and other utility services supplied to tenants, removal of trash,
rubbish and other refuse from the Project, cleaning of and replacement of signs
of the Project, including relamping, replacements and repairs made as required;
repair, operation and maintenance of the Common Area, including, but not limited
to, removal of any obstructions not reasonably required for the Common Area
uses, prohibition and removal of the sale or display of merchandise or the
storing of materials and/or equipment in the Common Area, and payment of all
electrical, water and other utility charges or fees for services furnished to
the Common Area; obtaining and maintaining public liability, property damage and
other forms of first party insurance which Landlord may or is required to
maintain in connection with the Project (including the payment of any
deductibles thereunder); personal property taxes; fees for required licenses and
permits; costs incurred in connection with compliance of any laws or changes in
laws applicable to the Project [amortized with interest at the rate of ten
percent (10%) over the lesser of ten (10) years or the period of time employed
by Landlord for federal income tax purposes], including, without limitation, any
laws or changes in laws regarding Hazardous Materials; establishment of
reasonable reserves for replacement and/or repair of Common Area improvements,
equipment and supplies; employment of such personnel as Landlord may deem
reasonably necessary, if any, to direct parking and police the Common Area and
facilities; depreciation or rental costs of machinery and equipment used in
connection with the maintenance and operation of the Common Area; service
agreement on equipment used in connection with maintenance and operation of the
Common Area; employment of personnel used in connection with any of the
foregoing (but only to the extent that such personnel perform work related to
the Project) at commercially reasonable compensation levels, including, but not
limited to, payment or provision for unemployment insurance, workers'
compensation insurance and other employee costs; the cost of bookkeeping,
accounting and auditing and legal services provided in connection with any of
the foregoing; the cost of any environmental consultant or other services used
in connection with Landlord's monitoring of the Project with respect to
Hazardous Materials; the cost of any tax, insurance or other consultant utilized
in connection with the Project; any other items reasonably necessary from time
to time to properly repair, replace, maintain and operate the Project; and any
interest in connection therewith. Operating Expenses shall also include a
management fee to cover Landlord's management, overhead and administrative
expenses (not to exceed 3% of base rent for the Project); provided, however, if
Landlord elects to delegate its duties hereunder to a professional property
manager, then Operating Expenses shall not include any management fee to
Landlord (except for any costs and/or administrative and overhead expenses
reasonably incurred by Landlord in monitoring and auditing the performance
delegated to the professional property manager), but under such circumstances
any reasonable amounts paid to the professional property manager shall be added
to and deemed a part of Operating Expenses (not to exceed 3% of base rent for
the Project). If Landlord elects to perform any maintenance, replacement
Page 20
<PAGE> 35
or repair herein described in conjunction with properties other than the
Project, and if a common maintenance contractor is contracted with for such
purpose, the contract amount allocable to the Project, as reasonably determined
by Landlord, shall be added to and deemed a part of the Operating Expenses
hereunder.
7.4(b) EXCLUSIONS. The provisions of Section 7.4(a)to the contrary
notwithstanding, the term Operating Expenses shall not include: (i) any net
income, franchise, capital stock estate or inheritance taxes or taxes which are
the personal obligation of Landlord; (ii) costs of janitors, maintenance
personnel, and all other persons who perform duties connected with the operation
and maintenance of the Premises to the extent Tenant retains and pays for such
services itself; (iii) expenses of initial development and construction,
including but not limited to, grading, paving, landscaping, and decorating; (iv)
costs of any capital expenditures, including extraordinary repairs, replacement
or improvements or capital tools or equipment all as determined in accordance
with generally accepted accounting principles, except as specifically permitted
above; (v) expenses for which Landlord is reimbursed or indemnified (either by
an insurer, condemnor, warrantor or otherwise); (vi) losses which would have
been insured losses if Landlord had carried insurance required of Landlord under
this Lease; (vii) legal expenses arising out of the initial construction of the
Premises, or any tenant improvements or disputes with other tenants of the
Project; (viii) interest or amortization payments on any mortgage or deed of
trust encumbering the Premises or any portion thereof; (ix) commercially
unreasonable wages, salaries or other compensation paid to any employees of
Landlord; (x) the cost of any work or service performed for or facilities
furnished to Tenant at Tenant's cost; (xi) the cost of correcting latent or
patent defects in the construction of the Building, or the Premises or any part
thereof, or any equipment incorporated therein; (xii) any cost or expense
representing an amount paid to an entity affiliated in any way with Landlord
which is in excess of the amount which would be paid in the absence of such
relationship; (xiii) depreciation claimed by Landlord for tax purposes (except
as specifically permitted above); (xiv) any costs related to the sale or
financing of the Premises or any part thereof; (xv) costs relating to the
disposition of Hazardous Materials from the Premises or Project or any part
thereof, unless such Hazardous Materials were deposited upon the Premises by
Tenant or Tenant's agents, employees, contractors or invitees; (xvi) Landlord's
advertising or promotional costs or charitable contributions; (xvii) any costs
or expenses incurred by Landlord in connection with any voluntary traffic
mitigation actions; (xviii) costs of maintenance, repair or replacement of any
item covered by warranty; or (xix) any fines, penalties or interest, or costs
resulting from the negligence or willful misconduct of Landlord or its agents,
employees, or contractors. Increases in Operating Expenses by reason of a
disproportionate impact by Tenant thereon (for example, and not by way of
limitation, increases in costs of trash collection because of Tenant's excessive
generation of trash or increases in costs of Common Area maintenance because of
Tenant's unpermitted storage of inventory or materials in the Common Area), in
Landlord's reasonable judgment, may be billed by Landlord, as an item of
Additional Rent, directly to Tenant. In no event shall: (i) Tenant's Share of
Operating Expenses for the first year of the Lease Term exceed twenty six cents
($.26) per rentable square foot of the Premises; and (ii) Tenant's Share of
Operating Costs for any future year increase by more than five percent (5%) over
the amount for the previous year of the Lease Term. In the event that Tenant
occupies the entire rentable area within any building or building(s) in the
Project: (i) any item which otherwise would be properly chargeable to Tenant as
a component of Operating Expenses which solely benefits the building or
buildings occupied by Tenant shall be entirely allocated to Tenant's Share of
Operating Expenses; and (ii) any item which otherwise would be properly
chargeable to
Page 21
<PAGE> 36
Tenant as a component of Operating Expenses which solely benefits a building or
buildings not occupied in whole or part by Tenant shall not be included as an
element of Operating Expenses.
7.5 DEFINITION OF REAL PROPERTY TAXES. The term "Real Property Taxes"
means any form of tax, assessment, charge, license, fee, rent tax, levy, penalty
(if a result of Tenant's delinquency), real property, transfer or other tax
(other than Landlord's net income, estate, succession, inheritance, or franchise
taxes), now or hereafter imposed with respect to the Project or any part thereof
(including any Alterations), this Lease or any Rent payable under this Lease by
an authority having the direct or indirect power to tax, or by any city, county,
state or federal government or any improvement district or other district or
division thereof, whether such tax or any portion thereof: (i) is determined by
the area of the Project or any part thereof or the Rent payable under this Lease
by Tenant including, but not limited to, any gross income or excise tax levied
by any of the foregoing authorities with respect to receipt of the Rent due
under this Lease; (ii) is levied or assessed in lieu of, in substitution for, or
in addition to, existing or additional taxes with respect to the Project or any
part thereof whether or not now customary or within the contemplation of
Landlord or Tenant; or (iii) is based upon any legal or equitable interest of
Landlord in the Project or any part thereof. The foregoing provisions of this
Section 7.5 to the contrary notwithstanding, the term Real Property Taxes shall
not include: (i) any interest or penalties imposed upon Landlord by any taxing
authority for late payment or otherwise; (ii) any increase caused by a sale or
transfer of the Building or the Project; or (iii) any taxes or assessments to
the extent that such are attributable to then undeveloped portions of the
Project.
7.6 APPORTIONMENT OF TAXES. Intentionally deleted.
7.7 PERMITTED CONTESTS. Tenant may contest the amount or validity of any
Real Property Taxes by appropriate proceedings; provided that Tenant gives the
Landlord prior written notice of any such contest and keeps Landlord advised as
to all proceedings, and provided further that Tenant shall continue to reimburse
Landlord for Landlord's payment of such Real Property Taxes unless such
proceeding shall operate to prevent or stay such payment and the collection of
the tax or assessment so contested. Landlord shall join in any proceedings if
any Applicable Laws shall so require, provided that Tenant shall hold harmless,
indemnify, protect and defend Landlord from and against any liability, claim,
demand, cost or expense in connection therewith, including, but not limited to,
actual attorneys' fees and costs reasonably incurred. In addition to the
foregoing, Tenant shall have the right to request Landlord to contest annual
Real Property Taxes for the Project, and if in Landlord's reasonable business
judgment such contest would be prudent, Landlord shall contest such matters with
the appropriate taxing authority.
7.8 PERSONAL PROPERTY TAXES. Tenant shall pay before delinquency to the
appropriate governmental authority any and all taxes, assessments, license fees
and public charges levied, assessed or imposed at any time and which become
payable during the Term of this Lease upon Tenant's Personal Property whether or
not such assessment is made against Tenant or against Landlord, either
separately or as a part of the assessment of the Project, and whether any such
item was installed by Landlord or Tenant. Tenant shall indemnify, protect,
defend and hold harmless Landlord from and against any liability, claim, demand,
cost or expense (including, but not limited to, reasonable attorneys' fees and
cost of suit) in connection with Tenant's responsibilities under this Section
7.8.
Page 22
<PAGE> 37
7.9 UTILITIES AND SERVICES. Landlord agrees to furnish to the Premises
during reasonable hours of generally recognized business days, subject to the
conditions and in accordance with the standards set forth in the Rules and
Regulations, as may be amended in writing by Landlord from time to time during
the Term of this Lease and delivered to Tenant, reasonable quantities of
electric current for normal lighting and fractional horsepower office machines,
water for lavatory and drinking purposes, heat and air conditioning required in
Landlord's judgment for the comfortable use and occupation of the Premises,
janitorial service, and elevator service (where appropriate) by non-attended
automatic elevators. Landlord shall not be liable for, and Tenant shall not be
entitled to any abatement or reduction of Rent by reason of Landlord's failure
to furnish any of the foregoing when such failure is caused by accident,
breakage, repairs (including replacements), strikes, lockouts or other labor
disturbances or labor disputes of any character, or for any other causes;
provided, however, Landlord shall use reasonable efforts to promptly restore any
disrupted utility service unless such disruption is a result of Tenant's
nonpayment of utility charges. If Tenant requires or utilizes more water or
electrical power than is considered reasonable or normal by Landlord, Landlord
may at its option require Tenant to pay, as Additional Rent, the cost, as fairly
determined by Landlord, incurred by such extraordinary usage. In addition,
Landlord may install separate meter(s) for the Premises, at Tenant's sole
expense, and Tenant thereafter shall pay all charges of the utility(ies) which
is separately metered. Tenant shall cooperate with any present or future
conservation practices established by Landlord. If there is any failure,
stoppage or interruption thereof, Landlord shall use reasonable diligence to
resume services promptly. Landlord shall at all times have free access to all
mechanical installations of the Building, including but not limited to air
conditioning equipment and vents, fans, ventilating and machine rooms and
electrical closets. Tenant acknowledges that the Project, Building and/or
Premises may become subject to the rationing of utility services, or
restrictions on use of such utility services during the Term. Notwithstanding
any such rationing or restrictions on use of any such utility services, Tenant
acknowledges and agrees that its tenancy and occupancy under this Lease shall be
subject to such rationing or restrictions as are now or which may be imposed
upon Landlord, Tenant, the Project, the Building or the Premises, and Tenant
shall in no event be excused or relieved from any covenant or obligation to be
kept or performed by Tenant by reason of any such rationing or restrictions;
provided, however, that in no event shall Landlord provide the Premises with
electrical service of less than 110/208 volts 3 phase 4 wire and 800 amps.
Tenant shall comply with any rationing or restrictions imposed by Landlord or
any empowered authority which arise from any such rationing or restrictions,
including, without limitation, any allocation by Landlord of rights among
tenants of the Project to the use of utility services.
ARTICLE 8
ALTERATIONS
8.1 RESTRICTIONS AND PROCEDURES. Tenant shall make no Alterations in or
to the Premises without Landlord's prior written consent, pursuant to plans and
specifications approved by Landlord and with work performed by contractors or
mechanics approved by Landlord. Landlord's consent to such Alterations, plans,
specifications, contractors and mechanics shall be in Landlord's sole
discretion. Tenant agrees that there shall be no construction of partitions or
other obstructions which
Page 23
<PAGE> 38
might interfere with Landlord's free access to mechanical installations or
service facilities of the Building or Project or interfere with the moving of
Landlord's equipment to or from the enclosures containing said installations or
facilities. Before commencing any work, Tenant shall give Landlord at least
fifteen (15) days' written notice of the proposed commencement of such work and,
if the projected costs of such work exceeds fifty thousand dollars ($50,000),
Tenant shall, if required by Landlord, secure at Tenant's own cost and expense,
a completion and lien indemnity bond, satisfactory to Landlord, for said work.
All Alterations upon the Premises, made by either party, including (without
limiting the generality of the foregoing) all wallcovering, bulletin boards,
cabinet work, paneling and the like, shall, unless Landlord elects otherwise,
become the property of Landlord and shall remain upon, and be surrendered with
the Premises, as a part thereof, at the end of the Term, except that Landlord
may, by written notice to Tenant, given at the time Landlord consents to such
Alterations require Tenant to remove any or all Alterations installed by Tenant,
and Tenant shall repair any damage to the Premises arising from such removal or,
at Landlord's option, shall pay to Landlord all of the Landlord's costs of such
removal and repair.
8.2 WORK STANDARDS. All work performed by or on behalf of Tenant in or
about the Premises shall be done in a good and workmanlike manner and, once
started, diligently prosecuted to completion to the end the improvements on the
Premises shall at all times be a complete unit except during the period of work.
Tenant covenants to only use contractors which are either: (i) one of the
contractors set forth by the Landlord in a listing of "approved" contractors; or
(ii) if not set forth in such listing, a contractor approved in writing by
Landlord prior to the commencement of Tenant's work. Tenant shall have all work
on or about the Premises performed in a such a manner so as not to interfere
with or obstruct the access of any other tenant of the Project. Tenant covenants
and agrees that all work done by or on behalf of Tenant shall be performed in
full compliance with all Applicable Laws. Any such work, whether such work was
approved by Landlord or not, which violates any such Applicable Laws shall be
corrected at Tenant's sole cost and expense, including any structural
alterations which are required as a result of such violation. Tenant shall
require its contractors (including all employees, agents, subcontractors and
material suppliers of such contractors) to conduct their work and employ labor
in such manner as to maintain harmonious labor relations at the Project and as
not to interfere unreasonably with or delay any work of other contractors at the
Project.
8.3 TRADE FIXTURES. All articles of personal property and all business
and trade fixtures, machinery and equipment, furniture and movable partitions
owned by Tenant or installed by Tenant at its expense in the Premises shall be
and remain the property of Tenant and may be removed by Tenant at any time
during the Term, and provided further that Tenant shall repair any damage caused
by such removal. If Tenant shall fail to remove all of its effects from said
Premises upon expiration or termination of this Lease for any cause whatsoever,
Landlord may, at its option, remove the same in any manner that Landlord shall
choose, and store said effects without liability to Tenant for loss thereof, and
Tenant agrees to pay Landlord upon demand any and all expenses incurred in such
removal, including court costs and attorneys' fees and storage charges on such
effects for any length of time that the same shall be in Landlord's possession,
or Landlord may, at its option, without notice, sell said effects, or any of the
same, at private sale, for such price as Landlord may obtain and apply the
proceeds of such sale first toward satisfaction of any amounts due under this
Lease from Tenant to Landlord and thereafter against any expense incurred by
Landlord incident to the removal of sale of said effects.
Page 24
<PAGE> 39
8.4 INSURANCE. Tenant, at Tenant's sole cost and expense, shall promptly
repair any damage (including structural damage) to the Building or the Project
caused by Tenant or Tenant's employees or contractors while engaged in Tenant's
operations (including all employees, agents, subcontractors and material
suppliers of such contractors) during performance of Alterations in or on the
Premises. Tenant shall require its contractors to obtain a builder's risk policy
of insurance in the amount set forth in Section 1.16 and a policy of commercial
general liability (on an occurrence basis) in the amount set forth in Section
1.16, combined single limit. Such policies of insurance shall: (i) be issued by
an insurance company licensed and authorized to do business in the state in
which the Premises are located, which insurer shall be rated "A-10" or better in
the Best's Key Rating Code; (ii) have Landlord and Mortgagees named as
additional insureds; and (iii) not be cancelled without at least thirty (30)
days prior written notice to Landlord. Such policies of commercial general
liability shall also specifically include: (a) contractual liability (all
written contracts); (b) premises-operations liability; (c) products completed
operations; (d) independent contractors, broad-form property damage including
completed operations; (e) name such contractor's employees as additional
insureds; and (f) cross-liability endorsement. Tenant shall require its
contractors and all of its contractors' subcontractors performing work on or for
the benefit of the Premises to carry worker's compensation insurance in the
amount and form as may be required by Applicable Laws and Employer's Liability
Insurance of not less than One Million Dollars ($1,000,000) for injury or death
per accident. If requested by Landlord, Tenant shall require its contractors and
its contractors' subcontractors to provide Landlord with payment and performance
bonds in a form and amount satisfactory to Landlord. Not less than five (5) days
prior to the commencement of any work in or on the Premises by Tenant, Tenant
shall provide Landlord with written notice setting forth: (x) a description and
schedule for the work to be performed on or to the Premises; (y) copies of all
licenses, permits or approvals required by Applicable Laws in connection with
the work; and (z) a copy of each of the insurance policies required by this
Section 8.4.
8.5 MECHANIC'S LIENS. Tenant shall not permit any mechanic's,
materialman's or other liens to be filed against the Premises, Building or any
portion of the Project nor against the Tenant's leasehold interest in the
Premises. Tenant further covenants and agrees that any mechanic's lien filed
against the Premises, Building or any portion of the Project for work claimed to
have been done for, or materials claimed to have been furnished to Tenant, will
be discharged by Tenant, by bond or otherwise, within forty-five (45) days after
the filing thereof, at the cost and expense of Tenant. Landlord shall have the
right at all reasonable times to post and keep posted on the Premises any
notices which it deems necessary for protection from such liens. If any such
liens are filed, Landlord may, without waiving its rights and remedies based on
such breach by Tenant and without releasing Tenant from any of its obligations,
cause such liens to be released by any means it shall deem proper, including
payment in satisfaction of the claim giving rise to such liens. Tenant shall pay
to Landlord at once, upon notice by Landlord, any sum paid by Landlord to remove
such liens, together with interest at the Applicable Rate from the date of such
payment by Landlord.
8.6 ALTERATIONS BY LANDLORD. Landlord reserves the right at any time and
from time to time without the same constituting an actual or constructive
eviction and without incurring any liability to Tenant therefor or otherwise
affecting Tenant's obligations under this Lease, to make such changes,
alterations, additions, improvements, repairs, or replacements in or to the
Building as may be required by any Applicable Laws, as well as in or to the
street entrances, hails, passages, and stairways thereof, to change the name by
which the Building is commonly known, as Landlord may
Page 25
<PAGE> 40
deem necessary or desirable. Nothing contained in this Section 8.6 shall be
deemed to relieve Tenant of any duty, obligation, or liability of Tenant with
respect to making any repair, replacement of, improvement or, complying with any
law, order or requirement of any government or other authority and nothing
contained in this Section 8.6 shall be deemed or construed to impose upon
Landlord any obligation, responsibility or liability whatsoever, for the care,
supervision, repair or maintenance of the Building or any part thereof other
than as otherwise provided in this Lease. In the event that Landlord makes
changes, alterations, additions, improvements, repairs or replacements pursuant
to this Section 8.6, Landlord shall use reasonable efforts to minimize any
disruption of Tenant's use and/or enjoyment of the Premises.
ARTICLE 9
MAINTENANCE AND REPAIR
9.1 LANDLORD'S MAINTENANCE AND REPAIR OBLIGATIONS. Landlord shall,
subject to receiving Tenant's Share of Operating Expenses except as set forth
herein, and subject to Article 12 and Article 13, maintain in good condition,
repair and replace (when necessary) the roof (excluding any skylights), exterior
wails and foundation of the Building, provide normal maintenance services for
the HVAC serving the Building (including, if Landlord in its sole discretion
elects, repair, replacement or maintenance of any specialized HVAC exclusively
serving the Premises) through maintenance contractors or otherwise, and paint
the exterior of the Building and clean the exterior windows (as reasonably
requested by Tenant from time to time) of the Building as and when such painting
or window cleaning, as the case may be, becomes necessary in Landlord's sole
discretion. Landlord shall not be required to make any repairs to the roof or
foundation unless and until Tenant has notified Landlord in writing of the need
of such repair(unless Landlord is otherwise made aware of the need for such
repair) and Landlord shall have a reasonable period of time thereafter to
commence and complete said repair, if warranted. The cost of any maintenance and
repairs on the part of Landlord provided for in this Section 9.1 shall be
considered part of Operating Expenses. Landlord's obligation to so repair and
maintain the Premises shall be limited to the cost of effecting such repair and
maintenance and in no event shall Landlord be liable for any costs or expenses
in excess of said amounts, including, but not limited to, any consequential
damages, opportunity costs or lost profits incurred or suffered by Tenant.
9.2 TENANT'S MAINTENANCE AND REPAIR OBLIGATIONS. Tenant shall, subject
to Landlord's maintenance, repair and replacement obligations set forth in
Section 9.1, at all times during the Term of this Lease, and at Tenant's sole
cost and expense, clean, keep, maintain, repair and make necessary improvements
to, the Premises and every portion thereof and all improvements therein or
thereto, in good and sanitary order and condition to the reasonable satisfaction
of Landlord and in compliance with all Applicable Laws, usual wear and tear
excepted. Any damage or deterioration of the Premises shall not be deemed usual
wear and tear if the same could have been prevented by good maintenance
practices by Tenant.
9.3 WAIVER. Tenant hereby waives all rights provided for by the
provisions of Section 1941 and Section 1942 of the California Civil Code and any
present or future laws regarding
Page 26
<PAGE> 41
Tenant's right to make repairs or replacements at the expense of Landlord or to
terminate this Lease because of the condition of the Premises.
9.4 LANDLORD'S SELF-HELP. If Tenant refuses or fails to repair, replace
and maintain the Premises as required hereunder within ten (10) days from the
date on which Landlord makes a written demand on Tenant to effect such repair,
replacement or maintenance, Landlord may enter upon the Premises and make such
repairs or perform such maintenance without liability to Tenant for any loss or
damage that may accrue to Tenant or its merchandise, fixtures or other property
or to Tenant's business by reason of such repairs or maintenance. All sums
reasonably disbursed, deposited or incurred by Landlord in connection with such
repairs or maintenance, shall be due and payable by Tenant to Landlord, as an
item of Additional Rent, on demand by Landlord, together with an interest at the
Applicable Rate on such aggregate amount from the date of such demand until paid
by Tenant.
9.5 TENANT'S SELF-HELP. If Landlord refuses or fails to repair, replace
or maintain the Premises as required hereunder in a reasonably prompt manner,
Tenant shall have the right to effect such repair, replacement or maintenance.
Should Tenant subsequently obtain a judgment from a court of competent
jurisdiction against Landlord for the costs of such repair, replacement or
maintenance, Tenant shall thereafter have the right to offset the amount of such
judgment against Tenant's next due installment(s) of Monthly Rent.
ARTICLE 10
COMMON AREA AND PARKING
10.1 GRANT OF NONEXCLUSIVE COMMON AREA LICENSE AND RIGHT. Landlord
hereby grants to Tenant and its successors and assigns, a nonexclusive license
and right for Tenant and its permitted subtenants, in common with Landlord and
all persons, firms and corporations conducting business in the Project and their
respective customers, guests, licensees, invitees, subtenants, employees and
agents, to use the Common Area within the Project for vehicular parking, for
pedestrian and vehicular ingress, egress and travel, and for such other purposes
and for doing such other things as may be provided for, authorized and/or
permitted by the Restrictions, such nonexclusive license and right to be
appurtenant to Tenant's leasehold estate created by this Lease. The nonexclusive
license and rights granted pursuant to the provisions of this Article 10 shall
be subject to the provisions of the Restrictions, which pertain in any way to
the Common Area covered by such Restrictions, and the provisions of this Lease.
10.2 USE OF COMMON AREA. Any other provision of this Lease to the
contrary notwithstanding, Tenant and its successors, assigns, employees, agents,
and invitees shall use the Common Area only for purposes permitted hereby and by
the Restrictions and the Rules and Regulations. All uses permitted within the
Common Area shall be undertaken with reason and judgment so as not to interfere
with the primary use of the Common Area which is to provide parking and
vehicular and pedestrian access throughout the Common Area within the Project
and to adjacent public streets for the Landlord, its tenants, subtenants and all
persons, firms and
Page 27
<PAGE> 42
corporations conducting business within the Project, and their respective
customers, guests, and licensees. In no event shall Tenant erect, install, or
place, or cause to be erected, installed, or placed any structure, building,
trailer, fence, wall, signs or other obstructions on the Common Area except as
otherwise expressly permitted in this Lease and in the Restrictions, and Tenant
shall not store or sell any merchandise, equipment or materials on the Common
Area.
10.3 CONTROL OF COMMON AREA. Subject to provisions of the Restrictions,
all Common Area and all improvements located from time to time within the Common
Area are for the general use, in common, of the Landlord, Landlord's agents and
Landlord's tenants and subtenants and all persons, firms and corporations
conducting business in the Project and their respective customers, guests,
licensees, invitees, employees and agents and shall at all times be subject to
the exclusive control and management of the Landlord. Landlord shall have the
right to: (i) construct, maintain, replace and operate lighting facilities
within the Common Area; (ii) police the Common Area from time to time; (iii)
change the area, level, location and arrangement of the parking areas and other
improvements within the Common Area (excluding the Designated Parking Areas, if
any); (iv) close all or any portion of the Common Area or improvements therein
to such extent as may, in the opinion of counsel for Landlord, be legally
sufficient to prevent a dedication thereof or the accrual of any rights to any
person or to the public therein; (v) close temporarily all or any portion of the
Common Area and/or the improvements thereon; (vi) discourage noncustomer
parking; (vii) designate other areas not currently part of the Common Area as
Common Area (including expansion of the Common Area to property which is
adjacent to the Project); (viii) select a person(s), firm(s) or corporation(s)
(which may be an entity related to Landlord) to maintain and operate all or any
part of he Common Area, if at any time Landlord determines that the best
interests of the Project would be served by having such Common Area maintained
and operated by that person(s), firm(s) or corporations(s); and (ix) do and
perform such other acts in and to said Common Area and improvements thereon as,
in the use of good business judgment, Landlord shall determine to be advisable.
Tenant acknowledges that Landlord makes no representation or warranty whatsoever
concerning the safety of the Common Area or the adequacy of any security system
which is or may be instituted for the Common Area.
10.4 MAINTENANCE OF COMMON AREA. Subject to the provisions of the
Restrictions, Landlord shall operate and maintain (or cause to be operated and
maintained) the Common Area in such a manner as Landlord in its reasonable
discretion shall determine from time to time. Without limiting the scope of such
discretion, Landlord shall have the full right and authority to employ or cause
to be employed all personnel and to make or cause to be made all rules and
regulations pertaining to or necessary for the proper operation and maintenance
of the Common Area and the improvements located thereon. The cost of such
maintenance of the Common Area shall be included as part of the Operating
Expenses. No part of the Common Area may be used for the storage of any items,
including without limitation, vehicles, materials, inventory and equipment. All
trash and other refuse shall be placed in designated receptacles. No work of any
kind, including, but not limited to, painting, drying, cleaning, repairing,
manufacturing, assembling, cutting, merchandising or displays shall be
permitted.
10.5 REVOCATION OF LICENSE. Intentionally omitted.
10.6 LANDLORD'S RESERVED RIGHTS. Landlord reserves the right to install,
use, maintain,
Page 28
<PAGE> 43
repair, relocate and replace pipes, ducts, conduits, wires and appurtenant
meters and equipment included in the Premises or outside the Premises, change
the boundary lines of the Project and install, use, maintain, repair, alter or
relocate, expand and replace any Common Area; provided, however, Landlord shall
not unreasonably interfere with Tenant's use of the Premises. Such rights of
Landlord shall include, but are not limited to, designating from time to time
certain portions of the Common Area as exclusively for the benefit of certain
tenants in the Project.
10.7 PARKING. Tenant shall be entitled to the number of vehicle parking
spaces set forth in Section 1.15, which spaces shall, except for 10 "reserved"
spaces, be unreserved and unassigned, on those portions of the Common Area
designated by Landlord for tenant parking. Tenant shall not use more parking
spaces than such number. All parking spaces shall be used only for parking by
vehicles no larger than full size passenger automobiles or pick-up trucks.
Tenant shall not permit or allow any vehicles that belong to or are controlled
by Tenant or Tenant's employees, suppliers, shippers, customers, or invitees to
be loaded, unloaded, or parked in areas other than those designated by Landlord
for such activities. If Tenant permits or allows any of the prohibited
activities described above, then Landlord shall have the right, without notice,
in addition to such other rights and remedies that Landlord may have, to remove
or tow away the vehicle involved and charge the cost to Tenant, which cost shall
be immediately payable upon demand by Landlord as and item of Additional Rent.
Landlord shall at all times provide the parking facilities required by
Applicable Laws for the Premises. Parking within the Common Area shall be
limited to striped parking stalls, and no parking shall be permitted in any
driveways, accessways or in any which would prohibit or impede the free flow of
traffic with the Common Area. There shall be no overnight parking of any
vehicles of any kind, and vehicles which have been abandoned or parked in
violation of the terms hereof may be towed away at the owner's expense. If
Tenant or its employees fail to park their vehicles in designated parking areas,
then Landlord, in addition to any other rights or remedies Landlord might have,
may charge Tenant Twenty Dollars ($20) per day for each day or partial day per
vehicle parked in such nondesignated areas, which amount Tenant shall pay to
Landlord as Additional Rent upon demand. Landlord shall designate Tenant's ten
(10) reserved parking spaces in front of the Premises and mark the pavement of
those parking spaces with the words "BC RESERVED". Furthermore, in the event
that Tenant has difficulty in fully utilizing the number of unreserved spaces
allotted to Tenant due to a shortage of available spaces, then Tenant shall have
the right to request in writing for Landlord to designate a portion of the
Common Area as Tenant's parking area and Landlord shall designate and mark
(either through signage or pavement markings) such an area (in a location
reasonably proximate to the Premises) for the benefit of Tenant (the "Designated
Parking Area"). If a Designated Parking Area is established, Landlord shall
include on any future lease with any new tenant for space in the Project, a
restriction on such new tenant's utilizing the Designated Parking Area. Tenant
acknowledges that as related to the ten (10) reserved spaces and/or the
Designated Parking Area: (i) such designations shall not be construed any more
broadly and neither Tenant nor any other person on behalf of Tenant shall have
the right to add any additional marking or signs relating to such spaces or to
enforce parking within such spaces in any more restrictive manner; (ii) such
designations and markings are being undertaken as an accommodation to Tenant
only, Landlord shall have no obligation or responsibility for policing or
enforcing Tenant's parking rights with regard to the ten (10) reserved spaces
and/or the designated Parking Area, and Tenant hereby releases Landlord from
same; (iii) any such restrictions related to the Designated Parking Area shall
not apply to nor be enforceable against any existing tenant nor against any
successor, sublessee or assignee of any existing tenant; and (iv) Landlord shall
have the
Page 29
<PAGE> 44
right to notify such existing tenants or their successors, sublessees or
assignees that the restrictions related to the Designated Parking Area do not
apply to such party.
ARTICLE 11
INDEMNITY AND INSURANCE
11.1 INDEMNIFICATION. To the fullest extent permitted by law, Tenant
hereby agrees to defend (with attorneys reasonably acceptable to Landlord),
indemnify, protect and hold harmless Landlord, Landlord's Agents and Additional
Insureds and any successors to all or any portion of Landlord's interest in the
Premises and their directors, officers, partners, employees, authorized agents,
representatives, affiliates and Mortgagees, from and against any and all damage,
loss, claim, liability and expense including, but not limited to, actual
attorneys' fees and legal costs, incurred directly or indirectly by reason of
any claim, suit or judgment brought by or on behalf of any person or persons for
damage, loss or expense due to, but not limited to, bodily injury or property
damage sustained by such person or persons which arise out of, are occasioned
by, or are in any way attributable to the use or occupancy of the Premises, the
acts or omissions of the Tenant, its agents, employees, contractors, licensees
or invitees (including but not limited to any Event of Default hereunder),
except to the extent caused by the negligence or willful misconduct of Landlord
and specifically excluding the negligent acts and willful misconduct of other
tenants. To the fullest extent permitted by law, Landlord hereby agrees to
defend (with attorneys reasonably acceptable to Landlord), indemnify, protect
and hold harmless Tenant and any successors to all or any portion of Tenant's
leasehold interest in the Premises and their directors, officers, partners,
employees, authorized agents, representatives and affiliates, from and against
any and all damage, loss, claim, liability and expense including, but not
limited to, actual attorneys' fees and legal costs, incurred directly or
indirectly by reason of any claim, suit or judgment brought by or on behalf of
any person or persons for damage, loss or expense due to, but not limited to,
bodily injury or property damage sustained by such person or persons to the
extent such items arise out of, are occasioned by, or are attributable to the
acts or omissions of the Landlord, its agents, employees, contractors, licensees
or invitees (excluding other tenants of Landlord), except to the extent caused
by the negligence or willful misconduct of Tenant.
11.2 PROPERTY INSURANCE. Landlord shall obtain and keep in force during
the Term of this Lease a policy or policies of insurance, with commercially
reasonable deductibles covering loss or damage to the Premises, the Tenant
Improvements and objects owned by Landlord at least in the amount of 95% of
insurable value, and in no event less than the total amount required by
Mortgagees, against all perils included within the classification of fire,
extended coverage, vandalism, malicious mischief, special extended perils ("all
risk" as such term is used in the insurance industry, including, at Landlord's
option, collapse, earthquake and flood) and other perils as required by the
Mortgagees or deemed necessary by Landlord. A stipulated value or agreed amount
endorsement deleting any co-insurance provision of said policy or policies shall
be procured with said insurance. All insurance required to be carried by
Landlord may be carried under a blanket policy covering the Premises, Building,
Project and other locations, provided that the coverage afforded Landlord by
reason of the use of such blanket policy shall not be reduced or diminished
Page 30
<PAGE> 45
from the requirements for such insurance set forth in this Section 11.2. The
cost of such insurance policies shall be included in the definition of Operating
Expenses, and shall be paid by Tenant in the manner set forth in Section 7.1.
Such insurance policies shall provide for payment of loss thereunder to Landlord
or, at Landlord's election, to the Mortgagees. If the Premises are part of a
larger building, or if the Premises are part of a group of buildings owned by
Landlord which are adjacent to the Premises, then Tenant shall pay for any
increase in the property insurance of the Building or such other building or
buildings within the Project if such increase is caused by Tenant's acts,
omissions, use or occupancy of the Premises. Tenant shall obtain and keep in
force during the Term, at its sole cost and expense: (i) an "all risk" property
policy in the amount of the full replacement cost covering Tenant's Personal
Property and any Alterations made by or at the request of Tenant, with Landlord
insured as its interest may appear; and (ii) an "all risk" policy of business
interruption and/or loss of income insurance covering a period of one (1) year,
plus such additional period of time, if any, as will permit Tenant to be in a
position to have the same revenues as were in effect the day before a loss
giving rise to a claim under such insurance occurs, with loss payable to
Landlord to the extent of Monthly Rent and Additional Rent only.
11.3 LIABILITY/MISCELLANEOUS INSURANCE. Tenant shall maintain in full
force and effect at all times during the Term, at its sole cost and expense, for
the protection of Tenant, Landlord, Landlord's Agents and the Mortgagees,
policies of insurance issued by a carrier or carriers acceptable to Landlord and
the Mortgagees which afford the following coverages: (i) statutory workers'
compensation; (ii) employer's liability with minimum limits of Five Hundred
Thousand Dollars ($500,000); (iii) comprehensive general liability insurance
(1973 Broad Form CGL policy, if available) including, but not limited to,
blanket contractual liability (including the indemnity set forth in Section
11.1), fire legal liability, broad form property damage, personal injury,
completed operations, products liability, independent contractors, and, if
alcoholic beverages are served, sold, consumed or obtained in the Premises,
liquor law liability, and owned, nonowned and hired vehicles, of not less than
the amount set forth Section 1.16, combined single limit bodily injury and
property damage (or current limit carried, whichever is greater), naming
Landlord, the Mortgagees, and the Additional Insureds named in Section 1.17 as
additional insureds; (iv) plate glass insurance, if applicable, provided Tenant
shall be permitted to self-insure for plate glass damage; (v) insurance covering
damage from leakage of sprinkler systems now or hereafter installed in the
Premises or the Building, in an amount equal to one hundred percent (100%) of
the replacement value of Tenant's merchandise, improvements and trade fixtures;
and (vi) such other insurance in such form and amounts as may be required by
Landlord or the Mortgagees from time to time, including, but not limited to,
Boiler and Machinery insurance for any specialized HVAC system exclusively
serving the Premises.
11.4 DEDUCTIBLES. Any policy of insurance specified to be carried by
Tenant pursuant to this Lease which contains a deductible in excess of Five
Thousand Dollars ($5,000) per occurrence must be approved in writing by Landlord
prior to the issuance of such policy. Tenant shall be solely responsible for the
payment or any and all such deductibles.
