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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
[X] SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-19395
SYBASE, INC.
(Exact name of registrant as Specified in its Charter)
Delaware 94-2941005
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
6475 Christie Avenue, Emeryville, California 94608
(Address of principal executive offices and Zip Code)
Registrant's telephone number, including area code: (510) 922-3500
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
Preferred Share Purchase Rights
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES /X/ NO / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates
of the Registrant, based upon the closing sale price of the Common Stock on
March 24, 1998 as reported on the NASDAQ National Market System, was
approximately $756,900,000. Shares of Common Stock held by each officer and
director and by each person who owns 10% or more of the outstanding Common Stock
have been excluded in that such persons may be deemed to be affiliates. This
determination of affiliate status is not necessarily a conclusive determination
for other purposes. As of March 24, 1998, Registrant had outstanding 80,818,083
shares of Common Stock.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Stockholders for the
fiscal year ended December 31, 1997 are incorporated by reference in Parts II
and IV of this Form 10-K to the extent stated herein. The Registrant's
definitive Proxy Statement for the Annual Meeting of Stockholders to be held on
May 27, 1998 is incorporated by reference in Part III of this Form 10-K to the
extent stated herein.
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PART I
ITEM 1. BUSINESS
THE COMPANY
Sybase, Inc. ("Sybase" or the "Company"), one of the ten largest global
independent software companies in the world, helps businesses gain competitive
advantage by enabling them to integrate and distribute information anywhere it
is needed. The Company's software products and consulting services provide a
comprehensive platform for delivery of integrated solutions that businesses need
to be successful. Sybase's software products consist of leading high-performance
database products, middleware products that provide interoperability,
connectivity and data movement, and application development tools. The Company
offers a broad range of consulting, education and technical support services to
provide customers with complete solutions for building on-line, enterprise-wide
applications. Unless otherwise specified, the terms "Sybase" or the "Company"
include Sybase and all of its direct and indirect consolidated subsidiaries.
ARCHITECTURE AND MARKET OVERVIEW
Sybase's advanced software product architecture allows users to build
and deploy applications that can be distributed across a heterogeneous networked
computing environment, and is based on a multi-tier model which is widely
recognized as the most effective approach to networked applications. The
Company's software is primarily used to address customer needs in the following
areas: online transaction processing (OLTP) systems, such as securities
brokerage systems which need to process and store a high rate of transactions;
data warehouse and datamart applications, which are designed to access and
analyze corporate data (either routinely or on an ad-hoc basis) to enable an
enterprise to rapidly obtain answers to specific queries about its business and
customers; and Internet and intranet applications, which are increasingly being
used to develop dynamic Web sites integrated with an enterprise's relational
database management systems (RDBMS). Sybase offers products that are designed
to address the unique requirements in each of these areas, to operate together
and to provide customers with the flexibility to mix and match software from
different vendors.
The Company's strategy is to leverage its existing strengths in
enterprise data management and enterprise application development to focus on
delivering market-leading computing solutions in three growing markets:
occasionally connected computing, data warehousing and Web computing.
OCCASIONALLY CONNECTED COMPUTING
Occasionally connected computing involves providing remote workgroups,
branch offices, mobile users, and other users occasionally connected to an
enterprise's computer network with the up-to-date strategic information and
computer applications necessary to give them the flexibility to transact
business anywhere, whether it be at a self-serve kiosk, in the field using a
sales force automation system, or using a hand-held device for remote access.
For example, sales and service professionals increasingly use laptops and other
devices to connect with their corporate network on an as-needed basis to obtain
up-to-the-minute information such as pricing, product availability and order
status. The Company believes its high-performance, scalable technology in
products such as Adaptive Server(TM) Anywhere, the industry's leading
small-footprint mobile database, position the Company at the forefront of this
market.
DATA WAREHOUSING
Data warehouses are typically used to enable enterprises to extract
meaningful information from the mountains of customer transaction data residing
in their corporate databases to better identify, predict and fulfill customer
needs. Sybase offers an integrated platform for the data warehousing market. The
Company believes that Adaptive Server(TM), with its Enterprise and IQ data
stores, is the first database development environment with optimized storage and
processing capabilities for both the back-end
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warehouse functions of data consolidation and integration, and the interactive
analysis requirements of warehouse users. Sybase's industry-leading middleware
provides organizations with the data movement, connectivity and interoperability
capabilities to effectively leverage and integrate information from diverse data
sources, and to distribute data throughout the enterprise and beyond. To speed
warehouse deployment and to ease management, Sybase delivers a full suite of
warehouse design tools, central meta data management facilities, and leading
development tools for building warehouse applications.
WEB COMPUTING
Businesses are increasingly differentiating themselves and gaining
competitive advantage by using the Internet as a platform for business
computing. Computing over the Internet's World Wide Web has created a tremendous
opportunity for companies to give their customers, vendors and partners better
access to information systems and to strategic data. It also allows companies to
advertise and sell products in a vast, global marketplace. Using the same
technology, organizations can also provide better, more timely information
internally to their employees. Through its combination of high-performance
database servers, middle-tier transaction servers, and powerful rapid
application development tools, Sybase enables companies to design, develop and
deploy enterprise dynamic Internet applications that can integrate their various
legacy and mainframe-based data sources. Sybase believes it is the only company
to provide a platform-neutral, integrated and open approach to Internet and
intranet enterprise application development and deployment.
- ----------------------------
Sybase, the Sybase logo, SQL Server, System 11, SQL Anywhere, Adaptive
Component Architecture, Adaptive Server, SQL Remote, Replication Server,
OmniConnect, DirectConnect, Jaguar CTS, jConnect, Sybase IQ, Power J, Open
Client, Open Server, Powersoft, PowerBuilder, PowerSite, PowerDesigner,
PowerDynamo, ProcessAnalyst, DataArchitect, AppModeler, Warehouse Architect,
MetaWorks, Viewer, Transact SQL, Bitwise, and AnswerBase are trademarks of
Sybase, Inc. This Form 10-K also includes additional trademarks of other
companies.
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PRODUCTS AND PLATFORMS
Sybase provides a comprehensive technology platform for enterprise
computing known as the Adaptive Component Architecture(TM) which supports the
use of industry-standard components; rapid application development; delivery of
data in the right form, to the right place, at the right time; and minimized
complexity for end-users and developers. This architecture is based on open
component logic, comprehensive development tools, and optimized data stores. Its
multi-tiered framework is designed to manage and deploy components across the
distributed heterogeneous computing environment.
The Company's software products consist primarily of high-performance
relational database products, such as Adaptive Server(TM) Enterprise and
Adaptive Server(TM) Anywhere, that are used primarily for OLTP and data
warehousing applications; industry-leading middleware products, such as
DirectConnect(TM) and OmniConnect(TM) that provide connectivity,
interoperability and data movement in heterogeneous computing environments; and
leading application development tools, such as PowerBuilder(R), that enable
customers to develop software applications. Sybase's database products generally
are marketed under the Adaptive Server(TM) brand name, and its application
development and design tools generally are marketed under the Powersoft(R) brand
name.
Sybase products are available for a wide variety of hardware platforms
from various hardware manufacturers including, but not limited to, Digital
Equipment Corporation, Hewlett-Packard, IBM, Silicon Graphics, and Sun
Microsystems. The Company also provides connectivity to other hardware platforms
with large installed bases. Sybase products are available for various UNIX
environments, DOS, Netware, OS/2, Windows, Windows NT and other software
operating systems.
ADAPTIVE SERVER(TM) PRODUCT FAMILY
Sybase's database management systems permit multiple users and
applications to access data concurrently while protecting the integrity of the
data against user and program errors and against computer and network failures.
The Adaptive Server database product family is unique in delivering optimized
database performance for different application environments, and in providing
common management, administration, access and other services across the entire
database family. The end result is a product family providing high performance
for today's transaction processing requirements with the flexibility to
accommodate future enterprise computing needs. The Adaptive Server product
family includes: Adaptive Server Enterprise, Adaptive Server Anywhere, Adaptive
Server IQ and Replication Server(R).
Adaptive Server Enterprise is the latest version of the Company's
flagship client/server RDBMS product designed specifically for online mission
critical applications, and is a key element of the Company's Adaptive Component
Architecture. This server defines, stores, retrieves, updates and manages data
by using an extended relational database language based primarily on the
Structured Query Language (SQL), the industry-standard data manipulation
language for RDBMSs. Adaptive Server Enterprise is designed to provide
organizations with predictable high performance in unpredictable mixed workload
online transaction processing and data warehouse environments. Product features
include Logical Memory Manager and Logical Process Manager for application and
user-specific dedicated resources; scalability for very large databases through
parallel operation for maximum utilization of system resources; common services
for management and administration, data access/movement, security and Web
access, and security features for Internet transactions and multi-tier
applications. In September 1997, Adaptive Server Enterprise for Windows NT
became generally available.
Adaptive Server Anywhere is a small footprint, self-tuning,
fully-functional RDBMS engine for applications operating in remote or mobile
computing environments, such as hand-held PCs or embedded solutions. Important
requirements in this market include a database solution that can be
transparently deployed and easily managed with a low cost of ownership. From
mobile computing to large-scale high-performance applications, the compatibility
and interoperability of Adaptive Server Anywhere with Adaptive Server Enterprise
provides an end-to-end data management platform. Key to the product's success is
SQL Remote(TM) which makes two-way synchronization possible for occasionally
connected users.
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Telecommuters, remote office locations or traveling professionals can both
download and upload mission critical information ensuring that up-to-date
information is always available both at their fingertips, and at the head
office. Data can be synchronized among multiple hand-held PCs, desktop PCs and
enterprise servers using standard communication and wireless products. This
technology allows users to achieve the benefits of a true mobile computing
solution.
Adaptive Server IQ. Adaptive Server IQ is an optional extension to
Adaptive Server Enterprise designed specifically to provide substantially
enhanced performance for the complex, interactive ad hoc queries that dominate
client/server-based data warehouse applications in a multi-user environment. In
December 1997, Sybase announced general availability of Adaptive Server IQ 11.5,
the latest version of Adaptive Server IQ. Adaptive Server IQ utilizes an
innovative Bitwise(TM) indexing technology to provide rapid responses with a
minimum of tuning. Intelligent data storage, compression and retrieval software
features are designed to reduce storage requirements for data in comparison to
traditional index RDBMSs and to minimize the associated hardware costs of data
warehousing. Adaptive Server IQ works with standard commercial hardware and
imported database information from a wide variety of data sources, and supports
a wide range of standard Sybase tools and online analytical processing
middleware from companies such as Business Objects, Cognos and Prodea.
Replication Server(R) synchronizes replicated copies of data on
heterogeneous platforms through a client/server network, and is designed to
allow data sharing among operational and decision support systems without
affecting data integrity and consistency or business performance. Frequently,
each piece of data in an organization has a primary site that is the actual
source of the data and is the location where the data is updated or revised.
Using Replication Server, organizations can allow remote sites to subscribe to
the primary site for the data they need, and Replication Server will deliver
that data and monitor the primary site for any transactions that change the
primary site data. Replication Server will then deliver such transactions to the
remote sites, thereby ensuring that the remote sites automatically have the
updated data. The Replication Server architecture uses store-and-forward
asynchronous replication. This transaction-based technology monitors and
replicates changes based on the activity at the primary data site and forwards
changes to replicated sites without the need for the system to query the primary
data manager. As a result, Replication Server reduces the impact on the primary
data manager while providing near real-time data replication.
DATA ACCESS AND DATA MOVEMENT PRODUCTS
Within larger enterprises, data is generally stored in RDBMS and
non-RDBMS sources developed by different vendors, operating on different
hardware platforms running under different operating systems and operated or
managed by different departments or groups. Sybase's middleware products are
designed to enable information that is different in format, distributed in
multiple locations and stored in disparate computing systems to be integrated
easily and transparently for use in OLTP and data warehouse applications and to
facilitate mass deployment. Recognizing the importance of access to data in a
multi-platform environment, Sybase offers a market-leading suite of data access
and data movement products to manage the flow of data required in most of the
applications being developed today. These products include: OmniConnect(TM),
DirectConnect(TM), jConnect(TM) for JDBC(TM), Open Client(TM) and Open
Server(TM).
OmniConnect(TM) is a data integration server that enables users and
developers to employ a single language to access multiple disparate data sources
as through they were a single database. In October 1997, OmniConnect 11.5, the
latest version of the product, became generally available. While SQL is the
industry standard language for RDBMS products, manufacturers employ different
dialects of SQL. OmniConnect translates Sybase Transact-SQL into the target
RDBMS SQL dialect and automatically joins data from multiple databases to
respond to a single query. Because it enables users to access multiple data
sources as if data were stored in a single database, users can reduce training
costs because they need to learn only the Sybase access language, rather than
separate access languages for each of the many databases that may be used in the
enterprise. In addition, because the OmniConnect catalogue stores the location
of each table of information for all RDBMSs accessed, users do not need to know
where each type of data resides within each database or which server controls a
database.
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DirectConnect(TM) is a single-source data access server which provides
users with complete read/write access to heterogeneous data sources. It
simplifies access to enterprise data wherever it resides and enables greater
flexibility in managing distributed heterogeneous environments. The product is
optimized for both OLTP and decision support and offers enhanced remote systems
management and monitoring; greater client and middleware configuration
flexibility; increased support for multi-tier application development;
integration of specialized services such as e-mail or additional data sources;
and utilization of Open Client(TM) and Open Server(TM) enhancements such as
directory and security services. DirectConnect also works in conjunction with
OmniConnect. Users can use a DirectConnect server on its own to connect directly
to a single data source, or combine DirectConnect with other products in the
Sybase family for enterprise data access, data movement, data transparency,
heterogeneous replication, and data warehousing.
jConnect(TM) for JDBC(TM), which became generally available in March
1997, provides Java developers with high-performance native database access in a
multi-tier environment to the complete family of Sybase database products,
including Adaptive Server Enterprise, Adaptive Server Anywhere, Adaptive Server
IQ and Replication Server. In addition, jConnect utilizes OmniConnect and
DirectConnect to provide high-performance, transparent access to Oracle,
Informix, DB2 and over 25 other enterprise and legacy databases. The product
allows enterprises to easily and cost effectively extend both mainframes and
client/server systems to the Internet. jConnect for JDBC is currently available
on all platforms running Java VM 1.02 or higher, and a variety of Java-enabled
Web servers and browsers.
Open Client(TM) is a client-side application kit for building interfaces
to Sybase data sources, including Adaptive Server, Open Server, Replication
Server and OmniConnect. Open Client offers developers a choice of
standards-based programming interfaces that are consistent across a variety of
hardware platforms.
Open Server(TM) products provide a server-side application programming
interface for developing gateways to other DBMSs, data sources and services.
These products integrate data from diverse sources such as real-time data feeds,
networking services and other relational and non-relational databases.
POWERSOFT(R) APPLICATION DEVELOPMENT AND DESIGN TOOLS
The Company's suite of open development tools enable enterprise
customers to design, develop and deploy component-based business applications
for client/server, distributed and Internet-based environments. The Powersoft(R)
product family includes, among other products, PowerBuilder(R), Jaguar CTS(TM),
PowerSite(TM), PowerJ(TM) and PowerDesigner(TM).
PowerBuilder(R) is the Company's principal application development tool
for building enterprise business applications for client/server, multi-tier and
Internet architectures. PowerBuilder combines an intuitive graphical interface
with a powerful object oriented development language, and enables developers to
rapidly build client/server and Internet applications without requiring
specialized knowledge of the operating system or complicated programming.
PowerBuilder Enterprise 6.0, the latest version of the product which became
generally available in September 1997, features new capabilities for creating
Web applications, key advancements in distributed development capabilities for
creating multi-tier applications, expanded UNIX platform support with HP/UX and
IBM AIX, and the capability for generation of industry-standard open components.
Jaguar CTS(TM), which became generally available in October 1997, is a
high-performance component transaction server designed for delivering scalable
transactional applications for Web OLTP. It combines the features of a TP
monitor and an object request broker to give developers an easy-to-use package
for rapidly deploying transactional applications. Jaguar CTS supports multiple
component models, such as ActiveX, Java, JavaBeans, and C/C++, for rapid
application development. With Jaguar CTS, developers can focus on solving
business problems instead of programming application infrastructure. In a
multi-tier distributed computing environment, Jaguar CTS delivers the foundation
for developing transactional applications.
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PowerSite(TM) is a complete, open, rapid application development
environment designed for teams of developers working together to build, manage
and deploy complex Web applications. For example, if a company wishes to run
Netscape LiveWire on UNIX on its external Web server, PowerDynamo(TM) for its
remote sales force, and Active Server pages from Microsoft on its intranet
servers, it can use PowerSite to build an application once and deploy it to all.
PowerSite also allows developers to integrate many different components when
building Web pages including HTML, dynamic HTML, graphics, scripts, ActiveX
components, JavaBeans and plug-ins, and more. PowerSite Enterprise 1.0 was
announced by Sybase in December 1997.
PowerJ(TM) offers simplified development and deployment of Java
applications for the enterprise, enhancing programmer productivity while
leveraging a company's existing investment and IT architecture plans. PowerJ,
which became generally available in late 1997, provides support for JavaBeans on
both the client and middle tiers, robust database access and the ability to
build and deploy multi-tier applications. PowerJ features seamless integration
with Jaguar CTS for building real-world business applications on the Web.
PowerDesigner(TM) is an integrated design toolset for building highly
optimized and functional databases, data warehouses and data-aware components,
and is comprised of six modules targeted at business and systems analysts, data
modelers, database administrators and application developers: ProcessAnalyst(TM)
for identifying and capturing data flow within a business; DataArchitect(TM) for
bi-level conceptual and physical database design and construction; Warehouse
Architect(TM) for data warehouse design and construction; AppModeler(TM) for
physical data modeling and data-aware component generation, MetaWorks(TM) for
model management and team design; and Viewer(TM) for read-only access to model
information. In December 1997, Sybase announced PowerDesigner 6.1, the newest
version of the product set.
SERVICES
Technical Support and Maintenance Services. The Sybase worldwide
Customer Service and Support organization provides support for the entire family
of Sybase products. A comprehensive portfolio of support programs let customers
choose the level of support their business requires, from personalized support
for mission critical projects, to minimum assistance designed to get development
underway. Support is provided by a worldwide organization with major support
centers located in North America, Europe, Asia Pacific and Latin America.
Operating as a virtual team, support resources are coordinated to provide
services 24 hours a day, seven days a week in all time zones around the world.
Sybase also offers a wide variety of methods to obtain support, including
electronic support services that allow customers to search vast sources of
problem-solving technical information, connect with other users, log support
cases and download software fixes. Access to the technical information sources
and newsgroups on Sybase's support web site is provided free to all customers.
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Sybase Professional Services. The Company provides comprehensive
consulting and integration services for its customers through the Sybase
Professional Services organization, which employs more than 1,300 professionals
worldwide. These service offerings assist customers on an enterprise-wide basis
with migration, design and development, implementation, performance improvement,
knowledge transfer and IT architecture projects, particularly in the areas of
data warehousing, Web computing and occasionally connected computing. Services
include architecture and resource planning, custom application design and
development, performance and migration services, system administration and
extensive SQL and Sybase product training.
Training and Education Services. The Company provides a broad education
curriculum for its customers allowing them to increase their proficiency in
Sybase products. The Company offers basic and advanced classes from
education centers in the United States, Australia, Belgium, Brazil, Canada,
China, France, Germany, Hong Kong, Italy, Japan, Korea, Malaysia, Mexico,
Netherlands, New Zealand, Singapore, Spain, Switzerland, Taiwan and the United
Kingdom. On-site and specially tailored customer classes are also available. A
number of the Company's distributors also provide training. In addition to
classroom training, Sybase also offers a number of videotape training materials
for self-paced training. Training is also available through authorized third
party providers. Sybase believes that customer training is as integral a
component of its products as the software and documentation. The Sybase
SKILS(TM) program also provides interactive multimedia training for users of
Sybase products, and enables individuals and teams to train, answer technical
questions and create their own reference notes.
SALES, MARKETING AND CUSTOMERS
The Company markets its products both through a direct sales
organization and through indirect sales channels comprised of commercial
application partners, systems integrators, original equipment manufacturers,
international distributors and other resellers. In general, enterprise database
products, middleware and services are primarily marketed through the direct
sales organization. Tools products and PC-oriented databases are marketed
primarily through a combination of indirect channels and direct sales. In 1998,
the Company expects to make changes in its sales model and sales compensation
programs, and focus on increasing the number of discrete quota-carrying sales
people. Although such changes are intended to enhance overall revenues, such
changes could, in the short-run, materially and adversely affect the sales
process and revenues. See "Part II, Item 5, Market For The Registrant's Common
Stock And Related Stockholder Matters - Future Operating Results; Stock Price
Volatility".
Approximately 38%, 39% and 37% of the Company's total revenues for the
years ended December 31, 1995, 1996 and 1997, respectively, were from
international operations. As of December 31, 1997, the Company's subsidiaries
licensed and supported the Company's products in Australia, Belgium, Brazil,
Chile, China, Czech Republic, France, Germany, Hong Kong, Indonesia, Italy,
Japan, Peru, South Korea, Malaysia, Mexico, New Zealand, The Netherlands,
Norway, Singapore, Spain, Sweden, Switzerland, Taiwan, Thailand, the United
Kingdom and Venezuela. In 1997, the Company acquired its distributors in
Argentina, Chile, Norway and Peru, and established a subsidiary in Venezuela, as
well as a representative office in Lao PDR. In 1996, the Company established
subsidiaries in the Philippines and Indonesia, and a liaison office in India.