11.5 INCREASED COVERAGE. Intentionally omitted.
11.6 SUFFICIENCY OF COVERAGE. Neither Landlord nor any of Landlord's
Agents makes any representation that the types of insurance and limits specified
to be carried by Tenant under this
Page 31
<PAGE> 46
Lease are adequate to protect Tenant if Tenant believes that any such insurance
coverage in insufficient, Tenant shall provide, at its own expense, such
additional insurance as Tenant deems adequate. Nothing contained herein shall
limit Tenant's liability under this Lease, and Tenant's liability under any
provision of this Lease, including without limitation under any indemnity
provision, shall not be limited to the amount of any insurance obtained.
11.7 INSURANCE REQUIREMENTS. Any policy of Tenant's insurance: (i) shall
be in a form satisfactory to Landlord and the Mortgagees; (ii) shall be issued
by insurance companies licensed and authorized to do business in the state in
which the Premises are located, which are rated "A-10" or better in Best's Key
Rating Guide and which are determined by Landlord, in its sole discretion, as
financially sound on a current basis; (iii) shall provide that such policies,
shall not be subject to material alteration or cancellation except after at
least thirty (30) days prior written notice to Landlord; (iv) shall be primary,
and any insurance carried by Landlord or Landlord's Agents shall be
noncontributing; and (v) shall include a cross-liability endorsement. Tenant's
policy or policies, or duly certified copies of such policies shall be deposited
with Landlord prior to the Commencement Date, and prior to renewal of such
policies. If Tenant fails to procure and maintain the insurance required to be
procured by Tenant under this Lease, Landlord may, but shall not be required to,
order such insurance at Tenant's expense. All sums reasonably disbursed,
deposited or incurred by Landlord in connection therewith, including, but not
limited to, all costs, expenses and actual attorneys' fees, shall be due and
payable by Tenant to Landlord, as an item of Additional Rent, on demand by
Landlord, together with interest thereon at the Applicable Rate from the date of
such demand until paid by Tenant.
11.8 IMPOUND FUNDS. Intentionally omitted.
11.9 LANDLORD'S DISCLAIMER. Notwithstanding any other provisions of this
Lease, and to the fullest extent permitted by law, Landlord and Landlord's
Agents shall not be liable for any loss or damage to persons or property
resulting from theft, vandalism, fire, explosion, falling materials, glass, tile
or sheetrock, steam, gas, electricity, water or rain which may leak from any
part of the Premises, or from the pipes, appliances or plumbing works therein or
from the roof, street or subsurface or whatsoever, unless such loss or damage is
caused by or due to the negligence or willful misconduct of Landlord. Landlord
and Landlord's Agents shall not be liable for interference with light or air, or
for any latent defect in the Premises except as otherwise expressly provided in
this Lease. Tenant shall give prompt written notice to Landlord in case of a
Casualty, accident or repair needed to the Premises.
11.10 WAIVER OF SUBROGATION. Landlord and Tenant each hereby waive all
rights of recovery against the other, the other's agents and the Additional
Insureds on account of loss and damage occasioned to such waiving party to the
extent that such loss or damage, is insured or is required to be insured against
under any insurance policies required by this Article 11 and Section 8.4. Tenant
and Landlord shall, upon obtaining policies of insurance required in this Lease,
give notice to the insurance carriers that the foregoing waiver of subrogation
is contained in this Lease. Each party shall use all reasonable efforts to cause
each insurance policy required of it pursuant to this Lease to provide that the
insurance company acknowledges acceptance of the mutual waiver (i.e., waiver of
subrogation) of claims under this Section 11.10 and each party shall provide the
other with written evidence of such waiver of subrogation. Notwithstanding the
foregoing, it is agreed that
Page 32
<PAGE> 47
(i) in the event that any loss is due to the act, omission or negligence or
willful misconduct of Tenant or any of its agents or employees, Tenant's
liability insurance shall be primary and shall cover all losses and damages
prior to any other insurance hereunder; and (ii) in the event that any loss is
due to the negligence or willful misconduct of Landlord or any of its agents or
employees, Landlord's liability insurance shall be primary and shall cover all
losses and damages prior to any other insurance hereunder.
ARTICLE 12
DAMAGE OR DESTRUCTION
12.1 LANDLORD'S OBLIGATION TO REBUILD. If the Premises are damaged or
destroyed by fire or other casualty (a "Casualty"), Tenant shall promptly give
notice of such Casualty to Landlord, and Landlord shall thereafter repair the
Premises as set forth in Section 12.3 and Section 12.4 unless Landlord has the
right to terminate this Lease as provided in Section 12.2 and Landlord elects to
so terminate. During the Term of this Lease, Landlord shall carry insurance
required by the first sentence of Section 11.2; in the event that Landlord fails
to carry such insurance, for purposes of this Article 12, Landlord shall be
deemed to have such coverage.
12.2 LANDLORD'S RIGHT TO TERMINATE. Landlord shall have the right to
terminate this Lease following a Casualty any of the following occurs: (1)
insurance proceeds (together with any additional amounts Tenant elects, at its
option, to contribute) are not available to Landlord to pay one hundred percent
(100%) of the cost to fully repair the Premises, excluding the deductible (for
which Tenant shall be fully responsible); (ii) Landlord's Architect determines
that the Premises cannot, with reasonable diligence, be fully repaired by
Landlord (or cannot be safely repaired because of the presence of hazardous
factors, including, but not limited to, Hazardous Materials, earthquake faults,
radiation, chemical waste and other similar dangers) within one hundred eighty
(180) days after the date of such Casualty; (iii) the Premises are destroyed or
substantially damaged (i.e., more than 25% of the replacement value of the
Premises) during the last twenty-four (24) months of the Term; or (iv) a total
destruction occurs. If Landlord elects to terminate this Lease following a
Casualty pursuant to this Section 12.2, Landlord shall give Tenant written
notice of its election to terminate within thirty (30) days after Landlord has
knowledge of such Casualty, and this Lease shall terminate fifteen (15) days
after the date of such notice.
12.3 EFFECT OF TERMINATION. If this Lease is terminated following a
Casualty pursuant to Section 12.2, Landlord shall, subject to the rights of the
Mortgagees, be entitled to receive and retain all the insurance proceeds
resulting from or attributable to such Casualty, except for those proceeds
payable under policies obtained by Tenant which specifically insure Tenant's
Personal Property. If neither party elects to terminate this Lease, this Lease
will continue in full force and effect, and Landlord shall, promptly following
the tenth (10th) day after the date of such Casualty, commence the process of
obtaining necessary permits and approvals for the repair of the Premises, and
shall commence such repair and prosecute the same diligently to completion as
soon thereafter as is practicable. Tenant shall fully cooperate with Landlord in
removing Tenant's Personal Property and any debris from the Premises to
facilitate the making of such repairs.
Page 33
<PAGE> 48
12.4 LIMITED OBLIGATION TO REPAIR. Landlord's obligation, should it
elect or be obligated to repair the Premises following a Casualty, shall be
limited to the basic Building and Tenant Improvements and Tenant shall, at its
expense, replace or fully repair all Tenant's Personal Property, and any
Alterations installed by Tenant existing at the time of such Casualty. If the
Premises are to be repaired in accordance with the foregoing, Tenant shall make
available to Landlord any portion of insurance proceeds it receives which are
allocable to the Tenant Improvements.
12.5 ABATEMENT OF MONTHLY RENT. During any period when there is material
adverse interference with Tenant's use of the Premises by reason of a Casualty,
Monthly Rent shall be temporarily abated in proportion to the percentage of the
Premises damaged, but only to the extent such proportion of Monthly Rent exceeds
any business interruption or loss of income insurance proceeds received by
Landlord from Tenant's insurance described in Section 11.2. Such abatement shall
commence upon the date Tenant notifies Landlord of such Casualty and shall end
upon the Substantial Completion of the repair of the Premises which Landlord
undertakes or is obligated to undertake hereunder. Tenant shall not be entitled
to any compensation or damages from Landlord for loss of the use of the
Premises, Tenant's Personal Property, Alterations or other damage or any
inconvenience occasioned by a Casualty or by the repair or restoration of the
Premises thereafter, including, but not limited to, any consequential damages,
opportunity costs or lost profits incurred or suffered by Tenant. Tenant hereby
waives the provisions of Section 1932(2) and Section 1933(4) of the California
Civil Code, and the provisions of any similar or successor statutes.
12.6 RIGHT TO TERMINATE. Within a reasonably prompt period of time after
damage to the Premises due to any Casualty, Landlord shall provide Tenant with
Landlord's best estimate of the time-frame for completion of repairs. In the
event that Landlord's projected schedule exceeds two hundred twenty five (225)
days from the date of the Casualty, Tenant shall have the right to terminate
this Lease by providing Landlord with written notice of such election within
fifteen (15) days of Tenant's receipt of Landlord's estimated schedule. If
Landlord estimated schedule is less than two hundred twenty five (225) days from
the date of the Casualty, and Landlord does not substantially complete the
repairs of such damage within two hundred twenty five (225) days after the date
of the Casualty, Tenant may terminate this Lease by written notice to Landlord
at any time after 225-day period and before Landlord substantially completes
such repair work.
12.7 LANDLORD'S DETERMINATION. The determination in good faith by
Landlord or Landlord's Architect of or relating to the estimated cost of repair
of any damage, replacement cost, the time period required for repair or the
interference with or suitability of the Premises for Tenant's use or occupancy
shall be conclusive for purposes of this Article 12 and Article 13.
ARTICLE 13
CONDEMNATION
13.1 TOTAL TAKING. If title to all of the Premises or so much of the
Premises is taken for any public or quasi-public use under any statute or by
right of eminent domain so that reconstruction of the Premises will not result
in the Premises being reasonably suitable for Tenant's continued
Page 34
<PAGE> 49
occupancy, as reasonably determined by Tenant, for the uses and purposes
permitted by this Lease, this Lease shall terminate as of the date possession of
the Premises or such part of the Premises is so taken.
13.2 PARTIAL TAKING. If any part of the Premises is taken for any public
or quasi-public use under any statute or by right of eminent domain and the
remaining part, as reasonably determined by Tenant, is reasonably suitable for
Tenant's continued occupancy for the uses permitted by this Lease, this Lease
shall, as to the part so taken, terminate as of the date that possession of such
part of the Premises is taken and the Monthly Rent shall be reduced in the same
proportion that the floor area of the portion of the Premises so taken (less any
addition thereto by reason of any reconstruction) bears to the original floor
area of the Premises immediately prior to such taking, as reasonably determined
by Landlord or Landlord's Architect. Landlord shall, at its own cost and
expense, make all necessary repairs or alterations to the Premises so as to make
the portion of the Premises not taken a complete architectural unit. Such work
shall not, however, exceed the scope for the work done by Landlord in originally
constructing the Tenant Improvements for the Premises. If severance damages from
the condemning authority are not available to Landlord in sufficient amounts to
permit such restoration, Landlord may terminate this Lease upon written notice
to Tenant. Monthly Rent due and payable hereunder shall be temporarily abated
during such restoration period in proportion to the percentage of the Premises
actually taken. Each party hereby waives the provisions of Section 1265.130 of
the California Code of Civil Procedure and any present or future law allowing
either party to petition the Superior Court to terminate this Lease in the event
of a partial taking of the Building or Premises.
13.3 NO APPORTIONMENT OF AWARD. No award for any partial or total taking
shall be apportioned, it being agreed and understood that Landlord shall be
entitled to the entire award for any partial or entire taking. Tenant assigns to
Landlord its interest in any award which may be made in such taking or
condemnation, together with any and all rights of Tenant arising in or to the
same or any part thereof. Nothing contained in this Section 13.3 shall be deemed
to give Landlord any interest in or require Tenant to assign to Landlord any
separate award made to Tenant for the taking of Tenant's Personal Property for
the interruption of Tenant's business, or its moving costs, or for the loss of
the goodwill; provided, that any such separate award to Tenant does not diminish
any award to which Landlord is entitled.
13.4 TEMPORARY TAKING. No temporary taking of the Premises (which for
purposes of this Section 13.4 shall mean a taking of all or any part of the
Premises for one hundred eighty (180) days or less) shall terminate this Lease
or give Tenant any right to any abatement of Rent. Any award made to Tenant by
reason of such temporary taking shall belong entirely to Tenant and Landlord
shall not be entitled to share therein. Each party agrees to execute and deliver
to the other all instruments that may be required to effectuate the provisions
of this Section 13.4.
13.5 SALE UNDER THREAT OF CONDEMNATION. A sale made in good faith by
Landlord to any authority having the power of eminent domain, either under
threat of condemnation or while condemnation proceedings are pending, shall be
deemed a taking under the power of eminent domain for all purposes of this
Article 13.
Page 35
<PAGE> 50
ARTICLE 14
ASSIGNMENT AND SUBLETTING
14.1 PROHIBITION. Tenant shall not directly or indirectly, voluntarily
or by operation of law, assign (which term shall include any transfer,
assignment, pledge, mortgage or hypothecation) this Lease, or any right or
interest hereunder, or sublet the Premises or any part thereof, or allow any
other person or entity to occupy or use all or any part of the Premises without
first obtaining the written consent of Landlord in each instance, which consent
shall not be unreasonably withheld or delayed. No assignment, encumbrance,
subletting, or other transfer in violation of the terms of this Article 14,
whether voluntary or involuntary, by operation of law, under legal process or
proceedings, by receivership, in bankruptcy, or otherwise shall be valid or
effective and, at the option of Landlord, shall constitute an Event of Default
under this Lease. To the extent not prohibited by provisions of the Bankruptcy
Code of 1978, 11 U.S.C. Section 101 et seq. (the "Bankruptcy Code"), Tenant on
behalf of itself, creditors, administrators and assigns waives the applicability
of Sections 541(c) and 365(e) of the Bankruptcy Code unless the proposed
assignee of the trustee for the estate of the bankrupt meets Landlord's
standards for consent as set forth below. Landlord has entered into this Lease
with Tenant in order to obtain for the benefit of the Project the unique
attraction of Tenant's name and business; the foregoing prohibition on
assignment or subletting is expressly agreed to by Tenant in consideration of
such fact. If this Lease is assigned to any person or entity pursuant to the
provisions of the Bankruptcy Code, any and all monies or other considerations
payable or otherwise to be delivered in connection with such assignment shall be
paid or delivered to Landlord, shall be and remain the exclusive property of
Landlord and shall not constitute property of Tenant or the estate of Tenant
within the meaning of the Bankruptcy Code. Any and all monies or other
considerations constituting Landlord's property under the preceding sentence not
paid or delivered to Landlord shall be held in trust for the benefit of Landlord
and be promptly paid or delivered to Landlord. Any person or entity to which
this Lease is assigned pursuant to the provisions of the Bankruptcy Code shall
be deemed without further act or deed to have assumed all of the obligations
arising under this Lease on and after the date of such assignment. Any such
assignee shall upon demand execute and deliver to Landlord an instrument
confirming such assumption.
14.2 LANDLORD'S CONSENT. In the event Landlord consents to any
assignment or subletting, such consent shall not constitute a waiver of any of
the restrictions of this Article 14 and the same shall apply to each successive
assignment of this Lease or subletting of the Premises (or portion of the
Premises), if any. In no event shall Landlord's consent to an assignment or
subletting affect the continuing primary liability of Tenant (which, following
assignment, shall be joint and several with the assignee(s)), or relieve Tenant
of any of its obligations hereunder without an express written release being
given by Landlord. In the event that Landlord shall consent to an assignment or
subletting under this Article 14, such assignment or subletting shall not be
effective until the assignee or sublessee shall execute, acknowledge and deliver
to Landlord an agreement, in form and substance satisfactory to Landlord,
whereby assignee or sublessee shall assume all of the obligations of this Lease
on the part of Tenant to be performed or observed and whereby the assignee or
sublessee shall agree that the provisions contained in this Lease shall,
notwithstanding such assignment or subletting, continue to be binding upon it
with respect to all future assignments and
Page 36
<PAGE> 51
sublettings. Such assignment or sublease agreement shall be duly executed and a
fully executed copy thereof shall be delivered to Landlord, and Landlord may
collect Monthly Rent and Additional Rent due hereunder directly from the
assignee or sublessee. Collection of Monthly Rent and Additional Rent directly
from an assignee or sublessee shall not constitute a consent or a waiver of the
necessity of consent to such assignment or subletting, nor shall such collection
constitute a recognition of such assignee or sublessee as the Tenant hereunder
or a release of Tenant from the performance of all of its obligations hereunder.
14.3 LANDLORD'S ACTIVITIES. Tenant shall notify Landlord in writing of
Tenant's intent to assign the Lease or any right or interest hereunder, or to
sublease the Premises or any part of the Premises, and of the name of the
proposed assignee or sublessee, the nature of the proposed assignee's or
sublessee's business to be conducted on the Premises, the terms and provisions
of the proposed assignment or sublease, a copy of the proposed assignment or
sublease form and such other information as Landlord may reasonably request
concerning the proposed assignee or sublessee, including, but not limited to,
net worth, income statements and other financial statements for a two-year
period preceding Tenant's request for consent, evidence of insurance complying
with the requirements of Article 11, a completed environmental questionnaire (in
a form provided by Landlord) from the proposed assignee or sublessee, and the
fee described in Section 14.7. Landlord shall, with thirty (30) days of receipt
of such written notice and all additional information requested by Landlord
concerning the proposed assignee or sublessee, elect to take one of the
following actions:
(a) Consent to such proposed assignment or sublease;
(b) Refuse to consent to such proposed assignment or sublease,
which refusal shall be on reasonable grounds; or
(c) If Tenant proposes to assign this Lease or to sublease all or
part of the Premises (except for the transfers permitted pursuant to Section
14.9), Landlord may, at its option exercised by thirty (30) days written notice
to Tenant, elect to recapture such portion of the Premises as Tenant proposes to
assign or sublease and as of the thirtieth (30th) day after Landlord so notifies
Tenant of its election to recapture, this Lease shall terminate as to the
portion of the Premises recaptured and the Monthly Rent payable under this Lease
shall be reduced in the same proportion that the floor area of that portion of
the Premises so recaptured bears to the floor area of the Premises prior to such
recapture.
If Landlord fails to elect any of the alternatives set forth in Section
14.3(a) through 14.3(c) within said thirty (30)-day period, Landlord shall be
deemed to have refused its consent to such assignment or subletting by Tenant.
Tenant acknowledges that if Tenant has any exterior sign rights under
this Lease, such rights are personal to Tenant and may not be assigned or
transferred to any assignee of this Lease or subtenant of the Premises without
Landlord's prior written consent, which consent may be withheld in Landlord's
sole and absolute discretion.
14.4 STANDARD FOR CONSENT. Tenant agrees, by way of example and without
limitation,
Page 37
<PAGE> 52
that it shall not be unreasonable for Landlord to withhold its consent to a
proposed assignment or subletting if any of the following situations exists or
may exist:
(a) Landlord determines that the proposed assignee's or
sublessee's use of the Premises conflicts with Article 5 or Article 6, presents
an unacceptable risk, as determined by Landlord, under Article 6 (and Landlord
may require such assignee or sublessee to complete the environmental
questionnaire in the manner described in Section 14.3 prior to making such
determined), or conflicts with any other provision under this Lease;
(b) Landlord determines that the proposed assignee or sublessee
lacks sufficient financial strength to adequately assure Landlord of such
parties' ability to fully perform its obligations to landlord or under the
proposed sublease or assignment;
(c) Landlord determines that the proposed assignee or sublessee
lacks sufficient business experience to conduct on the Premises a business of a
type and quality equal to that conducted by Tenant;
(d) Landlord determines that the proposed assignment or
subletting would breach a covenant, condition or restriction in some other
lease, financing agreement or other agreement related to the Project, the
Building, the Premises or this Lease, including, without limitation, covenants
respecting radius, location, use and/or exclusivity;
(e) Landlord determines that the proposed assignee or sublessee:
(i) has been required by any prior landlord, lender or governmental authority to
take remedial action in connection with Hazardous Materials contamination of a
property if such contamination resulted from the proposed assignee's or
sublessee's actions or use of the property in question; or (ii) is subject to
any enforcement order issued by any governmental authority in connection with
the use, disposal or storage of Hazardous Materials;
(f) An Event of Default has occurred and is continuing at the
time of Tenant's request for Landlord's consent, or as of the effective date of
such assignment or subletting; or
(g) The proposed assignee requires any change or changes to the
provisions of this Lease.
14.5 BONUS VALUE. Intentionally deleted.
14.6 CERTAIN TRANSFERS. The sale of all or substantially all of Tenant's
assets (other than bulk sales in the ordinary course of business), or, if Tenant
is a corporation, an unincorporated association, or a partnership, the transfer,
assignment or hypothecation of any stock or interest in such corporation,
association or partnership in the aggregate (cumulative during the Term) in
excess of twenty-five percent (25%) of the total ownership interest in such
entity shall be deemed an assignment within the meaning and provisions of this
Article 14.
14.7 LANDLORD'S FEE AND EXPENSES. If Tenant requests Landlord's consent
to an assignment or subletting by Tenant under this Lease, Tenant shall pay to
Landlord a fee of Five
Page 38
<PAGE> 53
Hundred Dollars ($500) and all of Landlord's out-of-pocket expenses, including,
but not limited to, actual attorneys' fees reasonably incurred related to such
assignment of subletting by Tenant, whether or not the assignment or subletting
is approved.
14.8 TRANSFER OF THE PREMISES BY LANDLORD. Upon any conveyance of the
Premises and assignment by Landlord of this Lease, Landlord shall be and is
hereby entirely released from all liability under any and all of its covenants
and obligations contained in or derived from this Lease occurring after the date
of such conveyance and assignment, and Tenant agrees to attorn to any entity
purchasing or otherwise acquiring Landlord's interest in the Premises.
14.9 PERMITTED TRANSFERS. Anything to the contrary contained in this
Article 14 notwithstanding, the following transactions (or any situation
resulting therefrom) shall not constitute an "assignment" or "subletting" for
purposes of this Article 14, be subject to the foregoing provisions of this
Article 14, or be prohibited or require Landlord's consent:
(i) Any sale or transfer of Voting Equity in connection with a public
offering of Voting Equity or securities convertible into Voting Equity,
and any subsequent sale, exchange, conversion or transfer of such Voting
Equity or securities convertible into Voting Equity. For this purpose,
"Voting Equity" includes the voting capital stock or other voting equity
interests of Tenant and voting capital stock or other voting equity
interests of a person or an entity which owns directly or indirectly
fifty percent (50%) or more of Tenant's voting power.
(ii) The transfer and/or assignment of this Lease, or the sublease of
the Premises, to a person or an entity which after such transfer (a)
owns directly or indirectly fifty percent (50%) or more of Tenant's
capital stock or other equity interests, or voting power ("Tenant's
Parent"); or (b) has fifty percent (50%) or more of its capital stock or
other equity interests or voting power owned directly or indirectly by
Tenant or Tenant's Parent.
(iii) Any of the following events, and transfer and/or assignment of
this Lease, if any, to the successor, survivor, or purchaser in such
transaction:
a. The acquisition (through an acquisition, exchange, or any
other method) of all or substantially all of the capital stock, other
equity interests or voting power ("Equity") of Tenant by any person or
entity.
b. A merger, consolidation or other reorganization to which
Tenant, Tenant's Parent, or Tenant's subsidiary is a party.
c. The acquisition of all or substantially all of the assets of
Tenant by any person or entity.
Any event set forth in subparagraphs (ii) and (iii) above shall be subject to
the following conditions: (x) Tenant and its successor, survivor or purchaser in
or other party to the transaction shall remain fully liable during the unexpired
term of this Lease, including any extensions thereof for all the terms,
covenants and conditions of this Lease; and (y) the acquiring entity, and Tenant
in the event
Page 39
<PAGE> 54
Tenant survives the transaction, shall have, in the aggregate in Landlord's
reasonable business judgment, a net worth sufficient to reasonably assure
Landlord of such entity's (ies') ability to meet the obligations of Tenant as
set forth in this Lease.
ARTICLE 15
DEFAULTS AND REMEDIES
15.1 TENANT'S DEFAULT. At the option of Landlord, a default under this
Lease by Tenant shall exist if any of the following events shall occur (each is
called an "Event of Default"):
(a) Tenant fails to pay the Monthly Rent, as and when due, for a
period of five (5) days after written notice by Landlord, or Tenant fails to pay
any item of Additional Rent within the time specified in the invoice of such
Additional Rent (or if no time is specified, within ten (10) days after receipt
thereof); provided, however, the notices given pursuant to this Section 15.1(a)
shall be in lieu of, and not in addition to, any notice required under Section
1161, et seq., of the California Code of Civil Procedure;
(b) Tenant attempts to make or suffers to be made any transfer,
assignment or subletting, except as provided in Article 14;
(c) Any of Tenant's rights under this Lease are sold or otherwise
transferred by or under court order or legal process or otherwise or if any of
the actions described in Section 15.2 are taken by or against Tenant or any
Guarantor;
(d) The Premises are used for any purposes other than as
permitted pursuant to Article 5;
(e) Tenant vacates or abandons the Premises or fails to
continuously and uninterruptedly conduct its business in the Premises;
(f) Any representation or warranty given by Tenant under or in
connection with this Lease proves to be materially false or misleading;
(g) Tenant fails to timely comply with the provisions of Article
6 ("Hazardous Materials"), Article 14 ("Assignment and Subletting"), Article 16
("Subordination; Estoppel Certificate"}, Section 21.6 ("Modifications for
Mortgagees"), Section 21.9 ("Financial Information") or Section 21.22
("Authority"); or
(h) Tenant fails to observe, keep, perform or cure with thirty
(30) days after written notice by Landlord any of the other terms, covenants,
agreements or conditions contained in this Lease or those set forth in any other
agreements or rules or regulations which Tenant is obligated to observe or
perform. In the event such default reasonably could not be cured or corrected
within such thirty (30)-day period, then Tenant shall not be in default of this
Lease if Tenant
Page 40
<PAGE> 55
commences the cure or correction of such default within such initial thirty
(30)-day period and diligently prosecutes the same to completion. The notice
required by this Section 15.1(h) shall be in lieu of, and not in addition to,
any notice required under Section 1161, et seq., of the California Code of Civil
Procedure. The provisions of this Section 15.1(h) to the contrary
notwithstanding, if Tenant commits a default of its obligations under Sections
4.1, 4.3, 4.6, 6.2, 7.1, 7.2, 7.8 and 7.9.
Notices given under this Section 15.1 shall specify the alleged default by
Tenant and shall demand that Tenant perform the provisions of this Lease or pay
the Rent that is in arrears, as the case may be, within the applicable period of
time, or quit the Premises. No such notice shall be deemed a forfeiture or a
termination of this Lease unless Landlord so elects in the notice.
15.2 BANKRUPTCY OR INSOLVENCY. In no event shall this Lease be assigned
or assignable by operation of law and in no event shall this Lease be an asset
of Tenant in any receivership, bankruptcy, insolvency, or reorganization
proceeding. In the event:
(a) A court makes or enters any decree of order adjudging Tenant
to be insolvent, or approving as properly filed by or against Tenant a petition
seeking reorganization or other arrangement of Tenant under any provisions of
the Bankruptcy Code or any Applicable Laws, or directing the winding up or
liquidation of Tenant and such decree or order shall have continued for a period
of thirty (30) days;
(b) Tenant makes or suffers any transfer which constitutes a
fraudulent or otherwise avoidable transfer under any provisions of the
Bankruptcy Code or any applicable state law;
(c) Tenant assigns its assets for the benefit of its creditors;
or
(d) The material part of the property of Tenant or any property
essential to Tenant's business or of Tenant's interest in this Lease is
sequestered, attached or executed upon, and Tenant fails to secure a return or
release of such property within ten (10) days thereafter, or prior to sale
pursuant to such sequestration, attachment or whichever is earlier;
then this Lease shall, at Landlord's election, immediately terminate and be of
no further force of effect whatsoever, without the necessity for any further
action by Landlord, except that Tenant shall not be relieved of obligations
which have accrued prior to the date of such termination. Upon such termination,
the provisions herein relating to the expiration or earlier termination of this
Lease shall control and Tenant shall immediately surrender the Premises in the
condition required by the provisions of this Lease. Additionally, Landlord shall
be entitled to all relief, including recovery of damages from Tenant, which may
from time to time be permitted, or recoverable, under the Bankruptcy Code or any
other Applicable Laws.
15.3 LANDLORD'S REMEDIES. Upon the occurrence of an Event of Default,
then, in addition to and without waiving any other rights and remedies available
to Landlord in law or in equity or otherwise provided in this Lease, Landlord
may, at its option, cumulatively or in the alternative, exercise the following
remedies:
Page 41
<PAGE> 56
(a) Landlord may terminate Tenant's right to possession of the
Premises, in which case this Lease shall terminate and Tenant shall immediately
surrender possession of the Premises to Landlord. No act by Landlord other than
giving written notice to Tenant of Landlord's election to terminate Tenant's
right to possession shall terminate this Lease. Acts of maintenance, efforts to
relet the Premises, or the appointment of a receiver on Landlord's initiative to
protect Landlord's interest under this Lease shall not constitute a termination
of Tenant's right to possession. Termination shall terminate Tenant's right to
possession of the Premises but shall not relieve Tenant of any obligation under
this Lease which has accrued prior to the date of such termination. Upon such
termination, Landlord shall have the right to re-enter the Premises, and remove
all persons and property, and Landlord shall also be entitled to recover from
Tenant:
(i) The worth at the time of award of the unpaid Monthly
Rent and Additional Rent which had been earned at the time of termination;
(ii) The worth at the time of award of the amount by which
the unpaid Monthly Rent and Additional Rent which would have been earned after
termination until the time of award exceeds the amount of such rental loss that
Tenant proves could have been reasonably avoided;
(iii) The worth at the time of award of the amount by
which the unpaid Monthly Rent and Additional Rent for the balance of the Term
after the time of award exceeds the amount of such rental loss that Tenant
proves could be reasonably avoided;
(iv) Any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result from Tenant's default, including, but not limited to, the cost
of recovering possession of the Premises, commissions and other expenses of
reletting, including necessary repair, renovation, improvement and alteration of
the Premises for a new tenant, the unamortized portion of any Tenant
Improvements and brokerage commissions funded by Landlord in connection with
this Lease, the cost of rectifying any damage to the Premises occasioned by the
act or omission of Tenant, reasonable attorneys' fees, and any other reasonable
costs; and
(v) At Landlord's election, all other amounts in addition
to or in lieu of the foregoing as may be permitted by law.
As used in subsection (i) and (ii) above, the worth at the time of award
shall be computed by allowing interest at the maximum legal rate permitted by
law. As used in subsection (iii) above, the "worth at the time of award" shall
be computed by discounting the amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus one percent (1%).
(b) Landlord may elect not to terminate Tenant's right to
possession of the Premises, in which event this Lease will continue in full
force and effect as long as Landlord does not terminate Tenant's right to
possession, and Landlord may continue to enforce all of its rights and remedies
under this Lease, including the right to collect all rent as it becomes due. In
the event that Landlord elects to avail itself of the remedy provided by this
Section 15.3(b), Landlord shall not
Page 42
<PAGE> 57
unreasonably withhold its consent to an assignment or subletting of the Premises
subject to the reasonable standards for Landlord's consent as are contained in
this Lease; provided, however, that if Tenant assigns or subleases the Premises
pursuant to this Section 15.3(b) while in default of this Lease, Tenant shall
not be entitled to any bonus value, however designated (including, but not
limited to, the value of any nonmonetary consideration), paid by any assignee or
sublessee. In addition, in the event Tenant has entered into a sublease which is
valid under the terms of this Lease, Landlord may also, at its option, cause
Tenant to assign to Landlord the interest of Tenant under said sublease,
including, but not limited to, Tenant's right to the payment of Rent as it
becomes due. Landlord may elect to enter the Premises and relet them, or any
part of them, to third parties for Tenant's account. Tenant shall be liable
immediately to Landlord for all costs Landlord incurs in reletting the Premises,
including, but not limited to, brokers' commissions, expenses of cleaning and
remodeling the Premises required by the reletting, attorneys' fees and like
costs. Reletting can be for a period shorter or longer than the remaining Term
of this Lease and for the entire Premises or any portion thereof. Tenant shall
pay to Landlord the Monthly Rent and Additional Rent due under this Lease on the
dates the Monthly Rent and such Additional Rent are due, less the rent Landlord
actually collects from any reletting. Except as provided in the preceding
sentence, if Landlord relets the Premises or any portion thereof, such reletting
shall not relieve Tenant of any obligation hereunder. Notwithstanding the above,
no act by Landlord allowed by this Section 15.3(b) shall terminate this Lease
unless Landlord notifies Tenant in writing that Landlord elects to terminate
this Lease.
15.4 NO SURRENDER. Tenant waives any right of redemption or relief from
forfeiture under California Code of Civil Procedure Sections 1174 and 1179, or
under any other present or future law, in the event Tenant is evicted or
Landlord takes possession of the Premises by reason of an Event of Default. No
act or thing done by Landlord or Landlord's Agents during the Term shall be
deemed an acceptance of a surrender of the Premises and no agreement to accept a
surrender shall be valid unless in writing and signed by Landlord. No employee
of Landlord or of Landlord's Agents shall have any power to accept the keys to
the Premises prior to the termination of this Lease, and the delivery of the
keys to any such employee shall not operate as a termination of this Lease or a
surrender of the Premises.
15.5 INTEREST ON LATE PAYMENTS. Any Rent due under this Lease that is
not paid to Landlord within five (5) days of a notice to Tenant of nonpayment
shall commence to bear interest at the Applicable Rate until fully paid. Neither
the accrual nor the payment of interest shall cure any default by Tenant under
this Lease.
15.6 LANDLORD'S DEFAULT. Landlord shall not be deemed to be in default
in the performance of any obligation required to be performed by it under this
Lease unless and until it has failed to perform such obligation within thirty
(30) days after receipt of written notice by Tenant to Landlord (and the
Mortgagees who have provided Tenant with notice) specifying the nature of such
default; provided, however, that if the nature of Landlord's obligation is such
that more than thirty (30) days are required for its performance, then Landlord
shall not be deemed to be in default if it shall commence such performance
within such thirty (30) day period and thereafter diligently prosecutes the same
to completion.
15.7 LIMITATION OF LANDLORD'S LIABILITY. The obligations of Landlord do
not constitute
Page 43
<PAGE> 58
the personal obligation of the individual partners, trustees, directors,
officers or shareholders of Landlord or its constituent partners. If Landlord
shall fail to perform any covenant, term, or condition of this Lease upon
Landlord's part to be performed, Tenant shall be required to deliver to Landlord
written notice of the same. If, as a consequence of such default, Tenant shall
recover a money judgment against Landlord, such judgment shall be satisfied only
out of the proceeds of sale received upon execution of such judgment and levied
thereon against the right, title and interest of Landlord in the Project and out
of Rent or other income from such property receivable by Landlord or out of
consideration received by Landlord from the sale or other disposition of all or
any part of Landlord's right, title or interest in the Project, and no action
for any deficiency may be sought or obtained by Tenant.
15.8 MORTGAGE PROTECTION. Upon any default on the part of Landlord,
Tenant will give notice by registered or certified mail to any Mortgagee who has
provided Tenant with notice of its interest together with an address for
receiving notice, and shall offer such Mortgagee a reasonable opportunity to
cure the default (which, in no event shall be more than sixty (60) days),
including time to obtain possession of the Premises by power of sale or a
judicial foreclosure, if such should prove necessary, to effect a cure. Tenant
agrees that each of the Mortgagees to whom this Lease has been assigned by
Landlord is an express third party beneficiary of this Lease. Tenant shall not
make any prepayment of Monthly Rent or Additional Rent more than one (1) month
in advance without the prior written consent of such Mortgagee. Tenant waives
any right under California Civil Code Section 1950.5 or any other present or
future law to the collection of any deposit from such Mortgagee or any purchaser
at a foreclosure sale of such Mortgagee's interest unless such Mortgagee or such
purchaser shall have actually received and not refunded the deposit. Tenant
agrees to make all payments under this Lease to the Mortgagee with the most
senior encumbrance upon receiving a direction, in writing, to pay said amounts
to such Mortgagee. Tenant shall comply with such written direction to pay
without determining whether an event of default exists under such Mortgagee's
loan to Landlord.
15.9 LANDLORD'S RIGHT TO PERFORM. If Tenant shall at any time fail to
make any payment or perform any other act on its part to be made or performed
under this Lease, Landlord may (but shall not be obligated to), at Tenant's
expense, and without waiving or releasing Tenant from any obligation of Tenant
under this Lease, make such payment or perform such other act to the extent
Landlord may deem desirable, and in connection therewith, pay expenses and
employ counsel. All sums paid by Landlord and all penalties, interest and costs,
including, but not limited to, collection costs and attorneys' fees reasonably
incurred in connection therewith, shall be due and payable by Tenant to
Landlord, as an item of Additional Rent, on demand by Landlord, together with
interest thereon at the Applicable Rate from the date of such demand until paid
by Tenant.
ARTICLE 16
SUBORDINATION; ESTOPPEL CERTIFICATE
16.1 SUBORDINATION, ATTORNMENT AND NON-DISTURBANCE. Without the
necessity of any additional document being executed by Tenant for the purpose of
effecting a subordination, and at
Page 44
<PAGE> 59
the election of Landlord or any Mortgagee or any ground lessor with respect
to the land of which the Premises are a part, this Lease shall be subject and
subordinate at all times to: (i) all ground leases or underlying leases which
may now exist or hereafter be executed affecting the Premises, the Building or
the Project, or all three; and (ii) the lien of any mortgage, deed of trust or
other security device which may now exist or hereafter be executed in any amount
for which the Project, the Building, ground leases or underlying leases, or
Landlord's interest or estate in any of said items is specified as security.