The Company also licenses its products through distributors in Europe, Asia and
Latin America. In the future, the Company could experience fluctuations in
international revenues and such fluctuations, could adversely affect the
Company's financial results. For a discussion of certain risks associated with
international operations, see "Part II, Item 5, Market For The Registrant's
Common Stock And Related Stockholder Matters - Future Operating Results; Stock
Price Volatility".
The Company's customers are primarily Fortune 1000 companies in North
America, or their equivalents in other geographic regions. Among the Company's
primary market segments are financial services, insurance, telecommunications,
defense and government agencies. Emerging segments include healthcare, the
pharmaceutical industry, media and publishing, retail, transportation and
utilities. No customer
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accounted for more than 10% of revenues during any of the years ended December
31, 1997, 1996 and 1995.
The Company's products and services are offered in a wide variety of
configurations depending on each customer's requirements and hardware
environment. As is customary in the software industry, in order to protect its
intellectual property rights, the Company does not sell or transfer title to its
software products to customers. Customers generally purchase nonexclusive,
nontransferable perpetual licenses in exchange for a fee that varies depending
on the mix of products and services, the number and type of users, the number of
servers, and the type of operating system. License fees range from several
hundred dollars for single user desktop tools or databases to several million
dollars for enterprise solutions that can support hundreds or thousands of users
throughout an organization. Under the Company's current standard forms of
end-user license agreement, customers license software either for use on a
single machine or by a single user, or for use in a networked environment by a
specified number of users and/or machines. The Company's Adaptive Server
Anywhere and PC-oriented databases, the Company's tool products, and products
licensed through the telemarketing sales organization, are typically licensed
under "break the seal" licenses. These licenses may not be enforceable in a
number of jurisdictions.
As is common in its industry, the Company's backlog is typically small
and not a meaningful indicator of future revenues.
PRODUCT DEVELOPMENT
Since inception, the Company has made substantial investments in
research and product development. The Company believes that timely development
of new products and enhancements to its existing products is essential to
maintain a strong position in its market. During 1997, 1996 and 1995, product
development and engineering expenses were $138.6 million, $164.7 million and
$151.9 million, representing 15%, 16% and 16% of total revenues, respectively.
Sybase currently is developing new products as well as enhancements to existing
products in each of its major product categories of database, middleware and
tools and Internet products. Sybase intends to continue to invest heavily in
research and product development.
The Company has from time-to-time received vendor funding for porting
its products to additional platforms and to extend its product offerings. The
Company generally retains technology ownership and rights to market developed
products to other customers, in some cases subject to the payment of royalties
to the funding party. In addition, the Company has entered into agreements with
certain end-user customers which have resulted in jointly funded product
development.
The Company's future results will depend in part on its ability to
enhance existing products and to introduce new products on a timely and
cost-effective basis that meet dynamic customer requirements. Customer
requirements for products can rapidly change as a result of innovations or
changes within the computer hardware and software industries. For example, the
widespread use of the Internet is rapidly giving rise to new customer
requirements as well as new methods and practices of selling, marketing, and
distributing products and services. Sybase's future results will depend in part
on its success in developing new products, making generally available products
that have been previously announced, enhancing its existing products and
adapting its existing products to changing customer requirements, and ultimately
gaining market acceptance for such new or enhanced products. The Company
recently announced the development and anticipated availability dates of several
products, including Adaptive Server(TM) Anywhere for Windows CE, which is
scheduled to become generally available in the second quarter of 1998.
The Company has experienced delays in introducing some new products in
the past. Unanticipated delays in product availability schedules could result
from various factors including development or testing difficulties, feature
changes, software errors, shortages in appropriately skilled software engineers,
and project management problems. Delays in the scheduled availability of these
or other products, a lack of or decrease in market acceptance of new or enhanced
products, or the Company's failure to accurately anticipate customer demand or
to meet customer performance requirements or to anticipate competitive products
and developments could have a material adverse effect
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on the Company's business and financial results. New products or new versions of
existing products may, despite testing, contain undetected errors or bugs that
could delay the introduction, or adversely affect commercial acceptance, of such
products or give rise to warranty or other customer claims, which could, in
turn, adversely affect the Company's financial results.
COMPETITION
The market for the Company's software products and services is extremely
competitive and characterized by dynamic customer demands, rapid technological
and marketplace changes, and frequent product enhancements and new product
introductions. The Company competes with a number of companies, including Oracle
Corporation, Informix Corporation, Microsoft Corporation, IBM Corporation, and
Computer Associates, Inc. Many of the Company's competitors and potential
competitors have significantly greater financial, technical, sales, and
marketing resources, and a larger installed base than the Company. New or
enhanced products, many of which have been announced and many of which are
continually introduced by existing or future competitors in the software
industry, could increase the competition faced by the Company's products from
time to time and result in greater price pressure on certain of the Company's
products, especially to the extent that market acceptance for personal
computer-oriented technologies increases. A failure by the Company to compete
successfully with its existing competitors or with new competitors could have a
material adverse effect on the Company's business and results of operations and
on the market price of the Company's common stock.
Existing and future competition or changes by the Company in its product
offerings or product pricing structure could result in an immediate reduction in
the prices of the Company's products. For example, changes to the Company's
pricing and licensing structure in the first quarter of 1996 increased prices
for certain products, and reduced prices for others. The Company will introduce
price and licensing changes from time to time in the future. If such changes or
changes in the Company's products, or existing or future competition were to
result in significant revenue declines, the Company's business and financial
results could be adversely affected.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
The Company relies on a combination of trade secret, copyright, patent
and trademark laws and contractual provisions to protect its proprietary rights
in its software products. These protections may not be adequate in certain
circumstances. As of February 1998, the Company had seventeen (17) issued
patents, expiring between 2113 and 2115, covering various aspects of software
technology. Competitors may independently develop technologies that are
substantially equivalent or superior to the Company's technology. In addition,
copyright and trade secret protection for the Company's products may be
unavailable or unreliable in certain foreign countries. As the number of
software products in the industry and the number of software patents increase,
the Company believes that software developers may become increasingly subject to
infringement claims. Third parties have in the past asserted, and may in the
future assert, that their patents or other proprietary rights are violated by
products offered by the Company. Any such claims, with or without merit, can be
time consuming and expensive to defend or settle, and could have an adverse
effect on the Company's business and results of operations. While the Company
believes that its products do not infringe other parties' patents and
proprietary rights, it cannot be certain that its products are not doing so.
Infringement of valid third party patents and proprietary rights could have an
adverse effect on the Company's business and results of operations. With respect
to an increasing number of products, the Company relies on "break the seal"
licenses not signed by the licensee to protect its proprietary rights. "Break
the seal" licenses may be unenforceable under the laws of certain jurisdictions.
EMPLOYEES
As of March 24, 1998, the Company and its subsidiaries had 5,216
employees, excluding temporary personnel and consultants. There were several
changes in 1997 and early 1998 to the Company's executive management team. For
example, in the third quarter of 1997, John Chen became the Company's President
and Chief Operating Officer, and Mitchell Kertzman, Chief Executive Officer,
became Chairman of the Board. In February 1998, the Company created the Office
of the Chief Executive
9
<PAGE> 12
with shared leadership responsibilities between Messrs. Kertzman and Chen, who
now also holds the title of Chief Executive Officer. Other management changes
and additions were also effected in late 1997 and early 1998, including the
appointment of several new Senior Vice Presidents in charge of several major
business units. Further changes in management, the Company's recent financial
performance, and a reduction in the overall number of Sybase employees made in
February 1998 could cause an increase in the amount of employee turnover. The
failure to effectively recruit, train, and retain qualified personnel or high
rates of employee turnover, particularly among engineering or sales staff, could
adversely affect the Company's product development efforts, product sales, and
other aspects of the Company's operations and results.
ITEM 2. PROPERTIES
The Company is headquartered in Emeryville, California, where it owns or
leases administrative, sales and marketing and product development facilities in
eight locations consisting of an aggregate of approximately 543,210 square feet.
Sybase owns property comprising approximately 63,000 square feet of its
headquarters facilities. The Company's leases with respect to its Emeryville
headquarters facilities expire as follows: approximately 269,831 square feet in
1998, 36,671 square feet in 2000, 129,700 square feet in 2001 and 44,000 square
feet in 2,002. The Company has renewal options, generally at the fair market
value, under each of these headquarters leases. The area of Emeryville in which
the Company's headquarters facilities are located includes significant amounts
of landfill and was historically used for industrial and light industrial uses.
Underground fuel storage tanks and soil contaminated from leaked fuel were
removed, prior to Sybase's occupancy, from the owned property and one leased
property included in Sybase's headquarters facilities. The cost of monitoring
and treating these sites is less than $100,000 per year. As of December 31,
1997, the Company maintained an engineering center in Mountain View, California
where it leased approximately 61,000 square feet of office space. According to
their terms, the leases for the Mountain View facilities expire December 31,
1998, unless renewed by the Company. The Company also maintains engineering
centers in Boulder, Colorado and in Concord, Massachusetts that are focused,
respectively, on the development of the Company's middleware products and tools
products.
As of December 31, 1997, the Company's field operations, professional
service organizations and subsidiaries occupied leased facilities in
approximately 120 locations in the United States, Australia, Belgium, Brazil,
Canada, China, Czech Republic, France, Germany, Hong Kong, Italy, Japan, Korea,
Mexico, The Netherlands, New Zealand, Philippines, Russia, Singapore, Spain,
Sweden, Switzerland, Taiwan, Argentina, Chile, Venezuela, Peru and the United
Kingdom aggregating approximately 1.9 million square feet. In addition, the
Company owns a building in Concord, Massachusetts encompassing approximately
55,500 square feet and a building encompassing 10,500 square feet located in
Maidenhead, England. The Company is in the process of leasing additional
premises in various locations.
ITEM 3. LEGAL PROCEEDINGS
Following the Company's announcements on January 2, 1998 and January 21,
1998 regarding its preliminary results of operations for the quarter and year
ended December 31, 1997, several class action lawsuits were filed against the
Company and certain of its officers and directors in the United States District
Court, Northern District of California. The complaints are similar and allege
violations of federal and state securities laws and request unspecified monetary
damages.
On January 27, 1998, a purported shareholder derivative action was filed
in the Superior Court of the State of California, County of Alameda. The
complaint alleges that certain of the Company's present and former officers
and/or directors breached fiduciary duties owed to the Company in connection
with the underlying circumstances alleged in the securities class action
complaints described above. Sybase is a nominal defendant in the action and no
damages are sought from it.
Following the Company's announcement on April 3, 1995 of its preliminary
results for the first fiscal quarter ended March 31, 1995, several class action
lawsuits were filed against the Company and certain of its officers in the U.S.
District Court, Northern District of California. The complaints are similar to
one another and allege violations of federal and state securities laws and
request unspecified monetary
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<PAGE> 13
damages. These actions have been consolidated, and a consolidated amended class
action complaint was served on August 7, 1995. The parties are in pretrial
discovery.
Management believes that the claims alleged against it in all of the
foregoing actions are without merit and intends to defend against the claims
vigorously. In the opinion of management, resolution of such litigation is not
expected to have a material adverse effect on the financial position of the
Company. However, depending on the amount and timing, an unfavorable resolution
of such litigation could materially affect the Company's future results of
operations or cash flows in a particular period.
The Company is also a party to various legal disputes and proceedings
arising from the ordinary course of business activities. In the opinion of
management, resolution of these matters is not expected to have a material
adverse effect on the financial position of the Company. However, depending on
the amount and timing, an unfavorable resolution of some or all of these matters
could materially affect the Company's future results of operations or cash flows
in a particular period.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a stockholder vote in the quarter ended
December 31, 1997.
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<PAGE> 14
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company who are elected by and serve in
such capacities at the discretion of the Board of Directors, and their ages, as
of March 24, 1998, are as follows:
<TABLE>
<CAPTION>
Name Age Position
- ---------------------------------------------- ---- ------------------------------------------------------------------
<S> <C> <C>
Mitchell E. Kertzman ......................... 49 Chairman of the Board, Chief Executive Officer
and Director
John S. Chen ................................. 42 President, Chief Executive Officer and Director
Jack L. Acosta ............................... 50 Executive Vice President and Chief Financial Officer
Robert S. Epstein ............................ 45 Executive Vice President, Chief Information Officer and Director
Michael S. Gardner ........................... 52 Senior Vice President, Worldwide Sales
Eric L. Miles ................................ 51 Senior Vice President, Product Operations
Raj Nathan ................................... 44 Senior Vice President, Corporate Program Office
Michael E. Regan ............................. 41 Senior Vice President, Worldwide Professional
Services
L. Mindi Butterfield ......................... 36 Vice President, Marketing
Mitchell L. Gaynor ........................... 38 Vice President, General Counsel and Secretary
Pieter A. Van der Vorst ...................... 43 Vice President and Corporate Controller
</TABLE>
Mr. Kertzman has served as a director since February 1995, as Chief
Executive Officer since July 1996 and as Chairman of the Board since July 1997.
Between February 1995 and July 1996 he served as an Executive Vice President and
between July 1996 and July 1997 he served as President. In February 1995, Sybase
merged with Powersoft Corporation ("Powersoft"), a leading provider of
application development tools. Mr. Kertzman had served as Chief Executive
Officer and a director of Powersoft since he founded it in 1974. He also served
as President of Powersoft from 1974 to 1992. Mr. Kertzman is also a director of
C-Net, Inc.
Mr. Chen has served as President and a director since August 1997. In
February 1998, the Company formed the Office of the Chief Executive, and Mr.
Chen began to share the position of Chief Executive Officer with Mr. Kertzman.
Between August 1997 and February 1998, Mr. Chen also held the position of Chief
Operating Officer. Before joining Sybase, Mr. Chen served between March 1995 and
July 1997 as the President of the Open Enterprise Computing Division of Siemens
Nixdorf, a computer and electronics company, and as Chief Executive Officer and
Chairman of the Siemens Pyramid subsidiary of Siemens Nixdorf. Before its
acquisition by Siemens Nixdorf in March 1995, Mr. Chen served in various
executive capacities with Pyramid Technology Corporation, a computer company,
where he became Chief Operating Officer in October 1992 and President in June
1993.
Mr. Acosta became Executive Vice President in February 1998, and has
served as Chief Financial Officer since July 1996. From July 1996 through
February 1998, Mr. Acosta also served as Senior Vice President. Prior to that,
beginning in March 1995, he served as Vice President of Products Group
Operations. From December 1994 though February 1995, Mr. Acosta served first as
Vice President of SCG Business Operations, then as Vice President of Products
Business Operations. From March 1993
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<PAGE> 15
through December 1994, Mr. Acosta was President and Chief Operating Officer of
Tanon Manufacturing, Inc., an electronics manufacturing company. From October
1984 to February 1993, he was employed by Ungermann-Bass, Inc., a computer
networking company. During that period, he held various titles, including
Executive Vice President, Corporate Operations, and Chief Financial Officer.
Dr. Epstein is a founder of the Company and has served as Executive Vice
President and as a director since November 1984. Since November 1996, Dr.
Epstein has also served as Chief Information Officer of the Company. From
December 1995 to November 1997, Dr. Epstein served as a director of First
Virtual Holding, Inc. He currently is the Chairman of the Board of Colorado
Microdisplay, a privately-held company, where he has been a director since
August 1996.
Mr. Gardner joined Sybase in February 1998 as Senior Vice President,
Worldwide Sales. Immediately prior to joining Sybase, Mr. Gardner served as
Chief Operating Officer of ACT Networks, an integrated multimedia access
company, beginning in December 1996. From June 1995 through November 1996, he
was President of Whittaker Corporation (formerly Hughes Lan Systems), a
networking hardware company. From May 1994 through June 1995, he held the
position of Senior Vice President of Sales and Marketing at Ungermann-Bass, Inc.
Prior to that, Mr. Gardner was Chief Operating Officer of Advanced Computer
Communications from February 1992 through April 1994.
Mr. Miles joined Sybase in December 1997 as Senior Vice President,
Product Operations. From November 1995 until he joined Sybase, Mr. Miles served
as Vice President, Product Development at Informix Corporation, a database
software company. Prior to that, he served as Vice President, Applications
Development at Ross Systems from September 1994 through November 1995. From
January through September 1994, Mr. Miles was President of the Ingres business
unit of Ask Corporation, a software company. Before that, he was corporate vice
president at Amdahl Corporation, and also held various positions with Bank of
America and IBM.
Dr. Nathan joined Sybase in November 1997 as Senior Vice President,
Corporate Program Office. From May through November 1997, he served as President
and CEO of Siemens Pyramid, and held a number of executive positions with
Siemens Pyramid prior to that. From 1985 through 1991, Dr. Nathan was manager of
manufacturing engineering and director of systems engineering at Unisys
Corporation. Before moving into the software industry, he taught engineering at
Kansas State University.
Mr. Regan became Senior Vice President, Worldwide Professional Services
in February 1998. Prior to that, he served as vice president and general manager
of Sybase's Server Product Group. Over the past nine years, Mr. Regan has held a
variety of positions at Sybase, including general manager of the applications
solution division, and a vice president of Sybase Professional Services. Prior
to joining Sybase in February 1988, Mr. Regan worked for Cullinet Software where
he was the director of that company's federal consulting practice.
Ms. Butterfield has served as Vice President, Marketing since February
1997. Prior to that, beginning in January 1996, she served as Vice President of
Workplace Marketing and Vice President of Product Group Marketing
Communications. From September 1992 to January 1996, Ms. Butterfield held
various positions with the Powersoft division (formerly Powersoft Corporation),
including Director of Marketing Communications. From March 1991 until she joined
Powersoft Corporation, Ms. Butterfield was a sales representative for Bachman
Information Systems, Inc., an application development company.
Mr. Gaynor has served as Vice President, General Counsel and Secretary
since January 1997. Prior to that, beginning in May 1996, he served as Vice
President and Associate General Counsel. Between February 1993 and May 1996, Mr.
Gaynor served first as Corporate Counsel, then as Senior Corporate Counsel.
Before joining Sybase, Mr. Gaynor was an attorney with the law firm of Brobeck,
Phleger & Harrison.
Mr. Van der Vorst became Vice President and Corporate Controller in
November 1997. Prior to that, he served as Sybase's Vice President, Tax and
Corporate Accounting beginning in April 1997. From the time he joined Sybase in
December 1991 through April 1997, Mr. Van der Vorst held various other
13
<PAGE> 16
positions, including Director of Tax and Assistant Controller. Prior to joining
Sybase, Mr. Van der Vorst held positions with Cetus Corporation, a biotechnology
company, Specta Physics, Inc., a laser manufacturing company, Levi Strauss &
Company and Price Waterhouse.
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<PAGE> 17
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
Sybase, Inc. Common Stock, par value $.001, is traded on the NASDAQ
National Market System under the symbol "SYBS." The price per share reflected in
the table below represents the range of low and high closing sale prices for the
Company's Common Stock as reported in the NASDAQ National Market System for the
quarters indicated.
<TABLE>
<CAPTION>
High Low
------ ------
<S> <C> <C>
Fiscal 1996:
Quarter ended March 31, 1996 $37.13 $22.25
Quarter ended June 30, 1996 $27.38 $21.50
Quarter ended September 30, 1996 $20.00 $14.38
Quarter ended December 31, 1996 $20.50 $13.88
Fiscal 1997:
Quarter ended March 31, 1997 $20.00 $13.25
Quarter ended June 30, 1997 $16.88 $12.50
Quarter ended September 30, 1997 $20.75 $12.50
Quarter ended December 31, 1997 $23.50 $12.00
</TABLE>
The Company has never paid cash dividends on its capital stock. The
Company currently intends to retain any earnings for use in its business and
does not anticipate paying any cash dividends in the foreseeable future.
The closing sale price of the Company's Common Stock as reported in the
NASDAQ National Market System on March 24, 1998 was $9.56. The number of
stockholders of record of the Company's Common Stock as of March 24, 1998 was
2,371.
FUTURE OPERATING RESULTS; STOCK PRICE VOLATILITY
The Company's future operating results may vary substantially from
period to period. The price of the Company's common stock will fluctuate in the
future, and an investment in the Company's common stock is subject to a variety
of risks, including but not limited to the specific risks identified below. The
results of operations for the quarter and year ended December 31, 1997 are not
necessarily indicative of results for the quarter and fiscal year ending
December 31, 1998 or any other future period. Expectations, forecasts, and
projections by the Company or others are by nature forward-looking statements,
and future results cannot be guaranteed. Forward-looking statements that were
true at the time made may ultimately prove to be incorrect or false. Inevitably,
some investors in the Company's securities will experience gains while others
will experience losses depending on the prices at which they purchase and sell
securities. Prospective and existing investors are strongly urged to carefully
consider the various cautionary statements and risks set forth in this report.