Landlord or any such Mortgagee or ground lessor shall have the right, at its
election, to subordinate or cause to be subordinated any such ground leases or
underlying leases or any such liens to this Lease. No subordination shall permit
interference with Tenant's rights hereunder, and any ground lessor or Mortgagee
shall recognize Tenant and its permitted successors and assigns as the tenant of
the Premises and shall not disturb Tenant's right to quiet possession of the
Premises during the Term so long as no Event of Default has occurred or is
continuing under this Lease. If Landlord's interest in the Premises is acquired
by any ground lessor or Mortgagee, or in the event any proceedings are brought
for the foreclosure of, or in the event of exercise of the power of sale under,
any mortgage, deed of trust or other security device made by Landlord covering
the Premises or any part thereof, or in the event a conveyance in lieu of
foreclosure is made for any reason, Tenant shall, notwithstanding any
subordination and upon the request of such successor in interest to Landlord,
attorn to and become the Tenant of the successor in interest to Landlord and
recognize such successor in interest as the Landlord under this Lease. Although
this Section 16.1 is self-executing, Tenant covenants and agrees to execute and
deliver, upon demand by Landlord and in the form requested by Landlord, or any
Mortgagee or ground lessor, any additional documents evidencing the priority or
subordination of this Lease with respect to any such ground leases of underlying
leases or the lien of any such mortgage or deed of trust. Tenant's failure to
timely execute and deliver such additional documents shall, at Landlord's
option, constitute an Event of Default hereunder.
16.2 ESTOPPEL CERTIFICATE. Tenant shall within ten (10) days following
written request by Landlord, execute and deliver to Landlord any documents,
including estoppel certificates, in a form prepared by Landlord: (i) certifying
that this Lease is unmodified and in full force and effect or, if this Lease has
been modified, attaching a copy of such modification and certifying that this
Lease, as so modified, is in full force and effect and the date to which the
Rent and other charges are paid in advance, if any; (ii) acknowledging that
there are not, to Tenant's knowledge, any uncured defaults on the part of the
Landlord or stating the nature of any uncured defaults; (iii) evidencing the
status of the Lease as may be required by a Mortgagee or a purchaser of the
Premises; (iv) certifying the current Monthly Rent amount and the amount and
form of Security Deposit on deposit with Landlord; and (v) certifying to such
other information as Landlord, Landlord's Agents, Mortgagees and prospective
purchasers may reasonably request, including, but not limited to, any requested
information regarding Hazardous Materials. Tenant's failure to deliver an
estoppel certificate within ten (10) days after delivery of Landlord's written
request therefor shall constitute an Event of Default hereunder.
16.3 RECOGNITION. Upon execution of this Lease, Landlord shall provide
Tenant with the standard recognition/nondisturbance agreement typically entered
by Chemical Bank (Landlord's mortgagee). If Tenant is unable to obtain a
recognition/nondisturbance agreement from Chemical Bank in a form and content
acceptable to Tenant, in Tenant's reasonable business judgment, Tenant shall
have the right to terminate this Lease, provided that Tenant must give Landlord
written notice
Page 45
<PAGE> 60
of Tenant's election to terminate pursuant to this Section 16.3, if at all,
within thirty (30) days from the date of this Lease.
ARTICLE 17
SIGNS, GRAPHICS AND ADVERTISING
17.1 TENANT'S SIGNAGE. Landlord shall designate the location(s) on the
Premises, Building or Project, if any, for not more than two (2) identification
signs for Tenant. Tenant shall have no right to maintain identification signs in
any other location in, on or about the Premises and shall not display or erect
any other signs, displays or other advertising materials that are visible from
the exterior of the Building. The size, design, color and other physical aspects
of permitted signs shall be subject to Landlord's written approval prior to
installation (which approval may be withheld in Landlord's sole discretion), any
Restrictions encumbering the Premises and any applicable municipal or other
governmental permits and approvals. All such signs and graphics shall conform to
the Sign Criteria set forth in Exhibit I. The parties hereby approve the signage
depicted in Exhibit I-A, provided that it meets all requirements set forth in
this Article 17. The cost of all signs and graphics, including the installation,
maintenance and removal thereof, shall be at Tenant's sole cost and expense. If
Tenant fails to maintain its signs, or if Tenant fails to remove same upon
termination of this Lease and repair any damage caused by such removal
(including, but not limited to, repainting the affected area, if required by
Landlord), Landlord may do so at Tenant's expense. All sums reasonably
disbursed, deposited or incurred by Landlord in connection with such removal and
repair, including, but not limited to, all costs, expenses and actual attorneys'
fees, shall be due and payable by Tenant to Landlord on demand by Landlord,
together with interest thereon at the Applicable Rate from the date of such
demand until paid by Tenant. Any sign and or advertising matter must be prepared
by a professional sign company or advertising organization. Tenant shall have an
exclusive right to place signage on the Building in which the Premises are
located, provided that Tenant otherwise complies with the requirements of this
Section 17.1 In the event that the Premises are expanded to include space in
other buildings in the Project, then provided that Tenant occupies at least
twenty-five percent (25%) of the total rentable area of such building, Tenant
shall have the exclusive right to use any building top signage space, subject to
the other requirements of this Section 17.1 and to any rights of other tenants
in such building which predate Tenant's occupancy of space in such building.
ARTICLE 18
REAL ESTATE INVESTMENT TRUSTS
During the Term or any extension thereof, should a real estate
investment trust ("REIT") become Landlord under this Lease the provisions of
this Article 18 shall pertain, and, all provisions of this Lease shall remain in
full force and effect except as specifically modified by this Article 18. The
provisions of this Article 18 shall have no force or effect except during such
period as a REIT
Page 46
<PAGE> 61
is Landlord under this Lease.
18.1 MANAGEMENT OF PROJECT. The parties to this Lease agree that
Landlord need not itself directly manage or otherwise service all or any part of
the Premises, Common Area or the Project of which the Premises are a part but
may cause such management, maintenance, operation and other services to Tenant
to be performed by Landlord's agent (hereafter "Project Manager"). Landlord
shall notify Tenant in writing of the name and address of the Project Manager,
but Landlord shall have the absolute right to designate from time to time
another person, association, corporation or partnership (general or limited) as
Project Manager upon ten (10) days' written notice to Tenant.
18.2 AMENDMENT TO SECTION 7.1. Notwithstanding any provision to the
contrary in Section 7.1, the following provisions shall apply:
(a) Tenant shall continue to pay all Additional Rent under this
Lease to Landlord, subject to the provisions of Section 7.1, as modified below
by Section 18.3. If the portion of Additional Rent due under Section 7.1 which
constitute Operating Expenses are not paid at the time and in the manner
provided in this Lease, said portion shall nevertheless be collectible with the
next installment of Monthly Rent and Additional Rent becoming due, but nothing
contained in this Article 18 shall be deemed to suspend or delay the payment of
any amount of money or charge at the time the same becomes due and payable under
this Lease, or limit any other remedy of Landlord; and
(b) Tenant shall pay all Rent and other charges to Landlord at
such place as Landlord may from time to time designate in writing at least ten
(10) days prior to the next ensuing payment date; provided that the payments
made by Tenant pursuant to Section 7.1 for Operating Expenses shall be made to
Landlord for the administrative convenience of the parties to this Lease and to
further the efficient operation of the Project and shall remain the sole and
separate property of the Project Manager for its services described in this
Lease.
18.3 AMENDMENT TO OTHER SECTIONS. This Lease is hereby amended, modified
and supplemented as follows:
(a) Landlord shall cause the Project Manager to render to Tenant,
other tenants and occupants of the Project the services required or permitted to
be performed by Landlord pursuant to Sections 8.6, 9.1,.9.4, 10.3, 10.4, 10.6,
10.7 and 21.29 as well as Articles 12, 13 and 20 in connection with the
maintenance, repair, management and operation of the Common Area or the Project
and the Project Manager shall be reimbursed by Tenant for its expenses in
connection with said Common Area or the Project in the manner provided below;
(b) Tenant shall continue to pay to the order of Landlord
Tenant's Share of Operating Expenses due under Section 7.1 concurrently with its
payment of Monthly Rent under this Lease, but Landlord shall disburse such
portion of Tenant's Additional Rent to and for the benefit of the Project
Manager; and
Page 47
<PAGE> 62
(c) Notwithstanding that such payments shall be made by Tenant to
the order of Landlord, the parties agree that all such payments for Tenant's
Share of Operating Expenses under Section 7.1 shall be retained by the Project
Manager as its sole and separate property.
18.4 REIT TAX PROVISIONS. If Landlord in good faith determines that its
status as a REIT under the provisions the Internal Revenue Code will be
jeopardized because of any provision of this Lease, Landlord may request
reasonable amendment to this Lease and Tenant will not unreasonably withhold,
delay, defer or condition its consent to such amendments, provided that such
amendments do not: (i) increase the monetary obligation of Tenant pursuant to
the terms of this Lease; or (ii) in any other manner have a material adverse
affect on Tenant's interest in the Premises.
ARTICLE 19
SURRENDER; HOLDING OVER
19.1 SURRENDER OF THE PREMISES. Upon the expiration or earlier
termination of this Lease, Tenant shall surrender the Premises to Landlord in
its condition existing as of the Commencement Date, normal wear and tear and
acts of God excepted, with all interior walls in good repair, all carpets
shampooed and cleaned, the HVAC equipment, plumbing, electrical and other
mechanical installations in good operating order and all noncarpeted floors
cleaned and waxed, all to the reasonable satisfaction of Landlord. Tenant shall
remove from the Premises all of Tenant's Alterations which Landlord requires
Tenant to remove pursuant to Section 8.1 and all Tenant's Personal Property, and
shall repair any damage and perform any restoration work necessitated by such
removal. If Tenant fails to remove such Alterations and Tenant's Personal
Property which Tenant is authorized and obligated to remove pursuant to the
above, and such failure continues after the expiration or termination of this
Lease, Landlord may retain such property and all rights of Tenant with respect
to such property shall cease, or Landlord may place all or any portion of such
property in public storage for Tenant's account. Tenant shall pay to Landlord,
upon demand, the costs of removal of any such Alterations and Tenant's Personal
Property and storage and transportation costs of same, and the cost of repairing
and restoring the Premises, together with an administrative fee to Landlord in
the amount of Five Hundred Dollars ($500) and all attorneys' fees and interest
on said amounts at the Applicable Rate from the date of expenditure by Landlord.
19.2 HOLDING OVER. If Tenant shall retain possession of the Premises or
any portion of the Premises without Landlord's consent following the expiration
or termination of this Lease, then Tenant shall pay to Landlord for each day of
such retention 110% of the amount of Monthly Rent (payable on a daily basis) for
the last month prior to the date of expiration or termination during the first
thirty (30) days of such holdover, with such amount to be increased by an
additional ten percent (10%) for each additional thirty (30) day increment.
Tenant shall also indemnify and hold Landlord harmless from any loss or
liability resulting from delay by Tenant in surrendering the Premises,
including, without limitation, any claims made by any succeeding tenant rounded
on such delay. Alternatively, if Landlord gives written notice of Landlord's
consent to Tenant's holding over, such holding over shall constitute renewal of
the Lease on a month to month basis, with Monthly Rent to be as set forth in
this Section 19.2, and otherwise on the terms of this Lease. Acceptance of Rent
Page 48
<PAGE> 63
by Landlord following expiration or termination of this Lease shall not
constitute a renewal of this Lease, and nothing contained in this Section 19.2
shall waive Landlord's right of reentry or any other right. Unless Landlord
gives its written consent as provided above, Tenant shall be only a Tenant at
sufferance, whether or not Landlord accepts any Rent from Tenant while Tenant is
holding over without Landlord's written consent. Additionally, in the event that
upon termination of the Lease Tenant has not fulfilled its obligation with
respect to repairs and cleanup of the Premises or any other Tenant obligations
as set forth in this Lease, then Landlord shall have the right to perform any
such Tenant obligations as it deems necessary at the Tenant's sole cost and
expense, and any time required by Landlord to complete such obligations shall be
considered a period of holding over and the terms of this Section 19.2 shall
apply.
ARTICLE 20
RELOCATION OF PREMISES
Intentionally Deleted.
Page 49
<PAGE> 64
ARTICLE 21
MISCELLANEOUS AND INTERPRETIVE PROVISIONS
21.1 BROKER. Landlord and Tenant each warrant and represent to the other
that neither has had any dealings with any real estate broker, agent or finder
in connection with the negotiation of this Lease or the introduction of the
parties to this transaction, except for the Broker (whose commission shall be
paid by Landlord), and that it knows of no other real estate broker, agent or
finder who is or might be entitled to a commission or fee in connection with
this Lease. In the event of any such additional claims for brokers' or finders'
fees with respect to this Lease, Tenant shall indemnify, hold harmless, protect
and defend Landlord from and against such claims if they shall be based upon any
statement or representation or agreement by Tenant, and Landlord shall
indemnify, hold harmless, protect and defend Tenant if such claims shall be
based upon any statement, representation or agreement made by Landlord.
21.2 EXAMINATION OF LEASE. Submission of this Lease for examination or
signature by Tenant does not create a reservation of or option to lease. This
Lease shall become effective and binding only upon full execution of this Lease
by both Landlord and Tenant.
21.3 NO RECORDING. Tenant shall not record this Lease or any memorandum
of this Lease without Landlord's prior written consent, such consent not to be
unreasonably withheld. If Landlord so requests, Tenant agrees to execute, have
acknowledged and deliver a memorandum of this Lease in recordable form which
Landlord thereafter may file for record. Such memorandum, if any, shall contain
reference to the options to expand contained in the Expansion Rights Rider to
this Lease.
21.4 QUITCLAIM. Upon expiration or termination of this Lease, Tenant
shall, at Landlord's request, execute, have acknowledged and deliver to Landlord
an instrument in writing releasing and quitclaiming to Landlord all of Tenant's
right, title and interest in and to the Premises by reason of this Lease or
otherwise.
21.5 LANDLORD'S SECURITY INTEREST. Intentionally deleted.
21.6 MODIFICATION FOR MORTGAGEES. If in connection with obtaining
financing for the Project or any portion of the Project containing the Premises,
Landlord's Mortgagees shall request reasonable modifications to this Lease as a
condition to such financing, Tenant shall not unreasonably withhold, delay,
condition or defer its consent to such modifications, provided such
modifications do not have a material adverse effect on Tenant's rights under
this Lease nor increase Monthly Rent. Tenant's failure to so consent shall
constitute an Event of Default under this Lease.
21.7 NOTICE. Any Notice required or desired to be given under this Lease
shall be in writing and shall be addressed to the address of the party to be
served. The addresses of Landlord and Tenant are as set forth in Sections 1.1
and 1.3, respectively, except that from and after the Commencement Date,
notwithstanding the addresses for Tenant set forth in Section 1.3, all Notices
regarding the operation and maintenance of the Project shall be delivered to
Tenant at the Premises. Each Notice shall be deemed effective and given: (i)
upon receipt, if personally delivered (which
Page 50
<PAGE> 65
shall include delivery by courier, expedited or overnight delivery service);
(ii) upon being telephonically confirmed as transmitted, if sent by telegram,
telex or telecopy (provided that originals are promptly forwarded); (iii) two
(2) business days after deposit in the United States mail in the County,
certified and postage prepaid, properly addressed to the party to be served; or
(iv) upon receipt if sent in any other way. Any party to this Lease may from
time to time, by written notice to the other in accordance with this Section
21.7, designate a different address than that set forth above for the purposes
of Notice.
21.8 ATTORNEYS' FEES. All sums reasonably incurred (including, but not
limited to, all costs, expenses and actual accountants', appraisers', attorneys'
and other professionals' fees, and any collection agency or other collection
charges) by Landlord in connection with an Event of Default or holding over of
possession by Tenant after the expiration or termination of this Lease, or by
Tenant in connection with a default under this Lease by Landlord, shall be due
and payable by defaulting party to the non-defaulting party on demand, and shall
bear interest at the Applicable Rate from the date of such demand until paid by
such defaulting party. In addition, in the event that any action shall be
instituted by either of the parties hereto for the enforcement of any of its
rights in and under this Lease, or if either party is involuntarily enjoined in
an action or proceeding involving the other party, the party in whose favor
judgment shall be rendered in such action shall be entitled to recover from the
other party all costs reasonably incurred by the prevailing party in such
action, including actual costs and attorneys' fees.
21.9 FINANCIAL INFORMATION. Tenant shall deliver to Landlord, prior to
the execution of this Lease, Tenant's current financial statements, and Tenant's
financial statements for lesser of the two (2) years prior, or Tenant's
financial statements from the date that Tenant incorporated from the date that
Tenant incorporated to the current financial statement's year, certified to be
true, accurate and complete by the chief financial officer of Tenant, including
a balance sheet and profit and loss statement for the most recent prior year
(collectively, the "Statements"), which Statements shall be prepared on an
accrual basis and accurately and completely reflect the financial condition of
Tenant. Landlord agrees that it will keep the Statements confidential, except
that Landlord shall have the right to deliver the same to any proposed purchaser
of the Premises, the Project or any portion of the Project containing the
Premises, and to the Mortgagees of Landlord or such proposed purchaser. Tenant
acknowledges that Landlord is relying on the Statements in its determination to
enter into this Lease, and Tenant represents to Landlord, which representation
shall be deemed made on the date of this Lease and again on the Commencement
Date, that no material change in the financial condition of Tenant, as reflected
in the Statements, has occurred since the date Tenant delivered the Statements
to Landlord.
21.10 CAPTIONS. The captions and headings used in this Lease are for the
purpose of convenience only and shall not be construed to limit or extend the
meaning of any part of this Lease.
21.11 EXECUTED COPY. Any fully executed copy of this Lease shall be
deemed an original for all purposes.
21.12 TIME. Time if of the essence for the performance of each term,
condition and covenant of this Lease.
Page 51
<PAGE> 66
21.13 SEVERABILITY. If any one (1) or more of the provisions contained
in this Lease shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision of this Lease, and this Lease shall be
construed as if such invalid, illegal or unenforceable provision had not been
contained in this Lease.
21.14 SURVIVAL. All covenants and indemnities set forth herein which
contemplate the payment of sums, or the performance by Tenant after the
expiration or termination of the Term or following an Event of Default,
including specifically, but not limited to, the covenants and indemnities set
forth in Section 3.3, Section 5.3, Article 6, Article 7, Section 8.1, Section
9.2, Section 11.1, Section 11.10, Article 15, and Article 19, and all
representations and warranties of Tenant, shall survive the expiration or sooner
termination of this Lease.
21.15 CHOICE OF LAW. This Lease shall be construed and enforced in
accordance with the laws of the state in which the Premises are located. The
language in all parts of this Lease shall in all cases be construed as a whole
according to its fair meaning and not strictly for or against either Landlord or
Tenant.
21.16 GENDER; SINGULAR, PLURAL. When the context of this Lease requires,
the neuter gender includes the masculine, the feminine, a partnership,
corporation or joint venture, the singular includes the plural and the plural
includes the singular.
21.17 NON-AGENCY. It is not the intention of Landlord or Tenant to
create by this Lease a relationship of master-servant or principal-agent, and
under no circumstance shall Tenant be considered the agent of Landlord, it being
the sole purpose and intent of the parties to this Lease to create a
relationship of landlord and tenant.
21.18 SUCCESSORS. The terms, covenants, conditions and agreements
contained in this Lease shall, subject to the provisions as to assignment,
subletting, and bankruptcy contained herein and any other provisions restricting
successors or assigns, apply to and bind the heirs, successors, legal
representatives and assigns of the parties to this Lease.
21.19 WAIVER, REMEDIES CUMULATIVE. The waiver by Landlord of any term,
covenant, agreement or condition contained in this Lease shall not be deemed to
be a waiver of any subsequent breach of the same or any other term, covenant,
agreement or condition contained in this Lease, nor shall any custom or practice
which may grow up between the parties in the administration of this Lease be
construed to waive or to lessen the right of Landlord to insist upon the
performance by Tenant in strict accordance with all of the provisions of this
Lease. The subsequent acceptance of Rent hereunder by Landlord shall not be
deemed to be a waiver of any preceding breach by Tenant of any provisions,
covenant, agreement or condition of this Lease, other than the failure of Tenant
to pay the particular Rent payment so accepted, regardless of Landlord's
knowledge of such preceding breach at the time of acceptance of such Rent
payment. Landlord's acceptance of any check, letter or payment shall in no event
be deemed an accord and satisfaction, and Landlord shall accept the check,
letter or payment without prejudice to Landlord's right to recover the balance
of the Rent or pursue any other remedy available to it. The rights and remedies
of Landlord under this Lease shall be cumulative and in addition to any and all
other rights and remedies which Landlord
Page 52
<PAGE> 67
has or may have.
21.20 UNAVOIDABLE DELAY. Landlord shall not be chargeable with, liable
for, or responsible to Tenant for anything or in any amount for any Unavoidable
Delay and any Unavoidable Delay shall not be deemed a breach of or default in
the performance of this Lease, it being specifically agreed that any time limit
provision contained in this Lease, at Landlord's option, shall be extended for
the same period of time lost by Unavoidable Delay, except for time limits which
apply to Landlord's direct financial obligations to Tenant, if any.
21.21 ENTIRE AGREEMENT. This Lease is the entire agreement between the
parties, and supersedes any prior agreements, representations, negotiations or
correspondence between the parties except as expressed in this Lease. Except as
otherwise provided in this Lease, no subsequent change or addition to this Lease
shall be binding unless in writing and signed by the parties to this Lease.
21.22 AUTHORITY. If Tenant is a corporation or a partnership (general or
limited), each individual executing this Lease on behalf of the corporation or
partnership, as the case may be, represents and warrants that: (i) he or she is
duly authorized to execute and deliver this Lease on behalf of such entity in
accordance with its corporate bylaws, statement of partnership or certificate of
limited partnership, as the case may be; (ii) this Lease is binding upon said
entity in accordance with its terms; (iii) Tenant is a duly organized and
legally existing corporation or partnership in good standing in the State of
California; and (iv) the execution and delivery of the Lease shall not result in
any breach of or constitute a default under any mortgage, deed of trust, lease,
loan, credit agreement, partnership agreement or other contract or instrument to
which Tenant is a party or by which Tenant may be bound. If Tenant is a
corporation, Tenant shall, if requested by Landlord, within thirty (30) days
after execution of this Lease and prior to entering into possession of the
Premises, deliver to Landlord a certified copy of a resolution of the board of
directors of the corporation authorizing or ratifying the execution of this
Lease. If Tenant is a partnership, Tenant shall, if requested by Landlord,
within thirty (30) days after execution of this Lease and prior to entering into
possession of the Premises, deliver to Landlord a certified copy of its
partnership agreement authorizing such execution.
21.23 GUARANTY. Intentionally omitted.
21.24 EXHIBITS, REFERENCES. All exhibits, attachments, amendments,
riders and addenda attached to this Lease are hereby incorporated into and made
a part of this Lease. In the event of variation or discrepancy, the duplicate
original hereof (including exhibits, amendments, riders and addenda, if any,
specified above) held by Landlord shall control. All references in this Lease to
Articles, Sections, Exhibits, Riders and clauses are made, respectively, to
Articles, Sections, Exhibits, Riders and clauses of this Lease, unless otherwise
specified.
21.25 BASIC LEASE PROVISIONS. The Basic Lease Provisions contained in
Article 1 of this Lease are intended to provide general information only. In the
event of any inconsistency between the such and the specific provisions of this
Lease, the specific provisions of this Lease shall prevail.
21.26 NO MERGER. The voluntary or other surrender of this Lease by
Tenant, or a mutual cancellation thereof, or a termination by Landlord, shall
not work a merger, and shall, at the option
Page 53
<PAGE> 68
of Landlord, terminate all or any existing subtenancies or may, at the option
of Landlord, operate as an assignment to Landlord of any or all of such
subtenancies.
21.27 JOINT AND SEVERAL OBLIGATIONS. If Tenant is constituted of more
than one person or entity, the obligations imposed on each such person or entity
shall be joint and several.
21.28 NO LIGHT OR AIR EASEMENT. Any diminution or shutting off of light
or air by any structure which may be erected on lands adjacent to the Building
(including expansions or modifications to the Building or the Project) shall in
no way affect this Lease, abate Rent or otherwise impose any liability on
Landlord.
21.29 SECURITY MEASURES. Tenant hereby acknowledges that Landlord shall
have no obligation whatsoever to provide guard service or other security
measures for the benefit of the Premises, Building, Common Area or the Project.
Tenant assumes all responsibility for the protection of Tenant, its agents, and
invitees and the property of Tenant and of Tenant's agents and invitees from
acts of third parties. Nothing contained in this Section 21.29 shall prevent
Landlord, at Landlord's sole option, from providing security protection for the
Project or any part thereof, in which event the cost thereof shall be included
within the definition of Operating Expenses and paid by Tenant in the manner set
forth in Section 7.1.
21.30 COVENANTS AND CONDITIONS. All provisions of this Lease, whether
covenants or conditions, on the part of Tenant shall be deemed to be both
covenants and conditions.
21.31 REASONABLE CONSENT. Except where other criteria are established in
this Lease, neither Landlord or Tenant shall unreasonably withhold or delay its
consent, approval or agreement, where such consent, approval or agreement is
required by this Lease.
Page 54
<PAGE> 69
EXHIBIT C
WORK LETTER
(TENANT IMPROVEMENT ALLOWANCE)
In connection with that certain lease (the "Lease") to which this
Exhibit C (this "Work Letter") is attached, and in consideration of the mutual
covenants contained in the Lease and in this Work Letter, Landlord and Tenant
hereby agree as follows:
1. APPLICATION OF EXHIBIT
Capitalized terms used and not otherwise defined in this Work Letter
shall have the same definitions as set forth in the Lease. The provisions of
this Work Letter shall apply to the planning and completion of leasehold
improvements requested by Tenant (the "Tenant Improvements") for the initial
fitting out of the Premises as more fully set forth herein.
2. LANDLORD AND TENANT PRE-CONSTRUCTION OBLIGATIONS
(a) PRELIMINARY PLANS. Attached to this Work Letter as Schedule 1 are
preliminary space plans for the Tenant Improvements (the "Preliminary Plans"),
which include, without limitation, sketches and/or drawings showing locations of
doors, partitioning, electrical fixtures, outlets and switches, plumbing
fixtures, if any, and other requirements. Tenant acknowledges that Preliminary
Plans have been prepared by Tenant's Architect after consultation and
cooperation between Tenant Architect and Landlord regarding the Premises, Tenant
Improvements and preparation of Preliminary Plans for same. Landlord and
Landlord's Architect shall be entitled, in all respects, to rely upon all
information supplied by Tenant regarding the Tenant Improvements. The costs
associated with preparation of the Preliminary Plans shall be borne by Tenant
and paid as set forth in Section 5 and Section 6 of this Work Letter.
(b) WORKING DRAWING. Within seven (7) days following full execution of
the Lease by both Landlord and Tenant, Tenant's Architect shall prepare working
drawings (the "Working Drawings") for the Tenant Improvements based upon the
approved Preliminary Plans and submit the Working Drawings to Landlord for
Landlord's approval. The Working Drawings shall include architectural,
mechanical and electrical construction drawings for the Tenant Improvements
based on the Preliminary Plans. Notwithstanding the Preliminary Plans, in all
cases the Working Drawings: [i) shall be subject to Landlord's final approval,
which approval shall not be unreasonably withheld; (ii) shall not be in conflict
with building codes for the City or County in which the Premises are located or
with insurance regulations for a fire resistive Class "A" building; and (iii)
shall be in a form satisfactory to appropriate governmental authorities
responsible for issuing permits and licenses required for construction of such
Tenant Improvements. The costs associated with preparation of the Working
Drawings shall be home by Tenant, subject to reimbursement from the Tenant
Improvement Allowance pursuant to the provisions set forth in Section 5 and
Section 6 of this Work Letter.
(c) APPROVAL OF WORKING DRAWINGS. Tenant or Tenant's Architect shall
submit the Working Drawings to Landlord for Landlord's review within the
time-frame established in Section
C-1
<PAGE> 70
2(b) of this Work Letter, and Landlord shall notify Tenant within five (5)
business days after Landlord's receipt of the Working Drawings of any requested
revisions. Within two (2) days after Tenant's receipt of Landlord's notice,
Tenant's Architect shall make all reasonably requested revisions to the Working
Drawings and resubmit two (2) copies of the revised Working Drawings to Landlord
for its review and approval, which approval shall be given or withheld within
five (5) business days thereafter. If Landlord should deny approval of the
Working Drawings, Landlord shall specify its requested revisions to the Working
Drawings and Tenant shall make such requested changes and then resubmit the
Working Drawings to Landlord in accordance with the provisions of the previous
sentence. Concurrently with the above review and approval process, Landlord may,
in its sole discretion, submit all plans and specifications to the City or
County, as appropriate, and other applicable governmental agencies in an attempt
to expedite governmental approval and finance of all necessary permits and
licenses to construct the Tenant Improvements as shown on the Working Drawings.
Any changes to the Working Drawings which are required by the City, the County
or other governmental entity shall be immediately submitted by Landlord to
Tenant and Tenant's Architect shall promptly make any such required changes to
the Working Drawings.
3. BUILDING PERMIT
After the Landlord has approved the Working Drawings, Landlord shall, if
Landlord has not already done so, submit the Working Drawings to the appropriate
governmental body or bodies for final plan checking and a building permit.
Landlord shall notify Tenant of, and Tenant shall cause to be made, any change
in the Working Drawings necessary to obtain the building permit; provided,
however, that after the Landlord's approval of the working Drawings pursuant to
Section 2(c), no changes shall be made to the Working Drawings without the prior
approval of both Landlord and Tenant, and then only after agreement by Tenant to
pay any excess costs resulting from such changes to the extent that such excess
costs cause the Tenant Improvement Costs (as defined below in Section 5(a)) to
exceed the maximum Tenant Improvement Allowance (as established below in Section
5(a)).
4. CONSTRUCTION OF TENANT IMPROVEMENTS
After Landlord has approved the Working Drawings pursuant to Section
2(c) and a building permit for the work has been issued, Landlord shall, through
a guaranteed maximum cost or fixed price (at Landlord's sole option)
construction contract (the "Construction Contract") with a reputable, licensed
contractor selected by Landlord (the "Contractor"), cause the construction of
the Tenant Improvements to be carried out in substantial conformance with the
Working Drawings in a good and workmanlike manner using first class materials.*
Landlord shall utilize a competitive bidding process to select the Contractor,
using a minimum or three (3) non-union contractors, including B. H. Miller.
Landlord shall have the right to select a union contractor to serve as
Contractor; provided, however, if the selection of a union Contractor results in
a net cost increase to the Tenant Improvements, Landlord shall be solely
responsible for such additional costs. The costs associated with the
construction of the Tenant Improvements shall be paid as set forth in Section 5
and Section 6 of this Work Letter. Landlord shall see that the construction
complies with all applicable building, fire, health, and sanitary codes and
regulations, the satisfaction of which shall be evidenced by a certificate of
occupancy for the Premises; provided, however, that this obligation shall in no
event be deemed to make Landlord liable for, nor exculpate Tenant or Tenant's
Architect from liability for,
C-2
<PAGE> 71
any violation of Applicable Laws or design deficiencies incorporated into the
Working Drawings by Tenant's Architect, except to the extent that any such
violation or deficiency is directly attributable to a change in the Working
Drawings required by the Landlord. See page C-2a.
5. TENANT IMPROVEMENT ALLOWANCE
(a) TENANT IMPROVEMENTS. Landlord shall provide Tenant with a maximum
Tenant Improvement Allowance in the amount of Twenty Eight Dollars ($28) per
rentable square foot of Premises, to be applied by Landlord towards the cost of
the design, purchase and construction of the Tenant Improvements, including
without limitation, design, engineering and consulting fees (collectively, the
"Tenant Improvement Costs"). The Tenant Improvement Allowance shall be used by
Landlord for payment of the following Tenant Improvement Costs:
(i) Review by Landlord's Architect of the Preliminary Plans and
the Working Drawings as provided in Section 2 of this Work Letter;
- Prior to Landlord's selecting the Contractor,
and without limiting Landlord's right in its
sole discretion to select the Contractor.
Landlord shall review with Tenant the various
contractor bids received by Landlord.
C-3
<PAGE> 72
Landlord shall use reasonable efforts to cause those contractors which
are bidding on the Tenant Improvements to include in their applicable
construction contracts a provision which: (i) affords the contractor a bonus of
$1,000 for every day prior to June 30, 1995 that the contractor substantially
completes the Tenant Improvements (the "Early Completion Bonus"), with such
Early Completion Bonus not to exceed $10,000; and (ii) penalizes the contractor
(i.e. decreases amounts payable to the contractor by $1,000 for every day that
substantial completion of the Tenant Improvements extends beyond June 30, 1995
(the "Late Completion Penalty"). If the Early Completion Bonus and the Late
Completion Penalty are included in the Construction Contract: (i) Tenant shall
be liable for, and shall (within ten (10) days after written demand therefor)
reimburse Landlord for any amounts actually paid by Landlord as, the Early
Completion Bonus; and (ii) the amount of any Late Completion Penalty actually
realized by Landlord under the terms of the Construction Contract shall accrue
to the benefit of Tenant, with regard to the first $10,000 of such Late
Completion Penalty, and to the benefit of both Landlord and Tenant on a 50/50
basis, to the extent that such Late Completion Penalty exceeds $10,000, with
Landlord to pay to Tenant that portion of the Late Completion Penalty to which
Tenant is entitled within tan (10) days after the amount of same is known.
(ii) Including, without limitation, all fees charged by the City
or the County (including, without limitation, fees for building permits and plan
checks)in connection with the Tenant Improvement work in the Premises;
(iii) Construction work for completion of the Tenant Improvements
as reflected in the Construction Contract;
(iv) All contractors' charges, general conditions, performance
bond premiums and construction fees; and
(v) Design and engineering services performed by Rengel & Company
on behalf of Tenant, not to exceed a total of $1.50 per rentable square foot of
the Premises. Tenant shall be responsible for any charges or fees from Rengel &
Company in excess of this limit.
(b) REIMBURSEMENTS. For any permitted item of Tenant Improvement Cost
directly incurred by Tenant (e.g., fees for Tenant's Architect), Landlord shall
reimburse Tenant for such properly incurred costs within thirty (30) days of
Tenant's delivery to Landlord of a request for reimbursement. Any such request
for reimbursement shall include a reasonably detailed description of the expense
and adequate supporting documentation (e.g., receipts, invoices, etc.).
(c) EXCESS ALLOWANCE. Within fifteen (15) days of the Commencement Date,
Landlord shall deliver a notice to Tenant specifying the anticipated amount, if
any, by which the amount of Tenant Improvement Allowance spent by Landlord
exceeds Twenty-Five Dollars ($25) per rentable square foot, if at all, for
purposes of establishing the required amount of the Standby Letter of Credit, if
any, and for purposes of increasing the Monthly Rent under Lease Section 1.10.
6. COSTS IN EXCESS OF TENANT IMPROVEMENT ALLOWANCE AT TENANT'S
EXPENSE
C-4
<PAGE> 73
(a) COST APPROVAL. Tenant shall promptly pay to Landlord the excess of
the Tenant Improvement Costs over the amount of the Tenant Improvement Allowance
available to defray such costs (i.e., $28/per rentable square foot), if any.
Concurrent with the plan checking referred to in Section 3 of this Work Letter,
Landlord shall prepare and submit to Tenant a written estimate of the amount of
the remaining Tenant Improvement Costs and the amount of the Tenant Improvement
Allowance still available to defray such costs (after preparation of the
Preliminary Plans and Working Drawings). Tenant shall approve or disapprove any
such estimate by written notice to Landlord within three (3) days after receipt
thereof. If Tenant fails to notify Landlord of its disapproval within such three
(3) day period, Tenant shall be deemed to have approved such estimate. If such
estimate exceeds the Tenant Improvement Allowance then still available and
Tenant approves such estimate, Tenant's notice of approval shall include payment
to Landlord for the full amount of such excess, or, in the event Tenant is
deemed to have approved such excess costs, Tenant shall promptly make such
payment to Landlord. If Tenant disapproves such estimate within the three (3)
day period, Landlord shall not proceed with the Tenant Improvements, but
Landlord and Tenant shall thereafter meet and cooperate to amend the Working
Drawings for the Premises as necessary to obtain Tenant's approval of the cost
thereof, provided that Tenant shall pay any costs resulting from such changes
and Tenant shall be liable for the delay in completing the Tenant Improvements
and the increased costs, if any, resulting from such delay.
(b) FINAL COST. Within sixty (60) days after the Commencement Date,
Landlord shall determine the actual final Tenant Improvement Cost and shall
submit a written statement of such amount to Tenant. If amounts previously paid
by Tenant pursuant to Section 6(a) or Section 7 of this Work Letter exceed the
amount actually due from Tenant for such work pursuant to those provisions, such
excess will be refunded to Tenant. Conversely, if any amount is still due from
Tenant for such work pursuant to Section 6(a) or Section 7 of this Work Letter,
then Tenant shall pay such amount in full within ten (10) days of receipt of
Landlord's statement.
(c) COST SAVINGS. If the actual final Tenant Improvement Costs are less
than the allocated Tenant Improvement Allowance (i.e., $28/rentable square
foot), Tenant shall in no event be entitled to a credit or payment for any
portion of such cost savings, except as expressly permitted in Section 6(b) for
a Tenant overpayment.
7. CHANGE ORDERS
Tenant may from time to time request and obtain change orders during the
course of construction provided that: (i) each such request shall be reasonable,
shall be in writing and signed by or on behalf of Tenant and shall not result in
any structural change in the Building, as reasonably determined by Landlord;
(ii) all additional charges and costs, including without limitation
architectural and engineering fees and costs, construction and material costs,
and processing costs of any government entity shall be the sole and exclusive
obligation of Tenant; and (iii) any resulting delay in the completion of the
Tenant Improvements shall be deemed a Tenant Delay and in no event shall extend
the Commencement Date of the Lease. Upon Tenant's request for a change order,
Landlord shall as soon as reasonably possible submit to Tenant a written
estimate of the increased or decreased cost and anticipated delay, if any,
attributable to such requested change. Within three (3) days of the date such
estimated cost adjustment and delay are delivered to Tenant, Tenant shall advise
Landlord whether it wishes to proceed
C-5
<PAGE> 74
with the change order, and if Tenant elects to proceed with the change order,
Tenant shall remit, concurrently with Tenant's notice to proceed, the amount of
the increased cost, if any, attributable,to such change order. Unless Tenant
includes in its initial change order request that the work in process at the
time such request is made be halted pending approval and execution of a change
order, Landlord shall not be obligated to stop construction of the Tenant
Improvements, whether or not the change order relates to the work then in
process or about to be started.
8. TENANT DELAYS
In no event shall the Commencement Date of the Lease be extended or
delayed due or attributable to delays due to the fault of Tenant ("Tenant
Delays"). Tenant Delays shall include, but are not limited to, delays caused by
or resulting from any one or more of the following:
(a) Tenant's failure to timely review and reasonably approve the Working
Drawings or to furnish information to Landlord for the preparation by Landlord
of the Working Drawings;
(b) Tenant's request for or use of special materials, finishes or
installments which are not readily available, provided that Landlord shall
notify Tenant in writing that the particular material, finish, or installation
is not readily available promptly upon Landlord's discovery of same;
(c) Change orders requested by Tenant to the extent such change orders
(in the aggregate) cause a total of more than fourteen (14) calendar days of
delay;
(d) Interference by Tenant or by Tenant's agents, employees, contractors
or subcontractors with Landlord's construction activities;
(e) Tenant's failure to approve any other item or perform any other
obligation in accordance with and by the dates specified in this Work Letter or
in the Construction Contract;
(f) Tenant's requested changes in the Preliminary Plans, Working
Drawings or any other plans and specifications after the approval thereof by
Tenant or submission thereof by Tenant to Landlord; and
(g) Tenant's failure to approve written estimates of costs in accordance
with this Work Letter.
If the Commencement Date of the Lease is delayed by any Tenant Delays, whether
or not within the control of Tenant, then the Commencement Date of the Lease and
the payment of Rent shall be accelerated by the number of days of such Tenant
Delay. Landlord shall give Tenant written notice within a reasonable time of any
circumstance that Landlord believes constitutes a Tenant Delay. In no event
shall any construction delays resulting from unanticipated problems related to
the existing condition of the Building be deemed to constitute a Tenant Delay.
9. TRADE FIXTURES AND EQUIPMENT
Tenant acknowledges and agrees that Tenant is solely responsible for
obtaining, delivering
C-6
<PAGE> 75
and installing in the Premises all necessary and desired furniture, trade names,
equipment and other similar items, and that Landlord shall have no
responsibility whatsoever with regard thereto. Tenant further acknowledges and
agrees that neither the Commencement Date of the Lease nor the payment of Rent
shall be delayed for any period of time whatsoever due to any delay in the
furnishing of the Premises with such items.
10. FAILURE OF TENANT TO COMPLY
Any failure of Tenant to comply with any of the provisions contained in
this Work Letter within the times for compliance set forth herein shall be
deemed a default by Tenant under the Lease. In addition to the remedies provided
to Landlord in the Lease or this Work Letter, upon the occurrence of such a
default by Tenant, Landlord shall have all remedies available at law or equity
to a landlord against a defaulting tenant pursuant to a written lease, including
but not limited to those rights and remedies set forth in the Lease.
11. PRE-EXISTING TENANT IMPROVEMENTS; CONDITION OF FLOOR
At no additional expense to Tenant, and without including the cost of
the following as a Tenant Improvement Cost, in constructing the Tenant
Improvements, Landlord shall: (i) place the floor of the Premises in a condition
ready to accept floor covering; and (ii) remove those preexisting tenant
improvements that are not consistent with the Tenant Improvements.
This Work Letter is executed as of the date of the Lease.
LANDLORD: TENANT:
LAGUNA CANYON, INC., a BROADCOM CORPORATION, a
California corporation California corporation
By: By:
------------------------------ ---------------------------
Name: Name:
---------------------------- ---------------------------
Its: Its:
----------------------------- ---------------------------
C-7
<PAGE> 76
EXHIBIT D
COMMENCEMENT DATE MEMORANDUM
TO:
DATE:
RE: __________________________________ (the "Lease") dated _______, between
_________________________________________________, a
_____________________ as "Landlord", and
__________________________________________, a _____________ as "Tenant",
concerning certain
premises (the "Premises") described in the Lease which are located at
__________________________,
California.
AGREEMENT
Landlord and Tenant hereby agree and stipulate as follows:
1. The Tenant Improvements (as defined in the Lease) to the Premises, if
required, have been substantially completed in accordance with the terms and
conditions of the Lease, subject only to Punch List items agreed to by Landlord
and Tenant pursuant to the terms of the Lease.
2. The Commencement Date, as defined in and determined in accordance
with the Lease, is hereby stipulated for all purposes to be
______________________.
3. In accordance with the Lease, Monthly Rent (as defined in the Lease)
commences to accrue on ____________________ and is due and payable in advance on
the first day of each and every calendar month during the Term (as defined in
the Lease).
4. The actual Premises Square Footage of the Premises is _______________
rentable square feet.
5. Monthly Rent during the initial Term is ___________ Dollars ($_____)
per month and Tenant's obligation to pay Monthly Rent shall commence on
________________.
LANDLORD: TENANT:
LAGUNA CANYON, INC., a BROADCOM CORPORATION, a
California corporation California corporation
By: By:
------------------------------ ---------------------------
Name: Name:
---------------------------- ---------------------------
Its: Its:
----------------------------- ---------------------------
D-1
<PAGE> 77
EXHIBIT E
DESCRIPTION OF RESTRICTIONS
This Exhibit is attached to and made a part of that certain lease (the
"Lease") dated April 30, 1995, between LAGUNA CANYON, INC., as "Landlord", and
BROADCOM CORPORATION, a California corporation as "Tenant", for that Premises
known as 16251 Laguna Canyon Road, Irvine, California. Unless otherwise defined
in this Exhibit E, capitalized terms used herein shall have the same meanings as
set forth in the Lease.
1. The CC&Rs referred to in the Lease consist of that certain
Declaration of Covenants, Conditions and Restrictions recorded March 12, 1987 as
Instrument No. 87-134994 in the Official Records of Orange County, State of
California ("Official Records"). Tenant acknowledges having had the opportunity
to receive and review a copy of the recorded CC&RS.
2. Tenant understands that the Building and the Premises are part of a
multi-building project ("Project") which covers the area shown on Exhibit "B"
attached to the Lease and which has not yet been fully developed. It is
anticipated that prior to or upon completion of the Project a Reciprocal
Easement Access and Maintenance Agreement or like instrument ("REA") will be
recorded against the Project for the mutual benefit of all owners of property
within the Project and their tenants, and will impose certain restrictions,
covenants, easements and obligations upon the Premises, Landlord and Tenant, in
order to obtain such benefit. The REA will be reasonable in form and content,
and will contain those features and provisions in similar instruments executed
and recorded by Landlord on real property in the vicinity of the Premises. The
REA will likely contain, without limitation, the following:
(a) Reciprocal easements for vehicular and pedestrian access,
circulation and parking;
(b) Covenants for the maintenance and repair (or reimbursement
for the costs thereof if done an "Operator" designated in the REA) of the
exterior or all buildings, landscaping and parking areas; and
(c) Assessment provisions for the reimbursement of costs incurred
by an "Operator" designated in the REA and who is authorized to enforce the REA
and/or perform certain maintenance and repair functions specified therein. Such
assessment will be allocated by either a separate charge attributable directly
to work or services provided for the Premises, or an in-common basis for the
whole Project, in which event a pro-rata allocation to the Premises will be made
based on the gross square footage of the Building compared with the gross square
footage of all completed buildings within the Project.
Tenant agrees that this Lease and Tenant's occupancy of the Premises
hereunder shall, upon the recordation of the REA in the Official Records of
Orange County, be subject and subordinate to the REA and Tenant agrees to abide
thereby. Tenant shall be relieved of any obligations under the Lease to the
extent that the REA requires the performance of those obligations by parties
other than Tenant. Landlord shall make a copy of the REA available to
E-1
<PAGE> 78
Tenant concurrently with or promptly following its recordation. To the extent
the obligations imposed by, or services provided by the Operator under, the REA
are the same obligations imposed upon Landlord under the Lease, they shall be
performed by Landlord or the Operator under the RFA and the cost thereof shall
be paid by Tenant to the Operator as provided in the REA or to Landlord as part
of Project Costs in accordance with the provisions of the Lease; to the extent
such obligations are the same obligations imposed upon Tenant under the Lease,
such obligations shall be performed by Tenant as Tenant's cost.
E-2
<PAGE> 79
EXHIBIT F
RULES AND REGULATIONS
1. No sign, placard, picture, advertisement, name or notice shall be
installed or displayed on any part of the outside or inside of the Building or
any other portion of the Project without the prior written consent of Landlord.
Landlord shall have the right to remove, at Tenant's expense and without notice,
any sign installed or displayed in violation of this rule. All approved signs or
lettering on doors and walls shall be printed, painted, affixed or inscribed at
the expense of Tenant by a person or entity chosen by Landlord.
2. If Landlord objects in writing to any curtains, blinds, shades,
screens or hanging plants or other similar objects attached to or used in
connection with any window or door of the Premises, Tenant shall immediately
discontinue such use. No awning shall be permitted on any part of the Premises.
Tenant shall not place anything against or near glass partitions or doors or
windows which may appear unsightly from outside the Premises.
3. Tenant shall not obstruct any sidewalks, halls, passages, exits,
entrances, elevators, escalators or stairways of any building in the Project.
The halls, passages, exits, entrances, elevators, escalators and stairways are
not for use by the general public, and Landlord shall in all cases retain the
right to control and prevent access thereto of all persons whose presence in the
judgment of Landlord would be prejudicial to the safety, character, reputation
and interests of the Project and its tenants; provided that nothing herein
contained shall be constructed to prevent such access to persons with whom any
tenant normally deals in the ordinary course of its business, unless such
persons are engaged in illegal activities. No tenant and no employee or invitee
of any tenant shall go upon the roof area of any building in the Project.
4. The directory of the Building will be provided exclusively for the
display of the name and location of tenants only, and Landlord reserves the
right to exclude any other names from such directory.
5. All cleaning and janitorial services for the Project, Building, and
the Premises shall be provided exclusively through Landlord, and except with the
written consent of Landlord, no person, persons, or entity other than those
approved by Landlord shall be employed by Tenant or permitted to enter the
Building for the purposes cleaning the same. The foregoing sentence to the
contrary notwithstanding, in the event that Tenant is not reasonably satisfied
with the Landlord provided janitorial service, or if the fees for such services
are not commercially competitive, Tenant shall have the right, upon written
notice to Landlord, to retain an independent janitorial service to clean the
Premises. Tenant shall not cause any unnecessary labor or carelessness or
indifference to the good order and cleanliness of the Premises, Building or
Project. Landlord shall not in any way be responsible to any Tenant for any loss
of property from the Premises, however occurring, or for any damage to any of
Tenant's property, by any janitor, any other employee of Landlord, or any other
person.
6. Keys for the Premises shall be provided to Tenant by Landlord and
Tenant shall
F-1
<PAGE> 80
return to Landlord any such keys upon expiration or termination of the Lease.
Tenant shall not alter any lock nor install any new or additional lock or any
bolt on any door of the Premises without the prior written consent of Landlord.
If Landlord gives its consent to any such lock or bolt, Tenant shall in each
case promptly furnish Landlord with a key for any such new or altered lock.
7. If Tenant requires telegraphic, telephonic, burglar alarm or similar
services, Tenant shall first obtain, and comply with, Landlord's instructions
regarding installation of such services.
8. Any freight elevator shall be available for use by all tenants in the
Building, subject to such reasonable scheduling as Landlord in its discretion
shall deem appropriate. No equipment, materials, furniture, packages, supplies,
merchandise or other property will be received in the Building or carried in the
elevators except between such hours and in such elevators as may be designated
by Landlord.
9. Tenant shall not place a load upon any floor of the Premises which
exceeds the load per square foot which such floor was designed to carry and
which is allowed by law. Landlord shall have the right to prescribe the weight,
size and position of all equipment, materials, furniture or other property
brought into the Building. Heavy objects shall, if considered necessary by
Tenant, stand on such platforms as determined by Landlord to be necessary to
property distribute the weight. Business machines and mechanical equipment
belonging to Tenant, which cause noise or vibration that may be transmitted to
the structure of the Building or to any other space in the Building to such a
degree as to be objectionable to Landlord or to any tenant in the Building,
shall be placed and maintained by Tenant, at Tenant's expense, on vibration
eliminators or other devices sufficient to eliminate such noise or vibration.
The persons employed to move equipment in or out of the Building must be
acceptable to Landlord. Landlord will not be responsible for loss of or damage
to any such equipment or other property from any cause, and all damage done to
the Building by maintaining or moving such equipment or other property shall be
repaired at the sole expense of Tenant.
10. Tenant shall not use or keep in the Premises any kerosene, gasoline
or inflammable or combustible fluid or material other than those limited
quantities necessary for the operation or maintenance of Tenant's office
equipment. Tenant shall not use or permit to be used in the Premises any foul or
noxious gas or substance, or permit or allow the Premises to be occupied or used
in a manner which is reasonably offensive or objectionable to Landlord or other
occupants of the Building by reason of noise, odors or vibrations, nor shall
Tenant bring into or keep in or about the Premises any birds or other animals.
11. Tenant shall not use any method of heating or air conditioning the
Premises other than that supplied by Landlord.
12. Tenant shall not waste electricity, water or air conditioning and
Tenant agrees to cooperate fully with Landlord to assure the most effective
operation of the Building's heating and air conditioning system and to comply
with any governmental energy-saving rules, laws or
F-2
<PAGE> 81
regulations of which Tenant has actual notice, and Tenant shall refrain from
attempting to adjust the controls for such systems other than room thermostats
installed in the Premises for Tenant's use. Tenant shall keep corridor doors
closed within the Premises, and shall close window coverings in the Premises at
the end of each business day.
13. Landlord reserves the right, upon sixty (60) days prior notice to
Tenant, exercisable without liability to Tenant, to change the name and street
address of the Building or Project.
14. Landlord reserves the right to exclude from the Building, on a
24-hour per day, seven (7) day per week basis, or such other hours as may be
established from time to time by Landlord, any person unless that person is
known to the person or employee in charge of the Building and has a pass or is
properly identified. Tenant shall be responsible for all persons for whom it
requests passes and shall be liable to Landlord for all acts of such persons.
Landlord shall not be liable for damages for any error with regard to the
admission to or exclusion from the Building of any person. Landlord reserves the
right to prevent access to the Building in case of invasion, mob, riot, public
excitement or other commotion by closing the doors or by other appropriate
action.
15. Tenant shall close and lock the doors of its Premises and entirely
shut off all water faucets or other water apparatus, and electricity, gas or air
outlets before Tenant and its employees leave the Premises. Tenant shall be
responsible for any damage or injuries sustained by other tenants or occupants
of the Building or by Landlord for noncompliance with this rule.
16. In the event the Premises include a balcony for use by Tenant,
Tenant agrees not to allow the accessways to such balcony to remain open so as
to cause an increase in utility charges as a result of increased heating or air
conditioning use. Landlord shall have the right to enter the Premises to assure
compliance with this provision.
17. The toilet rooms, toilets, urinals, wash bowls and other apparatus
in the Building shall not be used for any purpose other than that for which they
were constructed and no foreign substance of any kind whatsoever shall be thrown
therein. The expense of any breakage, stoppage or damage resulting form the
violation of this rule shall be borne by the tenant who, or whose employees or
invitees, shall have caused same.
18. Tenant shall not sell nor permit the sale at retail of newspapers,
magazines, periodicals, theater tickets or any other goods or merchandise to the
general public in or on the Premises except to the extent any such use is
expressly permitted in the Lease. Tenant shall not make any room-to-room
collections of business from other tenants in the Building or the Project.
Tenant shall not use the Premises for any business, activity or use other than
that specifically expressly provided for in Tenant's Lease.
19. Except as specifically permitted in the Lease, Tenant shall not
install any radio or television antenna, loudspeaker or other device on the roof
areas or exterior walls of the Building. Tenant shall not interfere with radio
or television broadcasting or reception from or in the Building or the Project.
F-3
<PAGE> 82
20. Tenant shall be responsible for repairing any marks, nail holes,
screw holes or other holes in the partitions, woodwork or plaster of the
Premises and Tenant shall repair any defacements of the Premises or any part
thereof. Landlord reserves the right to direct electricians as to where and how
communication and information system wires and cables are to be introduced to
the Premises. Tenant shall not cut or bore holes for wires or cables. Tenant
shall not affix any floor covering to the floor of the Premises in any manner
except as approved by Landlord. Tenant shall repair any damage resulting from
noncompliance with this rule.
21. Tenant shall not install, maintain or operate upon the Premises more
than three (3) vending machines without the prior written consent of Landlord.
22. Canvassing, soliciting and distribution of handbills or any other
written material, and peddling in the Building or Project are prohibited, and
each tenant shall cooperate to prevent same.
23. Landlord reserves the right to exclude or expel from the Building or
Project any person who, in Landlord's judgment, is intoxicated, under the
influence of liquor or drugs or who is in violation of any of the Rules and
Regulations of the Building or Project.
24. Tenant shall store all its trash and garbage within its Premises.
Tenant shall not place in any trash box or receptacle any material which cannot
be disposed of in the ordinary and customary manner of trash and garbage
disposal. All garbage and refuse disposal shall be made in accordance with
directions issued from time to time by Landlord.
25. The Premises shall not be used for the storage of merchandise held
for sale to the general public, or lodging or for the manufacturing of any kind,
nor shall the Premises be used for any improper, immoral or objectionable
purpose. No cooking shall be done or permitted by any tenant (except to the
extent such use is expressly permitted in the Lease), provided that use by
Tenant of Underwriters' Laboratory-approved microwave and equipment for brewing
coffee, tea, hot chocolate and similar beverages shall be permitted, provided
that such equipment and use is in accordance with all applicable federal, state,
county and city laws, codes, ordinances, rules and regulations.
26. Tenant shall not use in any space or in the public areas of the
Building or Project any hand trucks except those equipped with rubber tires and
side guards or such other material-handling equipment as Landlord may approve.
Tenant shall not bring any other vehicles of any kind into the Building.
27. Without the written consent of Landlord, Tenant shall not use the
name of the Building in connection with or in promoting or advertising the
business of Tenant except as Tenant's address.
28. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental agency.
29. Tenant assumes any and all responsibility for protecting its
Premises from theft,
F-4
<PAGE> 83
robbery and pilferage, which includes keeping doors locked and other means of
entry to the Premises closed.
30. Neither Tenant nor its employees shall park their vehicles in any
parking areas designated by Landlord as areas for parking by visitors to the
Building or Project. Tenant and its employees shall only park in such parking
spaces which Landlord specifically designates for use by Tenant and its
employees. All directional signs and arrows in the parking areas must be
observed. Washing, waxing, cleaning or servicing of any vehicle by anyone is
prohibited. Neither Tenant nor its employees shall leave vehicles in the Project
parking areas overnight. Landlord reserves the right to modify and/or adopt such
other reasonable and nondiscriminatory rules and regulations for parking areas
as it deems necessary for the operation of the parking areas. Landlord may
refuse to permit any person who violates these parking rules to park in the
parking areas, and any violation of the rules shall subject such vehicle to
removal. Landlord further reserves the right to institute a system of charging
for parking on a nondiscriminatory basis.
31. The requirements of Tenant will be attended to only upon the
appropriate application to the office of the Project by an authorized
individual. Employees of Landlord shall not perform any work or do anything
outside of their regular duties unless under special instructions from Landlord,
and no employee of Landlord will admit any person (Tenant or otherwise) to any
office without specific instructions from Landlord.
32. Tenant shall not cause or permit anything to be stored outside of
the Premises.
33. Landlord may waive any one or more of these Rules and Regulations
for the benefit of Tenant or any other tenant, but no such waiver by Landlord
shall be construed as a waiver of such Rules and Regulations in favor of Tenant
or any other tenant, nor prevent Landlord from thereafter enforcing any such
Rules and Regulations against any or all of the tenants of the Building.
34. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of the Lease.
35. Landlord reserves the right to make such other reasonable Rules and
Regulations as, in its judgment, may from time to time be needed for safety and
security, for care and cleanliness of the Building or Project and for the
preservation of good order therein. Tenant agrees to abide by these Rules and
Regulations and any additions which are adopted.
36. Tenant shall be responsible for the observance of all of the
foregoing Rules and Regulations by Tenant's employees, agents, clients,
customers, invitees and guests.
37. Landlord shall enforce the Rules and Regulations for the Project in
a nondiscriminatory manner.
38. In the event of a conflict between the terms and conditions of the
Lease and these
F-5
<PAGE> 84
Rules and Regulations, the terms of the Lease shall prevail.
F-6
<PAGE> 85
EXHIBIT G
GUARANTY
[Intentionally Omitted]
G-1
<PAGE> 86
EXHIBIT H
ESTOPPEL CERTIFICATE
______________________
______________________
______________________
______________________
Ladies and Gentlemen:
The undersigned, ___________________, a ________________("Tenant"), as
tenant under a lease (the "Lease") of certain premises (the "Premises") dated
________, executed by Tenant and ________________________, a __________________
("Landlord"), hereby states, declares, represents and warrants to the addressee
of this Estoppel Certificate and its successors and assigns)as follows:
1. The copy of the Lease (with all amendments, riders or side agreements
attached thereto) is attached to this Estoppel Certificate as Attachment A is a
true and correct copy of the Lease, constitutes the only agreement between
Landlord and Tenant with respect to the Premises, is in full force and effect,
and has not been otherwise amended, supplemented or modified except, if at all,
as follows:
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
2. Tenant has accepted possession of the Premises and any improvements
required by the terms of the Lease to be made by Landlord have been completed to
the satisfaction of Tenant.
3. Rental and other amounts payable under the Lease have been paid to
the date of Tenant's execution of this Estoppel Certificate.
4. Landlord is not in default under any of the terms, conditions or
covenants of the Lease.
5. No notice has been received or given by Tenant of any default under
the Lease by either Landlord or Tenant that has not been cured, and there are no
circumstances that with the passage of time or giving of notice, or both, would
constitute a default by Landlord or Tenant in the performance of any of the
terms, conditions and/or covenants under the Lease.
6. The address for notices to Tenant is set forth in the Lease.
7. Tenant has no charge, lien, or claim of offset under the Lease or
against rent or other
H-1
<PAGE> 87
charges due under the Lease, and Tenant has no outstanding claim for credit or
reimbursement on account of Tenant's improvements to the Premises, except as
follows:
_____________________
8. Tenant has no right or option to purchase the Premises or any part or
all of the building of which they are a part, or to renew or extend the Lease,
or to expand the Premises, except as set forth in Attachment A.
H-2
<PAGE> 88
EXHIBIT I
[FIRST PAGE MISSING FROM ORIGINAL DOCUMENT]
I-1
<PAGE> 89
This sign type shall be located on the top floor facia or spandrel area
and is available for major tenants occupying more than fifty percent
(50%) of the building. See Sign Location Plan, Page 12 (See Alternate
Location Note - Pg. 12) and Building Elevation, Page 19, for locations.
This sign may occur twice per building. In no case shall individual
letterforms exceed twenty-four inches (24") in height and twenty feet
(20'- 0") in length nor shall this sign type exceed forty square feet
(40 sq. ft.) in area. All sign margins shall be aligned as noted on
exhibit, Page 19.
No more than one parapet (top-of-building) sign shaft be allowed at the
parapet level per elevation per building. Either a parapet sign or an
eyebrow sign are allowed on the same building elevation, but not both.
This sign type allows only a company name to be used. Use of a logo is
not permitted.
These graphics may be internally "halo" illuminated or they may be non-
illuminated. All illuminated on-building signing shall be white light
only. All electrical service, materials and equipment shall be as
approved by Underwriters Laboratories. See Page 24.
B. Sign Type II-B. Business Identification Signs, Top-of-First-Floor:
(First Floor Eyebrow)
This sign type is available for non-illuminated tenant identification in
Two Story buildings and may not be duplicated on any one building. See
exhibit on Page 19 for exact placement of this sign type.
In no case shall individual letterforms exceed twelve inches (12") in
height and ten feet (10'-0") in length nor shall this sign type exceed
ten square feet (10 sq. ft.) in area. All sign margins shall be aligned
as noted on exhibit Page 19. On buildings with alternative sign
locations on adjacent sides of the same building corner, one or the
other location may be used, but not both.
At each building, particular architectural conditions exist that require
referral to each building's sign location plan. See Page 12.
No more than two eyebrow (top-of-first-floor) secondary signs are
allowed per building elevation.
ONE STORY BUILDINGS.
C. Sign Type II-C: Business Identification Signs, Top-of-Building:
I-2
<PAGE> 90
Sign Type Il-C-1; PARAPET SIGN, Single/Primary Tenant Identity Sign
18" letter height maximum; 15'-0" sign length maximum; 20 sq.ft.
area maximum.
Sign Type II-C-2; EYEBROW SIGN, Multiple/Secondary Tenant Identity Sign
12" letter height maximum; 10'-0" sign length maximum; 10 sq.ft.
area maximum. These sign types cannot occur on the same building at the
same time. Either one type or the other can occur, but not both.
This sign type is available for non-illuminated tenant identification
located in the top of 1st floor facia or spandrel area of a one story
building. This sign type allows only a company name to be used. Use of a
logo is not permitted.
All sign margins shall be aligned as noted on exhibit, Page 20. On
buildings with alternative sign locations on adjacent sides of the same
building corner, one or the other location may be used, but not both.
Each building has particular architectural conditions. Refer to Sign
Location Plan, Page 12.
D. Sign Type II-D: Tenant/Suite Identification Signs @ Window:Glass:
This sign type shall occur on the window glass immediately adjacent to
each tenant entry. The copy shall be limited to suite number, company
name with subtitle, emergency information and hours of operation. The
maximum area for this sign type is four (4) square feet. All graphics
shall be white, silk-screen or self-adhesive vinyl. The suite number
shall be in project letterstyle, Helvetica Bold Italic. Tenant
informational graphics/typestyles may vary. Logos may be permitted by
the I.O.E.P. Design Review Committee. Building department permits are
not required for this sign type. Align all margins as noted in exhibit
on Page 22.
RETAIL BUILDING (OAKS PAVILION):
E. Sign Type II-E: Building Identification/Alton Identity:
This sign type will identify and segregate the retail building from the
rest of the project. The intent of these signs are to enable retail
visitors to locate their destination within this mixed-use project. This
sign shall occur three (3) times on this building. All three signs shall
be the same size.
This sign shall consist of only polystyrene graphics with high impact
polystyrene faces. See exhibit on Page 21, for size, design and
locations.
F. (Sign Type II-F was deleted )
I-3
<PAGE> 91
OPTION TO EXTEND TERM RIDER
LANDLORD: LAGUNA CANYON, INC. a California corporation
TENANT: BROADCOM CORPORATION, a California corporation
PREMISES: 16251 Laguna Canyon Road
Irvine, California
DATE: April 30, 1995
THIS OPTION TO EXTEND TERM RIDER ("Extension Rider") is an amendment of
and an addition to that certain Standard Form Office Lease (Triple Net) of even
date herewith (the "Form Lease") between the party or entity designated above as
Landlord and the party designated above as Tenant, covering those premises
described in the Form Lease (the "Premises"). The capitalized terms used and not
otherwise defined in this Extension Rider shall have the same definition as set
forth in the Form Lease. In the case of any conflict between the provisions of
the Form Lease and the provisions of this Extension Rider, this Extension Rider
shall govern. This Extension Rider and the Form Lease shall be referred to
collectively as the "Lease."
1. OPTION TO EXTEND. Landlord hereby grants to Tenant one (1)
option to extend this Lease (the "Option") or an additional period of three (3)
years (the "Extension Term") on the same terms and conditions as set forth in
the Form Lease, except as expressly modified by this Extension Rider.
(a) EXERCISE OF OPTION. Tenant may exercise the Option only by
written notice delivered to Landlord not less than six (6) months and not more
than twelve (12) months days prior to the expiration of the initial term of the
Lease. If Tenant fails to deliver notice of its exercise of the Option within
this time period, the Option shall lapse, the term of the Lease shall expire at
the end of the then existing term, and there shall be no further right by Tenant
to extend the term of the Lease. The Option shall be exercisable by Tenant on
the express conditions that at the time that Tenant exercises the Option, and
thereafter at all times prior to the commencement of the Extension Term, no
Event of Default shall have occurred under the Lease which has not been cured
within any applicable cure period. If Tenant properly exercises the Option,
"Term" as used in this Lease, shall be deemed to include the Extension Term.
(b) CALCULATION OF RENT. The Monthly Rent as of the commencement
of the Extension Term, shall be the then "Fair Market Rental Value" of the
Premises, determined in accordance with the procedure described below. Fair
Market Rental Value of the Premises shall not include any amounts attributable
to any tenant improvement allowance and shall only include real estate
commissions or fees to the extent actually required to be paid by Landlord.
Landlord shall deliver to Tenant written notice of Landlord's determination of
the Fair Market Rental Value within twenty (20) days after Landlord receives
notice from Tenant exercising the Option. if Tenant disputes Landlord's
determination of the Fair Market Rental Value as contained in Landlord's notice,
Tenant shall notify Landlord in writing within ten (10) days of Tenant's receipt
of Landlord's determination, and Tenant's notice shall further set forth
Tenant's determination of the Fair Market Rental Value. The failure of Tenant to
timely deliver to Landlord its determination of the Fair Market Rental Value
shall conclusively be deemed Tenant's approval of Landlord's determination.
Should Tenant timely notify Landlord of Tenant's objection, Landlord and Tenant
shall attempt to resolve their differences within five (5) days following
Landlord's receipt of Tenant's objection notice. Should the parties be unable to
timely resolve their differences, each party shall, within five (5) days
thereafter, each at its own cost and by giving notice to the other party,
appoint an M.A.I. appraiser with at least five (5) years full time office and
industrial appraisal experience in the area in which the Premises are located to
appraise and set the Fair Market Rental Value. If a party does not appoint an
appraiser within said five (5) day period, the single appraiser appointed by the
other party shall be the sole appraiser and shall set the Fair Market Rental
Value. If an appraiser is appointed by each party, the two (2) appraisers shall
meet promptly and attempt to mutually determine the Fair Market Rental Value. If
the two (2) appraisers are unable to agree upon the Fair Market Rental Value
within twenty (20) days, then: (i) if the difference between the two (2)
appraisals is less than five percent (5%) (determined as a ratio of the larger
appraisal), the appraisals shall be added together and divided by two, the
quotient being the Fair Market Rental Value; or (ii) if the difference between
the two (2) appraisals is greater than or equal to five percent (5%) (determined
as a ratio of the larger appraisal), the appraisers shall select a third
appraiser meeting the qualifications stated above within, five (5) days after
the last day the two appraisers are given to set the Fair Market Rental Value.
If the two appraisers are unable to agree on the third appraiser, either party
may petition the Orange County Superior Court for the selection of a third
appraiser who meets the qualifications stated in this section. Each of the
parties shall bear one-half (1/2) of the third appraiser's fees and charges.
Within twenty (20) days after the selection of the third appraiser, the three
(3) appraisers shall independently determine the Fair Market Rental Value. The
average of the two (2) appraisals nearest in value to each other shall
conclusively be deemed to be the Fair Market Rental Value. The Fair Market
Rental Value of the Premises shall be determined by taking into account the
highest and best use of the Premises.
OTER-1
<PAGE> 92
2. NO FURTHER OPTIONS. Other than as expressly set forth in Section 1 of
this Extension Rider, Tenant shall have no right to extend the term of the
Lease.
IN WITNESS WHEREOF, this Extension Rider is executed by the parties as
of the date first above written.
LANDLORD: TENANT:
LAGUNA CANYON, INC., a BROADCOM CORPORATION, a
California corporation California corporation
By: By:
----------------------------------- ----------------------------------
Name: Thomas A. Mitchell Name: Scott C. Davis
-------------------------------- --------------------------------
Its: Vice President Its: CFO
--------------------------------- ---------------------------------
OTER-2
<PAGE> 93
EXPANSION RIGHTS RIDER
LANDLORD: LAGUNA CANYON, INC., a California corporation
TENANT: BROADCOM CORPORATION, a California corporation
PREMISES: 16251 Laguna Canyon Road
Irvine, California
DATE: April 30, 1995
THIS EXPANSION RIGHTS RIDER ("Expansion Rider") is an amendment of and
an addition to that certain lease of even date herewith (the "Form Lease")
between the party or entity designated above as Landlord and the party
designated above as Tenant, covering those premises described in the Form Lease
(the "Premises"). The capitalized terms used and not otherwise defined in this
Expansion Rider shall have the same definition as set forth in the Form Lease.
In the case of any conflict between the provisions of the Form Lease and the
provisions of this Expansion Rider, this Expansion Rider shall govern. This
Expansion Rider and the Form Lease shall be referred to collectively as the
"Lease."
1. NEW BUILDINGS. Provided that Tenant is not then in default under the
Lease, and subject to the relocation and expansion rights of now existing
tenants in the Project, Tenant shall have the right, at any time during the Term
of the Lease, to elect for Landlord to construct a new "shell" office building
("New Building") on any of the then unoccupied "Building Pads" designated as
such in Exhibit "B" to the Form Lease. Tenant may exercise this right by
notifying Landlord in writing of its election and such notice shall specifically
designate the Building Pad on which Tenant desires the New Building to be
constructed. Any election by Tenant to have Landlord construct a New Building
shall be subject to the approval of Landlord, in Landlord's sole discretion.
Within thirty (30) days of receiving Tenant's notice exercising its rights under
this Section 1, Landlord shall notify Tenant in writing of its decision to
construct the New Building or not. If Tenant exercises its rights under this
Section 1 and Landlord elects to construct the New Building, then prior to
Landlord being obligated to commence design and/or construction of such new
building, Landlord and Tenant shall promptly enter into a new and separate lease
for the New Building, with a minimum term of sixty (60) months, based upon then
market-rate business terms ("Market Rate Business Terms"), as determined by
Landlord and Tenant pursuant to the provisions set forth in Section 5 of this
Rider, and otherwise on the terms and conditions set forth in the Form Lease.
2. BUILDING 6 RIGHTS. Provided that Tenant is not then in default under
the Lease, and subject to the relocation and expansion rights of now existing
tenants in the Project or any rights granted by the Landlord to a third party to
lease Building 6 (or portions thereof) pursuant a binding letter of intent
entered into by Landlord prior to Tenant's exercise of its rights pursuant to
this Section 2, Tenant shall have the following expansion rights related to then
existing, unoccupied "shell" office space within the building designated as
"Building 6" on Exhibit "B" to the Form Lease:
(a) During the first two (2) years of the Lease Term, Tenant
shall have the option to lease the entirety of Building 6 (or portions thereof),
with such lease to be on the same terms and conditions as the Lease, except
that: (i) the term of such lease shall be for a period of years such that the
new lease is coterminous with the Lease Term; (ii) the tenant improvement
allowance in the new lease shall be Twenty Five Dollars ($25.00) per rentable
square foot, and (iii) the new lease shall not contain the provisions of this
Expansion Rider.
(b) At any time during the Lease Term after the first two (2)
years, Tenant shall have the option to lease the entirety of Building 6 (of
portions thereof), with such lease to be based upon the then Market Rate
Business Terms as determined by Landlord and Tenant pursuant to the provisions
set forth in Section 5 of this Rider, and otherwise on the terms and conditions
set forth in the Form Lease.
If Tenant elects to exercise either of the options set forth in subsections
"(a)" or "(b)" above, Tenant shall provide Landlord with written notice of such
election. Subject to the relocation and expansion rights of now existing tenants
in the Project, upon Landlord's receipt of Tenant's election notice, Landlord
shall promptly contact Tenant to initiate the leasing process and thereafter
both parties shall be obligated to diligently, and in good faith, negotiate and
execute a new and separate lease for Building 6 (or portions thereof).
EER-1
<PAGE> 94
3. EXISTING BUILDINGS. Provided that Tenant is not then in default under
the Lease, and subject to the relocation, expansion and term extension rights of
now existing tenants in the Project and Landlord's right to renew the lease of
any existing tenant in its existing space, Tenant shall have a right of first
negotiation for any space(s) which become available in any of the four (4)
buildings in the Project identified as "Option Buildings" in Exhibit "B" to the
Form Lease. If from time to time during the Lease Term, including any extensions
thereof, there becomes available .for lease in the Project any space(s) located
in any of the Option Buildings, then before leasing such space(s) to a third
party Landlord shall first notify Tenant in writing of the availability of such
space(s) and of the basic business terms on which Landlord is willing to lease
such space(s). If Tenant, within ten (10) days after receipt of Landlord's
notice of availability, notifies Landlord in writing of Tenant's agreement to
lease such space(s) on the specified business terms, then Landlord shall lease
such space to Tenant on the basic business terms set forth in Landlord's notice
and otherwise on the terms and conditions set forth in the Form Lease, and the
parties shall enter into a separate lease for such space(s) agreement
incorporating such terms and conditions. If Tenant notifies Landlord that it
does not wish to lease such spaces or if Tenant fails to commit to lease such
space as provided above in writing within such ten (10)-day period, then
Landlord shall have the right over the following six (6) month period to market
and lease such space(s) to third parties on basic business terms which, on a net
basis, are not materially more favorable to the prospective tenant(s) than those
basic business terms set forth in Landlord's original notice of availability.
The provisions of this Section 3 shall continue to apply to any additional
space(s) in the Option Buildings that may subsequently become available for
lease during the Lease Term, including any extensions thereof.