The timing and amount of the Company's license fee revenues are subject
to a number of factors that make estimation of revenues and operating results
prior to the end of a quarter extremely uncertain. Sybase has experienced a
seasonal pattern of license fee decline between the fourth quarter and the
succeeding first quarter contributing to lower total revenues and operating
earnings in the first quarter compared to the prior fourth quarter. For example,
the Company currently anticipates that revenues and earnings in the first
quarter of 1998 will be lower than in the fourth quarter of 1997. As a result of
the seasonal impact on revenues, an anticipated restructuring charge of
approximately $70 million which the Company has announced it will incur in 1998,
and forecasted expenses, the Company anticipates it will incur both an operating
loss and a net loss in the first quarter of 1998. The Company has operated
15
<PAGE> 18
historically with little or no backlog and, as a result, license fees in any
quarter are dependent on orders booked and shipped in that quarter. In addition,
the timing of closing of large license agreements increases the risk of
quarter-to-quarter fluctuations and the uncertainty of estimating quarterly
operating results. The Company has experienced a pattern of recording 50 percent
to 70 percent of its quarterly revenues in the third month of the quarter, with
a concentration of such revenues in the last two weeks of such third month. The
Company's operating expenses are based on projected annual and quarterly revenue
levels and are incurred approximately ratably throughout each quarter. Because
the Company's operating expenses are relatively fixed in the short term, if
projected revenues are not realized in the expected period, the Company's
operating results for that period would be adversely affected and could result
in an operating loss, as occurred in the first and second quarters of 1996.
Failure to achieve revenues, earnings, and other operating and financial results
as forecast or anticipated by brokerage firm and industry analysts could result
in an immediate and adverse effect on the market price of the Company's stock.
The Company may not achieve, in the future, the relatively high rates of growth
experienced by the Company in 1991 through 1994 or the rates of growth projected
for the software markets in which Sybase competes.
In 1998, the Company expects to make changes to the sales coverage model
and sales compensation programs, and focus on increasing the number of discrete
quota-carrying sales people. Although such changes are intended to enhance
overall revenues, such changes could, in the short-run, materially and adversely
affect the sales process and revenues. In February 1998, the Company appointed
Michael S. Gardner Senior Vice President of Worldwide Sales. In April 1998, Mr.
Gardner will assume responsibility for overseeing the Company's worldwide sales
force from Mike Forster, Senior Vice President of Worldwide Field Operations,
who will retire at the end of 1998. In the third quarter of 1997, John Chen
became the Company's President and Chief Operating Officer, and Mitchell
Kertzman, Chief Executive Officer, became Chairman of the Board. In February
1998, the Company created the Office of the Chief Executive with shared
leadership responsibilities between Messrs. Kertzman and Chen, who now also
holds the title of Chief Executive Officer. The Company may make other
management and organization changes in the future. Organizational and management
changes are intended to enhance productivity and competitiveness. However, such
changes may not produce the desired results and could materially adversely
affect productivity, expenses and revenues.
The market for the Company's stock is highly volatile. The trading price
of the Company's common stock fluctuated widely in 1995, 1996 and 1997 and may
in the future continue to be subject to wide fluctuations in response to
quarterly variations in operating and financial results, announcements of
technological innovations, new products, or customer contracts won by the
Company or its competitors. Changes in prices of the Company's or its
competitors' products and services, changes in product mix, changes in the
Company's revenues and revenue growth rates for the Company as a whole or for
individual geographic areas, business units, products or product categories, as
well as other events or factors could also affect the Company's stock prices.
Statements or changes in opinions, ratings or earnings estimates made by
brokerage firms and industry analysts relating to the market in which the
Company does business, the Company's competitors, or the Company or its products
specifically, have resulted, and could in the future result, in an immediate and
adverse effect on the market price of the Company's common stock. For example,
due to a variety of factors, the Company's stock price declined significantly
during the first quarter of 1996 and in 1998. In addition, the stock market has
from time to time experienced extreme price and volume fluctuations that have
particularly affected the market price for many high-technology companies and
which often have been unrelated to the operating performance of these companies.
An increased portion of the Company's revenues in recent quarters has
been derived from its international operations. Several of the Company's
international subsidiaries have been only recently acquired or formed. For
example, the Company recently acquired operations in Chile, Argentina, Norway
and Peru. In addition there have been several management and organizational
changes within the international operations. For example, in 1998, the country
managers in Australia, Thailand and Japan resigned or were replaced.
International revenues, in absolute dollars and as a percentage of total
revenues, may fluctuate in part due to the growth and, in some cases, the
relative immaturity of international organizations. The Company's operations and
financial results could be significantly affected by factors associated with
international operations such as changes in foreign currency exchange rates and
uncertainties relative to regional economic circumstances, political instability
in emerging markets, and
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<PAGE> 19
difficulties in staffing and managing foreign operations, as well as by other
risks associated with international activities. For example, the economic unrest
and currency devaluations in Asia in late 1997 adversely affected collection of
receivables, particularly dollar denominated receivables, and the recognition of
revenue in the fourth quarter of 1997.
The market for the Company's software products and services is extremely
competitive. For a discussion of risks associated with competition, see "Part I,
Item I, Business - Competition".
The Company's future results will depend in part on its ability to
enhance its existing products and to introduce new products on a timely and
cost-effective basis that meet dynamic customer requirements. See "Part I, Item
I, Business - Product Development".
Sybase's results will also depend increasingly on the ability of its
products to interoperate and perform well with existing and future leading,
industry-standard application software products intended to be used in
connection with relational database management systems ("RDBMSs"). Failure to
meet existing or future interoperability and performance requirements of certain
independent vendors marketing such applications in a timely manner has in the
past and could in the future adversely affect the market for Sybase's products.
Certain leading applications will not be interoperable with Sybase RDBMSs until
certain features are added to the Company's RDBMS, and others may never be
available on Sybase's RDBMSs. In addition, the Company's application development
tools, database design tools, and certain connectivity products are designed for
use with RDBMSs offered by the Company's competitors. Vendors of non-Sybase
RDBMSs and related products may become less willing in the future to provide the
Company with access to products, technical information, and marketing and sales
support. If existing and potential customers of the Company who use non-Sybase
RDBMSs refrain from purchasing such products due to concerns that the
development, quality, and support of products for non-Sybase RDBMSs will
diminish over time, the Company's business, results of operations, and financial
condition could be materially and adversely affected.
Commercial acceptance of the Company's products and services could be
adversely affected by critical or negative statements or reports by brokerage
firms, industry and financial analysts, and industry periodicals concerning the
Company and its products, business, or competitors, or by the advertising or
marketing efforts of competitors that could affect customer perception. In
addition, customer perception of Sybase and its products could be adversely
affected by financial results, particularly revenues and profitability, reported
for the 1997 fiscal year or future periods, by the market share of the Company's
products and by related press reports.
The Company's ability to achieve its future revenues and earnings will
depend in part on the ability of its officers and key personnel to manage
growth, costs, and expenses successfully through the implementation of
appropriate management systems and controls. Failure to effectively implement or
maintain such systems and controls could adversely affect the Company's business
and results of operations. The success of the Company also depends in part on
its ability to attract and retain qualified technical, managerial, sales, and
marketing personnel. The competition for such personnel is intense in the
software industry and, Sybase believes, has increased substantially in recent
years. See "Part I, Item I, Business - Employees".
Sybase currently ships most of its products in North America (other than
its Powersoft(R) products) from its Emeryville, California distribution
facility. Because of the pattern of recording a high percentage of quarterly
revenues within the last week or two weeks of the quarter, the closure or
inoperability of this facility during such weeks due to natural calamity or due
to a systems or power failure could have a material adverse effect on the
Company's ability to record revenues for such quarter.
The Company has acquired a number of companies in the past. Most
recently, in February 1998, the Company acquired Intellidex Systems, a provider
of meta data management technology for deploying and managing data warehouse
environments, The Company will likely acquire other distributors, companies,
products, or technologies in the future. The achievement of the desired benefits
of these and future acquisitions will depend in part upon whether the
integration of the acquired businesses is achieved
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<PAGE> 20
in an efficient and effective manner. The successful combination of businesses
will require, among other things, integration of the companies' related product
offerings and coordination of their sales, marketing, and research and
development efforts. The difficulties of such coordination may be increased by
the geographic distance between separate organizations. The Company may be
unable to integrate effectively these or future acquired businesses and may not
obtain the anticipated or desired benefits of such acquisitions. Such
acquisitions may result in costs, liabilities, or additional expenses that could
adversely affect the Company's results of operations and financial condition. In
addition, acquisitions or changes in business or market conditions may cause the
Company to revise its plans, which could result in unplanned expenses or a loss
of anticipated benefits from past investments.
In February 1998, the Company announced that it will incur a
restructuring charge of approximately $70 million in connection with a
Company-wide reorganization which is intended to reduce Sybase's cost structure
by approximately $100 million on an annualized basis. The Company will continue
to evaluate its business, products, and results of operations, and accordingly,
the Company may incur further restructuring charges in the first quarter and in
the future. The actual amount of such charge could exceed the estimated amount
and actual expense savings in the future could be offset by other expense
increases or changes in the Company's business. However, as these are
forward-looking statements, future actual results may differ based on the
factors described above.
In October 1997, the American Institute of Certified Public Accountants
issued Statement of Position No. 97-2, "Software Revenue Recognition ("SOP
97-2"), which supersedes SOP 91-1. The Company will be required to adopt this
standard in the first quarter of 1998. Restatement of prior financial statements
is prohibited. SOP 97-2 addresses software revenue recognition matters primarily
from a conceptual level and detailed implementation guidelines have not been
issued. Accordingly, the Company is not able to currently determine the effect,
if any, that adoption of SOP 97-2 will have on its existing revenue recognition
practices; depending on the implementation guidelines that ultimately emerge,
the amount and timing of revenue recognized could be adversely affected.
Year 2000
The Company is aware of and is addressing the issues associated with the
programming code in existing computer systems as the year 2000 approaches. The
"Year 2000" issue is pervasive and complex, as many computer systems will be
affected in some way by the rollover of the two-digit year value to 00. Systems
that do not properly recognize such information could generate erroneous data or
cause a system to fail. The "Year 2000" issue creates risk for the Company from
unforeseen problems in its own computer systems and from third parties with whom
the Company deals on financial transactions worldwide. Failures of the Company's
and/or third parties' computer systems could have a material impact on the
Company's ability to conduct its business.
The Company has completed an initial assessment of its worldwide
infrastructure systems (e.g., computer and telephone systems) and its business
systems (e.g., revenue, sales and marketing and finance functions) to determine
what actions are required to resolve the Year 2000 issue. As of February 1998,
approximately two-thirds of Company's systems had been tested or certified to be
Year 2000 compatible. Of the remaining one-third, approximately half are
scheduled for upgrades from suppliers which will be installed over the coming
year. The Company anticipates completion of testing on the remaining systems in
the second quarter of 1998. For systems which are not either vendor-certified or
internally certified to be Year 2000 compatible, the Company will endeavor to
upgrade or modify those systems where possible, and otherwise retire systems
where necessary. The Company believes it will have identified solutions
available for all of its systems before the end of 1998, and expects to install
all solutions by April of 1999. The Company has initiated formal communications
with all of its significant suppliers and large customers to determine the
extent to which the Company's interface systems are vulnerable to those third
parties' failure to remediate their own Year 2000 issues. There is no guarantee
that the systems of other companies on which the Company's systems rely will be
timely converted and would not have an adverse effect on the Company's systems.
The Company does not believe that the cost of such actions will have a material
effect on the Company's results of operations or financial condition. There are
no assurances, however, that there will not be a delay in, or increased cost
associated with, the implementation of such changes, and the Company's inability
to implement such changes could have an adverse effect on future results of
operations. Factors that could cause unusual costs and delays include the
availability and cost of
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<PAGE> 21
personnel trained in this area, the ability to locate and correct all relevant
computer codes and other uncertainties.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is incorporated by reference to
the section entitled "Selected Financial Data" of the Registrant's 1997 Annual
Report to Stockholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required by this item is incorporated by reference to
the section entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations" of the Registrant's 1997 Annual Report to
Stockholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated by reference to
the Consolidated Financial Statements, related notes thereto and Report of
Independent Auditors which appear in the Registrant's 1997 Annual Report to
Stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The information required by this item with respect to identification of
directors is incorporated by reference to the information contained in the
section captioned "Election of Directors" in the Registrant's definitive Proxy
Statement for the Annual Meeting of Stockholders to be held May 27, 1998 (the
"Proxy Statement"), to be filed with the Commission within 120 days after the
end of the Registrant's fiscal year ended December 31, 1997. For information
with respect to the executive officers of the Registrant, see "Executive
Officers of the Registrant" at the end of Part I of this Report on Form 10-K.
The information required by this item with respect to the information
required under Item 405 of Regulation S-K is incorporated by reference to the
information contained in the section captioned "Compliance With Section 16(a) of
the Exchange Act" in the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is incorporated by reference to
the information contained in the section captioned "Executive Compensation" in
the Proxy Statement.
19
<PAGE> 22
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated by reference to
the information contained in the section captioned "Share Ownership by Principal
Stockholders and Management" in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is incorporated by reference to
the information contained in the section captioned "Employment Agreements and
Certain Transactions" in the Proxy Statement.
20
<PAGE> 23
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report on Form
10-K:
1. Financial Statements. The following Consolidated Financial Statements
of Sybase, Inc. and Report of Independent Auditors are incorporated by reference
to the Registrant's 1997 Annual Report to Stockholders:
<TABLE>
<CAPTION>
Pages Located
in 1997 Annual
Report to
Stockholders
--------------
<S> <C>
Report of Independent Auditors 15
Consolidated Balance Sheets as of December 31, 1997 and 1996 16
Consolidated Statements of Operations for the Three Years Ended December 31, 1997 17
Consolidated Statements of Stockholders' Equity for the Three Years Ended December 31, 1997 18
Consolidated Statements of Cash Flows for the Three Years Ended December 31, 1997 19
Notes to Consolidated Financial Statements 20 - 33
</TABLE>
2. Financial Statement Schedules. The following financial statement
schedules of Sybase, Inc. for the years ended December 31, 1997, 1996 and 1995
are filed as part of this Report on Form 10-K and should be read in conjunction
with the Consolidated Financial Statements, and related notes thereto, of
Sybase, Inc.
Form
10-K
Schedule Page
- -------------------------------------- ----
II Valuation and Qualifying Accounts 25
Schedules not listed above have been omitted because they are not
applicable or are not required, or the information required to be set forth
herein is included in the Consolidated Financial Statements or notes thereto.
3. Exhibits Required by Item 601 of Regulation S-K. The management
contracts and compensatory plans required to be filed as part of, or
incorporated by reference into, this Report are: (i) 1991 Employee Stock
Purchase Plan, as amended, and 1991 Foreign Subsidiary Employee Stock Purchase
Plan, as amended, Exhibit 10.2, (ii) 1993 Sybase Executive Incentive Plan,
Exhibit 10.3, (iii) Sybase, Inc. 401(K) Plan, as amended, Exhibit 10.4, (iv)
1992 Director Stock Option Plan, as amended, Exhibit 10.5, (v) 1988 Stock Option
Plan, as amended, Exhibit 10.1, (vi) Executive Deferred Compensation Plan,
Exhibit 10.6, (vii) 1996 Stock Plan, as amended, and form of Stock Option
Agreement, Exhibit 10.20, (viii) Form of Statement of Employment Terms, Exhibit
10.21, (ix) Loan and Security Agreement dated as of January 7, 1998 between
Sybase, Inc. and Mitchell E. Kertzman, Exhibit 10.13, (x) Agreement of
Employment Terms dated as of August 1, 1996 between Sybase, Inc. and Jack
Acosta, Exhibit 10.14, (xi) Retirement Agreement and General Release between
Sybase, Inc. and Michael Forster dated as of March 11, 1998, Exhibit 10.22,
(xii) Employment Agreement between Sybase, Inc. and John S. Chen dated as of
July 11, 1997, Exhibit 10.23, (xiii) Promissory Note of Eric Miles in favor of
Sybase, Inc. dated as of January 2, 1998, Exhibit 10.26.
21
<PAGE> 24
The following Exhibits are filed as part of, or incorporated by
reference into, this Report on Form 10-K:
Exhibit No. Description
3.1(4) Restated Certificate of Incorporation of Registrant, as
amended
3.2 Bylaws of Registrant, as amended
4.1 Preferred Share Rights Agreement dated as of March 24, 1992
between Registrant and The First National Bank of Boston, as
amended, (incorporated herein by reference to Exhibit 4.2 of
the Registrant's Registration Statement on Form S-8 (file
no. 33-81692) filed July 18, 1994)
10.1 1988 Stock Option Plan and Forms of Incentive Stock Option
Agreements and Nonstatutory Stock Option Agreements, as
amended
10.2 1991 Employee Stock Purchase Plan and 1991 Foreign
Subsidiary Employee Stock Purchase Plan, as amended
10.3(6) Sybase Executive Incentive Plan
10.4(1) Sybase, Inc. 401(k) Plan, as amended
10.5(7) 1992 Director Stock Option Plan, as amended
10.6(6) Executive Deferred Compensation Plan
10.7(1) Standard Office Lease dated March 10, 1988 between
Registrant and Bay Center Associates
10.8(1) Standard Office Lease dated April 17, 1989 between
Registrant and P.O. Partners
10.9(1) Standard Office Lease dated April 21, 1989 between
Registrant and Christie Avenue Partners
10.10(1) Form of Indemnification Agreement
10.11(3) Second Amendment dated as of November 24, 1992 to Standard
Office Lease dated April 21, 1989 between the Registrant and
Christie Avenue Partners
10.12(3) Lease dated October 1, 1992 between JS - Bay Center
Associates and the Registrant
10.13 Loan and Security Agreement dated as of January 7, 1998
between Sybase, Inc. and Mitchell E. Kertzman
10.14 Agreement of Employment Terms dated as of August 1, 1996
between Sybase, Inc. and Jack Acosta
10.15(5) Powersoft Corporation 1984 Incentive Stock Option Plan, as
amended
22
<PAGE> 25
10.16(5) Powersoft Corporation Form of Incentive Option Granted under
the 1984 Incentive Stock Option Plan
10.17(5) Powersoft Corporation 1994 Amended and Restated Incentive
and Non-Qualified Stock Option Plan
10.18(5) Powersoft Corporation Forms of Incentive and Non-Qualified
Stock Option Granted under the 1994 Amended and Restated
Incentive and Non-Qualified Stock Option Plan
10.19(5) Powersoft Corporation 1994 Amended and Restated Employee
Stock Purchase Plan
10.20 1996 Stock Plan, as amended, and form of Stock Option
Agreement
10.21(7) Form of Statement of Employment Terms
10.22 Retirement Agreement and General Release between Sybase,
Inc. and Michael Forster dated as of March 11, 1998
10.23(8) Employment Agreement between Sybase, Inc. and John S. Chen
dated as of July 11, 1997
10.24 Office Lease dated March 17, 1998, Building A - Bay Center
between Sybase, Inc. and JS Bay Center Associates
10.25 Office Lease dated March 17, 1998, Building C - Bay Center
between Sybase, Inc. and JS Bay Center Associates
10.26 Promissory Note of Eric Miles in favor of Sybase, Inc. dated
as of January 2, 1998
13.1(2) Proxy for 1998 Annual Meeting of Stockholders
13.2 Pages 4 - 36 of the Registrant's Annual Report to
Stockholders for the fiscal year ended December 31, 1997
(except for the portions of the 1997 Annual Report to the
Stockholders expressly incorporated by reference in the
Report on Form 10-K, the 1997 Annual Report to Stockholders
is furnished for the information of the Securities and
Exchange Commission and is not to be deemed "filed")
21 Subsidiaries of Registrant
23.1 Consent of Independent Auditors
27 Financial Data Schedules
(1) Incorporated by reference to exhibits filed in response to Item 16(a),
"Exhibits," of the Company's Registration Statement on Form S-1 (File No.
33-41549) declared effective on August 13, 1991.
(2) To be filed with Securities and Exchange Commission not later than 120 days
after the end of the period covered by this Report on Form 10-K.
(3) Incorporated by reference to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1992, filed on March 29, 1993.
23
<PAGE> 26
(4) Incorporated by reference to Amendment No. 1 to the Company's Registration
Statement on Form S-4 filed March 8, 1994 (File No. 33-75462).
(5) Incorporated by reference to the Registrant's Registration Statement on Form
S-8 (file no. 33-89334) filed on February 10, 1995.
(6) Incorporated by reference to exhibits filed in response to Item 16(a),
"Exhibits," of the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
(7) Incorporated by reference to exhibits filed in response to Item 16(a),
"Exhibits," of the Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
(8) Incorporated by reference to exhibits filed in response to Item 6(a),
"Exhibits and Reports on Form 8K" of the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997.
(b) Reports on Form 8-K. The Company filed no Reports on Form 8-K
during the quarter ended December 31, 1997.