4. CANCELLATION RIGHTS. From and after the beginning of the
thirty-seventh (37th) full calendar month of the Lease Term and throughout the
remainder of the initial Term, in the event that (in Tenant's reasonable
business judgment) adequate expansion space is unavailable in the Project,
either due to Landlord's rejection of Tenant's election to have Landlord
construct a New Building pursuant to the provisions of Section 1 of this
Expansion Rider and/or the unavailability of Building 6 for lease pursuant to
the provisions of Section 2 of this Expansion Rider, then, provided that Tenant
is not then in default under the Lease, Tenant shall have the right to cancel
the Lease upon a minimum of one hundred eighty (180) days' written notice to
Landlord. In the event that Tenant elects to terminate the Lease pursuant to
this Section 4, Tenant shall pay to Landlord, on or before the effective date of
such termination and in addition to any other amounts of Rent or other charges
due to Landlord under the Lease, a cancellation charge equal to: (i) fifty
percent (50%) of the then unamortized amount of the Tenant Improvements
Allowance; plus (ii) one hundred percent (100%) of the then unamortized amount
of the leasing commission on the Premises; plus (iii) the payment of two months
Monthly Rent. Amortization of the Tenant Improvement Allowance and the leasing
commission, for purposes of the preceding sentence shall be based upon a five
(5) year amortization at nine percent (9%) annual interest. If the Lease is
terminated pursuant to this Section 4 of the Expansion Rider, the Lease Term
shall terminate as of later of: (a) the termination date designated in Tenant's
notice of termination; or (b) on the one hundred eighty first (181st) day
following the date on which Landlord receives Tenant's cancellation notice.
Tenant shall not have the right to cancel the Lease pursuant to this Section 4
at any time when Building Pads are available and Tenant has not exercised its
rights to expand pursuant to Section 1 of this Expansion Rider. Furthermore,
notwithstanding any other provision of this Expansion Rider to the contrary, the
cancellation rights granted to Tenant under this Section 4 shall terminate
immediately in the event that Tenant elects to have Landlord construct a New
Building pursuant to Section 1 of this Expansion Rider and Landlord accepts such
election.
5. MARKET RATE BUSINESS TERMS. Landlord shall deliver to Tenant written
notice of Landlord's determination of the Market Rate Business Terms within
twenty (20) days after Landlord receives notice from Tenant exercising an
expansion option. If Tenant disputes Landlord's determination of the Market Rate
Business Terms as contained in Landlord's notice, Tenant shall notify Landlord
in writing within ten (10) days of Tenant's receipt of Landlord's determination,
and Tenant's notice shall further set forth Tenant's determination of the Market
Rate Business Terms. Should Tenant fail to timely deliver to Landlord its
determination of the Market Rate Business Terms, and should such failure
continue for five (5) days after Landlord notifies Tenant in writing of such
failure, such failure shall conclusively be deemed Tenant's approval of
Landlord's determination. Should Tenant timely notify Landlord of Tenant's
objection, Landlord and Tenant shall attempt to resolve their differences within
five (5) days following Landlord's receipt of Tenant's objection notice. Should
the parties be unable to timely resolve their differences, each party shall,
within five (5) days thereafter, each at its own cost and by giving notice to
the other party, appoint an M.A.I. appraiser with at least five (5) years full
time office and industrial appraisal experience in the area in which the
Premises are located to appraise and set the Market Rate Business Terms. If a
party does not appoint an appraiser within said five (5) day period, the single
appraiser appointed by the other party shall be the sole appraiser and shall set
the Market Rate Business Terms. If an appraiser is appointed by each party, the
two (2) appraisers shall meet promptly and attempt to mutually determine the
Market Rate Business Terms. If the two (2) appraisers are unable to agree upon
the Market Rate Business Terms within twenty (20) days, then: (i) if the
difference between the two (2) appraisals is less than five percent (5%)
(determined as a ratio of the larger appraisal), the appraisals shall be added
together and divided by two, the quotient being the Market Rate Business Terms;
or (ii) if the difference between the two (2) appraisals is greater than or
equal to five percent (5%) (determined as a ratio of the larger appraisal), the
appraisers shall select a third appraiser meeting the qualifications stated
above within five (5) days after the last day the two appraisers are given to
set the Market Rate Business Terms. If the two appraisers are unable to agree on
the third appraiser, either party may petition the Orange County Superior Court
for the selection of a third appraiser who meets the qualifications stated in
this section. Each of the parties shall bear one-half (1/2) of the third
appraiser's fees and charges. Within twenty (20) days after the selection of the
third appraiser, the three (3) appraisers shall independently determine the
Market Rate Business Terms. The
EER-2
<PAGE> 95
average of the two (2) appraisals nearest in value to each other shall
conclusively be deemed to be the Market Rate Business Terms. The Market Rate
Business Terms for the option premises shall be determined by taking into
account the highest and best use of such expansion premises.
IN WITNESS WHEREOF, this Expansion Rider is executed by the parties as
of the date first above written.
LANDLORD: TENANT:
LAGUNA CANYON, INC. a BROADCOM CORPORATION, a
California corporation California corporation
By: By:
----------------------------------- ----------------------------------
Name: Thomas A. Mitchell Name: Scott C. Davis
-------------------------------- --------------------------------
Its: Vice President Its: CFO
--------------------------------- ---------------------------------
4/27/95
EER-3
<PAGE> 1
EXHIBIT 10.8
CONFIDENTIAL
- --------------------------------------------------------------------------------
DEVELOPMENT, SUPPLY AND LICENSE AGREEMENT
by and between
NEXTLEVEL SYSTEMS, INC.
and
BROADCOM CORPORATION
Dated
September 29, 1997
- --------------------------------------------------------------------------------
<PAGE> 2
CONFIDENTIAL TREATMENT REQUESTED
DEVELOPMENT, SUPPLY AND LICENSE AGREEMENT
THIS DEVELOPMENT, SUPPLY AND LICENSE AGREEMENT (this "AGREEMENT") is
made and entered into this 29th day of September, 1997 (the "EFFECTIVE DATE")
by and between NextLevel Systems, Inc. ("NLS"), a Delaware corporation with its
principal place of business at 8770 West Bryn Mawr Avenue, Suite 1300, Chicago,
Illinois 60631, and Broadcom Corporation ("BROADCOM"), a California corporation
with its principal place of business at 16251 Laguna Canyon Road, Irvine,
California 92618.
W I T N E S S E T H:
WHEREAS, NLS has invented and developed certain VLSI Technology (as
hereinafter defined); and
WHEREAS, Broadcom desires to develop, and NLS desires to have Broadcom
develop, in accordance with the terms and conditions set forth herein,
including the various responsibilities of Broadcom and NLS, respectively,
certain Development Program Products (as hereinafter defined), some of which
will use or include, in addition to Broadcom Intellectual Property, the VLSI
Technology; and
WHEREAS, NLS desires to grant to Broadcom, and Broadcom desires to
receive from NLS, a license under the VLSI Technology, in accordance with the
terms and conditions set forth herein, to use, develop, manufacture and sell
certain Broadcom Products (as hereinafter defined) in accordance with the terms
and conditions set forth herein; and
WHEREAS, Broadcom shall agree to supply to NLS, and NLS shall agree to
purchase from Broadcom, certain Broadcom Products pursuant to the terms and
conditions set forth herein, [*****] and minimum purchase commitments set forth
herein.
NOW THEREFORE, in consideration of the mutual promises herein
contained, the Parties agree as follows:
1. DEFINITIONS
Defined Terms. The following definitions apply to this Agreement:
(a) "Affiliate" means any person, partnership, joint
venture, corporation or other form of enterprise, domestic or foreign,
including but not limited to parents and subsidiaries, which directly or
indirectly Controls, is Controlled by, or is under common Control with, the
subject party.
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-1-
<PAGE> 3
(b) "Broadcom Enhancements" means any improvement,
modification or enhancement to the VLSI Technology developed by or for
Broadcom, other than a Broadcom Modification. Without limiting the foregoing,
Broadcom Enhancements include any intellectual property or technology acquired
or licensed by Broadcom from a third party (including without limitation any
MPEG, VEC, video or graphics technology) or independently developed by Broadcom
without use of or reference to the VLSI Technology or NLS Enhancements,
notwithstanding the fact that such technology may replicate features or
functionality of any VLSI Technology or NLS Enhancements.
(c) "Broadcom Intellectual Property" means any and all
technology, technical information and rights therein to the extent owned by or
licensed from a third party to Broadcom, including without limitation technical
data, inventions, concepts, processes, formulae, know-how, systems,
apparatuses, software, designs, drawings, and any other technical subject
matter related thereto, including all patents, copyrights, trade secrets, masks
and mask works, industrial designs and other intellectual property rights
therein protected under the laws of any country of the world (whether or not
rights therein are currently perfected). Broadcom Intellectual Property shall
also include any Broadcom Enhancements and Broadcom Modifications.
(d) "Broadcom Modifications" means Modifications
developed by or for Broadcom.
(e) "Broadcom NRE Payments" means the non-refundable
payments for non-recurring engineering costs to be made by Broadcom to NLS at
the times, in the amounts and subject to the conditions set forth in Exhibit E
hereto.
(f) "Broadcom Development Products" shall mean the
Development Program Products defined in Exhibit A and described in Exhibit G
hereto.
(g) "Broadcom Products" means the Development Program
Products and Other Broadcom Products referred to collectively.
(h) "Change Proposal" shall have the meaning set forth in
Section 4.2 below.
(i) "Confidential Information" means any information
disclosed by a Party hereto (the "Disclosing Party") to the other Party
("Recipient"), either directly or indirectly, in writing, orally or by
inspection of tangible objects (including without limitation documents,
prototypes, samples, plant and equipment), which is designated as
"Confidential," "Proprietary" or some similar designation within thirty (30)
days of its disclosure to the Recipient; provided, however, that any
information relating to product and business plans and strategies (including
proposed orders and pricing) shall be deemed to be Confidential Information
whether or not so designated. Information communicated orally shall be
considered Confidential Information if such information is designated, in
writing, as being confidential or proprietary within thirty (30) days after the
initial
-2-
<PAGE> 4
disclosure and, in any event, is reduced to or summarized in writing and
confirmed to Recipient as being Confidential Information within thirty (30)
days of the initial disclosure; provided, however, that any information
relating to product and business plans and strategies (including proposed
orders and pricing) shall be deemed to be Confidential Information whether or
not so reduced to or summarized in writing. Confidential Information shall
not, however, include any information which (i) was publicly known and
available in the public domain prior to the time of disclosure to the Recipient
by the Disclosing Party; (ii) becomes publicly known and available in the
public domain after disclosure to the Recipient by Disclosing Party through no
action or inaction of Recipient; (iii) is lawfully in the possession of
Recipient at the time of disclosure by Disclosing Party; (iv) is independently
developed by Recipient without use of or reference to Disclosing Party's
Confidential Information; (v) is received by Recipient from a third party which
Recipient has no reason to believe has a duty of confidentiality to the
Disclosing Party; (vi) is required by law to be disclosed by Recipient,
provided that Recipient gives Disclosing Party prompt written notice of such
requirement prior to such disclosure and cooperates with Disclosing Party in
the latter's attempt, if any, to prevent such disclosure or in obtaining a
protective or similar order with respect to the Confidential Information to be
disclosed; or (vii) has been approved for disclosure by Disclosing Party.
(j) "Control" means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
operating policies of an entity through direct or indirect ownership in the
aggregate of more than fifty percent (50%) of the voting and/or equity
securities of such entity.
(k) "Development Plan" shall have the meaning set forth
in Section 2.1(a) below.
(l) "Development Program" shall have the meaning set
forth in Section 2.1(a) below.
(m) "Development Program Products" shall mean each of the
products identified as such in Exhibit A hereto.
(n) "Evaluation" shall have the meaning set forth in
Section 3.2 below.
(o) "FCS" shall mean the time at which the first
commercial volume production shipment of a particular Broadcom Product is made
by Broadcom to NLS.
(p) "Gross Revenues" shall mean (i) the proceeds received
by Broadcom, Broadcom's Affiliates or any Sublicensees from the sale of any
products (including, without limitation, Broadcom Products) which materially
use or incorporate the VLSI Technology or portions thereof to persons other
than NLS, NLS' Affiliates, Broadcom or Broadcom's Affiliates, less (ii) those
adjustments made in accordance with Generally Accepted Accounting Principles
that impact net sales.
-3-
<PAGE> 5
CONFIDENTIAL TREATMENT REQUESTED
(q) "Mandatory Enhancements" shall have the meaning set
forth in Section 5.4 below.
(r) [*****].
(s) "Milestone(s)" refer to the particular milestones for
each individual stage of development of the Development Program Products as set
forth in Exhibit B hereto, as hereafter amended from time to time as mutually
agreed.
(t) "Modifications" shall mean any bug fixes, interface
changes, changes in register mapping, timing changes and comparable corrections
and modifications to the VLSI Technology developed by or for either party
during the term of the Agreement. "Modifications" do not include improvements
or enhancements that add new functionality or features to the VLSI Technology.
(u) "NLS Enhancements" means any improvement,
modification or enhancement to the VLSI Technology developed by or for NLS
during the term of the Agreement, including without limitation the Mandatory
Enhancements, other than an NLS Modification.
(v) "NLS Intellectual Property" means any and all
technology, technical information and rights therein to the extent owned by or
licensed from a third party to NLS, including without limitation technical
data, inventions, concepts, processes, formulae, know-how, systems,
apparatuses, software, designs, drawings, VLSI Technology, and any other
technical subject matter related thereto, including all patents, copyrights,
trade secrets, masks and mask works, industrial designs and other intellectual
property rights therein protected under the laws of any country of the world
(whether or not rights therein are currently perfected). NLS Intellectual
Property shall also include any NLS Enhancements and NLS Modifications.
(w) "NLS Modifications" means Modifications developed by
or for NLS.
(x) "NLS NRE Payments" means the non-refundable payments
for non-recurring engineering costs to be made by NLS to Broadcom at the times,
in the amounts and subject to the conditions set forth in Exhibit G hereto.
(y) "Other Broadcom Products" shall mean the following
current products, and future products, including any enhancements or
derivatives thereto and follow-on products, that provide comparable
functionality, which are made commercially available by Broadcom or its
Affiliates to any customers (including NLS and its Affiliates) during the term
of this Agreement: (i) digital cable set top components; (ii) digital satellite
MPEG components; (iii) cable modem components solely for use in NLS Telco
return cable modem products that are not MCNS compatible; and (iv) components
solely intended for use in digital cable set top boxes that also include
interactive MCNS
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-4-
<PAGE> 6
CONFIDENTIAL TREATMENT REQUESTED
compatibility as a feature; provided, however, that notwithstanding the
foregoing, Other Broadcom Products shall specifically not include tuner or CMOS
tuner products.
(z) "Party" or "Parties" means NLS and its Affiliates, or
Broadcom and its Affiliates, or both, as the case may be.
(aa) [*****].
(bb) "Project Manager" shall have the meaning set forth in
Section 2.3(a) below.
(cc) "Release Event" shall have the meaning set forth in
Section 9 below.
(dd) "Specifications" means the technical specifications
set forth in Exhibit A hereto, as hereafter amended from time to time as
mutually agreed.
(ee) "Sublicensee" means any third party to whom Broadcom
has granted a sublicense, under the VLSI Technology, to manufacture and sell
Broadcom Products pursuant to Section 5.1 below.
(ff) "Supply Terms" means the quality, quantity, pricing,
delivery and other requirements for Broadcom Products set forth in Exhibit D
hereto.
(gg) "Tangible Embodiments" shall have the meaning set
forth in Section 5.3(c) below.
(hh) "VLSI Technology" means any and all technology,
technical information and rights therein relating to NLS's VLSI-related
technology, as defined on Exhibit C hereto (which technology, information and
rights may be utilized by Broadcom without the payment of any additional
royalties or fees by Broadcom to NLS, NLS' Affiliates or any third party),
including without limitation technical data, inventions, concepts, processes,
formulae, know-how, systems, apparatuses, software, designs, drawings, and any
other technical subject matter related thereto, including all patents,
copyrights, trade secrets, masks and mask works, industrial designs and other
intellectual property rights therein protected under the laws of any country of
the world (whether or not rights therein are currently perfected), which are
conceived, developed, reduced to practice, licensed, owned, acquired or
controlled by NLS prior to the Effective Date. By way of clarification and not
of limitation, VLSI Technology excludes any intellectual property or technology
acquired or licensed by Broadcom from a third party (including without
limitation any MPEG, VEC, video or graphics technology) or independently
developed by Broadcom without use of or reference to the VLSI Technology or NLS
Enhancements, notwithstanding the fact that such technology may replicate
features or functionality of any VLSI Technology.
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-5-
<PAGE> 7
(ii) "VLSI Technology Products" shall have the meaning set
forth in Section 5.1 below.
2. DEVELOPMENT PROGRAM
Section 2.1. General.
(a) Establishment; Specifications and Milestones.
Pursuant to this Agreement, the Parties shall establish a development program
for the continued or new development of each Development Program Product set
forth in Exhibit A hereto (the "Development Program"). During the Development
Program, the Parties agree to work cooperatively with each other in good faith
and to use reasonable best efforts to ensure that the Development Program
Products conform to the material requirements set forth in Exhibit A
("Development Program Products and Specifications") and Exhibit B
("Milestones") hereto (collectively, the "Development Plan"). It is understood
that, at the commencement of the Development Program, the Development Plan will
be preliminary and certain of the Specifications will not have been fully
developed and thus the Specifications and Milestones set forth in Exhibits A
and B, respectively, will be subsequently amended (and, in the case of the
Milestones, extended) by the Parties upon mutual written agreement as described
further below. The Parties agree to act in good faith to develop and finalize
the Specifications and related Milestones at the earliest practicable date.
Except as otherwise agreed by the Parties in writing and as contemplated by the
previous sentence, the Development Program will be conducted in accordance with
the Development Plan.
(b) Additional Activities. NLS and Broadcom may from
time to time explore other opportunities for joint cooperation and product
development as may be mutually agreed ("Additional Activities"). In the event
that the Parties mutually agree to pursue Additional Activities, and wish to do
so pursuant to this Agreement, the Parties shall amend the Development Plan to
establish mutually agreed specifications, budgets, milestones and provisions
for proprietary and licensing rights for such Additional Activities.
Section 2.2. Development Obligations.
(a) Milestones. Each Party shall use its reasonable best
efforts, and shall dedicate and utilize adequate staffing and equipment, to
perform its development obligations in accordance with the Milestones set forth
in Exhibit B. Neither Party will be liable to the other Party based solely on
such Party's failure to meet one of its Milestones provided that such Party has
used, and continues to use, its reasonable best efforts during the Development
Program to accomplish the objectives of such Milestone. NLS agrees that any
delay in Broadcom meeting the delivery schedule that is caused by the failure
of NLS to timely provide design elements or information (including, without
limitation, final determination of the Specifications and related Milestones)
or to achieve timely resolution of issues emerging from design reviews shall
not constitute a breach or default of this
-6-
<PAGE> 8
Agreement on the part of Broadcom. The completion date for the tasks set forth
in Exhibit B and in Section 3.2 shall be extended accordingly to account for
the delay caused by NLS.
(b) Management and Support. Broadcom will have and
retain primary responsibility for managing and conducting the Development
Program and accomplishing the Development Program objectives, subject to the
Development Plan. Except as otherwise specified in Exhibit B, all development
activities will be conducted by Broadcom at its facilities. Certain activities
specified in Exhibit B will be conducted by NLS. NLS agrees to support
Broadcom's efforts with respect to the Development Program, to work under
Broadcom's direction with respect to NLS' activities thereunder, and to make
NLS resources available as reasonably required by Broadcom. During the term of
the Development Program, Broadcom will send certain technical staff to NLS who
will work with NLS to address technical issues and assist in evaluation and
other activities carried out by NLS under the Development Program. Except as
specifically provided in this Agreement, or as otherwise agreed, each Party
will bear all of its own direct and related costs associated with the
Development Program.
Section 2.3. Administrative Procedures. The Parties agree that the
following administrative procedures shall apply to each project under the
Development Program:
(a) Project Managers. Each Party shall designate in
writing a Project Manager to manage its participation in the Development
Program and coordinate its activities under the Development Program with the
other Party. The initial Project Manager for Broadcom shall be Steve Tsubota,
and the initial Project Manager for NLS shall be Dennis Clark. The Project
Manager for each Party may be replaced from time to time by that Party upon
written notice thereof to the other Party.
(b) Periodic Review Meetings and Reports. Broadcom will
keep NLS reasonably informed of Broadcom's progress under the Development
Program, and the respective Project Managers from Broadcom and NLS will
schedule formal Development Program meetings, at mutually agreeable times at
least quarterly during the term of the Agreement, to be attended by authorized
program management personnel of both Parties, to discuss the status of the
development and supply activities contemplated under this Agreement. Such
discussions shall be for information purposes only and shall not be binding
upon either Party other than as expressly set forth in a Change Proposal signed
by both Parties, or any amendment thereto or to this Agreement.
(c) Records and Progress Reports. At mutually agreeable
times during the Development Program, the Project Managers of both Parties will
meet, at least by telephone, to compare the status of the development. Each
Party will maintain and distribute, approximately bi-monthly during the course
of the Development Program, a written progress report in a form reasonably
mutually acceptable, which shall include any matter anticipated to delay
completion of any Milestone and the reason for, and anticipated extent of, such
delay.
-7-
<PAGE> 9
CONFIDENTIAL TREATMENT REQUESTED
(d) Review and Modification of Development Plan. The
Parties shall review the Development Plan on a quarterly basis and agree to act
in good faith to modify the Development Plan as necessary to achieve the
objectives set forth in Exhibit A, provided that any such modifications shall
be mutually agreed in writing. It is understood that, at the commencement of
the Development Program, the Development Plan will be preliminary and certain
of the Specifications will not have been fully developed and thus the
Specifications and Milestones will be subsequently amended (and, in the case of
the Milestones, established or extended) by the Parties upon mutual written
agreement. If the Parties agree that a modification to the Specifications is
necessary, the Parties shall follow the procedures set forth in Section 4.2 for
implementing a Change Proposal.
Section 2.4. Broadcom Failure to Meet Milestone Dates. In the event
that Broadcom fails to meet a Milestone as scheduled, NLS and Broadcom shall
promptly enter into consultations with respect to a modification of the
Specifications and/or the applicable Milestone to allow Broadcom to meet the
requirements of such Milestone or extend the due date for the applicable
Milestone, which modification shall be subject to the approval of NLS, such
approval not to be unreasonably withheld.
Section 2.5. Broadcom Development Products. NLS hereby agrees to
make the NLS NRE Payments to Broadcom as provided in Exhibit G. [*****].
Broadcom shall at all times keep an accurate account of all Broadcom
Development Products sold, distributed or otherwise disposed of by Broadcom,
Broadcom's Affiliates and Sublicensees. Broadcom shall render to NLS a written
statement to such effect with respect to each such quarterly period and shall
submit such statement to NLS [*****]. In connection with their annual audit of
Broadcom's financial statements, upon the written request of NLS delivered to
Broadcom no later than December 1 of the year under audit, Broadcom's
independent certified public accountants shall be requested to audit the
records of Broadcom and its Affiliates with respect to sales of Broadcom
Development Products [*****] pursuant to this Section 2.5 during such period
and shall be requested to provide to NLS, within thirty (30) days after
completion of the annual audit, a written certification that Broadcom's reports
hereunder are true and accurate in all material respects. The cost of the
Broadcom Development Product audit shall be borne by NLS. Notwithstanding the
foregoing, NLS shall have the option to engage a mutually acceptable "Big 6"
accounting firm in lieu of Broadcom's accountants to conduct such audit at
NLS's expense (such audit to be conducted in substantially the same manner,
including without limitation with respect to confidentiality, as if it had been
conducted by Broadcom's accountants). In the event that any Broadcom
Development Product audit establishes that a positive or negative adjustment is
needed, Broadcom shall promptly make such adjustment in its records and
supplement or reissue its outstanding invoices to NLS as necessary to reflect
such adjustment.
Section 2.6. Broadcom NRE Payments. Broadcom hereby agrees to make
the Broadcom NRE Payments to NLS as provided in Exhibit E.
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-8-
<PAGE> 10
CONFIDENTIAL TREATMENT REQUESTED
Section 2.7. Samples. Subject to the terms and conditions of this
Agreement, Broadcom shall supply to NLS as soon as practicable seven (7)
samples of every Development Program Product and each other Broadcom Product
incorporating NLS Intellectual Property that will be publicly available.
Section 2.8. Completion of Development. The Development Program
shall commence upon the Effective Date and shall continue until the earlier of
(i) expiration or termination of this Agreement under Article 13 below or (ii)
acceptance by NLS of all of the Milestones and associated deliverables from
Broadcom as set forth in Exhibit B.
3. DELIVERY AND ACCEPTANCE OF DEVELOPMENT PROGRAM PRODUCTS
Section 3.1. Delivery. Broadcom will deliver to NLS each deliverable
at the time and in the form set forth in Exhibit B. Upon such delivery, NLS
shall test each deliverable pursuant to Section 3.2 below. NLS shall not be
deemed to have accepted any such deliverable except through the procedures set
forth in Section 3.2 below. Broadcom will be deemed to have completed a
Milestone or deliverable only upon NLS accepting the corresponding deliverable,
which acceptance will not be unreasonably withheld, delayed or conditioned.
Section 3.2. Acceptance.
(a) Evaluation; Latent Defects. Upon receiving a
deliverable from Broadcom, NLS will test and evaluate such deliverable to
determine, acting reasonably and in good faith, whether it meets in all
material respects the associated Specifications set forth in Exhibit A. NLS
will use its reasonable best efforts to report the results of such tests and
evaluations in writing to Broadcom (an "Evaluation") within forty-five (45)
calendar days following its receipt of the associated deliverable. If NLS fails
to submit an Evaluation to Broadcom within forty-five (45) calendar days
following its receipt of the associated deliverable, such deliverable will be
deemed accepted. Notwithstanding the foregoing, Broadcom will use its
reasonable best efforts during the Development Program to correct any material
latent defects discovered in a deliverable after the acceptance of such
deliverable. If NLS conducted tests during the evaluation period that should
have revealed the latent defect and such defect was not so revealed, [*****].
If NLS did not conduct tests during the evaluation period that should have
revealed the latent defect, [*****].
(b) Material Deviations. If NLS provides an Evaluation
indicating material deviations from the Specifications set forth in Exhibit A,
Broadcom will use its reasonable best efforts, with assistance from NLS as
required and consistent with the allocation of responsibilities in Exhibit B,
to correct any such deviations and redeliver the associated deliverable to NLS
as soon as reasonably practicable. All redelivered deliverables shall be
subject to the evaluation procedure set forth in Section 3.2(a) above.
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-9-
<PAGE> 11
4. DEVELOPMENT PROGRAM PRODUCT SPECIFICATIONS
Section 4.1. Development Program Product Specifications. The
Specifications for the Development Program Products are attached hereto as
Exhibit A and incorporated herein. During the Development Program, NLS may, in
its sole discretion, modify the Specifications to relax the criteria required
for conformance as it deems necessary or desirable. Except as set forth above,
if the Parties agree that a modification to the Specifications is necessary,
the Parties will follow the procedures set forth in Section 4.2 for
implementing a Change Proposal. Such procedures shall also be used to
establish and finalize Specifications for those Development Program Products
for which final Specifications have not been finalized at the date of this
Agreement.
Section 4.2. Change Request Procedure. All requests for changes,
amendments, and supplements to the Specifications shall be handled in
accordance with the change order procedures set forth in this Section 4.2
unless otherwise specified in a writing signed by each Party. Either Party
may, from time to time during the term of this Agreement, provide written
notice to the other Party proposing changes to the Specifications (a "Change
Proposal"). Following a Change Proposal, the Parties shall promptly meet
(either in person, by teleconference or otherwise as mutually agreed) to
determine whether, and with what modifications, such Change Proposal may be
mutually agreeable. No Change Proposal shall have any effect until agreed to
in writing by both Parties. All Change Proposals that are agreed upon by the
Parties shall constitute amendments to the Specifications for all purposes of
this Agreement. All agreed upon Change Proposals shall include appropriate
adjustments to the development schedule and associated Milestones. The Parties
understand and acknowledge that certain Change Proposals will have to be agreed
to in order for the successful completion of the Development Program because at
the commencement of the Development Program, the Development Plan will be
preliminary and certain of the Specifications will not have been fully
developed.
5. TECHNOLOGY LICENSE FROM NLS TO BROADCOM
Section 5.1. License of VLSI Technology. Subject to the terms and
conditions of this Agreement, NLS hereby grants to Broadcom a perpetual,
irrevocable (other than for non-payment of royalties), world-wide,
non-exclusive, royalty-bearing right and license under the VLSI Technology to
use, develop, make or have made, distribute, market, sell, offer to sell,
import, export and otherwise exploit products and derivative products
(including without limitation Broadcom Products) which are based upon or
incorporate such VLSI Technology (collectively, "VLSI Technology Products").
Beginning on June 30, 1998, Broadcom shall have the limited right to sublicense
its rights under the VLSI Technology to any third party (including, without
limitation, other semiconductor manufacturers) in connection with a license by
Broadcom to such third party, for manufacture and sale by such third party, its
affiliates or subcontractors, of any specific Broadcom-designed integrated
circuit design. Without limitation, the rights granted by NLS to Broadcom
pursuant to this Section 5.1 would allow Broadcom to have the same third party
act as both (i) a manufacturer for Broadcom and (ii) a distributor for Broadcom
-10-
<PAGE> 12
CONFIDENTIAL TREATMENT REQUESTED
with respect to VLSI Technology Products. Broadcom agrees to promptly notify
NLS with respect to any sublicenses of the VLSI Technology by Broadcom.
Broadcom further agrees that all such sublicenses shall be made pursuant to
written agreements containing terms and restrictions (including without
limitation confidentiality restrictions) consistent with the terms and
restrictions of this Agreement.
Section 5.2. Delivery of VLSI Technology; Tangible Embodiments;
Support. As soon as practicable following the Effective Date of this
Agreement, NLS shall deliver to Broadcom copies of Tangible Embodiments of the
VLSI Technology and all other technological information and know-how which are
in NLS' possession and which are necessary for the full and complete exercise
by Broadcom of the licenses granted pursuant to Sections 5.1 and 5.3(a). As
soon as reasonably practicable, Broadcom will evaluate such Tangible
Embodiments and technical information received from NLS and will notify NLS if
Broadcom believes that additional Tangible Embodiments or technical information
are necessary for Broadcom to fully exploit the VLSI Technology. If Broadcom
so notifies NLS, NLS will promptly cooperate with Broadcom to provide such
additional Tangible Embodiments or technical information. In addition, and in
furtherance of NLS' obligations hereunder, NLS shall provide Broadcom from time
to time [*****] such training, technical assistance and support to Broadcom
personnel reasonably skilled in the art and as reasonably requested by Broadcom
in order for Broadcom to fully exploit its rights to the VLSI Technology, NLS
Modifications and NLS Enhancements. Such support shall include on-site support
at Broadcom's facility by qualified NLS personnel from the Effective Date until
the AVI 4.0 (BCM7100) chip has been transferred from development to production
by Broadcom. Broadcom shall also have access, at reasonable times and upon
reasonable notice, to NLS's video diagnostic test facilities and to NLS' design
team, design notes and records.
Section 5.3. Modifications and Enhancements to VLSI Technology.
(a) NLS Modifications and Enhancements. NLS hereby
grants to Broadcom and its Affiliates a perpetual, irrevocable, world-wide,
non-exclusive, royalty-free right and license, with the right to sublicense,
under the NLS Modifications and NLS Enhancements, to make, have made,
distribute, market, use, sell, offer for sale, import, export and otherwise
exploit products and derivative products which are based upon or incorporate
such NLS Modifications and NLS Enhancements.
(b) Broadcom Modifications. Broadcom hereby grants to
NLS and its Affiliates a perpetual, irrevocable, world-wide, non-exclusive,
royalty-free right and license, with the right to sublicense, under the
Broadcom Modifications, to make, have made, distribute, market, use, sell,
offer for sale, import, export and otherwise exploit products and derivative
products which are based upon or incorporate such Broadcom Modifications. This
license shall not extend to Broadcom Enhancements, all rights to which shall be
retained by Broadcom.
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-11-
<PAGE> 13
(c) Sharing of Modifications. During the term of the
Agreement, all Tangible Embodiments and technical information relating to the
NLS Modifications and NLS Enhancements described in Sections 5.3(a) and 5.4
shall be shared by NLS with Broadcom on a prompt and regular basis, such basis
to be mutually determined by the Parties in good faith from time to time. As
soon as reasonably practicable, Broadcom will evaluate such Tangible
Embodiments and technical information received from NLS and will notify NLS if
Broadcom believes that additional Tangible Embodiments or technical information
are necessary for Broadcom to fully exploit the technology. If Broadcom so
notifies NLS, NLS will promptly cooperate with Broadcom to provide such
additional Tangible Embodiments or technical information. Broadcom shall have
no obligation to provide any Broadcom Enhancements or Tangible Embodiments of
any Broadcom Modifications or Broadcom Enhancements to NLS but shall provide to
NLS, with respect to Broadcom Modifications only, block descriptions and
documentation sufficient for NLS to understand the nature and functionality of
the Broadcom Modification. For purposes of this Agreement, "Tangible
Embodiments" means transistor-level schematics, layouts, transistor-level net
lists and masks, together with all documentation related to same.
Section 5.4. Mandatory Enhancements by NLS. NLS agrees to develop,
at its sole expense, the enhancements to the VLSI Technology described in
Exhibit H ("Mandatory Enhancements"), which Mandatory Enhancements are required
in order for Broadcom to develop certain of the Development Program Products.
NLS shall promptly deliver alpha, beta and final versions of the Mandatory
Enhancements, any subsequent modifications or enhancements thereto, and all
Tangible Embodiments of the foregoing, to Broadcom as each becomes available.
Section 5.5. Royalties.
(a) Royalty Rates. In consideration of the license
granted by NLS to Broadcom pursuant to Section 5.1 above, Broadcom shall have a
continuing obligation to pay the following royalties to NLS, during the period
of time beginning upon the Effective Date and ending ten (10) years thereafter,
based upon the Gross Revenues received by Broadcom, Broadcom's Affiliates or
any Sublicensees during this time period. The expiration of the obligation to
make royalty payments to NLS shall not affect Broadcom's right to use or
sublicense, in accordance with the terms of this Agreement, any of the NLS
Intellectual Property licensed to it pursuant to this Agreement. The
applicable royalty rates shall depend upon the specific one year period (in
each case to be measured based on the period of elapsed time since the
Effective Date) during which such Gross Revenues are received by Broadcom,
Broadcom's Affiliates or any Sublicensees, and shall be calculated as follows:
-12-
<PAGE> 14
CONFIDENTIAL TREATMENT REQUESTED
<TABLE>
<CAPTION>
One Year Period Following
Effective Date Percentage of Gross Revenues
<S> <C>
First, Second and Third [*****]
Fourth and Fifth [*****]
Six and Seventh [*****]
Eighth, Ninth and Tenth [*****]
</TABLE>
Notwithstanding the foregoing, to the extent that Broadcom, Broadcom's
Affiliates or any Sublicensees receive any Gross Revenues with respect to any
integrated circuit products (including, without limitation, Broadcom Products)
which include both VLSI Technology and non-NLS Intellectual Property, NLS's
royalty shall be based solely on the portion of such Gross Revenues [*****].
In the event that Broadcom, Broadcom's Affiliates or any
Sublicensee provide both royalty-bearing and non-royalty-bearing products to a
customer in a "bundled" transaction or series of related transactions, any
price discounts and the allocation of revenue among the affected products may
be applied by Broadcom in any manner in its discretion; provided, however, that
the royalties payable to NLS pursuant to this Section 5.5 with respect to such
products shall be computed in a manner no less favorable to NLS than in
relative proportion to the generally prevailing independent prices of the
affected products.
(b) Maximum Limitation on Royalties. Notwithstanding
anything to the contrary contained in Section 5.5(a) above, Broadcom's
obligation to pay royalties to NLS shall cease after such time as Broadcom has
paid cumulative royalties to NLS in the amount of [*****]. Broadcom may at any
time elect to prepay the maximum amount of royalties due to NLS, at which time
NLS' rights to accounting and payment pursuant to this Section 5.5 shall cease.
(c) No Royalties for Sales to Related Parties.
Notwithstanding anything to the contrary contained in this Agreement, no
royalty shall be due to NLS pursuant to this Section 5 with respect to sales of
any products by Broadcom, its Affiliates or any Sublicensees to NLS, its
Affiliates, Broadcom or Broadcom's Affiliates.
(d) Accounting and Payment. The continuing royalty
payments due from Broadcom to NLS pursuant to Section 5.5(a) above shall be
computed on a calendar quarterly basis in arrears, beginning with the calendar
quarter in which the Effective Date occurs, and shall be payable to NLS within
thirty (30) days following each such quarterly period. Any payment of
royalties to NLS by a Broadcom Affiliate or Sublicensee shall be considered a
royalty payment by Broadcom. Broadcom shall at all times keep an accurate
account of all products, equipment and services sold, distributed or otherwise
disposed of
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-13-
<PAGE> 15
CONFIDENTIAL TREATMENT REQUESTED
by Broadcom and its Affiliates pursuant to the license set forth in Section 5.1
above. Broadcom shall render to NLS a written statement to such effect with
respect to each quarterly period and shall submit such statement to NLS along
with any continuing royalty payments due to NLS. In connection with their
annual audit of Broadcom's financial statements, upon the written request of
NLS delivered to Broadcom no later than December 1 of the year under audit,
Broadcom's independent certified public accountants shall be requested to audit
the records of Broadcom and its Affiliates with respect to sales of products
subject to royalty hereunder and Broadcom's royalty reports pursuant to this
Section 5.5 during such period and shall be requested to provide to NLS, within
thirty (30) days after completion of the annual audit, a written certification
that Broadcom's reports hereunder are true and accurate in all material
respects. The cost of the royalty audit shall be borne by NLS.
Notwithstanding the foregoing, NLS shall have the option to engage a mutually
acceptable "Big 6" accounting firm in lieu of Broadcom's accountants to conduct
such audit at NLS's expense (such audit to be conducted in substantially the
same manner, including without limitation with respect to confidentiality, as
if it had been conducted by Broadcom's accountants). In the event that any
royalty audit establishes that NLS was underpaid or overpaid in any manner, an
adjustment shall be made in the books of Broadcom and the appropriate party
shall promptly make an offsetting payment to the other party reflecting the
adjustment.
6. SUPPLY OF BROADCOM PRODUCTS TO NLS
Section 6.1. Obligation. Subject to the terms and conditions of this
Agreement, Broadcom shall manufacture Development Program Products, and shall
sell such Development Program Products to NLS and its Affiliates. All
purchases shall be made in accordance with the terms and conditions contained
in the Supply Terms attached hereto as Exhibit D, except as specifically
supplemented by this Agreement. In the event of any conflict between the terms
and conditions of Exhibit D and those of this Agreement, this Agreement shall
govern.
Section 6.2. Pricing.
(a) Initial Pricing. The pricing for all Broadcom
Products sold by Broadcom to NLS and its Affiliates shall be computed in
accordance with the provisions of this Section 6.2. Such pricing shall take
effect immediately upon the Effective Date except that, in the case of the
BCM3115 and the BCM3900 only, such pricing shall be effective for products
shipped after January 1, 1997. [*****]. Except as otherwise provided in this
Agreement, [*****] shall apply to all Broadcom Products. Such [*****] shall be
based as follows on the unit purchase volumes for each three month measurement
period (computed as of the anniversary of FCS) for each specific Broadcom
Product purchased by NLS and its Affiliates:
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-14-
<PAGE> 16
CONFIDENTIAL TREATMENT REQUESTED
(i) Broadcom Products Which [*****]
<TABLE>
<CAPTION>
Three Month NLS
Purchase Volume [*****]
<S> <C>
<12.5k [*****]
<25k [*****]
<62.5k [*****]
<125k [*****]
>125k [*****]
</TABLE>
(ii) Broadcom Products Which [*****]
<TABLE>
<CAPTION>
Three Month NLS
Purchase Volume [*****]
<S> <C>
<12.5k [*****]
<25k [*****]
<62.5k [*****]
<125k [*****]
>125k [*****]
</TABLE>
(iii) Broadcom Products Which [*****].
(iv) Determination of [*****]. Broadcom's pricing
to NLS for each Broadcom Product shall be determined in accordance with three
month purchase volumes [*****] as shown in the tables set forth in Sections
6.2(a)(i) and 6.2(a)(ii). Upon FCS of each product and on each three month
anniversary of such FCS, NLS shall estimate in good faith its anticipated
purchases of the product for the ensuing three month
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-15-
<PAGE> 17
CONFIDENTIAL TREATMENT REQUESTED
period. Actual quantities of each product purchased by NLS will be calculated
as of each three month anniversary of FCS of that product. If the actual
quantities purchased are not as originally estimated, appropriate pricing
adjustments will be made retroactively for the full three month period. In the
event that a higher purchase price shall apply to a particular product,
Broadcom shall reinvoice such purchases at the higher price, with credit for
prior payments by NLS, and NLS shall promptly pay the difference to Broadcom.
In the event that a lower purchase price shall apply to a particular product,
Broadcom shall promptly issue to NLS a credit voucher for the difference which
may be applied to any future purchases of Broadcom Products by NLS from
Broadcom.
(v) [*****]. [*****].
(b) [*****]. Notwithstanding anything to the contrary in
Section 6.2(a) above:
(i) With respect to Broadcom Products other than
those described in Section 7.1 (which other products shall be subject to the
minimum purchase commitments therein contained), NLS shall not be entitled to
continue to receive the benefits of [*****] with respect to a Broadcom Product
unless NLS and all of its Affiliates have purchased at least [*****] of their
total aggregate requirements for that general class of products from Broadcom
(except to the extent due to the fault of Broadcom or failure of Broadcom to
supply the quantities ordered by NLS, in accordance with the Supply Terms), as
measured at the end of each three month period, and in such event Broadcom's
invoices for all shipments of the Broadcom Products in such class after the
last three month period in which NLS and its Affiliates met the [*****]
requirement shall be issued, supplemented or reissued as necessary to reflect
pricing at Broadcom's standard rates.
(ii) [*****].
(iii) In the event that Broadcom notifies NLS of
the forthcoming availability of a product that is a successor to a product
subject to the provisions of Section 6.2(a) and NLS places orders to purchase
the successor product in volume in accordance with the Supply Terms, then for a
period not to exceed three (3) months after the date of NLS' first purchase
order for the successor product NLS shall be entitled to purchase additional
quantities of the old product with the same [*****] that applied to NLS'
purchases of the old product in the most recent three month measurement period.
(c) [*****]. The Parties mutually agree and acknowledge
that [*****]. In connection with their annual audit of Broadcom's financial
statements, upon the written request of NLS delivered to Broadcom no later than
December 1 of the year under audit, Broadcom's independent certified public
accountants shall be requested to audit Broadcom's records with respect to
[*****] during such period and shall be requested to provide to NLS, within
thirty (30) days after completion of the annual audit, a written
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-16-
<PAGE> 18
CONFIDENTIAL TREATMENT REQUESTED
certification that Broadcom's calculations are true and accurate in all
material respects. The cost of this audit shall be borne by NLS.
Notwithstanding the foregoing, NLS shall have the option to engage a mutually
acceptable "Big 6" accounting firm in lieu of Broadcom's accountants to conduct
such audit at NLS's expense (such audit to be conducted in substantially the
same manner, including without limitation with respect to confidentiality, as
if it had been conducted by Broadcom's accountants). In the event that [*****]
establishes that any positive or negative adjustment is needed, Broadcom shall
promptly make such adjustment in its records and issue an appropriate
supplemental invoice or credit voucher to NLS reflecting the adjustment.
(d) [*****]. [*****].
(e) [*****]. [*****]. In connection with their annual
audit of Broadcom's financial statements, upon the written request of NLS
delivered to Broadcom no later than December 1 of the year under audit,
Broadcom's independent certified public accountants shall be requested to audit
the records of Broadcom and its Affiliates with respect to Broadcom's
compliance with the [*****] provisions of this Section 6.2(e) during such
period and shall be requested to provide to NLS, within thirty (30) days after
completion of the annual audit, a written certification that Broadcom has
complied with this Section 6.2(e) in all material respects. The cost of the
[*****] audit shall be borne by NLS. Notwithstanding the foregoing, NLS shall
have the option to engage a mutually acceptable "Big 6" accounting firm in lieu
of Broadcom's accountants to conduct such audit at NLS's expense (such audit to
be conducted in substantially the same manner, including without limitation
with respect to confidentiality, as if it had been conducted by Broadcom's
accountants). In the event that any [*****] audit establishes that any
positive or negative adjustment is needed, Broadcom shall promptly make such
adjustment in its records and issue an appropriate supplemental invoice or
credit voucher to NLS reflecting the adjustment.
Section 6.3 [*****]. [*****].
7. NLS MINIMUM PURCHASE COMMITMENTS
Section 7.1. Minimum Purchase Commitment.
(a) First 48 Months. NLS agrees that NLS and its Affiliates shall
purchase from Broadcom, at a minimum, the following percentages of their total
aggregate annual requirements for each component which contains transmission or
communication functions for digital cable subscriber products, including
without limitation QAM modulators or demodulators and any components used in
digital cable products which contain video decompression algorithms such as
MPEG:
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-17-
<PAGE> 19
CONFIDENTIAL TREATMENT REQUESTED
<TABLE>
<CAPTION>
Percentage of Aggregate NLS/Affiliate
Period from Effective Date Requirements
-------------------------- -------------------------------------
<S> <C>
First Twelve Months [*****]
Second Twelve Months [*****]
Third Twelve Months [*****]
Fourth Twelve Months [*****]
</TABLE>
(b) Subsequent Periods. In order for NLS to receive the benefit
of the pricing described in Section 6.2 for a fifth or sixth twelve month
period from the Effective Date, NLS shall be required, at least two years prior
to the commencement of each such twelve month period, to deliver to Broadcom a
written undertaking and commitment to purchase at least [*****] of the total
aggregate requirements of NLS and all of its Affiliates for each component of
the classes described in Section 7.1 during such twelve month period.
Section 7.2. Conditions. NLS' minimum purchase commitment for
each class of products under this Section 7 during a given applicable period
during the Term shall be subject to Broadcom's material compliance during such
period with its obligations under the Supply Terms and Broadcom's good faith
effort during such period to maintain its competitive position with respect to
that class of products.
Section 7.3. MPEG Products. Notwithstanding the provisions of
Section 7.1, the minimum purchase commitment of NLS and its Affiliates with
respect to any digital cable subscriber video decompression products shall not
commence until FCS of the BCM7010 product. Upon FCS of the BCM7010 product,
the minimum purchase commitment of NLS and its Affiliates with respect to
digital cable subscriber video decompression products shall be [*****] of the
total aggregate requirements of NLS and its Affiliates for the first and second
twelve month periods from the Effective Date, [*****] for the third twelve
month period from the Effective Date, [*****] for the fourth twelve month
period from the Effective Date, and thereafter as provided in Section 7.1(b).
Section 7.4. Periodic Purchases.
(a) Even Run Rate. NLS and its Affiliates shall be required to
use their reasonable best efforts to purchase products subject to this Section
7 at an even percentage run rate as compared to NLS's product purchases from
any of its other sources for the same or similar products, during each twelve
month commitment period (rather than "front end" or "back end" loading of such
purchases) in order to allow Broadcom to properly coordinate order flow,
forecast manufacturing requirements and undertake volume production in a cost
efficient manner.
(b) Shortfall Fee. If, in any quarter of a twelve month
measurement period NLS and its Affiliates purchase from Broadcom less than the
stated minimum purchase commitment percentage less five percentage points for
any Broadcom Product (determined for this purpose as if the annual purchase
commitments were also applicable to such
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-18-
<PAGE> 20
CONFIDENTIAL TREATMENT REQUESTED
quarter), then NLS shall promptly pay to Broadcom an amount equal to [*****] of
Broadcom's unit profit margin (as set forth in Section 6) for such Broadcom
Product multiplied by the additional number of units of such Broadcom Product
that NLS and its Affiliates would be required to purchase so that their
aggregate purchases of such Broadcom Product for the quarter would have equaled
the stated minimum purchase commitment; provided, however, that in no event
will NLS's payment obligations to Broadcom pursuant to this Section 7.4(b)
exceed [*****] for any quarter. NLS shall provide Broadcom with reasonably
detailed calculations of its purchase commitment compliance within thirty (30)
days after the end of each quarter of a twelve month measurement period.
Nothing contained in this Section 7.4(b) shall be deemed to create a
minimum purchase obligation for NLS and its Affiliates in addition to the
annual minimum purchase commitments set forth in this Section 7, and no failure
on the part of NLS and its Affiliates to purchase particular quantities of
Broadcom Products in any quarter (other than as set forth in Section 7.4(a))
shall in itself be deemed to constitute a material breach of this Agreement,
but the failure of NLS and its Affiliates to purchase the stated minimum
quantity of each Broadcom Product described in Sections 7.1, 7.3 and 7.5 during
a twelve month measurement period shall constitute a material breach of this
Agreement.
Section 7.5. Special Purchase Commitment. With respect to each of
the BCM3900QUOD and BCM3902 only, NLS agrees that it shall purchase and take
delivery of, during each calendar quarter commencing with the quarter ending
December 31, 1997, at least the minimum quantities set forth in Exhibit L at
the prices set forth in Section 6.2(a).
Section 7.6 Audit. In connection with their annual audit of NLS'
financial statements, upon the written request of Broadcom delivered to NLS no
later than December 1 of the year under audit, NLS' independent certified
public accountants shall be requested to audit the records of NLS and its
Affiliates with respect to purchases of all products subject to the provisions
of this Section 7 during such period and shall be requested to provide to
Broadcom, within thirty (30) days after completion of the annual audit, a
written certification that NLS and its Affiliates have complied with the
requirements of this Section 7 in all material respects. The cost of the
minimum purchase commitment audit shall be borne by Broadcom. Notwithstanding
the foregoing, Broadcom shall have the option to engage a mutually acceptable
"Big 6" accounting firm in lieu of NLS' accountants to conduct such audit at
Broadcom's expense (such audit to be conducted in substantially the same
manner, including without limitation with respect to confidentiality, as if it
had been conducted by NLS's accountants).
Section 7.7. "Purchase". For purposes of Sections 6 and 7 of this
Agreement, the term "purchase by NLS" and equivalents thereof shall mean
products shipped for revenue by Broadcom to NLS or its Affiliates and accepted
by NLS or its Affiliates during the applicable period in fulfillment of
purchase orders by NLS or its Affiliates.
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-19-
<PAGE> 21
Section 7.8. Material Breach. The Parties acknowledge and agree
that a breach of this Section 7 (other than as expressly set forth in Section
7.4(b)) by NLS or its Affiliates shall be deemed a material breach of this
Agreement.
8. CONFIDENTIALITY
Section 8.1. Duty to Hold in Confidence. Each Party ("Recipient")
agrees that it will preserve in strict confidence and secure against accidental
loss any Confidential Information disclosed by the other Party ("Disclosing
Party") to Recipient. In preserving Disclosing Party's Confidential
Information, Recipient will use the same standard of care it would use to
secure and safeguard its own confidential information of similar importance,
but in no event less than reasonable care. Any permitted reproduction of
Disclosing Party's Confidential Information shall contain all confidential or
proprietary legends which appear on the original. Recipient shall immediately
notify Disclosing Party in writing in the event of any loss or unauthorized
disclosure or use of Confidential Information.
Section 8.2. Permitted Disclosures. Recipient shall permit access to
Disclosing Party's Confidential Information solely to its employees, agents and
contractors who (i) have a need to know such information; and (ii) have signed
confidentiality agreements containing terms at least as restrictive as those
contained herein. Except as permitted in the exercise of the licenses and
rights granted under this Agreement, Recipient shall not disclose or transfer
any Confidential Information to any third party, without the specific prior
written approval of Disclosing Party, except to the extent required by law or
governmental or court order to be disclosed by Recipient, provided that
Recipient gives Disclosing Party prompt written notice of such requirement
prior to such disclosure and cooperates with Disclosing Party in the latter's
attempt, if any, to prevent such disclosure or in obtaining a protective or
similar order with respect to the Confidential Information to be disclosed.
Recipient shall use Disclosing Party's Confidential Information disclosed
hereunder solely for the purpose of fulfilling such Party's obligations and
exercising such Party's rights under this Agreement.
Section 8.3. Obligation to Return Confidential Information.
Recipient acknowledges that Disclosing Party retains ownership of all
Confidential Information disclosed or made available to Recipient.
Accordingly, upon any termination, cancellation or expiration of this
Agreement, or upon Disclosing Party's request for any reason (other than in
violation of this Agreement), Recipient shall return promptly to Disclosing
Party the originals and all copies (without retention of any copy) of any
written documents, tools, materials or other tangible items containing or
embodying Confidential Information; provided, however, that Recipient shall be
entitled to retain such originals and copies of Confidential Information of
Disclosing Party as Recipient shall reasonably conclude are necessary to
Recipient's use and exploitation, as permitted by this Agreement, of any rights
or licenses retained by Recipient following such termination, cancellation,
expiration or request.
-20-
<PAGE> 22
Section 8.4. No Representations or Warranties. EXCEPT AS EXPRESSLY
SET FORTH IN SECTION 10, OR ELSEWHERE IN THIS AGREEMENT, DISCLOSING PARTY MAKES
NO REPRESENTATIONS OR WARRANTIES, WHETHER EXPRESS, STATUTORY OR IMPLIED,
RELATING TO THE SUFFICIENCY OR ACCURACY OF THE CONFIDENTIAL INFORMATION
DISCLOSED FOR ANY PURPOSE, NOR REGARDING INFRINGEMENT OF OTHERS' INTELLECTUAL
PROPERTY RIGHTS WHICH MAY ARISE FROM THE USE OF SUCH CONFIDENTIAL INFORMATION.
Section 8.5. No Grant of Property Rights. Recipient recognizes and
agrees that, except as expressly set forth in this Agreement, nothing herein
shall be construed as granting any property rights, by license or otherwise, to
any of Disclosing Party's Confidential Information, or to any invention or any
patent right that has issued or that may issue based on such Confidential
Information or to decompile or reverse engineer any of the Disclosing Party's
Confidential Information.
9. TECHNOLOGY ESCROW.
As soon as reasonably practicable after the transfer from development
to production of each Development Program Product for which Broadcom receives a
production purchase order from NLS, NLS and Broadcom shall enter into a
Technology Escrow Agreement with a mutually agreeable escrow agent which shall
contain, as a minimum and without limitation, the terms and conditions set
forth in this Section 9. The Technology Escrow Agreement shall provide, among
other things, for the deposit with the escrow agent, for storage at such escrow
agent's premises, of all materials reasonably required to manufacture the
Development Program Product. NLS shall have a non-exclusive, irrevocable,
perpetual (but only during the period that Broadcom is unable to perform as
described in clause (b) below) license allowing NLS's manufacturing
subcontractor to make and to deliver the Development Program Product directly
to NLS, for incorporation and use in its module and system products (and for no
other purpose or use), in the event that both of the following have occurred (a
"Release Event"):
(a) The institution by Broadcom of insolvency,
receivership or bankruptcy proceedings or any other material proceedings for
the settlement of its debts, including without limitation, a reorganization
under the federal bankruptcy laws, a compromise or arrangement or assignment
for the benefit of its creditors; the institution of such proceedings against
Broadcom, which such proceedings are not dismissed within ninety (90) days;
Broadcom making an assignment for the benefit of creditors; or Broadcom's
dissolution or ceasing to do business in the normal course; and
(b) Such event actually prevents Broadcom from continuing
to deliver the Development Program Product to NLS in substantial compliance
with the Supply Terms of this Agreement.
-21-
<PAGE> 23
10. REPRESENTATIONS AND WARRANTIES
Section 10.1. Broadcom Representations and Warranties.
Broadcom represents and warrants to NLS and its Affiliates:
(a) Corporate Authority. Broadcom has the right to enter
this Agreement, is a corporation duly organized, validly existing, and in good
standing under the laws of the state of its incorporation, has the corporate
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder, and has by all necessary corporate action duly and
validly authorized the execution and delivery of this Agreement and the
performance of its obligations hereunder.
(b) Binding Obligation. This Agreement is the valid and
legally binding obligation of Broadcom in accordance with its terms, subject to
bankruptcy, reorganization, insolvency, moratorium and similar laws and to
general principles of equity which are within the discretion of courts of
applicable jurisdiction.
(c) No Conflicts. The execution, delivery and
performance by Broadcom of this Agreement and each other agreement, document,
or instrument now or hereafter executed and delivered by Broadcom pursuant
thereto or in connection herewith will not: (i) conflict with or violate the
articles or certificate of incorporation or by-laws of Broadcom or any
provision of any law, rule, regulation, authorization or judgment of any
governmental authority having applicability to Broadcom or its actions; or (ii)
to Broadcom's knowledge, conflict with or result in any breach of, or
constitute a default under, any note, security agreement, commitment, contract
or other agreement, instrument or undertaking to which Broadcom is a party or
by which any of its property is bound.
(d) Ownership. With respect to all Broadcom Intellectual
Property used or to be used in the Broadcom Products or Development Program,
Broadcom has the right and power to assign, license, and otherwise make
agreements pertaining to such property, as may be entered into hereunder;
provided, however, that this Section 10.1(d) shall not constitute a
representation or warranty as to non-infringement of any intellectual property
rights of any third party.
(e) Independent Work. All Broadcom Intellectual Property
used or to be used in the Broadcom Products or Development Program has been (or
will be) created by Broadcom's employees, agents, or consultants, and, to the
best of Broadcom's knowledge, use of such property by Broadcom as contemplated
herein and development of the Broadcom Products will not depend upon the
acquisition of rights from any third party.
(f) No Litigation or Claims. As of the Effective Date
and except as disclosed in Exhibit J, there is no pending litigation or claim
nor, to the best of
-22-
<PAGE> 24
Broadcom's knowledge, the reasonable basis for any claim, that Broadcom does
not own Broadcom Intellectual Property used or to be used in the Broadcom
Products, or that the exercise by NLS of any of the rights granted hereunder,
infringes any Intellectual Property Right of any third party.
(g) Agreements with Employees. Broadcom has and will
maintain with all Broadcom employees, agents, and consultants, written
agreements sufficient to enable Broadcom to perform its obligations hereunder
with confidentiality terms at least as restrictive as those provided for the
Parties under this Agreement.
Section 10.2. NLS Representations and Warranties.
NLS represents and warrants to Broadcom and its Affiliates:
(a) Corporate Authority. NLS has the right to enter this
Agreement, is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation, has the
corporate power and authority to execute and deliver this Agreement and to
perform its obligations hereunder, and has by all necessary corporate action
duly and validly authorized the execution and delivery of this Agreement and
the performance of its obligations hereunder.
(b) Binding Obligation. This Agreement is the valid and
legally binding obligation of NLS in accordance with its terms, subject to
bankruptcy, reorganization, insolvency, moratorium and similar laws and to
general principles of equity which are within the discretion of courts of
applicable jurisdiction.
(c) No Conflicts. The execution, delivery and
performance by NLS of this Agreement and each other agreement, document, or
instrument now or hereafter executed and delivered by NLS pursuant thereto or
in connection herewith will not: (i) conflict with or violate the articles or
certificate of incorporation or by-laws of NLS or any provision of any law,
rule, regulation, authorization or judgment of any governmental authority
having applicability to NLS or its actions; or (ii) to NLS' knowledge, conflict
with or result in any breach of, or constitute a default under, any note,
security agreement, commitment, contract or other agreement, instrument or
undertaking to which NLS is a party or by which any of its property is bound.
(d) Ownership. With respect to all NLS Intellectual
Property used or to be used in the Broadcom Products or Development Program,
NLS has the right and power to assign, license, and otherwise make agreements
pertaining to such property, as may be entered into hereunder; provided,
however, that this Section 10.2(d) shall not constitute a representation or
warranty as to non-infringement of any intellectual property rights of any
third party.
-23-
<PAGE> 25
(e) Independent Work. All NLS Intellectual Property used
or to be used in the Broadcom Products or Development Program has been (or will
be) created by NLS' employees, agents, or consultants, and, to the best of NLS'
knowledge, use of such property by Broadcom as contemplated herein and
development of the Broadcom Products will not depend upon the acquisition of
rights from any third party.
(f) No Litigation or Claims. As of the Effective Date
and except as disclosed in Exhibit J, there is no pending litigation or claim
nor, to the best of NLS' knowledge, the reasonable basis for any claim, that
NLS does not own NLS Intellectual Property used or to be used in the Broadcom
Products, or that the exercise by Broadcom of any of the rights granted
hereunder, infringes any Intellectual Property Right of any third party.
(j) Agreements with Employees. NLS has and will maintain
with all NLS employees, agents, and consultants, written agreements sufficient
to enable NLS to perform its obligations hereunder with confidentiality terms
at least as restrictive as those provided for the Parties under this Agreement.
Section 10.3. Disclaimer. EXCEPT AS EXPRESSLY SET FORTH ABOVE IN
THIS SECTION 10 OR ELSEWHERE IN THIS AGREEMENT OR IN ANY EXHIBITS HERETO,
NEITHER PARTY MAKES ANY WARRANTY OR REPRESENTATION OF ANY KIND TO THE OTHER
PARTY WHETHER EXPRESS, IMPLIED, STATUTORY OR IN ANY OTHER PROVISION OF THIS
AGREEMENT, AND EACH PARTY SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTY OF
MERCHANTABILITY, NONINFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE.
11. INDEMNIFICATION
Section 11.1. General Indemnification by NLS. Subject to Section
14.1, NLS hereby agrees to indemnify, hold harmless and defend Broadcom and its
Affiliates against and in respect of any and all claims, damages, demands,
liabilities, losses, costs and expenses (including reasonable attorneys' fees,
litigation expenses and expert witness fees) (collectively, "Losses"), in each
case arising out of or based upon or relating or pertaining to:
(a) the inaccuracy in any material respect of any
representation or warranty made by NLS in Section 10.2 of this Agreement; or
(b) the breach by NLS or any of its Affiliates of any
material agreement or covenant contained in this Agreement.
-24-
<PAGE> 26
Section 11.2. General Indemnification by Broadcom. Subject to
Section 14.1, Broadcom hereby agrees to indemnify, hold harmless and defend NLS
and its Affiliates against and in respect of any and all Losses, in each case
arising out of or based upon or relating or pertaining to:
(a) the inaccuracy in any material respect of any
representation or warranty made by Broadcom in Section 10.1 of this Agreement;
or
(b) the breach by Broadcom or any of its Affiliates of
any material agreement or covenant contained in this Agreement.
Section 11.3. Product Indemnification by Broadcom. Subject to
Section 14.1(a), Broadcom agrees to defend, indemnify and hold NLS and its
Affiliates harmless against and in respect of any and all Losses (including
without limitation Losses resulting from any indemnification by NLS of its
customers and distributors) arising out of or based upon or relating or
pertaining to any claim that the manufacture, sale, importation or use of the
Broadcom Products supplied by Broadcom (either directly or by or through its
Affiliates) to NLS hereunder infringes the patent, copyright, trademark, trade
secret or other proprietary rights of any third party, except that Broadcom
shall have no such indemnification obligation with respect to (a) any
infringement arising from the use by NLS or its Affiliate of the Broadcom
Product in combination with other components supplied by NLS or its Affiliate
or any third party or (b) any infringement resulting from or relating to any
NLS Intellectual Property used by Broadcom in such products pursuant to the
terms of this Agreement.
Section 11.4. Product Indemnification by NLS. Subject to Section
14.1(a), NLS agrees to defend, indemnify and hold Broadcom and its Affiliates
harmless against and in respect of any and all Losses (including without
limitation Losses resulting from any indemnification by Broadcom of its
customers and distributors) arising out of or based upon or relating or
pertaining to any claim that the manufacture, sale, importation or use of the
Broadcom Products supplied by Broadcom (either directly or by or through its
Affiliates) to NLS or any of its other customers infringes the patent,
copyright, trademark, trade secret or other proprietary rights of any third
party to the extent that such claim results from or relates to: (a) any
infringement arising from the use by NLS or its Affiliate of the Broadcom
Product in combination with other components supplied by NLS or its Affiliate
or any third party or (b) any infringement resulting from or relating to any
NLS Intellectual Property used by Broadcom in such products pursuant to the
terms of this Agreement.
Section 11.5. Indemnification Procedures. A Party seeking
indemnification pursuant to this Agreement ( the "Indemnified Party") shall
give reasonably prompt written notice to the Party from whom such
indemnification is sought (the "Indemnifying Party") of the assertion of any
claim, or the commencement of any action, suit or proceeding, in respect of
which indemnity may be sought hereunder, and shall give the
-25-
<PAGE> 27
Indemnifying Party such information with respect thereto as the Indemnifying
Party may reasonably request, but no failure to give such notice shall relieve
the Indemnifying Party of any liability hereunder, except to the extent that
the Indemnifying Party has suffered actual prejudice thereby. The Indemnifying
Party shall have the right to undertake the defense of any such claim asserted
by a third person, and the Indemnified Party shall cooperate in such defense
and make available all personnel, records and materials requested by the
Indemnifying Party in connection therewith at the Indemnifying Party's expense.
The Indemnified Party shall be entitled to participate in such defense, but
shall not be entitled to indemnification with respect to the costs and expenses
of such defense if the Indemnifying Party shall have assumed the defense of the
claim with counsel reasonably satisfactory to the Indemnified Party. The
Indemnifying Party shall not be liable for any claim settled without its
consent, which consent may not be unreasonably withheld. The Indemnifying
Party may settle any claim without the consent of the Indemnified Party, but
only if the sole relief awarded is monetary damages.
Section 11.6. Benefit of Intellectual Property Rights. In the
event that Broadcom or its Affiliate becomes a defendant in a litigation where
it is defending against a claim for patent infringement and such claim relates
to the Specifications, NLS agrees to make available for use by Broadcom and its
Affiliates, without additional consideration, any additional intellectual
property rights held by NLS or its Affiliates that relate to the Specifications
(including patents, copyrights and any patent or copyright licenses which any
of them has received from third parties, if allowed by such licenses) which may
assist Broadcom and its Affiliates in defending against such claims(s).
Section 11.7. Covenant Not to Sue. It is mutually agreed by the
Parties that they will not prosecute or assist in the prosecution of any claim,
action or cause of action against each other or their respective Affiliates,
and each of their successors, assigns, customers or any of their respective
directors, officers or employees for, on account of, or arising out of any
infringement of any patents, copyrights or other intellectual property, or the
use of any technical information belonging to either of the Parties, in
connection with the design, manufacture, sale or use by Broadcom or its
Affiliates of any product incorporating the VLSI Technology, NLS Enhancements
or NLS Modifications, whether used alone or in combination with other
components supplied by any third party, or the manufacture, sale, importation
or use by NLS or its Affiliates of any product that uses or incorporates a
Broadcom Product purchased from Broadcom, whether used alone or in combination
with other components supplied by NLS or any third party.
12. EQUITY INVESTMENT
As additional consideration for the covenants and obligations of the
Parties under this Agreement, NLS shall purchase 1,500,000 shares of a new
Series E Preferred Stock of Broadcom for the purchase price of $15.15 per share
pursuant to the terms of a Series E Preferred Stock Purchase Agreement to be
entered into by the Parties. The closing of the
-26-
<PAGE> 28
stock purchase by NLS shall occur contemporaneously with the Parties' execution
of this Agreement.
13. TERM AND TERMINATION
Section 13.1. Term. Unless earlier terminated as permitted under this
Article 13, this Agreement shall expire four (4) years after the Effective
Date; provided, however, that if NLS delivers to Broadcom a written undertaking
to extend its minimum purchase commitment for a fifth or sixth twelve month
period as provided in Section 7.1(b), the term of this Agreement shall be
extended concomitantly.
Section 13.2. Termination.
(a) Failure to Meet Milestones. In the event that
Broadcom fails to meet a Milestone within sixty (60) days after the scheduled
date for such Milestone as set forth in Exhibit B hereto, as such date may be
extended (i) as specifically contemplated by Sections 2.1 and 4.2 above and/or
(ii) as set forth in Section 2.4 above, but only after NLS' compliance with
Section 3.2 if applicable, NLS' shall be entitled to terminate the Development
Program as to the applicable Development Program Product (and any planned
successor products thereto providing additional integration or functionality)
only by providing Broadcom with sixty (60) days advance written notice thereof;
provided, however, that NLS may not so terminate (x) if Broadcom meets the
Milestone within the sixty (60) day advance notice period or (y) for Broadcom's
failure to meet a Milestone that relates, directly or indirectly, to a
Specification that was not fully developed as of the date of this Agreement,
unless such failure occurs after such Specification has been finally determined
by the Parties and the associated Milestones have been established or
appropriately revised by the Parties pursuant to the terms of this Agreement.
The termination by NLS of the Development Program as to a Development Program
Product (and any permitted successor product) shall not affect NLS' obligations
with respect to the balance of the Development Program or NLS' minimum purchase
commitments under this Agreement except that (x) NLS shall not be obligated to
purchase the Development Program Product (and any permitted successor product)
that would have resulted from the terminated project and (y) the minimum
purchase commitment of NLS under Section 7.1 with respect to the class of
products including the terminated product shall end twelve (12) months after
the effective date of the termination. In all other respects this Agreement
shall remain in full force and effect.
(b) Termination of Agreement for Material Breach. This
Agreement may be terminated at any time immediately for a material breach of
this Agreement (other than a failure to meet the Milestones, which shall be
covered exclusively by Section 13.2(a)), by one Party after the other Party's
failure to cure such breach within thirty (30) days after receiving written
notice thereof (or a plan to cure has not been reasonably agreed upon by the
Parties within such thirty (30) days, which agreement shall not be unreasonably
withheld, delayed or conditioned). Without implication as to what
-27-
<PAGE> 29
other actions or inactions on the part of either of the Parties constitutes or
does not constitute a material breach of this Agreement, NLS agrees that any
individual default in the performance by Broadcom of any of its obligations to
supply products pursuant to a particular purchase order shall not, without
more, constitute a material default in Broadcom's obligations under this
Agreement. To the extent that Broadcom's repeated defaults in the performance
of its obligations under purchase orders acknowledged by Broadcom shall
constitute a material default, such material default shall be deemed to be only
with respect to the particular Broadcom Product(s) that are the subject of such
defaults, and NLS's remedy in such event shall be to terminate its minimum
purchase commitment under this Agreement only as and to the extent it relates
to such Broadcom Product(s). This Agreement shall remain in full force and
effect in all other respects, including with respect to NLS' purchase
obligations for other Broadcom Products and with respect to the Development
Program.
Section 13.3. Termination in First Year. Notwithstanding any other
provision of this Agreement, NLS agrees that it shall have no right to
terminate this Agreement for any reason prior to October 1, 1998.
Section 13.4. Survival. The rights and obligations contained in the
following Sections shall survive termination or expiration of this Agreement
for any reason: Sections 5.1, 5.3(a), 5.3(b), 5.4, 5.5, 8, 10, 11, 13 and 14
of this Agreement. In addition, Section 9 shall survive the termination of
this Agreement by NLS pursuant to Section 13.2.
14. GENERAL PROVISIONS
Section 14.1. Limitation of Liability. (a) IN NO EVENT SHALL EITHER
PARTY HAVE ANY LIABILITY TO THE OTHER PARTY, ITS AFFILIATES, ITS CUSTOMERS OR
ANY THIRD PARTY ON ANY CAUSE OF ACTION RELATING TO THIS AGREEMENT FOR ANY
INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, OR SPECULATIVE DAMAGES,
INCLUDING, BUT NOT LIMITED TO, DAMAGES FOR LOSS OF PROFITS OR USE, BUSINESS
INTERRUPTION, OR LOSS OF GOODWILL, IRRESPECTIVE OF WHETHER SUCH DAMAGES ARISE
UNDER CONTRACT, TORT, STATUTE, OR OTHERWISE AND WHETHER OR NOT THE PARTY HAS
ADVANCE NOTICE OF THE POSSIBILITY OF SUCH DAMAGES. THESE LIMITATIONS SHALL
APPLY NOTWITHSTANDING ANY FAILURE OF ESSENTIAL PURPOSE OF ANY LIMITED REMEDY.
The Parties acknowledge that this limitation on potential liabilities was an
essential element in setting consideration under this Agreement.
(b) EXCEPT FOR PERSONAL INJURY CAUSED BY BROADCOM'S
NEGLIGENCE, OR WITH RESPECT TO SECTION 11.3 ABOVE, IN NO EVENT SHALL BROADCOM'S
CUMULATIVE LIABILITY TO NLS OR ITS AFFILIATES UNDER ANY PURCHASE ORDER PLACED
PURSUANT TO THIS AGREEMENT
-28-
<PAGE> 30
EXCEED THE AGGREGATE AMOUNT PAID TO BROADCOM UNDER THAT PURCHASE ORDER, EVEN IF
A TERM OF THE PURCHASE ORDER FAILS OF ITS ESSENTIAL PURPOSE.
Section 14.2. Freely Entered Contract. Each Party acknowledges that
it has read this Agreement, understands it and agrees to be bound by it. Each
Party acknowledges that such Party has not been induced to enter into such
Agreement by any representations or statements, oral or written, not expressly
contained herein or expressly incorporated by reference.
Section 14.3. Assignment. This Agreement shall be binding upon the
Parties and their respective successors and permitted assigns. Neither Party
may assign or delegate any of its rights or obligations under this Agreement
without the prior written consent of the other Party, except that either Party
may assign and delegate all of its rights and obligations hereunder in
conjunction with a disposition of all or substantially all of its assets to
which this Agreement relates (whether by merger, sale or other form of
transaction). Any assignment or delegation in violation of this Section 14.3
shall be null and void. Subject to the foregoing restrictions, this Agreement
will inure to the benefit of the successors and permitted assigns of the
Parties hereto.
Section 14.4. Headings. The section headings appearing in this
Agreement are inserted only as a matter of convenience and in no way define,
limit, construe or describe the scope or extent of such section or in any way
affect the Agreement.
Section 14.5. Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which will be considered an
original, but all of which together will constitute one and the same
instrument.
Section 14.6. Notices. All notices and consents required to be given
or made by the Parties shall be in writing and shall be deemed validly given if
delivered by hand or sent by registered mail, return receipt requested, or
confirmed facsimile to the following addresses:
To Broadcom: To NLS:
Broadcom Corporation NextLevel Systems, Inc.
16251 Laguna Canyon Road 8770 West Bryn Mawr Ave., Suite 1300
Irvine, CA 92618 Chicago, IL 60631
Attention: Henry Nicholas Attention: Richard C. Smith
President & Chief Executive V.P., Business Development
Officer Facsimile: 773-695-1051
Facsimile: 714-450-8710
-29-
<PAGE> 31
With copy to: With copies to:
Irell & Manella LLP NextLevel Systems, Inc.
1800 Avenue of the Stars, Ste. 900 Broadband Networks Group
Los Angeles, CA 90067-4276 2200 Byberry Road
Attention: David A. Dull, Esq. Hatboro, PA 19040
Facsimile: 310-203-7199 Attention: Robert A. Scott, V.P &
General Counsel
David Robinson, V.P., Digital
Network Sys.
Facsimile: 215-956-6408
and
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Attention: Steven E. Bochner/
Jeffrey A. Herbst, Esq.
Facsimile: 650-493-6811
Notice delivered by hand shall be deemed to have been received by the addressee
on the date delivered. Notice given by registered mail shall be deemed to have
been received by the addressee on the fifth (5th) business day following the
day upon which it is mailed. Notice given by confirmed facsimile shall be
deemed to have been received by the addressee on the business day following the
day on which it was sent.