24
<PAGE> 27
II Valuation and Qualifying Accounts
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
-------------
SYBASE, INC.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- ------------------------------------------------------------------------------------------------------------------------------------
ADDITIONS
-----------------------------
Balance at Charged to Charged to Balance at
Beginning Costs Other End of
DESCRIPTION of Period and Expenses Accounts Deletions Period
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997:
Deducted from asset accounts:
Allowance for doubtful accounts $28,242,000 $ 1,484,000 $45,582,000 A $44,635,000 B $30,673,000
Allowance for amortization of intangible assets 28,965,000 14,523,000 43,488,000
----------- ----------- ----------- ----------- -----------
Totals $57,207,000 $16,007,000 $45,582,000 $44,635,000 $74,161,000
=========== =========== =========== =========== ===========
Year ended December 31, 1996:
Deducted from asset accounts:
Allowance for doubtful accounts $19,304,000 $11,713,000 $34,505,000 A $37,280,000 B $28,242,000
Allowance for amortization of intangible assets 21,969,000 6,996,000 28,965,000
----------- ----------- ----------- ----------- -----------
Totals $41,273,000 $18,709,000 $34,505,000 $37,280,000 $57,207,000
=========== =========== =========== =========== ===========
Year ended December 31, 1995:
Deducted from asset accounts:
Allowance for doubtful accounts $15,903,000 $ 867,000 $27,802,000 A $25,268,000 B $19,304,000
Allowance for amortization of intangible assets 12,996,000 8,973,000 21,969,000
----------- ----------- ----------- ----------- -----------
Totals $28,899,000 $ 9,840,000 $27,802,000 $25,268,000 $41,273,000
----------- ----------- ----------- ----------- -----------
</TABLE>
A Charged against revenue
B Uncollectible accounts written off and recoveries
25
<PAGE> 28
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report on Form 10-K to
be signed on its behalf of the undersigned, thereunto duly authorized.
SYBASE, INC.
By: /s/ MITCHELL E. KERTZMAN
----------------------------------
March 24, 1998 Mitchell E. Kertzman
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report on 10-K has been signed by the following persons in the capacities
and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- ----------------------------------------------- --------------------------------------------- --------------
<S> <C> <C>
/s/ MITCHELL E. KERTZMAN Chairman of the Board, Chief March 24, 1998
- ----------------------------------------------- Executive Officer (Principal
(Mitchell E. Kertzman) Executive Officer) and Director
/s/ JOHN S. CHEN President, Chief Executive March 24, 1998
- ----------------------------------------------- Officer (Principal Executive Officer)
(John S. Chen) and Director
/s/ JACK L. ACOSTA Executive Vice President and March 24, 1998
- ----------------------------------------------- Chief Financial Officer (Principal
(Jack L. Acosta) Financial Officer)
/s/ ROBERT S. EPSTEIN Executive Vice President March 24, 1998
- ----------------------------------------------- and Director
(Robert S. Epstein)
/s/ PIETER A. VAN DER VORST Vice President and Corporate March 24, 1998
- ----------------------------------------------- Controller (Principal Accounting
(Pieter A. Van der Vorst) Officer)
/s/ RICHARD C. ALBERDING Director March 24, 1998
- -----------------------------------------------
(Richard C. Alberding)
/s/ L. WILLIAM KRAUSE Director March 24, 1998
- -----------------------------------------------
(L. William Krause)
/s/ DAVID E. LIDDLE Director March 24, 1998
- -----------------------------------------------
(David E. Liddle)
/s/ ALAN B. SALISBURY Director March 24, 1998
- -----------------------------------------------
(Alan B. Salisbury)
/s/ ROBERT P. WAYMAN Director March 24, 1998
- -----------------------------------------------
(Robert P. Wayman)
/s/ JEFFREY T. WEBBER Director March 24, 1998
- -----------------------------------------------
(Jeffrey T. Webber)
</TABLE>
26
<PAGE> 29
EXHIBIT INDEX
Exhibit No. Description
3.1(4) Restated Certificate of Incorporation of Registrant, as
amended
3.2 Bylaws of Registrant, as amended
4.2 Preferred Share Rights Agreement dated as of March 24, 1992
between Registrant and The First National Bank of Boston, as
amended, (incorporated herein by reference to Exhibit 4.2 of
the Registrant's Registration Statement on Form S-8 (file
no. 33-81692) filed July 18, 1994)
10.2 1988 Stock Option Plan and Forms of Incentive Stock Option
Agreements and Nonstatutory Stock Option Agreements, as
amended
10.2 1991 Employee Stock Purchase Plan and 1991 Foreign
Subsidiary Employee Stock Purchase Plan, as amended
10.3(6) Sybase Executive Incentive Plan
10.4(1) Sybase, Inc. 401(k) Plan, as amended
10.5(7) 1992 Director Stock Option Plan, as amended
10.6(6) Executive Deferred Compensation Plan
10.7(1) Standard Office Lease dated March 10, 1988 between
Registrant and Bay Center Associates
10.8(1) Standard Office Lease dated April 17, 1989 between
Registrant and P.O. Partners
10.9(1) Standard Office Lease dated April 21, 1989 between
Registrant and Christie Avenue Partners
10.10(1) Form of Indemnification Agreement
10.11(3) Second Amendment dated as of November 24, 1992 to Standard
Office Lease dated April 21, 1989 between the Registrant and
Christie Avenue Partners
10.12(3) Lease dated October 1, 1992 between JS - Bay Center
Associates and the Registrant
10.15 Loan and Security Agreement dated as of January 7, 1998
between Sybase, Inc. and Mitchell E. Kertzman
10.16 Agreement of Employment Terms dated as of August 1, 1996
between Sybase, Inc. and Jack Acosta
10.15(5) Powersoft Corporation 1984 Incentive Stock Option Plan, as
amended
10.16(5) Powersoft Corporation Form of Incentive Option Granted under
the 1984 Incentive Stock Option Plan
27
<PAGE> 30
10.17(5) Powersoft Corporation 1994 Amended and Restated Incentive
and Non-Qualified Stock Option Plan
10.18(5) Powersoft Corporation Forms of Incentive and Non-Qualified
Stock Option Granted under the 1994 Amended and Restated
Incentive and Non-Qualified Stock Option Plan
10.19(5) Powersoft Corporation 1994 Amended and Restated Employee
Stock Purchase Plan
10.20 1996 Stock Plan, as amended, and form of Stock Option
Agreement
10.21(7) Form of Statement of Employment Terms
10.23 Retirement Agreement and General Release between Sybase,
Inc. and Michael Forster dated as of March 11, 1998
10.23(8) Employment Agreement between Sybase, Inc. and John S. Chen
dated as of July 11, 1997
10.24 Office Lease dated March 17, 1998, Building A - Bay Center
between Sybase, Inc. and JS Bay Center Associates
10.26 Office Lease dated March 17, 1998, Building C - Bay Center
between Sybase, Inc. and JS Bay Center Associates
10.26 Promissory Note of Eric Miles in favor of Sybase, Inc. dated
as of January 2, 1998
13.1(2) Proxy for 1998 Annual Meeting of Stockholders
13.2 Pages 4 - 36 of the Registrant's Annual Report to
Stockholders for the fiscal year ended December 31, 1997
(except for the portions of the 1997 Annual Report to the
Stockholders expressly incorporated by reference in the
Report on Form 10-K, the 1997 Annual Report to Stockholders
is furnished for the information of the Securities and
Exchange Commission and is not to be deemed "filed")
21 Subsidiaries of Registrant
23.1 Consent of Independent Auditors
27 Financial Data Schedules
(1) Incorporated by reference to exhibits filed in response to Item 16(a),
"Exhibits," of the Company's Registration Statement on Form S-1 (File No.
33-41549) declared effective on August 13, 1991.
(2) To be filed with Securities and Exchange Commission not later than 120 days
after the end of the period covered by this Report on Form 10-K.
(3) Incorporated by reference to the Registrant's Annual Report on Form 10-K for
the year ended December 31, 1992, filed on March 29, 1993.
28
<PAGE> 31
(4) Incorporated by reference to Amendment No. 1 to the Company's Registration
Statement on Form S-4 filed March 8, 1994 (File No. 33-75462).
(5) Incorporated by reference to the Registrant's Registration Statement on Form
S-8 (file no. 33-89334) filed on February 10, 1995.
(6) Incorporated by reference to exhibits filed in response to Item 16(a),
"Exhibits," of the Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
(7) Incorporated by reference to exhibits filed in response to Item 16(a),
"Exhibits," of the Company's Annual Report on Form 10-K for the year ended
December 31, 1995.
(8) Incorporated by reference to exhibits filed in response to Item 6(a),
"Exhibits and Reports on Form 8K" of the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1997.
29
<PAGE> 1
Exhibit 3.2
BYLAWS
OF
SYBASE, INC.
(as amended April 1, 1998)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - CORPORATE OFFICES....................................................................1
1.1 REGISTERED OFFICE.................................................................1
1.2 OTHER OFFICES.....................................................................1
ARTICLE II - MEETINGS OF STOCKHOLDERS............................................................1
2.1 PLACE OF MEETINGS.................................................................1
2.2 ANNUAL MEETING....................................................................1
2.3 SPECIAL MEETINGS..................................................................1
2.4 NOTICE OF STOCKHOLDERS' MEETINGS..................................................2
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES
AND STOCKHOLDER BUSINESS..........................................................2
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE......................................3
2.7 QUORUM............................................................................3
2.8 ADJOURNED MEETING; NOTICE.........................................................4
2.9 VOTING............................................................................4
2.10 WAIVER OF NOTICE..................................................................5
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT
WITHOUT A MEETING ................................................................5
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING;
GIVING CONSENTS ..................................................................5
2.13 PROXIES...........................................................................6
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE.............................................6
2.15 CONDUCT OF BUSINESS...............................................................6
ARTICLE III - DIRECTORS..........................................................................7
3.1 POWERS............................................................................7
3.2 NUMBER OF DIRECTORS...............................................................7
3.3 ELECTION QUALIFICATION AND TERM OF OFFICE OF DIRECTORS............................7
3.4 RESIGNATION AND VACANCIES.........................................................7
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE..........................................8
3.6 FIRST MEETINGS....................................................................8
3.7 REGULAR MEETINGS..................................................................9
3.8 SPECIAL MEETINGS; NOTICE..........................................................9
3.9 QUORUM............................................................................9
3.10 WAIVER OF NOTICE..................................................................9
3.11 ADJOURNED MEETING; NOTICE........................................................10
3.12 CONDUCT OF BUSINESS .............................................................10
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
3.13 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING................................10
3.14 FEES AND COMPENSATION OF DIRECTORS...............................................10
3.15 APPROVAL OF LOANS TO OFFICERS....................................................10
3.16 REMOVAL OF DIRECTORS.............................................................11
ARTICLE IV - COMMITTEES.........................................................................11
4.1 COMMITTEES OF DIRECTORS..........................................................11
4.2 COMMITTEE MINUTES................................................................12
4.3 MEETINGS AND ACTION OF COMMITTEES................................................12
ARTICLE V OFFICERS.............................................................................12
5.1 OFFICERS.........................................................................12
5.2 ELECTION OF OFFICERS.............................................................12
5.3 REMOVAL AND RESIGNATION OF OFFICERS..............................................13
5.4 CHAIRMAN OF THE BOARD............................................................13
5.5 PRESIDENT........................................................................13
5.6 VICE PRESIDENTS..................................................................13
5.7 SECRETARY........................................................................14
5.8 TREASURER........................................................................14
5.9 ASSISTANT SECRETARY..............................................................15
5.10 ASSISTANT TREASURER..............................................................15
5.11 AUTHORITY AND DUTIES OF OFFICERS.................................................15
ARTICLE VI - INDEMNITY..........................................................................15
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS........................................15
6.2 INDEMNIFICATION OF OTHERS........................................................16
6.3 INSURANCE........................................................................16
ARTICLE VII - RECORDS AND REPORTS...............................................................16
7.1 MAINTENANCE AND INSPECTION OF RECORDS............................................16
7.2 INSPECTION BY DIRECTORS..........................................................17
7.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS...................................17
ARTICLE VIII - GENERAL MATTERS..................................................................17
8.1 STOCK CERTIFICATES; PARTLY PAID SHARES...........................................17
8.2 LOST CERTIFICATES................................................................18
8.3 CONSTRUCTION; DEFINITIONS........................................................18
8.4 DIVIDENDS........................................................................18
8.5 FISCAL YEAR......................................................................18
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
8.6 SEAL.............................................................................18
8.7 TRANSFER OF STOCK................................................................19
8.8 STOCK TRANSFER AGREEMENTS........................................................19
8.9 REGISTERED ......................................................................19
ARTICLE IX - AMENDMENTS.........................................................................19
ARTICLE X - DISSOLUTION.........................................................................20
ARTICLE XI - CUSTODIAN..........................................................................21
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES......................................21
11.2 DUTIES OF CUSTODIAN..............................................................22
</TABLE>
-iii-
<PAGE> 5
BYLAWS
OF
SYBASE, INC.
(as amended April 1, 1998)
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation in the State of Delaware shall
be in the City of Wilmington, County of New Castle, State of Delaware. The name
of the registered agent of the corporation at such location is Corporation Trust
Company.
1.2 OTHER OFFICES
The board of directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at the principal executive
offices of the corporation, or at any other place, within or outside the State
of Delaware, designated by the board of directors. In the absence of any such
designation, stockholders' meetings shall be held at the principal executive
offices of the corporation.
2.2 ANNUAL MEETING
An annual meeting of stockholders shall be held for the election of
directors at such date, time and place, either within or without the State of
Delaware, as may be designated by resolution of the board of directors from time
to time. Any other proper business may be transacted at the annual meeting.
2.3 SPECIAL MEETINGS
A special meeting of the stockholders may be called at any time by the
board of directors, or
<PAGE> 6
by the chairman of the board, by the president or by the chief executive
officer, or by one or more stockholders holding shares in the aggregate entitled
to cast not less than ten percent of the votes at that meeting.
If a special meeting is called by any person or persons other than the
board of directors, the request shall be in writing, specifying the time of such
meeting and the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the chairman of the board, the president, chief
executive officer, or the secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
officer receiving the request shall cause notice to be promptly given to the
stockholders entitled to vote, in accordance with the provisions of Sections 2.4
and 2.5, that a meeting will be held at the time requested by the person or
persons who called the meeting, not less than thirty-five (35) nor more than
sixty (60) days after the receipt of the request. If the notice is not given
within twenty (20) days after the receipt of the request, the person or persons
requesting the meeting may give the notice. Nothing contained in this paragraph
of this Section 2.3 shall be construed as limiting, fixing, or affecting the
time when a meeting of stockholders called by action of the board of directors
may be held.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings with stockholders shall be in writing and shall
be sent or otherwise given in accordance with Section 2.6 of these bylaws not
less than ten (10) nor more than sixty (60) days before the date of the meeting
to each stockholder entitled to vote at such meeting. The notice shall specify
the place, date, and hour of the meeting, and, in the case of a special meeting,
the purpose or purposes for which the meeting is called.
2.5 ADVANCE NOTICE OF STOCKHOLDER NOMINEES AND STOCKHOLDER BUSINESS
To be properly brought before an annual meeting or special meeting,
nominations for the election of director or other business must be (a) specified
in the notice of meeting (or any supplement thereto) given by or at the
direction of the board of directors, (b) otherwise properly brought before the
meeting by or at the direction of the board of directors, or (c) otherwise
properly brought before the meeting by a stockholder. For such nominations or
other business to be considered properly brought before the meeting by a
stockholder such stockholder must have given timely notice and in proper form of
his intent to bring such business before such meeting. To be timely, such
stockholder's notice must be delivered to or mailed and received by the
secretary of the corporation not less than ninety (90) days prior to the
meeting; provided, however, that in the event that less than one-hundred (100)
days notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be so received
not later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made. To be in proper form, a stockholder's notice to the secretary shall set
forth:
-2-
<PAGE> 7
(i) the name and address of the stockholder who intends to
make the nominations or propose the business and, as the case
may be, the name and address of the person or persons to be
nominated or the nature of the business to be proposed;
(ii) a representation that the stockholder is a holder of
record of stock of the corporation entitled to vote at such
meeting and, if applicable, intends to appear in person or by
proxy at the meeting to nominate the person or persons specified
in the notice or introduce the business specified in the notice;
(iii) if applicable, a description of all arrangements or
understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant
to which the nomination or nominations are to be made by the
stockholder;
(iv) such other information regarding each nominee or each
matter of business to be proposed by such stockholder as would
be required to be included in a proxy statement filed pursuant
to the proxy rules of the Securities and Exchange Commission had
the nominee been nominated, or intended to be nominated, or the
matter been proposed, or intended to be proposed by the board of
directors; and
(v) if applicable, the consent of each nominee to serve as
director of the corporation if so elected.
The chairman of the meeting may refuse to acknowledge the nomination of
any person or the proposal of any business not made in compliance with the
foregoing procedure.
2.6 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.7 QUORUM
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum is not present or represented at any
meeting of
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the stockholders, then either (i) the chairman of the meeting or (ii) the
stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
When a quorum is present or represented at any meeting, the vote of the
holders of a majority of the stock having voting power present in person or
represented by proxy shall decide any question brought before such meeting,
unless the question is one upon which, by express provisions of the statutes or
of the certificate of incorporation, a different vote is required, in which case
such express provision shall govern and control the decision of the question.
2.8 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these
bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the corporation may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.9 VOTING
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.12 and Section 2.14
of these bylaws, subject to the provisions of Sections 217 and 218 of the
General Corporation Law of Delaware (relating to voting rights of fiduciaries,
pledgors and joint owners of stock and to voting trusts and other voting
agreements).
Except as may otherwise be provided in the certificate of incorporation
or the last paragraph of this Section 2.9, each stockholder shall be entitled to
one vote for each share of capital stock held by such stockholder.
At a stockholders' meeting at which directors are to be elected, or at
elections held under special circumstances, a stockholder shall be entitled to
cumulate votes (i.e., cast for any candidate a number of votes greater than the
number of votes which such stockholder normally is entitled to cast). Each
holder of stock of any class or series who elects to cumulate votes shall be
entitled to as many votes as equals the number of votes which (absent this
provision as to cumulative voting) he would be entitled to cast for the election
of directors with respect to his shares of stock multiplied by the number of
directors to be elected by him, and he may cast all of such votes for a single
director or may distribute them among the number to be voted for, or for any two
or more of them, as he may see fit, so long as the name of the candidate for
director shall have been placed in nomination prior to the voting and the
stockholder, or any other holder of the same class or series of stock, has given
notice at the meeting prior to the voting of the intention to cumulate votes;
provided that, except as
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may otherwise be provided in the certificate of incorporation, effective upon
such time as (i) shares of the capital stock of the corporation are designated
as qualified for trading as National Market System securities on the National
Association of Securities Dealers, Inc. Automated Quotation System (or any
successor national market system) and (ii) the corporation has at least 800
holders of shares of its capital stock, the cumulative voting rights set forth
in this Section 2.9 shall terminate.
2.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these bylaws.
2.11 STOCKHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Effective upon the closing of the corporation's initial public offering
of securities pursuant to a registration statement filed under the Securities
Act of 1933, as amended, the stockholders of the corporation may not take action
by written consent without a meeting but must take any such actions at a duly
called annual or special meeting.
2.12 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof
or entitled to express consent or dissent to corporate action in writing without
a meeting (if otherwise permitted by these bylaws and the corporation's
certificate of incorporation), or entitled to receive payment of any dividend or
other distribution or allotment of any rights or entitled to exercise any rights
in respect of any change, conversion or exchange of stock or for the purpose of
any other lawful action, the board of directors may fix, in advance, a record
date, which shall be not more than sixty (60) nor less than ten (10) days before
the date of such meeting, nor more than sixty (60) days prior to any other
action.
If the board of directors does not so fix a record date, the fixing of
such record date shall be governed by the provisions of Section 213 of the
General Corporation Law of Delaware.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
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2.13 PROXIES
Each stockholder entitled to vote at a meeting of stockholders or
entitled to express consent or dissent to corporate action in writing without a
meeting (if otherwise permitted by these bylaws and the corporation's
certificate of incorporation) may authorize another person or persons to act for
him by a written proxy, signed by the stockholder and filed with the secretary
of the corporation, but no such proxy shall be voted or acted upon after three
(3) years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(c) of the General Corporation Law of Delaware.
2.14 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present. The stock
ledger shall be the only evidence as to who are the stockholders entitled to
examine the stock ledger, the list of stockholders or the books of the
corporation, or to vote in person or by proxy at any meeting of stockholders and
of the number of shares held by each such stockholder.
2.15 CONDUCT OF BUSINESS
Meetings of stockholders shall be presided over by the chairman of the
board, if any, or in his absence by the president, or in his absence by a vice
president, or in the absence of the foregoing persons by a chairman designated
by the board of directors, or in the absence of such designation by a chairman
chosen at the meeting. The secretary shall act as secretary of the meeting, but
in his absence the chairman of the meeting may appoint any person to act as
secretary of the meeting. The chairman of any meeting of stockholders shall
determine the order of business and the procedures at the meeting, including
such matters as the regulation of the manner of voting and conduct of business.
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ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the certificate of incorporation or these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
3.2 NUMBER OF DIRECTORS
The number of directors of the corporation is fixed at eight (8), of
which two shall be designated Class I, three shall be designated as Class II
directors and three shall be designated Class III directors. No reduction of the
authorized number of directors shall have the effect of removing any director
before that director's term of office expires.
3.3 ELECTION QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Each director shall hold office until his successor is elected and
qualified or until his earlier resignation or removal. Directors need not be
stockholders unless so required by the certificate of incorporation or these
bylaws. Election of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the
corporation. Stockholders may remove directors with or without cause. Any
vacancy occurring in the board of directors with or without cause may be filled
by a majority of the remaining members of the board of directors, although such
majority is less than a quorum, or by a plurality of the votes cast at a meeting
of stockholders, and each director so elected shall hold office until the
expiration of the term of office of the director whom he has replaced.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(i) Vacancies and newly created directorships resulting from
any increase in the authorized number of directors elected by
all of the stockholders having the right to vote as a single
class may be filled by a majority of the directors then in
office, although less than a quorum, or by a sole remaining
director.