Section 14.7. Entire Agreement. This Agreement and the Exhibits
hereto are the complete agreement of the Parties relating to the subject matter
hereof. This Agreement supersedes and governs any other prior or collateral
agreements with respect to the subject matter hereof. Any amendment to this
Agreement or any modification of any term of this Agreement must be in writing
and be executed by an authorized officer of each Party.
Section 14.8. Governing Law and Dispute Resolution.
(a) Mandatory Mediation. Unless the parties otherwise
agree in writing, any dispute, controversy, or claim, regardless of the legal
or equitable theory involved, arising out of or with reference to this
Agreement, or the interpretation, making, performance, breach or termination
thereof (a "Disputed Matter") shall be subject to confidential mandatory
non-binding mediation proceedings, in accordance with Section 14.8(b), prior to
the initiation of any litigation or other proceeding in any court of law or
equity. Notwithstanding the foregoing, before or during the mediation any
Party may apply to any of the courts described in Section 14.8(d) for a
temporary restraining order, preliminary injunction, permanent injunction or
other equitable relief where such relief is reasonably required to protect its
interests pending completion or termination of the mediation proceedings.
-30-
<PAGE> 32
(b) Mediation Procedures. Each Party agrees that, prior
to the initiation of any litigation against the other Party or its Affiliates
with respect to any Disputed Matter or the relationship between the Parties
(including its commencement and termination), whether based on breach of
covenant, breach of an implied covenant or other theories, the Parties shall
attempt to amicably resolve the claim or dispute through confidential mandatory
non-binding mediation. To this end, each Party will make available one or more
members of such Party's senior management who shall have expertise in the
subject matter of the claim or dispute (e.g., a Party's senior technical
officer in the event of a claim or dispute related to technology or a Party's
senior finance executive in the event of a claim or dispute related to
financial matters) and who shall be authorized to enter into negotiations with
respect to the claim or dispute. If the Parties are not able to resolve the
claim or dispute in this manner within thirty days of the initiation of
negotiations, they shall submit such claim or dispute to confidential
non-binding mediation before a single mediator in accordance with the
Commercial Mediation Rules of the American Arbitration Association ("AAA") then
in effect. The Parties shall agree on a mediator within fifteen (15) days of
notice that a Party intends to seek mediation. If the Parties cannot agree on
a mediator, the mediator shall be selected using the methods provided in the
Commercial Mediation Rules of the AAA. Unless the Parties shall otherwise
agree, the mediator shall be a partner or principal of a nationally recognized
firm of independent certified public accountants from the management advisory
services department (or comparable department or group) of such firm with at
least five (5) years of recent experience in the subject matter of the claim or
dispute; and provided further that such firm cannot be any firm of certified
public accountants that has audited the financial statements or books and
records of either Party or provided management or advisory services for either
Party within the last three years or that is engaged or reasonably expected to
do so for either Party for the current year. The Parties agree that the
mediation proceeding will be attended by one or more members of such Party's
senior management who meet the qualifications set forth above and who shall be
authorized to enter into negotiations with respect to the claim or dispute.
The fees of the mediator shall be borne equally by each Party.
(c) Governing Law. This Agreement shall be governed by
and construed under the laws of the State of California, without reference to
conflict of laws principles.
(d) Exclusive Jurisdiction and Venue. Any action or
other proceeding brought with respect to a Disputed Matter shall be brought and
heard only in an appropriate state or federal court located in the Counties of
Los Angeles or Orange, California, or in the County of New York, New York. The
parties hereto acknowledge that such courts have the exclusive jurisdiction to
interpret and enforce the provisions of this Agreement, and the parties waive
any and all objections that they may have as to personal jurisdiction or venue
in any of the above courts.
-31-
<PAGE> 33
Section 14.9. Affiliates. Each Party agrees that it will ensure that
all of its Affiliates are subject to the restrictions to which such Party is
subject under this Agreement with respect to the treatment and use of the other
Party's technology and Confidential Information, regardless of how such
Affiliate acquires such technology or Confidential Information.
Section 14.10. Severability. The illegality or unenforceability of
the whole or any part of the provisions of this Agreement will not affect the
continued operation of the remaining provisions of this Agreement.
Section 14.11. Waiver. The failure of either Party at any time to
insist upon strict performance of any of the terms and conditions contained in
this Agreement will not be deemed a waiver of its right at any time thereafter
to insist upon strict performance.
Section 14.12. Independent Contractors. The relationship of the
Parties established by this Agreement is that of independent contractors, and
nothing contained in this Agreement shall be construed to (i) give either party
the power to direct and control the day-to-day activities of the other, (ii)
constitute the Parties as partners, joint venturers, co-owners or otherwise as
participants in a joint or common undertaking, or (iii) allow either Party to
create or assume any obligation on behalf of the other Party for any purpose
whatsoever.
Section 14.13. Confidentiality of Agreement. Each Party agrees that
the terms and conditions of this Agreement shall be treated as confidential
information and that no reference to the terms and conditions of this Agreement
can be made without the prior written consent of the other Party (such consent
not to be unreasonably withheld, conditioned or delayed); provided, however,
that each Party may disclose the mere existence of this Agreement without
restriction and may disclose the terms and conditions of this Agreement: (i) as
required by any court, administrative agency or other governmental body,
including without limitation any filing or public disclosure that may be
required under any federal or state securities law or regulation; (ii) as
otherwise required by law; (iii) in confidence, to legal counsel of the Parties
and other professional advisors; (iv) in confidence, to accountants, banks,
potential investors, financing sources and their respective advisors who would
not reasonably be deemed to be potential customers or competitors of either
Party; (v) in confidence, in connection with the enforcement of this Agreement
or rights under this Agreement; or (vi) in confidence, in connection with a
merger or acquisition or proposed merger or acquisition, or the like.
Notwithstanding the foregoing, the Parties agree that no initial announcement
or other public disclosure of the existence or terms of this Agreement shall be
made until the Parties have agreed upon the text of and issued an appropriate
joint press release announcing the Agreement and its principal terms and the
associated equity investment by NLS in Broadcom.
-32-
<PAGE> 34
Section 14.14. Force Majeure.
(a) Neither Party to this Agreement shall be held
responsible for any failure or delay in performance under this Agreement where
such performance is rendered impracticable by any act of war, compliance with
laws, governmental acts or regulations, fire, flood, other natural disaster,
epidemic, strikes and other causes similar to those listed, in each case where
failure to perform is beyond the control, and not caused by the negligence, of
the nonperforming Party ("Force Majeure").
(b) Upon the occurrence of an event of Force Majeure, the
Party whose performance is so affected shall promptly give notice to the other
Party of the occurrence or circumstance upon which it intends to rely to excuse
its performance. Duties and obligations of both Parties shall be suspended for
the duration of the Force Majeure.
(c) During the Force Majeure, the Party so affected shall
use its reasonable best efforts to avoid or remove such Force Majeure and shall
use its reasonable best efforts to resume its performance under this Agreement
with the least possible delay. If one Party is prevented to fulfill its
obligations under this Agreement by one of the Force Majeure causes for a
period exceeding ninety (90) days after such obligation is due, the other Party
may at its option terminate this Agreement upon fifteen (15) days' advance
written notice.
(d) The provisions of this Section 14.14 shall govern in
the event of any Force Majeure, and the Parties each hereby waive any other
defense or excuse for non-performance on grounds of implausibility or
impossibility.
Section 14.15. Joint Work Product. This Agreement is the joint work
product of the Parties hereto; accordingly, in its interpretation, no
inferences will be drawn against either Party based upon its drafting of the
provision(s) at issue.
Section 14.16. No Third Party Beneficiaries. Unless otherwise
expressly provided, no provisions of this Agreement are intended or shall be
construed to confer upon or give to any person or entity other than NLS and
Broadcom and, to the extent specifically so provided, their respective
Affiliates, any rights, remedies or other benefits under or by reason of this
Agreement.
Section 14.17. Further Assurances. Each of the Parties hereto
covenants, without the need for additional consideration, that it and its
Affiliates will take such further actions and execute upon request any further
documents as may be reasonably required to fully effectuate the terms,
conditions and intent of this Agreement and to more fully vest in the other
Party and its Affiliates the rights, licenses and other benefits provided to
such other Party and its Affiliates hereunder.
[The remainder of this page intentionally left blank.]
-33-
<PAGE> 35
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed by their representatives thereunto duly authorized as of the date
first written above.
NEXTLEVEL SYSTEMS, INC. BROADCOM CORPORATION
By:_____________________________ By:____________________________
Name:___________________________ Name:__________________________
Title:____________________________ Title:_________________________
-34-
<PAGE> 36
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT A
DEVELOPMENT PROGRAM PRODUCTS AND SPECIFICATIONS
1. DEVELOPMENT PROGRAM PRODUCTS
A. AVI 2.5 (BCM7010)
B. QUOD 2 (BCM3120)
C. AVI 4.0 (BCM7100) [*****]
2. SPECIFICATIONS
AVI 2.5 (BCM7010) FEATURES
[*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-35-
<PAGE> 37
CONFIDENTIAL TREATMENT REQUESTED
QUOD 2 (BCM3120) FEATURES
[*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-36-
<PAGE> 38
CONFIDENTIAL TREATMENT REQUESTED
AVI 4.0 (BCM7100) FEATURES
[*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-37-
<PAGE> 39
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT B
MILESTONES
AVI 2.5 (BCM7010)
DEVICE DEVELOPMENT PLAN
[*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-38-
<PAGE> 40
CONFIDENTIAL TREATMENT REQUESTED
QUOD 2 (BCM3120)
DEVICE DEVELOPMENT PLAN
[*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-39-
<PAGE> 41
CONFIDENTIAL TREATMENT REQUESTED
QUOD 2/AVI 4.0 (BCM7100)
DEVICE DEVELOPMENT PLAN
[*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-40-
<PAGE> 42
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT C
VLSI TECHNOLOGY
[*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-41-
<PAGE> 43
EXHIBIT D
SUPPLY TERMS
(a) Terms and Conditions. All purchases of Broadcom Products by
NLS from Broadcom during the term of the Agreement shall be subject to the
terms and conditions of the Agreement, including these Supply Terms. NLS's
purchase orders submitted to Broadcom from time to time with respect to
Broadcom Products to be purchased hereunder, and Broadcom's acknowledgments
provided to NLS from time to time, shall be governed by the terms of the
Agreement, including these Supply Terms, and nothing to the contrary contained
in any such purchase order or acknowledgment shall in any way modify, or add
any additional terms and conditions to, the Agreement and/or the Supply Terms.
Broadcom and NLS understand and acknowledge that the nature of their respective
businesses may necessitate occasional requests for waivers of, or variances
from, one or more of the terms set forth in these Supply Terms. Broadcom and
NLS accordingly each agree to cooperate and negotiate in good faith with
respect to any such occasional requests for waivers or variances (other than
with respect to price terms); provided, however, that this agreement shall not
obligate either Broadcom or NLS to grant a waiver in any particular instance.
(b) Prices. The purchase price to NLS for each of the Broadcom
Products ("Purchase Price") shall be determined in accordance with Section 6.2
of the Agreement. All prices are F.O.B. Broadcom's facility currently located
at the address listed for Broadcom at the beginning of the Agreement.
(c) Taxes. NLS's Purchase Price does not include any federal,
state or local taxes and/or duties that may be applicable to the Broadcom
Products. When Broadcom has the legal obligation to collect such taxes, the
appropriate amount shall be added to NLS's invoice and paid by NLS, unless NLS
provides Broadcom with a valid tax exemption certificate authorized by the
appropriate taxing authority.
(d) Forecasts. NLS shall supply Broadcom, within the first seven
(7) business days following the beginning of each month during the term of the
Agreement, with a rolling twelve (12) month forecast of NLS's anticipated
requirements for Broadcom Products. The forecasts for any given month (a
"Shipment Month") shall become binding upon Broadcom and NLS, following the
final permitted adjustment (i.e. the adjustment permitted in the fourth month
prior to the Shipment Month so specified below), three (3) months prior to the
start of that Shipment Month (such three (3) month period to be referred to as
the "Committed Period"), at which time NLS shall be required to submit binding
purchase orders pursuant to Section (f) below for the number of units forecast
for such Shipment Month. Prior to that time, monthly forecasts may be adjusted
by NLS without penalty as follows:
-42-
<PAGE> 44
CONFIDENTIAL TREATMENT REQUESTED
<TABLE>
<S> <C>
Fourth month prior to Shipment Month [*****] adjustment from previous forecast for that
(i.e. between three and four months prior to start of Shipment Month
Shipment Month)
Fifth month prior to Shipment Month [*****] adjustment from previous forecast for that
(i.e. between four and five months prior to start of Shipment Month
Shipment Month)
Sixth month prior to Shipment Month [*****] adjustment from previous forecast for that
(i.e. between five and six months prior to start of Shipment Month
Shipment Month)
Seventh, eighth, ninth, tenth, eleventh and twelfth No restrictions
months prior to start of Shipment Month
</TABLE>
Notwithstanding the foregoing, if a mutually agreed third party published
standard (the "Published Standard") indicates, at any time during the term of
this Agreement, that standard industry lead times for binding purchase orders
for the manufacture of custom ASICs are greater than three (3) months, the
monthly forecasting adjustments and Committed Period set forth above shall be
appropriately adjusted (upon each such material change, in either direction, in
standard industry lead times) to reflect such lengthened industry lead times;
provided, however, that if and when the Published Standard indicates that such
standard industry lead times revert to being less than or equal to three (3)
months, the monthly forecasting adjustments and Committed Period set forth
above shall be reset to the original provisions set forth above (i.e., a
minimum Committed Period of three (3) months).
(e) Reschedule and Cancellation.
(i) Rescheduling. NLS may not reschedule a shipping date
within thirty (30) days of the date of delivery specified in NLS's purchase
order. All other delivery dates specified in NLS's purchase orders may be
delayed by up to a maximum of sixty (60) days from the original delivery date
specified in such purchase orders. Only one (1) reschedule per purchase order
is allowed. Notwithstanding the foregoing, the rescheduling of purchase orders
specifying delivery days within the Committed Period (as it may be adjusted
pursuant to section (d) above) shall be subject to the following restrictions:
<TABLE>
<CAPTION>
Months Prior Maximum
to Shipment Reschedule Percentage
----------- ---------------------
<S> <C>
2 [*****]
3 [*****]
</TABLE>
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-43-
<PAGE> 45
CONFIDENTIAL TREATMENT REQUESTED
(ii) Cancellation. NLS may cancel any purchase order
specifying a delivery date inside the Committed Period upon written notice to
Broadcom, subject to a cancellation charge calculated from the following table:
<TABLE>
<CAPTION>
Cancellation Charge
Stage of Production (% of Contract Price)
------------------- ---------------------
<S> <C>
Assembly/Finished Goods [*****]
Probed Die [*****]
Wafer Fabrication [*****]
</TABLE>
(f) Order and Acceptance. All orders for Broadcom Products
submitted by NLS shall be initiated by written purchase orders sent to Broadcom
and requesting a delivery date during the term of the Agreement; provided,
however, that an order may initially be placed orally or by telex if a
confirmational written purchase order is received by Broadcom within ten (10)
days following said oral or telex order. NLS shall submit purchase orders to
Broadcom at least ninety (90) days prior to the requested day of delivery. No
NLS order shall be binding upon Broadcom unless Broadcom acknowledges it in
writing. Broadcom shall send NLS a formal written acknowledgment or rejection
of an order within ten (10) business days of receipt thereof. If Broadcom
shall fail to send such an acknowledgment or rejection, the offer shall be
deemed rejected. With respect to any order accepted by Broadcom, unless
Broadcom objects to the date of delivery in the purchase order in its
acknowledgment of acceptance, Broadcom shall use its reasonable best efforts to
deliver Broadcom Products to NLS on, or no more than three (3) days prior to,
the date specified in the purchase order. If Broadcom notifies NLS of its
objection to the date of delivery specified in an NLS purchase order, the
parties shall mutually agree on an alternative delivery date. No partial
shipment of an order shall constitute the acceptance of the entire order,
absent the written acceptance of such entire order.
(g) Payment. Broadcom shall submit an invoice to NLS upon
shipment of each Broadcom Product. The invoice shall cover NLS's Purchase
Price for the Broadcom Products in a given shipment plus any freight, taxes or
other applicable costs initially paid by Broadcom but to be borne by NLS.
[*****]
(h) Shipping. All Broadcom Products delivered pursuant to the
terms of this Agreement shall be suitably packed for air freight shipment in
Broadcom's standard shipping cartons, marked for shipment at NLS's address set
forth above, and delivered to NLS or its carrier agent F.O.B. Broadcom's
facility currently located at the address listed for Broadcom at the beginning
of this Agreement, at which time title to such Broadcom Products and risk of
loss shall pass to NLS. Unless otherwise instructed in writing by NLS,
Broadcom shall select the carrier. All freight, insurance, and other shipping
expenses, as well as any special packing expense, shall be paid by NLS. NLS
shall also bear all applicable taxes, duties, and similar charges that may be
assessed against the Broadcom Products after delivery to the carrier at
Broadcom's facility.
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-44-
<PAGE> 46
(i) Quality Level. Broadcom shall use its reasonable best efforts
to achieve an acceptable outgoing quality level of at least 100 ppm (as
measured through Broadcom's Acceptance Quality Level testing) for all Broadcom
Products during the term of the Agreement.
(j) Warranties and Warranty Disclaimers.
(i) Broadcom Warranty. Broadcom warrants that each
Broadcom Product will be free from defects in workmanship and materials for one
year from the date of shipment ("Warranty Period"). This warranty does not
apply to any Broadcom Product which has been misused (including static
discharge, improper installation, repair or accident) or neglected or which
Broadcom is not capable of testing (and such incapability of testing has
occurred through no fault of Broadcom). Broadcom's sole obligation to NLS for
a Broadcom Product failing to meet this warranty is, at Broadcom's option, to
replace or repair the Broadcom Product or to issue NLS a credit for the
purchase price of the Broadcom Product, but only if (i) Broadcom has received
written notice of the warranty claim within the Warranty Period, (ii) NLS has
returned the Broadcom Product to Broadcom in accordance with the rejection
procedures set forth in Section k(ii) below, and (iii) Broadcom has verified
that the Broadcom Product is defective. Broadcom warrants a replacement or
repaired Broadcom Product only for the unexpired term of the warranty for the
defective Product.
(ii) NOTWITHSTANDING CLAUSE (i) ABOVE, BROADCOM PROVIDES
PROTOTYPES "AS-IS", WITHOUT WARRANTY OF ANY KIND.
(iii) Broadcom's warranties shall not be enlarged by, nor
shall any obligation or liability of Broadcom arise due to, Broadcom providing
technical advice, facilities, or service in connection with any Broadcom
Product.
(iv) THE WARRANTY AND REMEDIES STATED IN THIS SECTION (j)
ARE EXCLUSIVE. BROADCOM DISCLAIMS ALL OTHER WARRANTIES, EXPRESS AND IMPLIED,
INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE AND NONINFRINGEMENT. BROADCOM NEITHER ASSUMES NOR
AUTHORIZES ANY OTHER PERSON TO ASSUME FOR IT ANY OTHER LIABILITY IN CONNECTION
WITH THE SALE, INSTALLATION OR USE OF ITS PRODUCTS.
(k) Rejection of Broadcom Products.
(i) Acceptance Period. NLS shall have the right to
inspect all Broadcom Products promptly upon receipt thereof and may reject any
Broadcom Product that fails in any material way to meet the current published
specifications for that Broadcom Product. Any Broadcom Product not properly
rejected within forty-five (45)
-45-
<PAGE> 47
CONFIDENTIAL TREATMENT REQUESTED
days after receipt of that Broadcom Product by NLS ("Rejection Period") shall
be deemed accepted. If any Broadcom Product is shipped by NLS to its customer
prior to expiration of the Rejection Period, then that unit shall be deemed
accepted upon shipment by NLS.
(ii) Rejection Procedures. To reject a Broadcom Product,
NLS shall, within the Rejection Period, notify Broadcom in writing of its
rejection and request a Material Return Authorization ("MRA") number. Broadcom
shall use its reasonable best efforts to provide the MRA number in writing to
NLS within ten (10) days following the receipt of such request; provided,
however, that if the quantity rejected by NLS is greater than ten (10) pieces,
Broadcom shall have the right, prior to issuing an MRA number for the full
quantity, to request that a sample of the defective Broadcom Product be
returned with the initial MRA. In such case, subject to Broadcom's
verification of the initial MRA samples, but no later than ten (10) days
following the return of such samples, Broadcom shall notify NLS in writing of
the disposition of the full quantity; provided, however, that in the event such
samples are returned by NLS as part of actual NLS product units, Broadcom shall
have up to thirty (30) days to notify NLS in writing of the disposition of the
full quantity. If such full quantity is deemed defective, Broadcom shall then
issue a subsequent MRA which shall cover such full quantity. Within ten (10)
days after receipt of the written MRA number, NLS shall return to Broadcom the
rejected Broadcom Product, freight prepaid, with the MRA number displayed on
the outside of the carton. NLS shall have the right to debit the purchase
price of rejected Broadcom Products from its accounts payable to Broadcom
immediately upon receipt of the MRA number with respect to such rejected
Broadcom Products. In this regard, the MRA number issued by Broadcom with
respect to samples of rejected Broadcom Products which are part of larger
quantity of rejected Broadcom Products shall be considered distinct from the
MRA number for such full quantity of rejected Broadcom Products. In addition,
with respect to rejected quantities greater than ten (10) pieces for which
Broadcom has issued NLS an MRA number and for which NLS has taken a debit,
Broadcom shall reserve the right, at its sole option, to repair or replace such
rejected quantities and, thereafter, to sell such quantities back to NLS.
Provided that Broadcom has complied with its obligations in this Section (k),
Broadcom reserves the right to refuse to accept any rejected Broadcom Products
that do not bear an MRA number on the outside of the carton.
(l) Production Capacity and Supply. Broadcom shall use its
reasonable best efforts to establish and maintain a minimum production capacity
sufficient to supply NLS's requirements (such requirements to be determined
consistent with these Supply Terms) for all Broadcom Products during the term
of the Agreement. [*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-46-
<PAGE> 48
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT E
BROADCOM NRE PAYMENTS
Upon execution of the Agreement, Broadcom shall pay to NLS the non-refundable
sum of [*****] for non-recurring engineering (NRE) in support of Broadcom's
MPEG development program. NLS deliverables under this program include:
[*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-47-
<PAGE> 49
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT F
[*****]
[*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-48-
<PAGE> 50
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT G
NLS NRE PAYMENTS
Upon completion of the milestones identified below, NLS shall make
non-refundable NRE payments to Broadcom in the amounts shown below:
[*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-49-
<PAGE> 51
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT H
MANDATORY ENHANCEMENTS
[*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-50-
<PAGE> 52
EXHIBIT I
[INTENTIONALLY OMITTED]
-51-
<PAGE> 53
EXHIBIT J
PENDING LITIGATION AND CLAIMS
1. DISCLOSURES BY BROADCOM
One or more employees or independent contractors of the Company were
working at the University of California at Los Angeles ("UCLA") while
concurrently working at the Company. Each employee or independent contractor
of the Company who worked at UCLA executed a State Oath of Allegiance and
Patent Agreement, pursuant to which each such person agreed that every possible
patentable device, process, plant or product (collectively referred to as
"Inventions"), conceived or developed by such person while employed by UCLA, or
during the course of his or her utilization of any research facilities or in
connection with his or her use of any gift, grant or contract research funds
received through UCLA, would be assigned to UCLA. UCLA has refused to execute
any document releasing its interest in any such Inventions or assigning its
right to any such inventions to the Company. UCLA may assert a claim to the
Inventions of such persons, although no such claim has been received by the
Company to date.
On or about December 20, 1996, Stanford Telecommunications, Inc.
("STel") filed an action for patent infringement and injunctive relief (the
"Action") against the Company in the United States District Court for the
Northern District of California. STel alleges in its complaint in the Action
that the Company infringes United States Patent No. 5,412,352 (the "'352
Patent"), entitled "Modulator Having Direct Digital Synthesis for Broadband RF
Transmission." On or about February 18, 1997, the Company filed its answer and
affirmative defenses to STel's complaint, denying the allegations in STel's
complaint, and asserted a counterclaim requesting the Court to issue a
declaration that the Company does not infringe the '352 Patent and that the
'352 Patent is invalid and unenforceable.
On or about April 25, 1997, Sarnoff Corporation ("Sarnoff") filed a
complaint in New Jersey Superior Court against the Company and five former
Sarnoff employees now employed by the Company (the "Former Employees")
asserting claims against the Former Employees for breach of contract, (common
law) misappropriation of trade secrets and breach of the covenant of good faith
and fair dealing, and against the Company for inducing such actions. These
claims stem from the alleged disclosure of Sarnoff's supposedly proprietary
Quadrature Amplitude Modulation ("QAM") technology. The complaint also asserts
claims against the Company and the Former Employees for unfair competition,
misappropriation of trade secrets and tortious interference with present and
prospective economic advantage, as well as a claim against the Company for
"piracy" of Sarnoff's employees. Sarnoff seeks to preliminarily and
permanently restrain the Company and the Former Employees from utilizing any
alleged Sarnoff trade secrets, and to restrain the Former Employees from
violating their statutory and contractual duties of confidentiality to Sarnoff
by precluding them from working for six months in any capacity relating to the
Company's QAM-related programs. On or about May 20, the New Jersey court
denied Sarnoff's request for a temporary restraining order; in the four months
since, Sarnoff has not sought any other injunctive relief.
From time to time, companies have asserted exclusive patent, copyright
and other intellectual property rights to technologies that are important to
the integrated chip industry. The Company
-52-
<PAGE> 54
evaluates each claim and, if appropriate, seeks a license to use the protected
technology. There can be no assurances that the Company would be able to
obtain licenses to use such technology or obtain such licenses on terms that
would not have a material adverse effect on the Company. If the Company or its
suppliers are unable to license protected technology used in the Company's
products, the Company could be prohibited from marketing such products. The
Company could also incur substantial costs to redesign its products or to
defend any legal action taken against it. If the Company's products should be
found to infringe protected technology, the Company could be required to pay
damages to the infringed party and to stop using such protected technology.
2. DISCLOSURES BY NLS
None.
-53-
<PAGE> 55
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT K
[*****]
[*****]
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-54-
<PAGE> 56
CONFIDENTIAL TREATMENT REQUESTED
EXHIBIT L
MINIMUM PURCHASE COMMITMENTS FOR
BCM3900QUOD AND BCM3902
<TABLE>
<CAPTION>
Calendar Minimum
Quarter Unit
Ended Quantity
- --------- -----------------------------------
BCM3900QUOD BCM3902
----------- -------
<S> <C> <C>
12/31/97 [*****] [*****]
3/31/98 [*****] [*****]
6/30/98 [*****] [*****]
</TABLE>
(A) Subject to Broadcom's ability to ship.
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-55-
<PAGE> 57
CONFIDENTIAL TREATMENT REQUESTED
EXHIBITS
Exhibit A - Development Program Products and Specifications
Exhibit B - Milestones
Exhibit C - VLSI Technology
Exhibit D - Supply Terms
Exhibit E - Broadcom NRE Payments
Exhibit F - [*****]
Exhibit G - NLS NRE Payments
Exhibit H - Mandatory Enhancements
Exhibit I - [Intentionally Omitted]
Exhibit J - Pending Litigation and Claims
Exhibit K - [*****]
Exhibit L - Minimum Purchase Commitments for BCM3900QUOD and BCM3902
[*****] Confidential portion has been filed separately with the Securities and
Exchange Commission.
-56-
<PAGE> 1
EXHIBIT 10.9
BROADCOM CORPORATION
STOCK PURCHASE AGREEMENT
February 3, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Purchase and Sale of Stock.................................................. 1
1.1 Sale and Issuance of Stock........................................... 1
1.2 The Closing.......................................................... 1
2. Representations and Warranties of the Company............................... 2
2.1 Organization and Good Standing....................................... 2
2.2 Authorization........................................................ 2
2.3 Valid Issuance of Stock.............................................. 2
2.4 Litigation........................................................... 2
2.5 Properties........................................................... 2
2.6 Compliance with Other Documents...................................... 2
3. Representations and Warranties of the Investor.............................. 3
3.1 Authorization........................................................ 3
3.2 Investigation........................................................ 3
3.3 Accredited Investor.................................................. 3
3.4 Purchase Entirely for Own Account.................................... 3
4. Conditions to the Investor's Obligation at Closing.......................... 3
4.1 Representations and Warranties....................................... 3
4.2 Securities Laws...................................................... 3
4.3 Authorizations....................................................... 3
4.4 Initial Public Offering of Common Stock.............................. 3
5. Conditions to the Company's Obligations at Closing.......................... 4
5.1 Representations and Warranties....................................... 4
5.2 Securities Laws...................................................... 4
5.3 Authorizations....................................................... 4
5.4 Initial Public Offering of Common Stock.............................. 4
5.5 Payment of Purchase Price............................................ 4
6. Covenants of the Company and the Investor................................... 4
6.1 Agreement Not to Transfer............................................ 4
6.2 Market Stand-Off..................................................... 5
6.3 Notice of Intention to Transfer...................................... 5
6.4 Standstill........................................................... 5
6.5 Voting Agreements.................................................... 6
6.6 Hart-Scott-Rodino.................................................... 6
6.7 Registration of Stock................................................ 6
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
7. Miscellaneous............................................................... 7
7.1 Governing Law........................................................ 7
7.2 Survival; Additional Securities...................................... 7
7.3 Successors and Assigns............................................... 7
7.4 Entire Agreement..................................................... 7
7.5 Notices.............................................................. 7
7.6 Amendments and Waivers............................................... 8
7.7 Legal Fees........................................................... 8
7.8 Expenses............................................................. 8
7.9 Titles and Subtitles................................................. 8
7.10 Counterparts......................................................... 8
7.11 Severability......................................................... 8
7.12 Confidentiality...................................................... 8
</TABLE>
<PAGE> 4
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of the 3rd day of
February 1998, by and between Broadcom Corporation, a California corporation
(the "Company") and Cisco Systems, Inc., a Delaware Corporation (the
"Investor").
WHEREAS, the Company and the Investor are parties to a
Development and License Agreement dated as of September 1, 1996, pursuant to
which the Company has granted the Investor an option (the "Option") to purchase
shares of the Company's Common Stock in conjunction with the Company's initial
public offering (the "IPO").
WHEREAS, the Investor has indicated a desire to purchase 500,000
shares of Class A Common Stock from the Company and to have such shares
registered under the Securities Act of 1933, as amended (the "Securities Act")
concurrently with the Company's IPO.
WHEREAS, the Company has indicated a desire to sell 500,000
shares of Class A Common Stock to the Investor and has agreed to register such
shares under the Securities Act on the terms set forth herein.
WHEREAS, the Company and the Investor have agreed that the Option
shall be terminated and that this Agreement shall constitute the entire
understanding and agreement between the parties with regard to the subject
matter hereof.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
1.1 Sale and Issuance of Stock. Subject to the terms and
conditions of this Agreement, the Company agrees to sell to the Investor and the
Investor agrees to purchase from the Company 500,000 shares1 of the Company's
Class A Common Stock (the "Stock"), having the rights, preferences, privileges
and restrictions set forth in the form of Amended and Restated Articles of
Incorporation of the Company (the "Restated Articles") to be filed with the
California Secretary of State prior to the Closing (as defined below).
1.2 The Closing. The purchase and sale of the Stock shall be held
at the Company's offices concurrently with the closing of IPO or, if later, upon
satisfaction or waiver of each of the conditions set forth in Sections 4 and 5
(the "Closing"). At the Closing, the Company will deliver the Stock to the
Investor against payment of the purchase price therefor by
- --------
1 The 500,000 shares have been calculated assuming the Company effects a
three-for-two split of its outstanding Common Stock prior to the Closing. In the
event that the Company does not effect this three-for-two stock split, the
number of shares to be purchased shall be adjusted to 333,333.
<PAGE> 5
check payable to the order of the Company or by wire transfer. The per share
purchase price for the Stock shall be equal to the per share price paid by the
public for the Company's Class A Common Stock in the IPO, less any underwriter
discounts and commissions.
2. Representations and Warranties of the Company. The Company
hereby represents and warrants to the Investor that:
2.1 Organization and Good Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California and has all requisite corporate power and authority to carry
on its business as now conducted.
2.2 Authorization. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement, the performance of all
obligations of the Company hereunder, and the authorization, issuance and
delivery of the Stock has been taken or will be taken prior to the Closing,
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors and by general principles of equity.
2.3 Valid Issuance of Stock. The Stock, when issued, sold and
delivered in accordance with the terms hereof for the consideration expressed,
will be duly and validly issued, fully paid and nonassessable and, based in part
upon the representations of the Investor in this Agreement, will be issued in
compliance with all applicable federal and state securities laws.
2.4 Litigation. Except as set forth in the Company's registration
statement prepared in connection with the IPO, as filed with the Securities and
Exchange Commission ("SEC") and amended from time to time (the "Registration
Statement"), there are no actions, proceedings or investigations pending or, to
the best of Company's knowledge, any basis therefor or threat thereof, against
or affecting the Company, that, either in any case or in the aggregate, would
result in any material adverse change in the business, financial condition, or
results of operations of the Company.
2.5 Properties. To the best of the Company's knowledge (but
without having conducted any special investigation), the Company has (i) good
and marketable title to its properties and assets and has good title to all its
leasehold interests, and (ii) sufficient title, license and/or ownership of all
patents, trademarks, service marks, trade names, copyrights, trade secrets,
information, proprietary rights and processes necessary for its business as now
conducted on the date hereof.
2.6 Compliance with Other Documents. The execution and delivery
of this Agreement, consummation of the transactions contemplated hereby, and
compliance with the terms and provisions hereof will not conflict with or result
in a breach of the terms and conditions of, or constitute a default under the
Restated Articles or Bylaws of the Company or of any contract or agreement to
which the Company is now a party, except where such conflict, breach or default
of any such contract or agreement, either individually or in the aggregate,
would not have a material adverse effect on the Company's business, financial
condition or results of operations.
2
<PAGE> 6
3. Representations and Warranties of the Investor. The Investor
hereby represents and warrants that:
3.1 Authorization. This Agreement constitutes the valid and
legally binding obligation of the Investor, enforceable in accordance with its
terms, subject to laws of general application relating to bankruptcy, insolvency
and the relief of debtors and by general principles of equity.
3.2 Investigation. The Investor acknowledges that it has had an
opportunity to discuss the business, affairs and current prospects of the
Company with the Company's president. The Investor further acknowledges having
had access to information about the Company that it has requested or considers
necessary for purposes of purchasing the Stock.
3.3 Accredited Investor. The Investor is an "accredited investor"
as such term is defined in Regulation D adopted by the SEC.
3.4 Purchase Entirely for Own Account. This Agreement is made
with the Investor in reliance upon the Investor's representation to the Company,
which by the Investor's execution of this Agreement the Investor hereby
confirms, that the Stock will be acquired for investment for the Investor's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that the Investor has no present intention
of selling, granting any participation in, or otherwise distributing the same.
4. Conditions to the Investor's Obligation at Closing. The
obligation of the Investor to purchase the Stock at the Closing is subject to
the fulfillment to the Investor's satisfaction on or prior to the Closing of the
following conditions:
4.1 Representations and Warranties. The representations and
warranties made by the Company in Section 2 hereof shall be true and correct
when made, and shall be true and correct as of the Closing with the same force
and effect as if they had been made on and as of such date, subject to changes
contemplated by this Agreement.
4.2 Securities Laws. The offer and sale of the Stock to the
Investor pursuant to this Agreement shall be either (i) registered under the
Securities Act, or (ii) exempt from the registration requirements of the
Securities Act and the registration and/or qualification requirements of all
applicable state securities laws.
4.3 Authorizations. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body that are required in
connection with the lawful issuance and sale of the Stock pursuant to this
Agreement (including, if applicable, the expiration of any waiting period under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act")) shall have been duly obtained and shall be effective on and as of the
Closing.
4.4 Initial Public Offering of Common Stock. The initial public
offering of the Company's Class A Common Stock shall have occurred.
3
<PAGE> 7
5. Conditions to the Company's Obligations at Closing. The
obligation of the Company to sell the Stock at the Closing is subject to the
fulfillment to the Company's satisfaction on or prior to the Closing of the
following conditions:
5.1 Representations and Warranties. The representations and
warranties of the Investor contained in Section 3 hereof shall be true as of the
Closing with the same force and effect as if they had been made on and as of
such date, subject to changes contemplated by this Agreement.
5.2 Securities Laws. The offer and sale of the Stock to the
Investor pursuant to this Agreement shall be either (i) registered under the
Securities Act, or (ii) exempt from the registration requirements of the
Securities Act and the registration and/or qualification requirements of all
applicable state securities laws.
5.3 Authorizations. All authorizations, approvals or permits, if
any, of any governmental authority or regulatory body that are required in
connection with the lawful issuance and sale of the Stock pursuant to this
Agreement (including, if applicable, the expiration of any waiting period under
the HSR Act) shall have been duly obtained and shall be effective on and as of
the Closing.
5.4 Initial Public Offering of Common Stock. The initial public
offering of the Company's Common Stock shall have occurred.
5.5 Payment of Purchase Price. The Investor shall have delivered
to the Company the purchase price for the Stock as set forth in Section 1.2
hereof.
6. Covenants of the Company and the Investor.
6.1 Agreement Not to Transfer.
(a) Prior to the first anniversary of the Closing, the Investor
shall not, directly or indirectly, Transfer or offer to Transfer any shares of
the Stock.
(b) Following the first anniversary of the Closing and prior to
the second anniversary of the Closing, the Investor shall not, directly or
indirectly, Transfer or offer to Transfer, in the aggregate, more than 250,000
shares of the Stock during any one calendar quarter.