(ii) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by
the provisions of
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the certificate of incorporation, vacancies and newly created
directorships of such class or classes or series may be filled
by a majority of the directors elected by such class or classes
or series thereof then in office, or by a sole remaining
director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder may apply to the Court of Chancery for a decree summarily
ordering an election as provided in Section 211 of the General Corporation Law
of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent of the total number of the shares at the time
outstanding having the right to vote for such directors, summarily order an
election to be held to fill any such vacancies or newly created directorships,
or to replace the directors chosen by the directors then in office as aforesaid,
which election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be held
at such time and place as shall be fixed by the vote of the stockholders at the
annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
board of directors, or as shall be specified in a written waiver signed by all
of the directors.
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3.7 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice at
such time and at such place, within or without the State of Delaware, as shall
from time to time be determined by the board.
3.8 SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors may be held at such time and
at such place, within or without the State of Delaware, whenever called by the
chairman of the board, by the president, by the secretary or by any two
directors.
When given by the chairman of the board, the president or the secretary,
notice of the time and place of special meeting shall be delivered personally or
by telephone or facsimile to each director at least 24 hours in advance of the
date and time of the special meeting.
When given by any two directors, notice of the time and place of the
special meeting shall be delivered personally or by telephone or facsimile to
each director or sent by first-class mail to them, charges prepaid addressed to
each director at that director's address as it is shown on the records of the
Corporation. Such notice shall be given at least four days before the time of
the holding of the meeting. If the notice is mailed, it shall be deposited in
the United States mail at least six days before the time of the holding of the
meeting. If the notice is delivered personally or by telephone, facsimile or by
telegram, it shall be delivered personally or by telephone, facsimile or to the
telegraph company at least four days before the time of the holding of the
meeting.
Any oral notice (when given by either the chairman, the president, the
secretary or any two directors) given either personally or by telephone may be
communicated either to the director or to a person at the office of the director
whom the person giving the notice has reason to believe will promptly
communicate it to the director. No notice need specify the place for the meeting
if the meeting is to be held at the principal executive office of the
Corporation.
3.9 QUORUM
At all meetings of the board of directors, a majority of the number of
authorized directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation.
3.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such
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meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
directors, or members of a committee of directors, need be specified in any
written waiver of notice unless so required by the certificate of incorporation
or these bylaws.
3.11 ADJOURNED MEETING; NOTICE
If a quorum is not present at any meeting of the board of directors,
then the directors present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum is
present.
3.12 CONDUCT OF BUSINESS
Meetings of the board of directors shall be presided over by the
chairman of the board, if any, or in his absence by the president, or in their
absence by a chairman chosen at the meeting. The secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting. The chairman of any
meeting shall determine the order of business and the procedures at the meeting.
3.13 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or these
bylaws, any action required or permitted to be taken at any meeting of the board
of directors, or of any committee thereof, may be taken without a meeting if all
members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee.
3.14 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the certificate of incorporation or these
bylaws, the board of directors shall have the authority to fix the compensation
of directors. The directors may be paid their expenses, if any, of attendance at
each meeting of the board of directors and may be paid a fixed sum for
attendance at each meeting of the board of directors or a stated salary as
director. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor. Members
of special or standing committees may be allowed like compensation for attending
committee meetings.
3.15 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan,
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guaranty or assistance may reasonably be expected to benefit the corporation.
The loan, guaranty or other assistance may be with or without interest and may
be unsecured, or secured in such manner as the board of directors shall approve,
including, without limitation, a pledge of shares of stock of the corporation.
Nothing in this section shall be deemed to deny, limit or restrict the powers of
guaranty or warranty of the corporation at common law or under any statute.
3.16 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of
incorporation or by these bylaws, any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided, however,
that, so long as stockholders of the corporation are entitled to cumulative
voting, if less than the entire board is to be removed, no director may be
removed without cause if the votes cast against his or her removal would be
sufficient to elect him or her if then cumulatively voted at an election of the
entire Board of Directors.
No reduction of the authorized number of directors shall have the effect
of removing any director prior to the expiration of such director's term of
office.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist of
one or more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the board of
directors to act at the meeting in the place of any such absent or disqualified
member. Any such committee, to the extent provided in the resolution of the
board of directors or in the bylaws of the corporation, shall have and may
exercise all the powers and authority of the board of directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers that may require it; but no
such committee shall have the power or authority to (i) amend the certificate of
incorporation (except that a committee may, to the extent authorized in the
resolution or resolutions providing for the issuance of shares of stock adopted
by the board of directors as provided in Section 151(a) of the General
Corporation Law of Delaware, fix any of the preferences or rights of such shares
relating to dividends, redemption, dissolution, any distribution of assets of
the corporation or the conversion into, or the exchange of such shares for,
shares of any other class or classes or any other series of the same or any
other class or classes of stock of the corporation), (ii) adopt an agreement of
merger or consolidation under Sections 251 or 252 of the General Corporation Law
of Delaware, (iii) recommend to the stockholders the sale, lease or exchange of
all or substantially all of
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the corporation's property and assets (iv) recommend to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or (v) amend
the bylaws of the corporation; and, unless the board resolution establishing the
committee, the bylaws or the certificate of incorporation expressly so provide,
no such committee shall have the power or authority to declare a dividend, to
authorize the issuance of stock, or to adopt a certificate of ownership and
merger pursuant to Section 253 of the General Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws, Section
3.5 (place of meetings and meetings by telephone), Section 3.7 (regular
meetings), Section 3.8 (special meetings and notice), Section 3.9 (quorum),
Section 3.10 (waiver of notice), Section 3.11 (adjournment and notice of
adjournment), Section 3.12 (conduct of business) and Section 3.13 (action
without a meeting), with such changes in the context of those bylaws as are
necessary to substitute the committee and its members for the board of directors
and its members; provided, however, that the time of regular meetings of
committees may also be called by resolution of the board of directors and that
notice of special meetings of committees shall also be given to all alternate
members, who shall have the right to attend all meetings of the committee. The
board of directors may adopt rules for the government of any committee not
inconsistent with the provisions of these bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, one or more vice
presidents, a secretary, and a treasurer. The corporation may also have, at the
discretion of the board of directors, a chairman of the board, one or more
assistant vice presidents, assistant secretaries, assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.2 of these bylaws. Any number of offices may be held by the same
person.
5.2 ELECTION OF OFFICERS
Except as otherwise provided in this Section 5.2, the officers of the
corporation shall be chosen by the board of directors, subject to the rights, if
any, of an officer under any contract of employment. The board of directors may
appoint, or empower the president to appoint (whether or not such officer is
described in this Article V), such officers and agents of the business as the
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corporation may require, each of whom shall hold office for such period, have
such authority, and perform such duties as are provided in these bylaws or as
the board of directors may from time to time determine. Any vacancy occurring in
any office of the corporation shall be filled by the board of directors or may
be filled by the president (if the president appointed such officer).
5.3 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors or, in the case of an officer appointed by
the president, by the president.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.4 CHAIRMAN OF THE BOARD
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.5 of these bylaws.
5.5 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the board
of directors to the chairman of the board, if there be such an officer, the
president, unless otherwise determined by the board of directors, shall be the
chief executive officer of the corporation and shall, subject to the control of
the board of directors, have general supervision, direction, and control of the
business and the officers of the corporation. He shall preside at all meetings
of the shareholders and, in the absence or nonexistence of a chairman of the
board, at all meetings of the board of directors. He shall have the general
powers and duties of management usually vested in the office of president of a
corporation and shall have such other powers and duties as may be prescribed by
the board of directors or these bylaws.
5.6 VICE PRESIDENTS
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors,
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shall perform all the duties of the president and when so acting shall have all
the powers of, and be subject to all the restrictions upon, the president. The
vice presidents shall have such other powers and perform such other duties as
from time to time may be prescribed for them respectively by the board of
directors, these bylaws, the president or the chairman of the board.
5.7 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and shareholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at shareholders'
meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the board of
directors, a share register, or a duplicate share register, showing the names of
all shareholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the shareholders and of the board of directors required to be given by law or
by these bylaws. He shall keep the seal of the corporation, if one be adopted,
in safe custody and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or by these bylaws.
5.8 TREASURER
The treasurer shall keep and maintain, or cause to be kept and
maintained, adequate and correct books and records of accounts of the properties
and business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained earnings
and shares. The books of account shall at all reasonable times be open to
inspection by any director.
The treasurer shall deposit all money and other valuables in the name
and to the credit of the corporation with such depositaries as may be designated
by the board of directors. He shall disburse the funds of the corporation as may
be ordered by the board of directors, shall render to the president and
directors, whenever they request it, an account of all of his transactions as
treasurer and of the financial condition of the corporation, and shall have such
other powers and perform such other duties as may be prescribed by the board of
directors or these bylaws.
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5.9 ASSISTANT SECRETARY
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.10 ASSISTANT TREASURER
The assistant treasurer, or, if there is more than one, the assistant
treasurers, in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the treasurer or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the treasurer
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.11 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the board of directors or the stockholders.
ARTICLE VI
INDEMNITY
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner permitted
by the General Corporation Law of Delaware, indemnify each of its directors and
officers against expenses (including attorneys' fees), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was an
agent of the corporation. For purposes of this Section 6.1, a "director" or
"officer" of the corporation includes any person (i) who is or was a director or
officer of the corporation, (ii) who is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, including, without limitation, any direct or
indirect subsidiary of the corporation, or (iii) who was a director or officer
of a corporation which was a predecessor corporation of the corporation or of
another enterprise at the request of such predecessor corporation.
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<PAGE> 20
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the extent and in the manner
permitted by the General Corporation Law of Delaware, to indemnify each of its
employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation (other
than a director or officer) includes any person (i) who is or was an employee or
agent of the corporation, (ii) who is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, including, without limitation, any direct or
indirect subsidiary of the corporation, or (iii) who was an employee or agent of
a corporation which was a predecessor corporation of the corporation or of
another enterprise at the request of such predecessor corporation.
6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any
person who is or was 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 or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of Delaware.
ARTICLE VII
RECORDS AND REPORTS
7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at
such place or places as designated by the board of directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
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<PAGE> 21
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the
treasurer, the secretary or assistant secretary of this corporation, or any
other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of a corporation shall be represented by certificates,
provided that the board of directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and, upon request,
every holder of uncertificated shares, shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the board of directors, or the president or vice-president, and by the treasurer
or an assistant treasurer, or the secretary or an assistant secretary of such
corporation representing the number of shares registered in certificate form.
Any or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate has ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
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<PAGE> 22
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, or upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.2 LOST CERTIFICATES
Except as provided in this Section 8.2, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnity it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
8.3 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
8.4 DIVIDENDS
The directors of the corporation, subject to any restrictions contained
in the certificate of incorporation, may declare and pay dividends upon the
shares of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the corporation's
capital stock.
The directors of the corporation may set apart out of any of the funds
of the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve.
8.5 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.6 SEAL
The corporation may adopt a corporate seal, which may be altered at
pleasure, and may use
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<PAGE> 23
the same by causing it or a facsimile thereof to be impressed or affixed or in
any other manner reproduced.
8.7 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction in its books.
8.8 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any agreement
with any number of stockholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.9 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted, amended
or repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal bylaws.
Notwithstanding any other provision of these bylaws or any provision of
law which might otherwise permit a lesser vote or no vote, but in addition to
any affirmative vote of the holders of the capital stock required by law or by
these bylaws, the affirmative vote of at least two-thirds (2/3) of the combined
voting power of all of the then-outstanding shares of the corporation entitled
to vote shall be required to alter, amend or repeal Article II, Section 2.9 or
Section 2.11 of these bylaws or this Article IX or any provision thereof, or to
add or amend any other bylaw in order to change or nullify the effect of such
provisions, unless such amendment shall be approved by a majority of the
directors of the corporation not affiliated or associated with any person or
entity holding (or which
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<PAGE> 24
has announced an intent to obtain) 26% or more of the voting power of the
corporation's outstanding capital stock.
ARTICLE X
DISSOLUTION
If it should be deemed advisable in the judgment of the board of
directors of the corporation that the corporation should be dissolved, the
board, after the adoption of a resolution to that effect by a majority of the
whole board at any meeting called for that purpose, shall cause notice to be
mailed to each stockholder entitled to vote thereon of the adoption of the
resolution and of a meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate's becoming
effective in accordance with Section 103 of the General Corporation Law of
Delaware, the corporation shall be dissolved.
ARTICLE XI
CUSTODIAN
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may appoint
one or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:
(i) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect
successors to directors whose terms have expired or would have
expired upon qualification of their successors; or
(ii) the business of the corporation is suffering or is
threatened with irreparable injury because the directors are so
divided respecting the management of the affairs of the
corporation that the required vote for action by the board of
directors cannot be obtained and the stockholders are unable to
terminate this division; or
(iii) the corporation has abandoned its business and has
failed within
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<PAGE> 25
a reasonable time to take steps to dissolve, liquidate or
distribute its assets.
11.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver
appointed under Section 291 of the General Corporation Law of Delaware, but the
authority of the custodian shall be to continue the business of the corporation
and not to liquidate its affairs and distribute its assets, except when the
Court of Chancery otherwise orders and except in cases arising under Sections
226(a)(3) or 352(a)(2) of the General Corporation Law of Delaware.
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<PAGE> 1
Exhibit 10.1
SYBASE, INC.
1988 STOCK OPTION PLAN
(As Amended March 13, 1998)
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and Consultants
of the Company and to promote the success of the Company's business.
Options granted hereunder may be either Incentive Stock Options or
Nonstatutory Stock Options, at the discretion of the Board and as reflected in
the terms of the Option Agreement.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" shall mean the Committee, if one has been appointed,
or the Board of Directors of the Company, if no Committee is appointed.
(b) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(c) "Committee" shall mean the Common Stock of the Company.
(d) "Common Stock" shall mean the Common Stock of the Company.
(e) "Company" shall mean Sybase, Inc., a Delaware corporation.
(f) "Consultant" shall mean any person who is engaged by the
Company or any parent or Subsidiary to render consulting services; the term
Consultant shall not include Directors.
(g) "Continuous Status as an Employee or Consultant" shall mean
the absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any other
leave of absence approved by the Board or its delegate; provided that, in the
case of an Incentive Stock Option only, such leave is for a period of not more
than 90 days or reemployment upon the expiration of such leave is guaranteed by
contract or statute.
(h) "Director" shall mean a member of the Board of Directors of
the Company.
(i) "Employee" shall mean any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of the Company.
The
<PAGE> 2
payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended.
(k) "Incentive Stock Option" shall mean an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code.
(l) "Nonstatutory Stock Option" shall mean an Option not intended
to qualify as an Incentive Stock Option.
(m) "Officer" shall mean an officer of the Company within the
meaning of the rules and regulations promulgated under Section 16 of the
Exchange Act.
(n) "Option" shall mean a stock option granted pursuant to the
Plan.
(o) "Option Agreement" shall mean the written agreement evidencing
an Option. An Option Agreement may be an "Incentive Stock Option Agreement" or a
"Nonstatutory Stock Option Agreement."
(p) "Optioned Stock" shall mean the Common Stock subject to an
Option.
(q) "Optionee" shall mean an Employee or Consultant who receives
an Option.
(r) "Parent" shall mean a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(s) "Plan" shall mean this 1988 Stock Option Plan.
(t) "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(u) "Subsidiary" shall mean a "subsidiary corporation," whether
now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11
of the Plan, the maximum aggregate number of shares which may be optioned and
sold under the Plan is 17,930,480 shares of Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan. Notwithstanding any other provision of the Plan,
shares issued under the Plan and
<PAGE> 3
later repurchased by the Company shall not become available for future grant or
sale under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. If permitted by Rule
16b-3 promulgated under the Exchange Act ("Rule 16b-3"), the Plan may be
administered by different bodies with respect to Directors, Officers who are not
Directors, and Employees who are neither Directors nor Officers.
(ii) Administration with Respect to Directors and Officers.
With respect to Option grants made to Employees or consultants who are also
Officers or Directors, the Plan shall be administered by (A) the Board of
Directors, if the Board may administer the Plan in compliance with the rules
governing a plan intended to qualify as a discretionary grant or award plan
under Rule 16b-3, or (B) one or more committees designated by the Board of
Directors to administer the Plan, which committee(s) shall be constituted in
such a manner as to comply with the rules governing a plan intended to qualify
as a discretionary plan under Rule 16b-3. Once appointed, any such committee
shall continue to serve in its designated capacity until otherwise directed by
the Board of Directors. From time to time the Board of Directors may increase
the size of any such committee and appoint additional members, remove members
(with or without cause), substitute new members, fill vacancies (however
caused), or remove all members of any such committee and thereafter directly
administer the Plan, all to the extent permitted by the rules governing a plan
intended to qualify as a discretionary grant or award plan under Rule 16b-3.
(iii) Administration with Respect to Other Person. With
respect to Option grants made to Employees or consultants who are neither
Directors nor Officers, the Plan shall be administered by (A) the Board of
Directors or (B) a committee designated by the Board of Directors, which
committee shall be constituted to satisfy the legal requirements relating to the
administration of stock option plans under applicable state corporate and
securities laws and the Code ("Applicable Laws"). Once appointed, such committee
shall serve in its designated capacity until otherwise directed by the Board of
Directors. The Board of Directors may increase the size of any such committee
and appoint additional members, remove members (with or without cause) and
substitute new members, fill vacancies (however caused), or remove all members
of such committee and thereafter directly administer the Plan, all to the extent
permitted by Applicable Laws.
(b) Powers of the Board. Subject to the provisions of the Plan,
the Board shall have the authority, in its discretion: (i) to grant Incentive
Stock Options or Nonstatutory Stock Options; (ii) to determine, upon review of
relevant information and in accordance with Section 8(b) of the Plan, the fair
market value of the Common Stock; (iii) to determine the exercise price per
share of Options to be granted which exercise price shall be determined in
accordance with Section 8(a) of the Plan; (iv) to determine the Employees and
Consultants to whom, and the time or times at which, Options shall be
<PAGE> 4
granted and the number of shares to be represented by each Option; (v) to
interpret the Plan; (vi) to prescribe, amend and rescind rules and regulations
relating to the Plan; (vii) to accelerate or defer (with the consent of the
Optionee) the exercise date of any Option, consistent with the provisions of
Section 5 of the Plan; (ix) to authorize any person to execute on behalf of the
Company any instrument required to effectuate the grant of an option previously
granted by the Board; (x) to delegate to others such authority to administer the
Plan as may be permitted under Applicable Laws, and (xi) to make all other
determinations deemed necessary or advisable for the administration of the Plan.
(c) Effect of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
5. Eligibility.
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he or she is
otherwise eligible, be granted an additional Option or Options.
(b) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate fair market
value of all shares subject to an Optionee's Incentive Stock Options (granted by
the Company or any Parent or Subsidiary under all plans of the Company, any
Parent and any Subsidiary, including this Plan) which first become exercisable
during any calendar year exceeds $100,000, such excess Options shall be treated
as Nonstatutory Stock Options. For purposes of this Section 5(b), Incentive
Stock Options shall be taken into account in the order in which they were
granted, and the fair market value of the shares shall be determined as of the
time of grant of the Option.
(c) Section 5(b) of the Plan shall apply only to an Incentive
Stock Option evidenced by an Incentive Stock Option Agreement which sets forth
the intention of the company and the Optionee that such Option shall qualify as
an Incentive Stock Option. Section 5(b) of the Plan shall not apply to any
Option evidence by a Nonstatutory Stock Option Agreement which sets forth the
intention of the Company and the Optionee that such Option shall be a
Nonstatutory Stock Option.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment with or consulting relationship with the
Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate such employment or consulting relationship at any
time.
6. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company a described in Section 17 of the Plan. It shall
continue in effect until June 18, 2000, unless sooner terminated under Section
13 of the Plan.
<PAGE> 5
7. Term of Option. The term of teach Option shall be ten (10) years
from the date of grant thereof or such shorter term as may be provided in the
Option Agreement. However, in the case of an Incentive Stock Option granted ton
Optionee who, at the time the Option is granted, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of such Incentive Stock Option
shall be five (5) years from the date of grant thereof or such shorter term as
may be provided in the Incentive Stock Option Agreement.
8. Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an employee who, at the time of the
grant of such Incentive Stock Option, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price shall be no less than 110% of
the fair market value per Share on the date of grant or, if the Incentive Stock
Option is amended to reduce the per Share exercise price, no less than 110% of
the fair market value per Share on the date the Board approves such amendment.
(B) granted to any Employee, the per Share exercise
price shall be no less than 100% of the fair market value per Share on the date
of grant or, if the Incentive Stock Option is amended to reduce the per Share
exercise price, no less than 100% of the fair market value per Share on the date
the Board approves such amendment.
(ii) In the case of a Nonstatutory Stock Option, the per
Share exercise price shall be determined by the Administrator, but in no case
shall the per Share exercise price be less than 85% of the Fair Market Value per
Share on the date of grant; provided, however, that for any calendar year, the
aggregate number of Shares subject to Nonstatutory Options granted during such
calendar year with a per Share exercise price less that the Fair Market Value
per Share on the date of grant shall not exceed five percent of the number of
Shares subject to options granted in the preceding calendar year
(b) The fair market value per Share shall be determined by the
Board in its discretion; provided, however, that where there is a public market
for the Common Stock, the fair market value per Share shall be the mean of the
bid and asked prices (or the closing price per share if the Common Stock is
listed on the national Association of Securities Dealers Automated Quotation
("NASDAQ") National Market System) of the Common Stock for the date of grant (or
date of approval of an amendment to reduce the exercise price per Share, as the
case may be), as reported in the Wall Street Journal (or, if not so reported, as
otherwise reported by the NASDAQ System) or, in the event the
<PAGE> 6
Common Stock is listed on a stock exchange, the fair market value per Share
shall be the closing price on such exchange on such date, as reported in the
Wall Street Journal.
(c) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Board and may consist entirely of (i) cash, (ii) check, (iii) delivery of
other shares of Common Stock of the Company, which (A) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender, and (B) have a value equal to the
exercise price of the Shares as to which the Option is being exercised, (iv)
promissory note, (v) delivery of a properly executed exercise notice together
with such other documentation as the Company and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price, (vi) any
combination of such methods of payment or (vii) such other consideration and
method of payment for the issuance of Shares to the extent permitted under the
Delaware Corporation Law.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder.
(i) Any option granted hereunder shall be exercisable at
such times and under such conditions as may be determined by the Board,
including performance criteria with respect to the Company and/or the Optionee,
and as shall be permissible under the terms of the Plan.
(ii) An Option may not be exercised for a fraction of a
Share.
(iii) An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option and full payment for the Shares with respect to which the
Option is exercised has been received by the Company. Full payment may, as
authorized by the Board, consist of any consideration and method of payment
allowable under Section 8(c) of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the Stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a shareholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. The Company shall issue (or cause to be issued) such stock certificate
promptly upon exercise of the Option. No adjustment will be made for a dividend
or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 11 of the Plan.
(iv) Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
<PAGE> 7
(b) Termination of Status as an Employee or Consultant. In the
event of termination of an Optionee's Continuous Status as an Employee or
Consultant (as the case may be), such Optionee may exercise his or her Option to
the extent that he or she was entitled to exercise it at the date of such
termination (or at such greater extent as the Board may determine). Any such
exercise must occur within the period set forth in the Option Agreement which,
in the case of an Incentive Stock Option, shall be no more than three (3) months
after the date of termination (and in any event such exercise shall be on or
before the expiration date of the Option as set forth in the Option Agreement).
The Option shall terminate on the date of such termination of Continuous Status
as an Employee or consultant to the extent of the number of shares of Optioned
Stock as to which the Option was not exercisable on the date of such
termination, as set forth in the Option Agreement or as the Board may otherwise
determine. To the extent the Optionee fails, within the time period specified in
the Option Agreement, to exercise the Option for those shares of Optioned Stock
as to which he or she is entitled to exercise, the Option shall terminate upon
the expiration of such time period.
(c) Disability of Optionee. Notwithstanding the provisions of
Section 9(b) above, in the event of termination of an Optionee's Continuous
Status as an Employee or Consultant as a result of his or her total and
permanent disability (as defined in Section 22(e)(3) of the Code), he or she may
exercise his or her Option to the extent he or she was entitled to exercise it
at the date of such termination (or to such greater extent as the Board may
determine). Any such exercise must occur within the period set forth in the
Option Agreement which, in the case of an Incentive Stock Option, shall be no
more than twelve (12) months after the date of such termination (and in any
event such exercise shall be on or before the expiration date of the Option as
set forth in the Option Agreement). The Option shall terminate on the date of
such termination of Continuous Status as an Employee or Consultant to the extent
of the number of shares of Optioned Stock as to which the Option was not
exercisable on the date of such termination, as set forth in the Option
Agreement or as the Board may otherwise determine. To the extent the Optionee
fails, within the time period specified in the Option Agreement, to exercise the
Option for those shares of Optioned Stock as to which he or she is entitled to
exercise, the Option shall terminate upon the expiration of such time period.
(d) Death of Optionee. In the event of the death of an Optionee:
(i) during the term of the Option who is at the time of his
or her death an Employee or Consultant of the Company and who shall have been in
Continuous Status as an Employee or Consultant since the date of grant of the
Option, the Option may be exercised by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent, and within the time period, set forth in the Option Agreement (or
such greater extent or time period as the Board may determine). In no event
shall the Option be exercised after the expiration date set forth in the Option
Agreement.
(ii) within three (3) months after the termination of
Continuous Status as an Employee or Consultant, the Option may be exercised by
the Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or
<PAGE> 8
inheritance, but only to the extent, and within the time period, set forth in
the Option Agreement (or such greater extent or time period as the Board may
determine). In no event shall the Option be exercised after the expiration date
set forth in the Option Agreement.
10. Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization, Dissolution, Merger,
Asset Sale or Change of Control.
(a) Changes in Capitalization. Subject to any required action by
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or which have been returned to the Plan upon cancellation or expiration
of an Option, as well as the price per share of Common Stock covered by each
such outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of issued
shares of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised it will terminate immediately prior to the
consummation of such proposed action. The Board may, the exercise of its sole
discretion in such instances, declare that any Option shall terminate as of a
date fixed by the Board and give each Optionee the right to exercise his or her
Option as to all or any part of the Optioned Stock, including Shares as to which
the Option would not otherwise be exercisable.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation or the sale of substantially all of the assets
of the Company, each outstanding Option shall be assumed or an equivalent option
substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation (the "Successor Corporation"), unless the Successor
Corporation refuses to assume or substituute for the Option, in which case the
Optionee shall have the right to exercise the Option as to all of the Optioned
Stock, including Shares as to which it would not otherwise be exercisable. If an
Option is exercisable in lieu of assumption or substitution
<PAGE> 9
in the event of a merger or sale of asets, the Administrator shall notify the
Optionee in writing or electronically that the Option shall be fully exercisable
for a period of not less than forty-five (45) days from the date of such notice,
and upon the expiration of such period the Option shall terminate.
For the purposes of this Section 11(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets was not solely common stock of the Successor Corporation, the
Administrator may, with the consent of the Successor Corporation, provide for
the consideration to be received upon the exercise of the Option, for each Share
of Optioned Stock subject to the Option, to be solely common stock of the
Successor Corporation equal in fair market value to the per share consideration
received by holders of Common Stock in the merger or sale of assets.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Board makes the determination granting
such Option. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or discontinue the Plan, but no amendment, alternation,
suspension or discontinuation shall be made which would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3
promulgated under the Exchange Act (or any other applicable law or regulation),
the Company shall obtain stockholder approval of any amendment to the Plan in
such manner and to such degree as is required.
(b) Effect of Amendment. No such amendment, alteration, suspension
or discontinuation of the Plan shall affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended, altered, suspended or discontinued, unless mutually agreed otherwise
between the Optionee and the Company, which agreement must be in writing and
signed by the Optionee and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange or quotation system upon
which the Shares may then be listed or quoted, and
<PAGE> 10
shall be further subject to the approval of counsel for the Company with respect
to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
15. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
16. Option Agreement. Options shall be evidenced by Option Agreements in
such form as the Board shall approve.
17. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such approval, and approval for any
amendment to the Plan requiring stockholder approval pursuant to Section 13 of
the Plan, shall be obtained in the degree and manner required under applicable
state and federal law.
<PAGE> 11
SYBASE, INC.
INCENTIVE STOCK OPTION AGREEMENT
Sybase, Inc., a Delaware corporation (the "Company"), has granted to the
person whose name is written on the first page hereof (the "Optionee"), an
option to purchase the number of shares of Common Stock stated on the first page
hereof, at the price determined as provided herein, and in all respects subject
to the terms, definitions and provisions of the 1988 Stock Option Plan (the
"Plan") adopted by the Company which is incorporated herein by reference. The
terms defined in the Plan shall have the same defined meanings herein.
1. Nature of the Option. This Option is intended to qualify as an
Incentive Stock Option as defined in Section 422 of the Code.
2. Exercise Price. The exercise price for each share of Common Stock is
as stated on the first page hereof.
3. Exercise of Option. This Option shall be exercisable during its term
in accordance with the provisions of Section 9 of the Plan as follows:
(i) Right to Exercise.
(a) Subject to subsections 3(i)(b), (c), (d) and (e) below,
this Option shall be exercisable cumulatively, to the extent of 1/8 of the
Shares subject to the Option six months after the Vesting Start Date written on
the first page of this Incentive Stock Option Agreement and an additional 1/48
of the Shares subject to the Option for each month which has expired thereafter.
(b) This Option may not be exercised for a fraction of a
share.
(c) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 6, 7 and 8 below, subject to the limitations contained in subsections
3(i)(d) and (e).
(d) In no event may this Option be exercised after the date
of expiration of this Option as set forth on the first page of this Incentive
Stock Option Agreement.
(e) To the extent that the aggregate fair market value of
all Shares subject to an Optionee's Incentive Stock Options (granted by the
Company, any Parent or Subsidiary) which first become exercisable during any
calendar year (under all plans of the Company, any Parent or Subsidiary)
<PAGE> 12
exceeds $100,000, such excess Options shall be treated as Nonstatutory Stock
Options. For purposes of this Section 3(i)(e), Incentive stock Options shall be
taken into account in the order in which they were granted, and the fair market
value of the Shares shall be determined as of the time of grant.
(ii) Method of Exercise. This Option shall be exercisable by
written notice in the form of Exhibit A attached hereto which shall state the
election to exercise the Option, the number of Shares in respect of which the
Option is being exercised, and such other representations and agreements as to
the holder's investment intent with respect to such shares of Common Stock as
may be required by the Company pursuant to the provisions of the Plan. Such
written notice shall be signed by the Optionee and shall be delivered in person
or by certified mail to the Secretary of the Company. The written notice shall
be accompanied by payment of the exercise price. This Option shall be deemed to
be exercised upon receipt by the Company of such written notice accompanied by
the exercise price.
No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed.
Assuming such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.
4. Method of Payment. Payment of the exercise price shall be by any of
the following, or a combination thereof, at the election of the Optionee:
(i) cash;
(ii) check;
(iii) delivery of other shares of Common Stock of the Company, which
(A) in the case of Shares acquired upon exercise of an option, have been owned
by the Optionee for more than six months on the date of surrender, and (B) have
a value equal to the exercise price of the Shares as to which the Option is
being exercised; or
(iv) delivery of a properly executed exercise notice together with
such other documentation as the Company and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale or loan proceeds required to pay the exercise price.
5. Restrictions on Exercise. As a condition to the exercise of this
Option, the Company may require Optionee to make any representation and
<PAGE> 13
warranty to the Company as may be required by any applicable law or regulation.
6. Termination of Status as an Employee. In the event of termination of
Optionee's Continuous Status as an Employee, Optionee may, but only within three
(3) months after the date of such termination (but in no event later than the
expiration date of this Option as set forth on the first page of this Incentive
Stock Option Agreement), exercise this Option to the extent that he or she was
entitled to exercise it at the date of such termination. To the extent that
Optionee is not entitled to exercise this Option at the date of such
termination, this Option shall terminate as of the date of such termination. To
the extent Optionee does not exercise the balance of this Option within the time
period specified herein, the Option shall terminate as of the expiration of such
time period.
7. Disability of Optionee. Notwithstanding the provisions of Section 6
above, in the event of termination of Optionee's Continuous Status as an
Employee as a result of his total and permanent disability (as defined in
Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months
from the date of termination of employment (but in no event later than the
expiration date of this Option as set forth on the first page of this Incentive
Stock Option Agreement) exercise this Option to the extent he or she was
entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise this Option at the date of termination
this Option shall terminate as of the date of such termination. To the extent
Optionee does not exercise the balance of this Option within the time specified
herein, the Option shall terminate as of the expiration of such time period.
8. Death of Optionee. In the event of the death of Optionee:
(i) during the term of this Option and while an Employee of the
Company and having been in Continuous Status as an Employee since the date of
grant of the Option, the Option may be exercised, at any time within twenty-four
(24) months following the date of death (but in no event later than the
expiration date of this Option as set forth on the first page of this Incentive
Stock Option Agreement), by Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the extent
the Optionee was entitled to exercise it at the date of death. To the extent
this Option is not exercisable at the date of death, this Option shall terminate
on the date of death. To the extent the balance of this Option is not exercised
within the time period specified herein, the Option shall terminate as of the
expiration of such time period; or
(ii) within three (3) months after the termination of Optionee's
Continuous Status as an Employee, the Option may be exercised, at any time
<PAGE> 14
within twenty-four (24) months following the date of death (but in no event
later than the expiration date of this Option as set forth on the first page of
this Incentive Stock Option Agreement), by Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent of the right to exercise that had accrued at the date of termination.
To the extent the balance of this Option is not exercised within such time
period, the Option shall terminate as of the expiration of such time period.
9. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by him or her. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
10. Early Disposition of Stock. Optionee understands that if he or she
disposes of any Shares issued upon exercise of this Option within two (2) years
after the date of grant set forth on the cover page of this Incentive Stock
Option Agreement or within one (1) year after the date of such exercise,
Optionee will be treated for federal income tax purposes as having received
ordinary income at the time of such disposition in an amount generally measured
by the difference between the price paid for the Shares and the lower of the
fair market value of the Shares at the date of the exercise or the fair market
value of the Shares at the date of disposition. The amount of such ordinary
income may be measured differently if Optionee is an officer, director or 10%
shareholder of the Company, or if the Shares were subject to a substantial risk
of forfeiture at the time they were transferred to Optionee. Optionee hereby
agrees to notify the Company in writing within 30 days after the date of any
such disposition. Optionee understands that if he or she disposes of such Shares
at any time after the expiration of such two-year and one-year holding periods,
any gain on such sale will be taxed as long-term capital gain.
<PAGE> 15
SYBASE, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
Sybase, Inc., a Delaware corporation (the "Company"), has granted to the
person whose name is written on the first page hereof (the "Optionee"), an
option to purchase the number of shares (the "Shares") of Common Stock of the
Company stated on the first page hereof, at the price determined as provided
herein, and in all respects subject to the terms, definitions and provisions of
the 1988 Stock Option Plan (the "Plan") adopted by the Company which is
incorporated herein by reference. The terms defined in the Plan shall have the
same defined meanings herein.
1. Nature of the Option. This Option is intended by the Company and the
Optionee to be a nonstatutory stock option, and does not qualify for any special
tax benefits to the Optionee. This Option is not an Incentive Stock Option and
is not subject to Section 5(b) of the Plan.
2. Exercise Price. The exercise price for each share of Common Stock is
as stated on the first page hereof.
3. Exercise of Option. This Option shall be exercisable during its term
in accordance with the provisions of Section 9 of the Plan as follows:
(i) Right to Exercise.
(a) Subject to subsections 3(i)(b), (c) and (d) below, this
Option shall be exercisable cumulatively, to the extent of 1/8 of the Shares
subject to the Option six months after the Vesting Start Date written on the
first page of this Nonstatutory Stock Option Agreement and an additional 1/48 of
the Shares for each month which has expired thereafter.
(b) This Option may not be exercised for a fraction of a
share.
(c) In the event of Optionee's death, disability or other
termination of employment or consulting relationship, the exercisability of the
Option is governed by Sections 6, 7 and 8 below, subject to the limitation
contained in subsection 3(i)(d).
(d) In no event may this Option be exercised after the date
of expiration of the term of this Option as set forth on the first page of this
Nonstatutory Stock Option Agreement.
<PAGE> 16
(ii) Method of Exercise. This Option shall be exercisable by
written notice in the form of Exhibit A attached hereto which shall state the
election to exercise the Option, the number of Shares in respect of which the
Option is being exercised, and such other representations and agreements as to
the holder's investment intent with respect to such shares of Common Stock as
may be required by the Company pursuant to the provisions of the Plan. Such
written notice shall be signed by the Optionee and shall be delivered in person
or by certified mail to the Secretary of the Company. The written notice shall
be accompanied by payment of the exercise price. This Option shall be deemed to
be exercised upon receipt by the Company of such written notice accompanied by
the exercise price.
No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be listed.
Assuming such compliance, for income tax purposes the Shares shall be considered
transferred to the Optionee on the date on which the Option is exercised with
respect to such Shares.
4. Method of Payment. Payment of the exercise price shall be by any of
the following, or a combination thereof, at the election of the Optionee:
(i) cash;
(ii) check;
(iii) delivery of other shares of Common Stock of the Company, which
(A) in the case of Shares acquired upon exercise of an option, have been owned
by the Optionee for more than six months on the date of surrender, and (B) have
a value equal to the exercise price of the Shares as to which the Option is
being exercised; or
(iv) delivery of a properly executed exercise notice together with
such other documentation as the Board and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale or loan proceeds required to pay the exercise price.
5. Restrictions on Exercise. As a condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
<PAGE> 17
6. Termination of Status as an Employee or Consultant. In the event of
termination of Optionee's Continuous Status as an Employee or Consultant (as the
case may be), Optionee may, but only within three (3) months after the date of
such termination (but in no event later than the expiration date of this Option
as set forth on the first page of this Nonstatutory Stock Option Agreement),
exercise this Option to the extent that he or she was entitled to exercise it at
the date of such termination. To the extent that Optionee is not entitled to
exercise this Option at the date of such termination, this Option shall
terminate as of the date of such termination. To the extent Optionee does not
exercise the balance of this Option within the time period specified herein, the
Option shall terminate as of the expiration of such time period.
7. Disability of Optionee. Notwithstanding the provisions of Section 6
above, in the event of termination of Optionee's Continuous Status as an
Employee or Consultant (as the case may be) as a result of his or her total and
permanent disability (as defined in Section 22(e)(3) of the Code), Optionee may,
but only within twelve (12) months from the date of termination of his or her
employment or consulting relationship (but in no event later than the expiration
date of this Option as set forth on the first page of this Nonstatutory Stock
Option Agreement) exercise this Option to the extent he or she was entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise this Option at the date of termination this Option shall
terminate as of the date of such termination. To the extent Optionee does not
exercise the balance of this Option within the time specified herein, the Option
shall terminate as of the expiration of such time period.
8. Death of Optionee. In the event of the death of Optionee:
(i) during the term of this Option and while an Employee or
Consultant of the Company and having been in Continuous Status as an Employee or
Consultant (as the case may be) since the date of grant of the Option, the
Option may be exercised, at any time within twenty-four (24) months following
the date of death (but in no event later than the expiration date of this Option
as set forth on the first page of this Nonstatutory Stock Option Agreement), by
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent the Optionee was entitled to
exercise it at the date of death. To the extent this Option is not exercisable
at the date of death, this Option shall terminate on the date of death. To the
extent the balance of this Option is not exercised within the time period
specified herein, the Option shall terminate as of the expiration of such time
period; or
(ii) within three (3) months after the termination of Optionee's
Continuous Status as an Employee or Consultant (as the case may be), the
<PAGE> 18
Option may be exercised, at any time within twenty-four (24) months following
the date of death (but in no event later than the expiration date of this Option
as set forth on the first page of this Nonstatutory Stock Option Agreement), by
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
had accrued at the date of termination. To the extent the balance of this Option
is not exercised within such time period, the Option shall terminate as of the
expiration of such time period.
9. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by him or her. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
10. Taxation Upon Exercise of Option. Optionee understands that, upon
exercise of this Option, he or she will recognize income for tax purposes in an
amount equal to the excess of the then fair market value of the Shares over the
exercise price. If the Optionee is also an Employee, the Company will be
required to withhold tax from Optionee's current compensation with respect to
such income; to the extent that Optionee's current compensation is insufficient
to satisfy the withholding tax liability, the Company may require the Optionee
to make a cash payment to cover such liability as a condition to exercise of
this Option. Upon a resale of such shares by the Optionee, any difference
between the sale price and the fair market value of the shares on the date of
exercise of the Option will be treated as capital gain or loss.
<PAGE> 1
EXHIBIT 10.2
SYBASE, INC.
1991 AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN
(As Amended on March 13, 1998)
1. Purpose
This Amended and Restated Sybase, Inc. 1991 Employee Stock Purchase
Plan (the "Plan") is designed to encourage and assist employees of Sybase, Inc.
("Sybase") and participating subsidiaries (together, the "Company") to acquire
an equity interest in the Company through the purchase of shares of Sybase
common stock (the "Common Stock").
2. Administration
The Plan shall be administered by the Board of Directors of Sybase
(or a committee of "disinterested" directors no fewer in number than required by
Rule 16b-3 of the Securities and Exchange Commission ("Rule 16b-3") as in effect
with respect to the Company from time to time, which in either case is referred
to as the "Board") in accordance with Rule 16b-3. The Board may from time to
time select a committee or persons (the "Administrator"), to be responsible for
any matters for which a "disinterested administrator" is not required by Rule
16-b. Subject to the express provisions of the Plan, to the overall supervision
of the Board, and to the limitations of Section 423 of the Internal Revenue Code
of 1986, as amended (the "Code"), the Administrator may administer and interpret
the Plan in any manner it believes to be desirable, and any such interpretation
shall be conclusive and binding on the Company and all participants.
3. Number of Shares
(a) The Company has reserved for sale under the Plan 7,500,000
shares of Common Stock (after giving effect to the November 1993 2-for-1 stock
split) less any shares sold under the Sybase 1991 Amended and Restated Foreign
Subsidiary Employee Stock Purchase Plan. Shares sold under the Plan may be newly
issued shares or shares reacquired in private transactions or open market
purchases, but all shares sold under the Plan, regardless of source, shall be
counted against the 7,500,000 share limitation.