(c) Notwithstanding the foregoing restrictions on Transfer (the
"Transfer Restrictions"), the Transfer Restrictions shall be ineffective in the
event (i) an unrelated third party has publicly announced and is actively
pursuing the purchase of all or substantially all of the assets or capital stock
of the Company or a merger in which the Company would not be the surviving
corporation; provided, that if such acquisition or merger is not consummated
within sixty days of such public announcement, the Transfer Restrictions shall
be reinstated, or (ii) Dr. Henry Samueli and Mr. Henry Nicholas have a material
conflicting operational or management role in another company or are no longer
in a position to influence management or operating responsibilities at
4
<PAGE> 8
the Company (a "Key Executive Loss"), it being understood that the Company's
retention of additional management shall not by itself be deemed a Key Executive
Loss.
(d) In order to enforce the Transfer Restrictions, the Company
may impose stop-transfer instructions with respect to the Stock until the end of
the restricted period.
(e) As used in this Agreement, the term "Transfer" shall mean any
sale, transfer, assignment, hypothecation, encumbrance or other disposition,
whether voluntary or involuntary, of shares of the Stock. In the case of a
hypothecation, the Transfer shall be deemed to occur both at the time of the
initial pledge and at any pledgee's sale or a sale by any secured creditor or a
retention by the secured creditor of the pledged shares of the Stock in complete
or partial satisfaction of the indebtedness for which the shares of the Stock
are security.
6.2 Market Stand-Off. In addition to the Transfer Restrictions
(which shall in no way be limited by the following), in connection with any
underwritten public offering by the Company of its equity securities pursuant to
an effective registration statement filed under the Securities Act, the Investor
shall not Transfer or offer to Transfer any shares of the Stock without the
prior written consent of the Company and its underwriters. Such restriction (the
"Market Stand-Off") shall be in effect for such period of time from and after
the effective date of the final prospectus for the offering as may be requested
by the Company or such underwriters; provided, however, that (i) such Market
Stand-Off shall not exceed one hundred eighty (180) days, and (ii) the Investor
shall be subject to the Market Stand-Off only if the officers and directors of
the Company are also subject to similar restrictions. In order to enforce the
Market Stand-Off, the Company may impose stop-transfer instructions with respect
to the Stock until the end of the applicable stand-off period.
6.3 Notice of Intention to Transfer. On or prior to the third
anniversary of the Closing, in the event the Investor plans to Transfer in the
aggregate more than 100,000 shares of the Stock in one or more transactions
during any three (3) month period, the Investor shall use its best efforts to
inform the Company of such intention to Transfer such shares ten (10) days prior
to such Transfer.
6.4 Standstill. The Investor agrees that, prior to the third
anniversary of the Closing, unless specifically invited by the Company, the
Investor will not, in any manner, directly or indirectly, effect any acquisition
of Voting Securities (as hereinafter defined), or beneficial ownership thereof
if, immediately after any such acquisition, the Investor would beneficially own,
in the aggregate, Voting Securities representing more than ten percent (10%) of
the outstanding Common Stock of the Company. The Investor also agrees during
such period not to make any public request (or publicize any request) of the
Company (or its directors, officers, employees or agents), directly or
indirectly, to amend or waive any provision of this Section 6.4 (including this
sentence). The Investor also agrees not to form, join or in any way participate
in a "group" (as defined under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")), or take any other action, in order to circumvent the
provisions of this Section 6.4.
For purposes of this Agreement, (i) the term "Voting Securities"
shall refer to all securities of the Company entitled to vote generally for the
election of directors, and (ii) the term
5
<PAGE> 9
"beneficial ownership" shall have the meaning set forth in Rule 13d-3 under
the Exchange Act.
The restrictions set forth in this Section 6.4 shall be
ineffective upon the occurrence of either of the following events: (i) an
unrelated third party has publicly announced and is actively pursuing the
purchase of all or substantially all of the assets or capital stock of the
Company or a merger in which the Company would not be the surviving corporation;
or (ii) an officer of the Company, duly authorized by the Company's Board of
Directors, has informed the Investor in writing of the Company's potential
interest in entering into a sale of all or substantially all of its assets or
stock or a merger in which the Company would not be the surviving corporation;
provided, however, that if such acquisition, merger or sale is not consummated
within sixty days of such public announcement (in the case of clause (i)) or of
such notice in writing (in the case of clause (ii)), the restrictions set forth
in this Section 6.4 shall be reinstated.
6.5 Voting Agreements. For a period ending on the later of (a)
the seventh anniversary of the Closing, (b) the expiration of any and all
agreements between the Company and the Investor, including but not limited to
the Development and License Agreement dated as of September 1, 1996, future
co-development agreements, ASIC volume purchase and supply agreements, and any
extensions or modifications of the foregoing, or (c) the Investor's ceasing to
make a regular pattern of ASIC purchases from the Company, the Investor agrees
to vote all shares of Voting Securities owned by it (i) in each election of
directors for the entire slate of nominees recommended by the Company's Board of
Directors to the Company's shareholders and (ii) on all other matters to be
voted on by holders of Voting Securities, unless the Company otherwise consents
in writing, in the same proportion as the votes cast by all other shareholders
of the Company entitled to vote on such matter (other than the Investor). The
Investor, as a holder of Voting Securities, shall be present, in person or by
proxy, at all meetings of shareholders of the Company so that all shares of
Voting Securities beneficially owned by it may be counted for the purpose of
determining the presence of a quorum at such meetings.
The voting agreements set forth in this Section 6.5 shall
terminate immediately upon the occurrence of either of the following events: (i)
an unrelated third party has publicly announced and is actively pursuing the
purchase of all or substantially all of the assets or capital stock of the
Company or a merger in which the Company would not be the surviving corporation;
or (ii) a Key Executive Loss has occurred; provided, however, that if in the
case of clause (i) such acquisition, merger or sale is not consummated within
sixty days of such public announcement, the voting agreements set forth in this
Section 6.5 shall be reinstated.
6.6 Hart-Scott-Rodino. The Company and the Investor will assist
and cooperate with each other regarding any filings required under the HSR Act
and any other applicable laws and regulations. The Company and the Investor each
agree to make any HSR Act and other filings promptly upon the other's request.
6.7 Registration of Stock. The Company agrees that, to the extent
allowed by the SEC, it will register the Stock in the IPO. If the Company is not
able to register the Stock in the IPO, the Company agrees that, upon request by
the Investor, it will effect registration of the Stock in accordance with the
provisions contained in Exhibit A attached hereto. If the Company
6
<PAGE> 10
is not able to register the Stock in the IPO, the Investor understands and
agrees that (i) the Stock will be characterized as "restricted securities" under
the federal securities laws inasmuch as it is being acquired from the Company in
a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Securities Act only in certain limited circumstances, and (ii) each
certificate representing the Stock and any other securities issued in respect of
the Stock upon any stock split, stock dividend, recapitalization, merger or
similar event (unless no longer required in the opinion of counsel for the
Company) shall be stamped or otherwise imprinted with appropriate legends
mandated by federal and state securities laws.
7. Miscellaneous.
7.1 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California, without regard to the conflict of law provisions thereof.
7.2 Survival; Additional Securities. The representations and
warranties set forth in Sections 2 and 3 shall survive until the Closing. The
covenants and agreements set forth in Section 6 shall survive in accordance with
their terms. Any new, substituted or additional securities which are by reason
of any stock split, stock dividend, recapitalization or reorganization
distributed with respect to the Stock ("Stock Distributions") shall be
immediately subject to the covenants and agreements set forth in Section 6 to
the same extent the Stock is at such time covered by such provisions.
7.3 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the respective successors and assigns of the parties hereto.
Nothing in this Agreement, express or implied, is intended to confer upon any
party other than the parties hereto or their respective successors and assigns
any rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement. Notwithstanding
anything to the contrary contained herein, the covenants set forth in Section 6
shall not be binding upon any entity (other than an affiliate of the Investor)
which acquires any shares of the Stock or a Stock Distribution in a transaction
permitted hereunder.
7.4 Entire Agreement. This Agreement constitutes the entire
understanding and agreement between the parties with regard to the subject
matter hereof.
7.5 Notices. Except as otherwise provided, all notices and other
communications required or permitted hereunder shall be in writing, shall be
effective when given, and shall in any event be deemed to be given upon receipt
or, if earlier, (i) five (5) days after deposit with the U.S. postal service or
other applicable postal service, if delivered by first class mail, postage
prepaid, (ii) upon delivery, if delivered by hand, (iii) one (1) business day
after the day of deposit with Federal Express or similar overnight courier,
freight prepaid, if delivered by overnight courier or (iv) one (1) business day
after the day of facsimile transmission, if delivered by facsimile transmission
with copy by first class mail, postage prepaid, and shall be addressed,
7
<PAGE> 11
(a) if to the Investor, at the Investor's address set forth below its signature,
or at such other address as the Investor shall have furnished to the Company in
writing, or (b) if to the Company, at its address as set forth below its
signature, or at such other address as the Company shall have furnished to the
Investor in writing.
7.6 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of the Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively)
only with the written consent of the Company and the Investor.
7.7 Legal Fees. In the event of any action at law, suit in equity
or arbitration proceeding in relation to this Agreement or the Stock or any
Stock Distribution, the prevailing party shall be paid by the other party a
reasonable sum for the attorneys' fees and expenses incurred by such prevailing
party.
7.8 Expenses. Irrespective of whether the Closing is effected,
the Company and the Investor shall each pay their own costs and expenses
incurred with respect to the negotiation, execution, delivery and performance of
this Agreement.
7.9 Titles and Subtitles. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
7.10 Counterparts. This Agreement may be executed in
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
7.11 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
7.12 Confidentiality. The parties hereto agree that, except with
the prior written permission of the other party, it shall at all times keep
confidential and not divulge, furnish, or make accessible to anyone any
confidential information, knowledge, or data concerning or relating to the
business or financial affairs of such other party to which said party has been
or shall become privy by reason of this Agreement, discussions or negotiations
relating to this Agreement, or the performance of its obligations hereunder.
[Signature Page to Follow]
8
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year hereinabove first written.
BROADCOM CORPORATION
16251 Laguna Canyon Road
Irvine, CA 92618
Attn: Henry T. Nicholas, President
- -------------------------------------
By: Henry T. Nicholas, President
CISCO SYSTEMS, INC.
170 W. Tasman Drive
San Jose, CA 95134
Attn: Dan Scheinman, General Counsel
- -------------------------------------
By:
9
<PAGE> 13
EXHIBIT A
1. Registration Rights. The Company covenants and agrees as
follows:
1.1 Definitions. For purposes of this Exhibit A, capitalized
terms used herein and not otherwise defined shall have the meanings ascribed to
them in the Stock Purchase Agreement between the Company and the Investor to
which this Exhibit A is attached. In addition, the following terms used herein
shall have the following meanings:
(a) The term "Form S-1" means such form under the Act as
in effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(b) The term "Form S-3" means such form under the Act as
in effect on the date hereof or any registration form under the Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
(c) The term "1934 Act" means the Securities Exchange Act
of 1934, as amended.
(d) The term "register", "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Act, and the declaration or
ordering of effectiveness of such registration statement or document.
1.2 Request for Registration.
(a) If the Company shall receive, at any time after one
year following the Closing, a written request from the Investor that the Company
effect a registration on a Form S-3 and any related qualification or compliance
with respect to the Stock, then the Company shall, as expeditiously as
reasonably possible, effect the registration of all, but not less than all, such
Stock on Form S-3 and all such qualifications and compliances as may be so
requested and as would permit or facilitate the sale and distribution of all of
the Stock. The Company shall have no obligation to effect any registration of
less than all of the Stock.
(b) Notwithstanding anything to the contrary in this
Section 1.2, the Company shall not be obligated to effect any such registration,
qualification or compliance, pursuant to this Section 1.2: (i) if the Company
shall furnish to the Investor a certificate signed by the President of the
Company stating that, in the good faith judgment of the Board of Directors of
the Company, such registration should be deferred due to material events
directly relating to the Company, in which event the Company shall have the
right to defer the filing of the Form S-3 for a period of not more than 90 days
after receipt of the request of the Investor under this Section
A-1
<PAGE> 14
1.2 (provided, however, that the Company may defer such registration only once);
or (ii) in any particular jurisdiction in which the Company would be required to
qualify to do business or to execute a general consent to service of process in
effecting such registration, qualification or compliance.
(c) If Form S-3 is not available to the Company to effect
the registration of the Stock as contemplated by this Section 1.2, then (i) the
Company shall effect such registration on Form S-1 and (ii) in such event, all
references in this Section 1 to Form S-3 shall be read as references to Form
S-1.
(d) The Company shall not be obligated to effect, or to
take any action to effect, any registration pursuant to this Section 1.2 after
the earlier to occur of the following events: (i) the Company has effected one
registration pursuant to this Section 1.2, and such registration has been
declared or ordered effective and otherwise satisfies and continues to satisfy
the terms and conditions of this Section 1.2; or (ii) the Company has
voluntarily effected the registration of all of the Stock without having first
received a request for such registration pursuant to this Section 1.2 (a
"Voluntary Registration"), and such Voluntary Registration has been declared or
ordered effective and otherwise satisfies and continues to satisfy the terms and
conditions of this Section 1.2.
1.3 Obligations of the Company. Whenever required under Section
1.2 to effect the registration on Form S-3 of the Stock, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a Form S-3 with respect
to such Stock and use its best efforts to cause such registration statement to
become effective as soon as reasonably practicable after the mailing of the
request for such registration but in no event later than ninety (90) days after
such mailing. The Company shall keep such registration statement effective until
the earlier of (i) two (2) years after the Closing, (ii) the distribution of all
of the Stock as contemplated in the registration statement has been completed,
and (iii) the date which all shares of the Stock held by the Investor may
immediately be sold under Rule 144 during any 90-day period.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Investor such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as the Investor may reasonably
request in order to facilitate the disposition of the Stock.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Investor; provided that the Company shall not be required in
A-2
<PAGE> 15
connection therewith or as a condition thereto to qualify to do business or to
file a general consent to service of process in any such states or
jurisdictions.
(e) Notify the Investor covered by such registration
statement at any time when a prospectus relating thereto is required to be
delivered under the Act of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
(f) Cause all such Stock registered pursuant hereunder to
be listed on each securities exchange on which similar securities issued by the
Company are then listed.
(g) Provide a transfer agent and registrar for all of the
Stock registered pursuant hereunder and a CUSIP number for all such Stock, in
each case not later than the effective date of such registration.
1.4 Investor Obligation to Furnish Information. It shall be a
condition precedent to the obligations of the Company to take any action
pursuant hereto with respect to the Stock that the Investor shall furnish to the
Company such information regarding itself, the Stock, and the intended method of
disposition of such securities as shall be required to effect the registration
of such Stock.
1.5 Expenses of Registration. All expenses incurred in connection
with registrations, filings or qualifications pursuant hereto, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company
(including fees and disbursements of counsel for the Company in its capacity as
counsel to the Investor hereunder but excluding the fees and disbursements of
any other counsel for the Investor) shall be borne by the Company; provided,
however, that the Company shall not be required to pay for any expenses of any
registration proceeding begun pursuant hereto if the registration request is
subsequently withdrawn at the request of the Investor, unless the Investor
agrees to forfeit its right to any demand registration pursuant hereto; provided
further, however, that if at the time of such withdrawal, the Investor has
learned of a material adverse change in the condition, business, or prospects of
the Company from that known to the Investor at the time of its request and has
withdrawn the request with reasonable promptness following disclosure by the
Company of such material adverse change, then the Investor shall not be required
to pay any of such expenses and shall retain its right of registration pursuant
to Section 1.2.
1.6 Indemnification. In the event any Stock is included in a
registration statement under Section 1.2:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless the Investor, any underwriter (as defined in the
Act) for the Investor and each person, if any, who controls the Investor or
underwriter within the meaning of the Act or the 1934 Act, against any losses,
claims, damages, or liabilities (joint or several) to which they may become
subject under the Act, the 1934 Act or other federal or state law, insofar as
such losses, claims,
A-3
<PAGE> 16
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, the 1934 Act or any state
securities law; and the Company will pay to the Investor, or such underwriter or
controlling person, as incurred, any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such loss, claim,
damage, liability, or action; provided, however, that the indemnity agreement
contained in this subsection (a) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability, or action if such settlement is
effected without the consent of the Company (which consent shall not be
unreasonably withheld), nor shall the Company be liable in any such case for any
such loss, claim, damage, liability, or action to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon and in conformity
with written information furnished expressly for use in connection with such
registration by any such Investor, underwriter or controlling person.
(b) To the extent permitted by law, the Investor will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, and any
controlling person of any such underwriter, against any losses, claims, damages,
or liabilities (joint or several) to which any of the foregoing persons may
become subject, under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Investor expressly for
use in connection with such registration; and each such Investor will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection (b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection (b)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Investor, which consent shall not be unreasonably withheld; provided, that, in
no event shall any indemnity under this subsection (b) exceed the gross proceeds
from the offering received by the Investor.
(c) Promptly after receipt by an indemnified party under
this Section 1.6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.6, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by
A-4
<PAGE> 17
the counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and any
other party represented by such counsel in such proceeding. The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 1.6, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 1.6.
(d) If the indemnification provided for in this Section
1.6 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage, or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
in connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in an underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and the Investor under
this Section 1.6 shall survive the completion of any offering of the Stock in a
registration statement pursuant hereto, and otherwise.
1.7 Termination. The Company's obligation to register the Stock
pursuant to this agreement shall terminate on the earlier of (i) the second
anniversary of the Closing and (ii) the date on which all shares of the Stock
held by the Investor may immediately be sold under Rule 144 during any 90-day
period.
A-5
<PAGE> 1
EXHIBIT 10.10
----------------------
REGISTRATION RIGHTS AGREEMENT
----------------------
February 26, 1996
(as amended on September 29, 1997)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
I. REGISTRATION RIGHTS......................................................... 2
Section 1.1 Definitions................................................... 2
Section 1.2 Company Registration.......................................... 3
Section 1.3 Obligations of the Company.................................... 3
Section 1.4 Furnish Information........................................... 3
Section 1.5 Expenses of Company Registration.............................. 3
Section 1.6 Underwriting Requirements - Company Registration.............. 4
Section 1.7 Delay of Registration......................................... 5
Section 1.8 Indemnification............................................... 5
Section 1.9 "Market Stand-Off" Agreement.................................. 7
Section 1.10 Compliance with Rule 144...................................... 8
Section 1.11 Termination of Registration Rights............................ 8
II. COVENANTS OF HOLDERS........................................................ 9
Section 2.1 Covenants of Holders.......................................... 9
III. MISCELLANEOUS............................................................... 9
Section 3.1 Successors and Assigns........................................ 9
Section 3.2 Governing Law................................................. 9
Section 3.3 Counterparts.................................................. 9
Section 3.4 Titles and Subtitles.......................................... 9
Section 3.5 Notices....................................................... 9
Section 3.6 Expenses...................................................... 10
Section 3.7 Amendments and Waivers........................................ 11
Section 3.8 Severability.................................................. 11
Section 3.9 Aggregation of Stock.......................................... 11
Section 3.10 Entire Agreement.............................................. 11
Section 3.11 Facsimile Signatures.......................................... 11
Schedule A Schedule of Investors
Schedule B Schedule of Management Holders
</TABLE>
i.
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT
[This agreement has been revised to reflect amendments made effective September
29, 1997]
This Registration Rights Agreement (the "Agreement") is made as of this
26th day of February, 1996, by and among Broadcom Corporation, a California
corporation (the "Company"), the investors listed on Schedule A hereto, each of
which is herein referred to as an "Investor" and collectively as the
"Investors", and the individuals listed on Schedule B hereto, each of which is
herein referred to as a "Management Holder" and collectively as the "Management
Holders."
RECITALS
WHEREAS, the (i) the Company and one of the Investors are parties to the
Purchase Agreement (the "Series A Purchase Agreement") dated July 1, 1994
whereby such Investor purchased from the Company shares of the Company's Series
A Preferred Stock, (ii) the Company and certain of the Investors are parties to
the Purchase Agreement (the "Series B Purchase Agreement") dated July 1, 1994
whereby such Investors purchased from the Company shares of the Company's Series
B Preferred Stock and Common Stock, (iii) the Company and one of the Investors
are parties to the Purchase Agreement (the "Series C Purchase Agreement") dated
March 22, 1995 whereby such Investor purchased from the Company shares of the
Company's Series C Preferred Stock, and (iv) the Company and certain of the
Investors are parties to the Purchase Agreement (the "Series D Purchase
Agreement") dated February 26, 1996 (the Series A Purchase Agreement, Series B
Purchase Agreement, Series C Purchase Agreement and Series D Purchase Agreement
each are referred to herein individually as a "Purchase Agreement" and
collectively as the "Purchase Agreements");
WHEREAS, each such Purchase Agreement, except for the Series D Purchase
Agreement, sets forth certain provisions with respect to the Investors' rights
to include shares of the Company's capital stock held by them in the Company's
registered public offerings of its capital stock; and
WHEREAS, in anticipation of the Company's initial public offering of
Common Stock, the Investors and Management Holders wish to consolidate and
clarify their right to participate in the Company's registered public offerings
of its capital stock in a single agreement which will supersede any registration
rights previously granted.
NOW, THEREFORE, the parties hereby agree as follows:
1.
<PAGE> 4
I.
REGISTRATION RIGHTS
Section 1.1 Definitions. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "Affiliate" means a person or entity that directly,
or indirectly through one or more intermediaries, controls or is controlled by,
or is under common control with, a specified person or entity.
(c) The term "Common Stock" means the Company's Common Stock
authorized for issuance under its Restated Articles of Incorporation.
(d) The term "Holder" means any person owning or having the right
to acquire Registrable Securities or any assignee thereof.
(e) The term "1934 Act" shall mean the Securities Exchange Act of
1934, as amended.
(f) The term "register", "registered," and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document.
(g) The term "Registrable Securities" means (i) shares of Common
Stock issued to the Investors pursuant to the Purchase Agreements; (ii) shares
of Common Stock issued to the Management Holders, including shares issuable upon
the exercise of stock options issued to the Management Holders; (iii) shares of
Common Stock issuable or issued to the Investors or Management Holders upon
conversion of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock or Series E Preferred Stock; and (iv)
any Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of
the shares referenced in (i), (ii) and (iii) above, excluding in all cases,
however, any Registrable Securities sold by a person in which such person's
rights under this Section I are not assigned.
(h) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
2.
<PAGE> 5
(i) The term "SEC" shall mean the Securities and Exchange
Commission.
Section 1.2 Company Registration. If (but without any obligation to do
so) the Company proposes to register (including for this purpose a registration
effected by the Company for shareholders other than the Holders) any of its
stock or other securities under the Act in connection with the public offering
of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan, a registration
on any form which does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Registrable Securities or a registration in which the only Common Stock being
registered is Common Stock issuable upon conversion of debt securities which are
also being registered), the Company shall, at such time, promptly give each
Holder written notice of such registration. Upon the written request of each
Holder given within 20 days after delivery of such notice by the Company in
accordance with Section 3.5, the Company shall, subject to the provisions of
Section 1.6, cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered.
Section 1.3 Obligations of the Company. Whenever effecting the
registration of any Registrable Securities under this Section 1, the Company
shall, as expeditiously as reasonably possible:
(a) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.
(b) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
(c) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant hereunder and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration.
Section 1.4 Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 1
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as the Company may reasonably request in writing and as shall be
required to effect the registration of such Holder's Registrable Securities.
3.
<PAGE> 6
Section 1.5 Expenses of Company Registration. The Company shall bear and
pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to registrations pursuant
to Section 1.2 for each Holder, including (without limitation) all registration,
filing, and qualification fees, printers and accounting fees relating or
apportionable thereto and the fees and disbursements for one counsel to the
Holders, such fees and disbursements not to exceed $27,500, but excluding
underwriting discounts and commissions relating to Registrable Securities.
Section 1.6 Underwriting Requirements - Company Registration. In
connection with any offering involving an underwriting of shares of the
Company's capital stock pursuant to Section 1.2, the Company shall not be
required under Section 1.2 to include any of the Holders' securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it (or by other persons
entitled to select the underwriters), and then only in such quantity as the
underwriters determine in their sole discretion will not, jeopardize the success
of the offering by the Company. If the total amount of securities, including
Registrable Securities, requested by Holders to be included in such offering
exceeds the amount of securities sold other than by the Company that the
underwriters determine in their sole discretion is compatible with the success
of the offering, then the Company shall be required to include in the offering
only that number of such securities, including Registrable Securities, which the
underwriters determine in their sole discretion will not jeopardize the success
of the offering (the securities so included to be apportioned 50% to the
Management Holders and 50% to the Investors; provided that (i) the securities to
be included by the selling Management Holders shall be apportioned pro rata
among the selling Management Holders according to the total amount of securities
entitled to be included therein owned by each selling Management Holder, (ii)
the securities to be included by the selling Investors shall be apportioned pro
rata among the selling Investors according to the total number of securities
entitled to be included therein owned by each selling Investor, (iii) to the
extent the selling Management Holders do not request that Registrable Securities
in an amount equal at least to 50% of the total number of such securities
permitted by the underwriters be included in such underwriting, the selling
Investors may include additional Registrable Securities equal to the balance of
the Management Holders' portion, such additional Registrable Securities to be
apportioned pro rata among the Investors in the manner described above and (iv)
to the extent the selling Investors do not request that Registrable Securities
in an amount equal at least to 50% of the total number of such securities
permitted by the underwriters be included in such underwriting, the selling
Management Holders may include additional Registrable Securities equal to the
balance of the Investors' portion, such additional Registrable Securities to be
apportioned pro rata among the Management Holders in the manner described above)
but in no event shall the amount of securities of the selling Holders included
in the offering be reduced below 25% of the total amount of securities requested
by the Holders to be included in the offering, unless such offering is the
initial public offering of the Company's securities in which case the selling
Holders may be excluded if the underwriters make the determination described
above. For
4.
<PAGE> 7
purposes of the preceding parenthetical concerning apportionment, for any
selling Holder which is a partnership or corporation, the partners, retired
partners and shareholders of such holder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of any of
the foregoing persons shall be deemed to be a single "selling Holder", and any
pro-rata reduction with respect to such "selling Holder" shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such "selling Holder", as defined in this sentence.
Section 1.7 Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1 filed with and declared
effective by the SEC.
Section 1.8 Indemnification. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the 1934 Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the Act,
or the 1934 Act or other federal or state law, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "Violation"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, or the 1934 Act or any state
securities law; and the Company will pay to each such Holder, underwriter or
controlling person, any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, however, that the indemnity agreement contained
in this subsection 1.8(a) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability, or action if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in any such case for any such loss,
claim, damage, liability, or action to the extent that it arises out of or is
based upon a Violation which occurs in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by such Holder, underwriter or controlling person. Notwithstanding
the foregoing, the Company shall not be required to indemnify any Holder
pursuant to this Section 1.8(a) against any loss, claim, damage, liability, or
action arising from any untrue or misleading statement or omission contained in
any
5.
<PAGE> 8
preliminary prospectus, if such deficiency is corrected in the final prospectus
and the Company made timely delivery of the final prospectus to all purchasers
of shares of the Company's capital stock pursuant to the public offering of such
shares.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, or the 1934 Act or other federal or state
law, insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder expressly
for use in connection with such registration; and each such Holder will pay, any
legal or other expenses reasonably incurred by any person intended to be
indemnified pursuant to this subsection 1.8(b), in connection with investigating
or defending any such loss, claim, damage, liability, or action; provided,
however, that the indemnity agreement contained in this subsection 1.8(b) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Holder (which consent shall not be unreasonably withheld); provided, that, in no
event shall any indemnity under this subsection 1.8(b) exceed the gross proceeds
from the offering received by such Holder. Notwithstanding the foregoing, no
Holder shall be required to indemnify the Company, its directors, its officers
or any controlling person pursuant to this Section 1.8(b) against any loss,
claim, damage, or liability arising from any untrue or misleading statement or
omission contained in any preliminary prospectus if such deficiency is corrected
in the final prospectus and the Company made timely delivery of the final
prospectus to all purchasers of shares of the Company's capital stock pursuant
to the public offering of such shares.
(c) Promptly after receipt by an indemnified party under this
Section 1.8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 1.8, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party if the
indemnified party, acting reasonably, determines that representation of such
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by
6.
<PAGE> 9
such counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if prejudicial to its ability to defend such action, shall relieve such
indemnifying party of any liability to the indemnified party under this Section
1.8, but the omission so to deliver written notice to the indemnifying party
will not relieve it of any liability that it may have to any indemnified party
otherwise than under this Section 1.8.
(d) If the indemnification provided for in this Section 1.8 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement, which shall be customary for registration of the type then proposed,
shall control.
(f) The obligations of the Company and Holders under this Section
1.8 shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
Section 1.9 "Market Stand-Off" Agreement. Each Holder hereby agrees
that, during the period of duration specified by the Company and an underwriter
of Common Stock or other securities of the Company, following the date of the
first sale to the public pursuant to a registration statement of the Company
filed under the Act, it shall not, to the extent requested by the Company and
such underwriter, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) any securities of the Company held by it at any time during such period
except Common Stock included in such registration; provided, however, that:
7.
<PAGE> 10
(a) with respect to the first such registration statement of the
Company which covers Common Stock (or other securities) to be sold on its behalf
to the public in an underwritten offering such market stand-off time period
shall not exceed 180 days;
(b) with respect to any subsequent registration statement such
market standoff time period shall not exceed 90 days;
(c) all officers and directors of the Company and all other
persons with registration rights enter into similar agreements;
(d) each Holder's agreement to refrain from the acts and
transactions described in this Section 1.9 shall not prohibit such Holders from
transferring Registrable Securities (i) as a bona fide gift; (ii) as a private
sale; or (iii) as a contribution to one or more trusts provided that in each
such transfer the recipients of such Registrable Securities agree to be bound by
this Agreement (the foregoing notwithstanding, each Holder may transfer up to
10% of the Registrable Securities held by such Holder to a charitable
institution without requiring that such charitable institution agree to be bound
by this Agreement); and
(e) the underwriter will agree to give reasonable consideration
in good faith to a request by a Holder to be released from the terms of this
Section 1.9 and any related underwriter's letter based upon hardship of the
Holder or of a member of such Holder's immediate family.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period. If requested to do so by
the Company, each Holder shall execute an underwriter's letter the terms of
which are consistent with the foregoing prior to the registration of the
Company's initial public offering.
Notwithstanding the foregoing, the obligations described in this Section
1.9 shall not apply to a registration relating solely to employee benefit plans
on Form S-l or Form S-8 or similar forms which may be promulgated in the future,
or a registration relating solely to a Commission Rule 145 transaction on Form
S-14 or Form S-15 or similar forms which may be promulgated in the future.
Section 1.10 Compliance with Rule 144.
(a) In the event that the Company shall commence to file reports
under Section 13 or 15(d) of the 1934 Act, thereafter, at the request of any
Holder who proposes to sell Registrable Securities in compliance with the filing
requirements of the SEC as set forth in
8.
<PAGE> 11
Rule 144, the Company shall forthwith furnish to such Holder a written statement
of compliance with the filing requirements of the SEC as set forth in Rule 144.
(b) Nothing in this Section 1.10 shall prevent the Company from
discontinuing filing such reports if permissible under the Securities Act and
Rule 144, provided that it shall give reasonable notice of its intent to
discontinue to each Holder who has previously requested a statement of
compliance.
Section 1.11 Termination of Registration Rights. No Holder shall be
entitled to exercise any right provided for in this Section 1 after five years
following the consummation of the sale of securities pursuant to a registration
statement filed by the Company under the Act in connection with the initial firm
commitment underwritten offering of its securities to the general public. The
foregoing notwithstanding, no Holder shall be entitled to exercise any right
provided for in this Section 1 following the consummation of the sale of
securities pursuant to a registration statement filed by the Company under the
Act in connection with the initial firm commitment underwritten offering of its
securities to the general public if the Registrable Securities held by such
Holder may be sold pursuant to Rule 144.
II.
COVENANTS OF HOLDERS
Section 2.1 Covenants of Holders. The Holders, and their duly appointed
representatives, shall obtain and provide to the Company, promptly upon request,
any and all information reasonably required by the Company to comply with state
and federal securities laws and other requirements, including but not limited
to, beneficial ownership information and all shall cooperate with any state or
federal licensing agency in any investigation by such agencies.
III.
MISCELLANEOUS
Section 3.1 Successors and Assigns. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferee of any shares of Registrable Securities). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
9.
<PAGE> 12
Section 3.2 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
Section 3.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 3.4 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
Section 3.5 Notices. All notices, requests, demands and other
communications which a party is required to or may desire to give any other
party in connection with this Agreement shall be in writing, and shall be
personally delivered, delivered by facsimile transmission, or delivered by
United States registered or certified mail, postage prepaid with return receipt
requested, addressed as follows:
If to the Company: Scott O. Davis
Broadcom Corporation
16251 Laguna Canyon Road
Irvine, CA 92718
Fax No. (714) 450-8710
With a copy to: Bruce R. Hallett, Esq.
Brobeck, Phleger & Harrison LLP
4675 MacArthur Court, Suite 1000
Newport Beach, CA 92660-1846
Fax No. (714) 752-7522
If to the Holders: At the addresses on the signature
pages of this Agreement
With a copy to: David A. Dull, Esq.
Irell & Manella
1800 Avenue of the Stars
Suite 900
Los Angeles, CA 90067
Fax No. (310) 203-7199
10.
<PAGE> 13
And a copy to: Jennifer L. Borow, Esq.
O'Melveny & Myers
1999 Avenue of the Stars
Los Angeles, CA 90067
Fax No. (310) 246-6779
and a copy to: Paul, Hastings, Janofsky & Walker
555 South Flower Street
Twenty-Third Floor
Los Angeles, CA 90007
Attn: Siobhan M. Burke
Fax No. (213) 627-0705
If notice is given by personal delivery in accordance with the provisions of
this Section 3.5, said notice shall conclusively be deemed given at the time of
delivery. If notice is given by confirmed facsimile transmission in accordance
with the provisions of this Section 3.5, said notice shall conclusively be
deemed given at the time of the transmission. If notice is given by mail in
accordance with the provisions of this section, said notice shall conclusively
be deemed given 48 hours after deposit thereof in the United States mail. The
addressees or addresses set forth above may be changed from time to time by a
notice sent to the other parties.
Section 3.6 Expenses. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
Section 3.7 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Registrable Securities then outstanding. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon each
holder of any Registrable Securities then outstanding, each future holder of all
such Registrable Securities, and the Company.
Section 3.8 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
Section 3.9 Aggregation of Stock. All shares of Registrable Securities
held or acquired by a Holder's Affiliate shall be aggregated together for the
purpose of determining the availability of such Holder's rights under this
Agreement.
11.
<PAGE> 14
Section 3.10 Entire Agreement. This Agreement (including the exhibits
and schedules hereto, if any) constitutes the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
This Agreement supersedes any registration rights granted to the Holders
including, without limitation, any registration rights granted under any of the
Purchase Agreements. Each party to this Agreement acknowledges and represents
that no representations, warranties, covenants, conditions, inducements,
promises or agreements, oral or otherwise, other than as set forth herein, have
been made by any party hereto, or anyone acting on behalf of any party.
Section 3.11 Facsimile Signatures. This Agreement may be executed
manually or by facsimile signatures, all of which signatures shall have the same
force and effect. Any party executing this Agreement by facsimile shall as soon
as practicable thereafter deliver to counsel for the other parties a manually
signed copy of this Agreement.
[Signature Page Follows]
12.
<PAGE> 15
[Signature Page for Registration Rights Agreement]
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
THE COMPANY: BROADCOM CORPORATION
a California corporation
By:
------------------------------------
Henry Nicholas
By:
------------------------------------
Henry Samueli
MANAGEMENT HOLDERS:
---------------------------------------
Henry Nicholas
---------------------------------------
Henry Samueli
---------------------------------------
Scott Davis
---------------------------------------
Tim Lindenfelser
INVESTORS: INTEL CORPORATION
By:
------------------------------------
SCIENTIFIC-ATLANTA, INC.
By:
------------------------------------
<PAGE> 16
---------------------------------------
Werner Wolfen
---------------------------------------
Herb Alpert
---------------------------------------
Jerome Moss
---------------------------------------
Max Palevsky
---------------------------------------
Richard Carpenter
---------------------------------------
Ruth Mandel
---------------------------------------
Carl Mandel
---------------------------------------
Ray Mandel
---------------------------------------
Judy Mandel
---------------------------------------
David Mandel
---------------------------------------
ROSTON ENTERPRISES Myron Eichen
<PAGE> 17
By:
-----------------------------
---------------------------------------
William Norgren
---------------------------------------
Rex Bates
---------------------------------------
Peter Preuss
---------------------------------------
Hiromi Yoshida
---------------------------------------
Don Brooks
---------------------------------------
Philip Lozowick
---------------------------------------
Lanny Ross
---------------------------------------
Terry Eger
---------------------------------------
Roland Vandermeer
Leon M. Samueli and Barbara Jane Samueli,
Trustees of the Leon M. Samueli and
Barbara Jane Samueli Trust, Dated 1-2-1996
<PAGE> 18
---------------------------------------
By:
<PAGE> 19
SCHEDULE A TO REGISTRATION RIGHTS AGREEMENT
Investors
NextLevel Systems, Inc.
Intel Corporation
Scientific-Atlanta, Inc.
Werner Wolfen
Herb Alpert
Jerome Moss
Max Palevsky
Richard Carpenter
Ruth Mandel
Carl Mandel
Ray Mandel
Judy Mandel
David Mandel
Myron Eichen
Roston Enterprises
William Norgren
Rex Bates
Peter Preuss
Hiromi Yoshida
Don Brooks
Philip Lozowick
Lanny Ross
Terry Eger
Roland Vandermeer
Leon M. Samueli and Barbara Jane
Samueli Trust Dated 1-2-1996
<PAGE> 20
SCHEDULE B TO REGISTRATION RIGHTS AGREEMENT
Management Holders
Henry Nicholas
Henry Samueli
Scott Davis
Tim Lindenfelser