(b) In the event of any reorganization, recapitalization, stock
split, reverse stock split, stock dividend, combination of shares, merger,
consolidation, offering of rights, or other similar change in the capital
structure of the Company, the Board may make such adjustment, if any, as it
deems appropriate in the number, kind, and purchase price of the shares
available for purchase under the Plan and in the maximum number of shares
subject to any option under the Plan.
4. Eligibility Requirements
(a) Each employee of the Company, except those described in the
next paragraph, shall become eligible to participate in the Plan in accordance
with Section 5 on the first Enrollment Date on or following commencement of his
or her employment
<PAGE> 2
by the Company or following such period of employment as is designated by the
Board from time to time. Participation in the Plan is entirely voluntary.
(b) The following employees are not eligible to participate in the
Plan:
(i) employees who would, immediately upon enrollment in the
Plan, own directly or indirectly, or hold options or rights to acquire stock
possessing, five percent or more of the total combined voting power or value of
all classes of stock of Sybase or any subsidiary of Sybase;
(ii) employees who are customarily employed by the Company
less than 20 hours per week or less than five months in any calendar year; and
(iii) employees who are prohibited by the laws of the nation
of their residence or employment from participating in the Plan.
Employees who are also directors or officers of the Company may participate only
in accordance with Rule 16b-3 of the Securities and Exchange Commission.
(c) "Employee" shall mean any individual who is an employee of the
Company or a Participating Subsidiary within the meaning of Section 3401(c) of
the Code and the Treasury Regulations thereunder. "Subsidiary" shall mean any
corporation described in Section 425(e) or (f) of the Code. "Participating
Subsidiary" shall mean a subsidiary which has been designated by the
Administrator as covered by the Plan.
5. Enrollment
Any eligible employee may enroll or re-enroll in the Plan each year
as of the first trading day of (i) the month immediately following the closing
of the Company's initial public offering of shares of its Common Stock on a
Registration Statement on Form S-1 (except that if such closing occurs during
the last month of a fiscal quarter (e.g. September), then the first Enrollment
Date will be the first trading day of the second month of the quarter
immediately following the closing (e.g. November)), (ii) the sixth month
following such month, and (iii) each yearly anniversary of such months (e.g. any
March and September or May and November), or such other days as may be
established by the Board from time to time (the "Enrollment Dates"). In order to
enroll, an eligible employee must complete, sign, and submit to the Company an
enrollment form. Any enrollment form received by the Company by the 15th day of
the month preceding an Enrollment Date (or by the Enrollment Date in the case of
employees hired after such 15th day), or such other date established by the
Administrator from time to time, will be effective on that Enrollment Date. For
purposes of the Plan, a "trading day" is any day on which regular trading occurs
on any established stock exchange or market system on which the Common Stock is
traded.
6. Grant of Option on Enrollment
(a) Enrollment or re-enrollment by a participant in the Plan on an
Enrollment Date will constitute the grant by the Company to the participant of
an option to purchase shares of Common Stock from the Company under the Plan.
Any participant whose option expires and who has not withdrawn from the Plan
will automatically be re-
<PAGE> 3
enrolled in the Plan and granted a new option on the Enrollment Date
immediately following the date on which the option expires.
(b) Except as provided in Section 9, each option granted under the
Plan shall have the following terms:
(i) each option granted under the Plan will have a term of
not more than 24 months or such shorter option period as may be established by
the Board from time to time; notwithstanding the foregoing, however, whether or
not all shares have been purchased thereunder, the option will expire on the
earlier to occur of (A) the completion of the purchase of shares on the last
Purchase Date occurring within 24 months after the Enrollment Date for such
option, or such shorter option period as may be established by the Board before
an Enrollment Date for all options to be granted on such date or (B) the date on
which the employee's participation in the Plan terminates for any reason;
(ii) payment for shares purchased under the option will be
made only through payroll withholding in accordance with Section 7;
(iii) purchase of shares upon exercise of the option will be
effected only on the Purchase Dates established in accordance with Section 8;
(iv) the price per share under the option will be determined
as provided in Section 8;
(v) the number of shares available for purchase under the
option will, unless otherwise established by the Board before an Enrollment Date
for all options to be granted on such date, be determined by dividing $25,000 by
the fair market value of a share of Common Stock on the Enrollment Date and by
multiplying the result by the number of calendar years included in whole or in
part in the period from grant to expiration of the option;
(vi) the option (taken together with all other options then
outstanding under this and all other similar stock purchase plans of Sybase and
any subsidiary of Sybase, collectively "Options") will in no event give the
participant the right to purchase shares at a rate per calendar year which
accrues in excess of $25,000 of fair market value of such shares, less the fair
market value of any shares accrued and already purchased during such year under
Options which have expired or terminated, determined at the applicable
Enrollment Dates; and
(vii) the option will in all respects be subject to the terms
and conditions of the Plan, as interpreted by the Administrator from time to
time.
7. Payroll and Tax Withholding; Use by Company
(a) Each participant shall elect to have amounts withheld from his
or her compensation paid by the Company during the option period, at a rate
equal to any whole percentage up to a maximum of 10 percent, or such lesser
percentage as the Board may establish from time to time before an Enrollment
Date. Compensation includes regular salary payments, annual and quarterly
performance bonuses, hire-on bonuses, cash recognition awards, commissions,
overtime pay, shift premiums, and elective
<PAGE> 4
contributions by the participant to qualified employee benefit plans, but
excludes all other payments including, without limitation, long-term disability
or workers compensation payments, car allowances, employee referral bonuses,
relocation payments, expense reimbursements (including but not limited to
travel, entertainment, and moving expenses), salary gross-up payments, and
non-cash recognition awards. The participant shall designate a rate of
withholding in his or her enrollment form and may elect to increase or decrease
the rate of contribution effective as of any Enrollment Date, by delivery to the
Company, not later than 15 days before such Enrollment Date, of a written notice
indicating the revised withholding rate.
(b) Payroll withholdings shall be credited to an account
maintained for purposes of the Plan on behalf of each participant, as soon as
administratively feasible after the withholding occurs. The Company shall be
entitled to use the withholdings for any corporate purpose, shall have no
obligation to pay interest on withholdings to any participant, and shall not be
obligated to segregate withholdings.
(c) Upon disposition of shares acquired by exercise of an option,
the participant shall pay, or make provision adequate to the Company for payment
of, all federal, state, and other tax (and similar) withholdings that the
Company determines, in its discretion, are required due to the disposition,
including any such withholding that the Company determines in its discretion is
necessary to allow the Company to claim tax deductions or other benefits in
connection with the disposition. A participant shall make such similar
provisions for payments that the Company determines, in its discretion, are
required due to the exercise of an option, including such provisions as are
necessary to allow the Company to claim tax deductions or other benefits in
connection with the exercise of the option.
8. Purchase of Shares
(a) On the last trading day of each month immediately preceding a
month containing an Enrollment Date, or on such other days as may be established
by the Board from time to time, prior to an Enrollment Date for all options to
be granted on an Enrollment Date (each a "Purchase Date"), the Company shall
apply the funds then credited to each participant's payroll withholdings account
to the purchase of whole shares of Common Stock. The cost to the participant for
the shares purchased under any option shall be not less than 85 percent of the
lower of:
(i) the fair market value of the Common Stock on the
Enrollment Date for such option; or
(ii) the fair market value of the Common Stock on that
Purchase Date.
The "fair market value" of the Common Stock on a date shall be the closing price
of the Common Stock on such date on any established stock exchange or market
system if the Common Stock is traded on such an exchange or market system (and
the largest such exchange or market system if the Common Stock is traded on more
than one), if the Common Stock is not so traded then the mean between the bid
and asked prices for Common Stock on such date as quoted on NASDAQ or reported
in The Wall Street Journal or similar publication if such prices are so quoted
or reported, or the fair market
<PAGE> 5
value on such date as determined by the Administrator if shares of Common Stock
are not so traded, quoted, or reported.
(b) Any funds in an amount less than the cost of one share of
Common Stock left in a participant's payroll withholdings account on a Purchase
Date shall be carried forward in such account for application on the next
Purchase Date, and any additional amount shall be distributed to the participant
.
(c) If at any Purchase Date, the shares available under the Plan
are less than the number all participants would otherwise be entitled to
purchase on such date, purchases shall be reduced proportionately to eliminate
the deficit. Any funds that cannot be applied to the purchase of shares due to
such a reduction shall be refunded to participants as soon as administratively
feasible.
9. Grant of Additional Options
In addition to the options which may be granted under Section 6 of
this Plan, the Board, in its sole discretion, may grant, to each employee
satisfying the eligibility requirements of Section 4, additional options, for a
term not to exceed 27 months and for an identical number of shares. The options
granted hereunder shall be subject to the limitations of Section 6(b)(v) and
6(b)(vi); provided, however, that immediately before the grant of such
additional options, the limitations imposed thereby upon each recipient's
Options subject to payroll withholdings shall be adjusted to the minimum extent
necessary to permit the grant. The option price shall not be less than 85% of
the lower of (i) the fair market value of the stock on the grant date for such
option, or (ii) the fair market value on the date of exercise. The option will
be subject to such additional terms and conditions, not inconsistent with the
terms of the Plan as interpreted by the Administrator, as may be established
from time to time by the Board.
10. Withdrawal from the Plan
A participant may withdraw from the Plan in full (but not in part)
at any time, effective after written notice thereof is received by the Company.
All funds credited to a participant's payroll withholdings account shall be
distributed to him or her without interest within 60 days after notice of
withdrawal is received by the Company. Any eligible employee who has withdrawn
from the Plan may enroll in the Plan again on any subsequent Enrollment Date in
accordance with the provisions of Section 5.
11. Termination of Employment
Participation in the Plan terminates immediately when a participant
ceases to be employed by the Company for any reason whatsoever (including death
or disability) or otherwise becomes ineligible to participate in the Plan. As
soon as administratively feasible after termination, the Company shall pay to
the participant or his or her beneficiary or legal representative, all amounts
credited to the participant's payroll withholdings account; provided, however,
that if a participant ceases to be employed by the Company because of the
commencement of employment with a Subsidiary of the Company that is not a
Participating Subsidiary, funds then credited to such participant's payroll
withholdings account shall be applied to the purchase of whole
<PAGE> 6
shares of Common Stock at the next Purchase Date and any funds remaining after
such purchase shall be paid to the participant.
12. Designation of Beneficiary
(a) Each participant may designate one or more beneficiaries in
the event of death and may, in his or her sole discretion, change such
designation at any time. Any such designation shall be effective upon receipt in
written form by the Company and shall control over any disposition by will or
otherwise.
(b) As soon as administratively feasible after the death of a
participant, amounts credited to his or her account shall be paid in cash to the
designated beneficiaries or, in the absence of a designation, to the executor,
administrator, or other legal representative of the participant's estate. Such
payment shall relieve the Company of further liability with respect to the Plan
on account of the deceased participant. If more than one beneficiary is
designated, each beneficiary shall receive an equal portion of the account
unless the participant has given express contrary written instructions.
13. Assignment
(a) The rights of a participant under the Plan shall not be
assignable by such participant, by operation of law or otherwise. No participant
may create a lien on any funds, securities, rights, or other property held by
the Company for the account of the participant under the Plan, except to the
extent that there has been a designation of beneficiaries in accordance with the
Plan, and except to the extent permitted by the laws of descent and distribution
if beneficiaries have not been designated.
(b) A participant's right to purchase shares under the Plan shall
be exercisable only during the participant's lifetime and only by him or her,
except that a participant may direct the Company in the enrollment form to issue
share certificates to the participant and his or her spouse in community
property, to the participant jointly with one or more other persons with right
of survivorship, or to certain forms of trusts approved by the Administrator.
14. Administrative Assistance
If the Administrator in its discretion so elects, it may retain a
brokerage firm, bank or other financial institution to assist in the purchase of
shares, delivery of reports, or other administrative aspects of the Plan. If the
Administrator so elects, each participant shall (unless prohibited by the laws
of the nation of his or her employment or residence) be deemed upon enrollment
in the Plan to have authorized the establishment of an account on his or her
behalf at such institution. Shares purchased by a participant under the Plan
shall be held in the account in the name in which the share certificate would
otherwise be issued pursuant to Section 13(b).
15. Costs
All costs and expenses incurred in administering the Plan shall be
paid by the Company, except that any stamp duties or transfer taxes applicable
to participation in the Plan may be charged to the account of such participant
by the Company. Any
<PAGE> 7
brokerage fees for the purchase of shares by a participant shall be paid by the
Company, but brokerage fees for the resale of shares by a participant shall be
borne by the participant.
16. Equal Rights and Privileges
All eligible employees shall have equal rights and privileges with
respect to the Plan so that the Plan qualifies as an "employee stock purchase
plan" within the meaning of Section 423 of the Code and the related Treasury
Regulations. Any provision of the Plan which is inconsistent with Section 423 of
the Code shall without further act or amendment by the Company or the Board be
reformed to comply with the requirements of Section 423. This Section 16 shall
take precedence over all other provisions of the Plan.
17. Applicable Law
The Plan shall be governed by the substantive laws (excluding the
conflict of laws rules) of the State of California.
18. Modification and Termination
(a) The Board may amend, alter, or terminate the Plan at any time,
including amendments to outstanding options. No amendment shall be effective
unless within 12 months after it is adopted by the Board, it is approved by the
holders of a majority of the votes cast at a duly held shareholders' meeting at
which a quorum of the voting power of the Company is represented in person or by
proxy, if such amendment would:
(i) increase the number of shares reserved for purchase under
the Plan; or
(ii) require shareholder approval in order to comply with SEC
Rule 16b-3.
(b) In the event the Plan is terminated, the Board may elect to
terminate all outstanding options either immediately or upon completion of the
purchase of shares on the next Purchase Date, or may elect to permit options to
expire in accordance with their terms (and participation to continue through
such expiration dates). If the options are terminated prior to expiration, all
funds contributed to the Plan that have not been used to purchase shares shall
be returned to the participants as soon as administratively feasible.
(c) In the event of the sale of all or substantially all of the
assets of Sybase or the Company, or the merger of Sybase or the Company with or
into another corporation, or the dissolution or liquidation of Sybase, a
Purchase Date shall occur on the trading day immediately preceding the date of
such event, unless otherwise provided by the Board in its sole discretion,
including provision for the assumption or substitution of each option under the
Plan by the successor or surviving corporation, or a parent or subsidiary
thereof.
19. Rights as an Employee
<PAGE> 8
Nothing in the Plan shall be construed to give any person the right
to remain in the employ of the Company or to affect the Company's right to
terminate the employment of any person at any time with or without cause.
20. Rights as a Shareholder; Delivery of Certificates
Unless otherwise determined by the Board, certificates evidencing
shares purchased on any Purchase Date shall be delivered to participants as soon
as administratively feasible. Participants shall be treated as the owners of
their shares effective as of the Purchase Date.
21. Board and Shareholder Approval
The Plan was approved by the Board of Directors on April 30, 1991,
and by the holders of a majority of the votes cast at a duly held shareholders'
meeting on June 13, 1991, at which a quorum of the voting power of the Company
was represented in person or by proxy. As amended and restated to adopt
amendments not requiring shareholder approval, the Plan was approved by the
Board of Directors on July 30, 1991. The Plan was amended by the Board of
Directors on January 28, 1993, January 27, 1994, January 24, 1995 and January
21, 1997 and such amendments were approved by the holders of a majority of the
votes cast at a duly held shareholders' meeting on May 18, 1993, May 24, 1994,
May 23, 1995, and May 20, 1997 respectively. The Plan also was amended by the
Board of Directors on March 13, 1998.
SYBASE, INC.
By: /s/ MITCHELL L. GAYNOR
-------------------------------
Its: Vice President, General
Counsel and Secretary
Date: March 13, 1998
<PAGE> 9
SYBASE, INC.
1991 AMENDED AND RESTATED
FOREIGN SUBSIDIARY EMPLOYEE STOCK PURCHASE PLAN
(As Amended March 13, 1998)
1. Purpose
This Amended and Restated Sybase, Inc. 1991 Foreign Subsidiary
Employee Stock Purchase Plan (the "Plan") is designed to encourage and assist
employees of designated subsidiaries of Sybase, Inc. ("Sybase" or the "Company")
to acquire an equity interest in the Company through the purchase of shares of
Sybase common stock (the "Common Stock").
2. Administration
The Plan shall be administered by the Board of Directors of Sybase
or a committee (the "Committee") selected from time to time by the Board.
Subject to the express provisions of the Plan and to the overall supervision of
the Board, the Committee may administer and interpret the Plan in any manner it
believes to be desirable, and any such interpretation shall be conclusive and
binding on the Company and all participants. If and to the extent that Rule
16b-3 of the Securities and Exchange Commission ("Rule 16b-3") becomes
applicable to the Plan, the Board and the Committee shall use their best efforts
to cause the Plan to be administered in accordance therewith.
3. Number of Shares
(a) The Company has reserved for sale under the Plan 7,500,000
shares of Common Stock (after giving effect to the November 1993 2-for-1stock
split) less any shares sold under the Sybase 1991 Amended and Restated Employee
Stock Purchase Plan. Shares sold under the Plan may be newly issued shares or
shares reacquired in private transactions or open market purchases, but all
shares sold under the Plan, regardless of source, shall be counted against the
7,500,000 share limitation.
(b) In the event of any reorganization, recapitalization, stock
split, reverse stock split, stock dividend, combination of shares, merger,
consolidation, offering of rights, or other similar change in the capital
structure of the Company, the Committee may make such adjustment, if any, as it
deems appropriate in the number, kind, and purchase price of the shares
available for purchase under the Plan and in the maximum number of shares
subject to any option under the Plan.
4. Designation of Subsidiaries; Employee Eligibility Requirements
(a) The Board may at any time designate one or more Subsidiaries
as participating in the Plan. The names of all Participating Subsidiaries shall
be shown on Exhibit A to the Plan, which shall be amended from time to time to
reflect additions and deletions of Participating Subsidiaries; failure to show a
Participating Subsidiary on Exhibit A shall not, however, prevent otherwise
eligible employees of that Subsidiary from participating in the Plan. No
Subsidiary participating in the Company's 1991 Employee Stock Purchase Plan may
be designated for participating in the Plan.
<PAGE> 10
(b) Each employee of a Participating Subsidiary, except those
described in the next paragraph, shall become eligible to participate in the
Plan in accordance with Section 5 on the first Enrollment Date on or following
commencement of his or her employment by the Participating Subsidiary or
following such period of employment as is designated by the Board from time to
time. Participating in the Plan is entirely voluntary.
(c) Except to the extent otherwise determined by the Board or
provided by the Plan, the following employees are not eligible to participate in
the Plan:
(i) employees who would, immediately upon enrollment in the
Plan, own directly or indirectly, or hold options or rights to acquire stock
possessing, five percent or more of the total combined voting power or value of
all classes of stock of Sybase or any subsidiary of Sybase;
(ii) employees who are customarily employed by the
Participating Subsidiary less than 20 hours per week or less than five months in
any calendar year; and
(iii) employees who are prohibited by the laws of the nation
of their residence or employment from participating in the Plan.
Employees who are also directors or officers of the Company may participate only
in accordance with Rule 16b-3 of the Securities and Exchange Commission.
(d) "Employee" shall mean any individual who is an employee of a
Participating Subsidiary within the meaning of Section 3401(c) of the Internal
Revenue Code of 1986, as amended (the "Code") and the Treasury Regulations
thereunder. "Subsidiary" shall mean any corporation described in Section 425(e)
or (f) of the Code. "Participating Subsidiary" shall mean a subsidiary which has
been designated by the Committee as covered by the Plan.
5. Enrollment
Any eligible employee may enroll or re-enroll in the Plan each
year as of the first trading day of (i) the month immediately following the
closing of the Company's initial public offering of shares of its Common Stock
on a Registration Statement on Form S-1 (except that if such closing occurs
during the last month of a fiscal quarter (e.g., September), then the first
Enrollment Date will be the first trading day of the second month of the quarter
immediately following the closing (e.g., November)), (ii) the sixth month
following such month, and (iii) each yearly anniversary of such months (e.g.,
any March and September or May and November), or such other days as may be
established by the Board from time to time (the "Enrollment Dates"). In
addition, for purposes of participating in the Plan by an eligible employee
following termination of such employee's participation in the Sybase 1991
Amended and Restated Employee Stock Purchase Plan (the "U.S. Plan") a deemed
Enrollment Date may be designated corresponding to the employee's most recent
Enrollment Date under the U.S. Plan. In order to enroll, an eligible employee
must complete, sign, and submit to the Company or the Participating Subsidiary
an enrollment form. Any enrollment form received by the
<PAGE> 11
Participating Subsidiary or the Company by the 15th day of the month preceding
an Enrollment Date (or by the Enrollment Date in the case of employees hired
after such 15th day), or such other date established by the Committee from time
to time, will be effective on that Enrollment Date. For purposes of the Plan, a
"trading day" is any day on which regular trading occurs on any established
stock exchange or market system on which the Common Stock is traded.
6. Grant of Option on Enrollment
(a) Enrollment or re-enrollment by a participant in the Plan on an
Enrollment Date will constitute the grant by the Company to the participant of
an option to purchase shares of Common Stock from the Company under the Plan.
Any participant whose option expires and who has not withdrawn from the Plan
will automatically be re-enrolled in the Plan and granted a new option on the
Enrollment Date immediately following the date on which the option expires.
(b) Except as provided in Section 9 or Section 11, each option
granted under the Plan shall have the following terms unless otherwise
determined by the Board:
(i) each option granted under the Plan will have a term of
not more than 24 months or such shorter option period as may be established by
the Board from time to time; notwithstanding the foregoing, however, whether or
not all shares have been purchased thereunder, the option will expire on the
earlier to occur of (A) the completion of the purchase of shares on the last
Purchase Date occurring within 24 months after the Enrollment Date for such
option, or such shorter option period as may be established by the Board before
an Enrollment Date for all options to be granted on such date or (B) the date on
which the employee's participation in the Plan terminates for any reason;
(ii) payment for shares purchased under the option will be
made only through payroll withholding in accordance with Section 7;
(iii) purchase of shares upon exercise of the option will be
effected only on the Purchase Dates established in accordance with Section 8;
(iv) the price per share under the option will be determined
as provided in Section 8;
(v) the number of shares available for purchase under an
option will, unless otherwise established by the Board before an enrollment Date
for all options to be granted on such date, be determined by dividing $25,000 by
the fair market value of a share of Common Stock on the Enrollment Date and by
multiplying the result by the number of calendar years included in whole or in
part in the period from grant to expiration of the option;
(vi) the option (taken together with all other options then
outstanding under this and all other similar stock purchase plans of Sybase and
any subsidiary of Sybase, collectively "Options") will in no event give the
participant the right to purchase shares at a rate per calendar year which
accrues in excess of $25,000 of fair market value of such shares, less the fair
market value of any shares accrued and
<PAGE> 12
already purchased during such year under Options which have expired or
terminated, determined at the applicable Enrollment Dates; and
(vii) the option will in all respects be subject to the terms
and conditions of the Plan, as interpreted by the Committee from time to time.
7. Payroll and Tax Withholding; Use by Participating Subsidiary and the
Company
(a) Each participant shall elect to have amounts withheld from his
or her compensation and paid to the Company during the option period, at a rate
equal to any whole percentage up to a maximum of 10 percent, or such lesser
percentage as the Board may establish from time to time before an Enrollment
Date. Compensation includes regular salary payments, annual and quarterly
performance bonuses, hire-on bonuses, cash recognition awards, commissions,
overtime pay, shift premiums, and elective contributions by the participant to
qualified employee benefit plans, but excludes all other payments including,
without limitation, long-term disability or workers compensation payments, car
allowances, employee referral bonuses, relocation payments, expense
reimbursements (including but not limited to travel, entertainment, and moving
expenses), salary gross-up payments, and non-cash recognition awards. The
participant shall designate a rate of withholding in his or her enrollment form
and may elect to increase or decrease the rate of contribution effective as of
any Enrollment Date, by delivery to the Participating Subsidiary, not later than
15 days before such Enrollment Date, of a written notice indicating the revised
withholding rate.
(b) Payroll withholdings shall be credited to an account
maintained for purposes of the Plan on behalf of each participant in local
currency, as soon as administratively feasible after the withholding occurs. The
Participating Subsidiary and the Company shall be entitled to use the
withholdings for any corporate purpose, shall have no obligation to pay interest
on withholdings to any participant, and shall not be obligated to segregate
withholdings.
(c) Upon disposition of shares acquired by exercise of an option,
the participant shall pay, or make provision adequate to the Company and the
Participating Subsidiary for payment of, all federal, state, and other tax (and
similar) withholdings that the Company or the Participating Subsidiary
determines, in its discretion, are required due to the disposition, including
any such withholding that the Company or the Participating Subsidiary
determines, in its discretion, is necessary to allow the Company or the
Participating Subsidiary to claim tax deductions or other benefits in connection
with the disposition. A participant shall make such similar provisions for
payment that the Company or the Participating Subsidiary determines, in its
discretion, are required due to the exercise of an option, including such
provisions as are necessary to allow the Company or the Participating Subsidiary
to claim tax deductions or other benefits in connection with the exercise of the
option.
8. Purchase of Shares
(a) On the last trading day of each month immediately preceding a
month containing an Enrollment Date, or on such other days as may be established
by the Board from time to time, prior to an Enrollment Date for all options to
be granted on an
<PAGE> 13
Enrollment Date (each a "Purchase Date"), the Company shall convert each
participant's account balance, including amounts carried forward pursuant to
Section 8(b) below, to U.S. Dollars determined as of such Purchase Date (or
applying such formula as may be established by the Administrator) and shall
apply the funds then credited to each participant's payroll withholdings account
to the purchase of whole shares of Common Stock. The cost to the participant for
the shares purchased under any option shall be not less than 85 percent of the
lower of:
(i) the fair market value of the Common Stock on the
Enrollment Date for such option; or
(ii) the fair market value of the Common Stock on that
Purchase Date.
The "fair market value" of the Common Stock on a date shall be the
closing price of the Common Stock on such date on any established stock exchange
or market system if the Common Stock is traded on such an exchange or market
system (and the largest such exchange or market system if the Common Stock is
traded on more than one), if the Common Stock is not so traded then the mean
between the bid and asked prices for Common Stock on such date as quoted on
NASDAQ or reported in The Wall Street Journal or similar publication if such
prices are so quoted or reported, or the fair market value on such date as
determined by the Committee if shares of Common Stock are not so traded, quoted,
or reported.
(b) Any funds in an amount less than the cost of one share of
Common Stock left in a participant's payroll withholdings account on a Purchase
Date shall be carried forward in such account for application on the next
Purchase Date, and any additional amount shall be distributed to the
participant.
(c) If at any Purchase Date, the shares available under the Plan
are less than the number all participants would otherwise be entitled to
purchase on such date, purchases shall be reduced proportionately to eliminate
the deficit. Any funds that cannot be applied to the purchase of shares due to
such a reduction shall be refunded to participants as soon as administratively
feasible.
9. Grant of Additional Options
In addition to the options which may be granted under Section 6
of this Plan, the Committee, in its sole discretion, may grant, to each employee
of a Participating Subsidiary satisfying the eligibility requirements of Section
4, additional options, for a term not to exceed 27 months and for an identical
number of shares. The options granted hereunder shall be subject to the
limitations of Section 6(b)(v) and 6(b)(vi); provided, however, that immediately
before the grant of such additional options, the limitations imposed thereby
upon each recipient's Options subject to payroll withholdings shall be adjusted
to the minimum extent necessary to permit the grant. The option price shall not
be less than 85% of the lower of (i) the fair market value of the stock on the
grant date for such option, or (ii) the fair market value on the date of
exercise. The option will be subject to such additional terms and conditions,
not inconsistent with the terms of the Plan as interpreted by the Committee, as
may be established from time to time by the Board.
<PAGE> 14
10. Withdrawal from the Plan
A participant may withdraw from the Plan in full (but not in part)
at any time, effective after written notice thereof is received by the Company.
All funds credited to a participant's payroll withholdings account shall be
distributed to him or her without interest within 60 days after notice of
withdrawal is received by the Company. Any eligible employee who has withdrawn
from the Plan may enroll in the Plan again on any subsequent Enrollment Date in
accordance with the provisions of Section 5.
11. Termination of Employment
(a) Except as provided in Section 11(b) below, participation in
the Plan terminates immediately when a participant ceases to be employed by a
Participating Subsidiary for any reason whatsoever (including death or
disability) or otherwise becomes ineligible to participate in the Plan. Transfer
of a participant's employment from one Participating Subsidiary to another
without material interruption shall not be deemed a termination of employment
for purposes of this Section 11. As soon as administratively feasible after
termination, the Company shall pay to the participant or his or her beneficiary
or legal representative, all amounts credited to the participant's payroll
withholdings account.
(b) Following transfer of a participant's employment without
material interruption from a Participating Subsidiary to the Company or any
subsidiary of the Company other than a participating Subsidiary, any outstanding
option granted to such participant under the Plan shall not terminate until the
occurrence of the earliest of: (i) the last Purchase Date included in the term
of such option; (ii) enrollment of the participant in the U.S. Plan; or (iii)
any event or change of condition or status (other than the transfer described in
this Section 11(b)) that would have caused the option to terminate if the
transfer of employment described in this Section 11(b) had not occurred. While
an option remains outstanding pursuant to this Section 11(b), the Company or
other subsidiary to which the participant is transferred shall, in accordance
with Section 7, effect payroll withholdings under the option and shall remit
them to the Company or the Participating Subsidiary that employed the
participant at the time of the transfer; such withholdings shall be credited to
the Participant's payroll withholdings account at the time withheld by the
Company or other subsidiary and in the currency of the Company or subsidiary by
which the participant is employed at the time of the withholdings.
12. Designation of Beneficiary
(a) Each participant may designate one or more beneficiaries in
the event of death and may, in his or her sole discretion, change such
designation at any time. Any such designation shall be effective upon receipt in
written form by the Company or the Participating Subsidiary and shall control
over any disposition by will or otherwise.
(b) As soon as administratively feasible after the death of a
participant, amounts credited to his or her account shall be paid in cash to the
designated beneficiaries or, in the absence of a designation, to the executor,
administrator, or other legal representative of the participant's estate. Such
payment shall relieve the
<PAGE> 15
Participating Subsidiary of further liability with respect to the Plan on
account of the deceased participant. If more than one beneficiary is designated,
each beneficiary shall receive an equal portion of the account unless the
participant has given express contrary written instructions.
13. Assignment
(a) The rights of a participant under the Plan shall not be
assignable by such participant, by operation of law or otherwise. No participant
may create a lien on any funds, securities, rights, or other property held by
the Company or the Participating Subsidiary for the account of the participant
under the Plan, except to the extent that there has been a designation of
beneficiaries in accordance with the Plan, and except to the extent permitted by
the laws of descent and distribution if beneficiaries have not been designated.
(b) A participant's right to purchase shares under the Plan shall
be exercisable only during the participant's lifetime and only by him or her,
except that a participant may direct the Company in the enrollment form to issue
share certificates to the participant and his or her spouse in community
property, to the participant jointly with one or more other persons with right
of survivorship, or to certain forms of trusts approved by the Committee.
14. Administrative Assistance
If the Committee in its discretion so elects, it may retain a
brokerage firm, bank, or other financial institution to assist in the purchase
of shares, delivery of reports, or other administrative aspects of the Plan. If
the Committee so elects, each participant shall (unless prohibited by the laws
of the nation of his or her employment or residence) be deemed upon enrollment
in the Plan to have authorized the establishment of an account on his or her
behalf at such institution. Shares purchased by a participant under the Plan
shall be held in the account in the name in which the share certificate would
otherwise be issued pursuant to Section 13(b).
15. Costs
All costs and expenses incurred in administering the Plan shall be
paid by the Company, except that any stamp duties or transfer taxes applicable
to participation in the Plan may be charged to the account of such participant
by the Company. Any brokerage fees for the purchase of shares by a participant
shall be paid by the Company, but brokerage fees for the resale of shares by a
participant shall be borne by the participant.
16. Equivalent Rights and Privileges
It is intended that all eligible employees shall have substantially
equivalent rights and privileges with respect to the Plan; notwithstanding any
other provision of the Plan, however, the Committee may make such changes in the
terms of eligibility and participation from Subsidiary to Subsidiary that it
determines, in its discretion, to be necessary or desirable to reflect or comply
with local laws or conditions.
<PAGE> 16
17. Applicable Law
The Plan shall be governed by the substantive laws (excluding the conflict
of laws rules) of the State of California.
18. Modification and Termination
(a) The Board may amend, alter, or terminate the Plan at any time,
including amendments to outstanding options. To the extent required for the Plan
to comply with Rule 16b-3 or applicable tax laws or regulations, no amendment
shall be effective unless within 12 months after it is adopted by the Board, it
is approved by the holders of a majority of the votes cast at a duly held
shareholders' meeting at which a quorum of the voting power of the Company is
represented in person or by proxy, if such amendment would:
(i) increase the number of shares reserved for purchase under the
Plan;
(ii) increase the benefits accruing to participants under the Plan;
or
(iii) modify the requirements as to eligibility for participation in
the Plan.
(b) In the event the Plan is terminated, the Board may elect to
terminate all outstanding options either immediately or upon completion of the
purchase of shares on the next Purchase Date, or may elect to permit options to
expire in accordance with their terms (and participation to continue through
such expiration dates). If the options are terminated prior to expiration, all
funds contributed to the Plan that have not been used to purchase shares shall
be returned to the participants as soon as administratively feasible.
(c) In the event of the sale of all or substantially all of the
assets of Sybase or a Participating Subsidiary, or the merger of Sybase or a
Participating Subsidiary with or into another corporation, or the dissolution or
liquidation of Sybase, a Purchase Date shall occur on the trading day
immediately preceding the date of such event, unless otherwise provided by the
Board in its sole discretion, including provision for the assumption or
substitution of each option under the Plan by the successor or surviving
corporation, or a parent or subsidiary thereof.
19. Rights as an Employee
Nothing in the Plan shall be construed to give any person the right
to remain in the employ of the Participating Subsidiary or to affect the
Participating Subsidiary's right to terminate the employment of any person at
any time with or without cause.
20. Rights as a Shareholder; Delivery of Certificates
<PAGE> 17
Unless otherwise determined by the Board, certificates evidencing
shares purchased on any Purchase Date shall be delivered to participants as soon
as administratively feasible. Participants shall be treated as the owners of
their shares effective as of the Purchase Date.
21. Board and Shareholder Approval
The Plan was approved by the Board of Directors on April 30, 1991,
and by the holders of a majority of the votes cast at a duly held shareholders'
meeting on June 13, 1991, at which a quorum of the voting power of the Company
was represented in person or by proxy. As amended and restated to adopt
amendments not requiring shareholder approval, the Plan was approved by the
Board of Directors on July 30, 1991. The Plan was amended by the Board of
Directors on January 28, 1993, January 27, 1994, January 24, 1995 and January
21, 1997 and such amendments were approved by the holders of a majority of the
votes cast at a duly held shareholders' meeting on May 18, 1993, May 24, 1994,
May 23, 1995, and May 20, 1997 respectively. The Plan also was amended by the
Board of Directors on March 13, 1998.
SYBASE, INC.
By: /s/ MITCHELL L. GAYNOR
------------------------------------
Its: Vice President, General
Counsel and Secretary
Date: March 13, 1998
<PAGE> 1
EXHIBIT 10.13
LOAN AND SECURITY AGREEMENT
Between
SYBASE, INC.,
and
MITCHELL E. KERTZMAN
This LOAN AND SECURITY AGREEMENT dated as of January 7, 1998 is made by
and between: Sybase, Inc., a Delaware corporation ("Sybase") and Mitchell E.
Kertzman ("Kertzman").
RECITALS
WHEREAS, Kertzman desires to borrow initially $333,000 from Sybase and
Sybase is willing to make a secured loan of $350,000 to Kertzman on the terms
and conditions contained herein (the "Loan");
NOW THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the parties agree as follows:
ARTICLE I
AGREEMENT TO LOAN AND PROMISSORY NOTE
1.1 Sale and Issuance of Promissory Note. Subject to the terms and
conditions of this Agreement, Kertzman shall issue and sell to Sybase, and
Sybase shall purchase from Kertzman, at the Closing, as defined below, a
promissory note in the form attached hereto as Exhibit A in the in the principal
amount of $333,000 (the "Note") for a purchase price equal to the principal
amount set forth on the Note.
1.2 Closing. The purchase and sale of the Note shall occur at the
offices of Sybase, 6475 Christie Avenue, Emeryville, California, on the date
hereof (the "Closing"). At the Closing, Kertzman shall deliver to Sybase an
originally executed Note in the principal amount of $333,000 against payment of
the purchase price therefor by wire transfer to Kertzman's margin account
maintained at Goldman Sachs on or before the Closing.
Subsequent Loans. In the event the parties desire that additional loans in the
future be extended under and be subject to this Agreement, the parties agree
that the execution by Kertzman of one or more promissory notes in substantially
the form attached hereto and the payment therefor by Sybase (whether directly to
Kertzman or in the manner described in Section 1.2). Each such promissory note
shall be deemed to be a "Note" hereunder.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF KERTZMAN
Kertzman represents and warrants to Sybase as follows:
2.1 Authority. Kertzman has all requisite power and authority to enter
into this Agreement and each Note and to consummate the transactions
contemplated hereby, the execution and delivery of this Agreement and each Note
have duly executed and delivered by Kertzman, and constitute the valid and
binding obligation of Kertzman, enforceable against Kertzman in accordance with
its respective terms.
2.2 Encumbrances and Liens. No security agreement, financing statement,
equivalent security or lien instrument or continuation statement covering all or
any part of the Collateral, is on file or of record in any local or state public
office. As of the date hereof, this Agreement grants a valid and continuing
first-priority security interest in the Collateral, as herein defined, in favor
of Sybase, which when duly perfected as set forth in Section 5.4 will be
enforceable against creditors of and purchasers from Kertzman.
1
<PAGE> 2
ARTICLE III
SECURITY INTEREST
3.1. Defined Terms. The following terms shall have the following
meanings, unless the context otherwise requires:
"Code" or "Uniform Commercial Code": the Uniform Commercial Code of the
State of Montana as the same may from time to time be in effect.
"Collateral": all of Kertzman's right, title and interest in and to that
certain real property located at 72 Ratine Sheridan Road, Red Lodge, Montana and
all improvements thereon, and all proceeds and products of all of the foregoing.
"Event of Default": Any Event of Default specified in a Note.
"Obligations": All the unpaid principal amount of and accrued interest on
the Notes, now existing or hereafter incurred, and all covenants and obligations
of Kertzman under this Agreement or the Notes.
"Proceeds": shall have the meaning assigned to it under the Code.
3.2. Grant of Security Interest. As security for the prompt and complete
payment and performance when due of all the Obligations, Kertzman hereby
assigns, pledges, transfers, and grants to Sybase, an undivided security
interest in the Collateral and the Proceeds and products of any sale of the
Collateral.
3.3. Appointment as Attorney-in-Fact. Kertzman hereby irrevocably
constitutes and appoints Sybase with full power of substitution, as Kertzman's
true and lawful attorney-in-fact with full power and authority in its place and
stead and in its name, upon the occurrence and during the continuation of an
Event of Default, to take any and all appropriate action and to execute any and
all documents and instruments which may be necessary to perfect the security
interest created hereunder, including, without limitation, the Uniform
Commercial Code financing and continuation statements.
3.4. Remedies Upon Default. If any Event of Default shall occur and be
continuing and not waived, Sybase may exercise in addition to all other rights
and remedies granted to it in this Agreement and in any other instrument or
agreement securing, evidencing or relating to the Obligations, all rights and
remedies of secured parties under the Code. Without limiting the generality of
the foregoing, Kertzman expressly agrees that in any such event Sybase, without
demand of performance or other demand, or notice (except for the notice of prior
sale described below) to or upon Kertzman, may, subject to the laws of Montana,
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, lease, assign, give options to
purchase, or sell or otherwise dispose of and deliver said Collateral (or
contract to do so), or any private sales, for cash or credit. Sybase shall have
the right upon any such public sale or sales, and, to the extent permitted by
law, upon such private sale or sales, to purchase the whole or any part of said
Collateral so sold, free of any right or equity of redemption in Kertzman.
Sybase shall apply the net proceeds of any such collection, recovery, receipt,
appropriation, realization or sale, after deducting all reasonable costs and
expenses of every kind incurred therein or incidental to the care, safe keeping
or otherwise of any or all of the Collateral or in any way relating to the
rights of Sybase hereunder, including reasonable attorneys' fees and legal
expenses, to the payment in whole or in part of the Obligations, in such order
as Sybase may elect, Kertzman remaining liable for any deficiency remaining
unpaid after such application, and only after so applying such net proceeds and
after the payment by Sybase of any other amount required by any provisions of
law, need Sybase account for the surplus, if any, to Kertzman. Sybase shall give
no less than twenty (20) days' prior notice of the time and place of any public
or private sale. Nothing in the foregoing sentence shall prevent Sybase from
bidding for or acquiring Collateral in any sale, lease or other disposition
initiated by Kertzman or any secured creditor of Kertzman.
Security Interest Filings and Records. Within forty-five days of the date
of this Agreement at the election of Sybase, Kertzman shall file a valid
mortgage and/or deed of trust in a form and substance acceptable to Sybase
perfecting the security interest granted above in accordance with the laws of
the
2
<PAGE> 3
State of Montana. At any time and from time to time, upon the written request of
Sybase, and at the sole expense of Sybase, Kertzman will promptly and duly
execute and deliver any and all such further instruments and documents and take
such further action as Sybase may reasonably deem desirable in obtaining the
full benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, the filing of any financing or continuation
statements under the Uniform Commercial Code and the laws of the State of
Montana. Kertzman also hereby authorizes Sybase to file and record any such
financing or continuation statement without the signature of Kertzman to the
extent permitted by applicable law. Kertzman will keep and maintain at its own
cost and expense complete records of the Collateral satisfactory to Sybase.
Kertzman will mark its books and records pertaining to the Collateral to
evidence this Agreement and the security interests granted hereby.
ARTICLE IV
GENERAL PROVISIONS
4.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) to the parties at the following address (or at such other address for
a party as shall be specified by like notice):
(a) if to Sybase, to:
Sybase, Inc.
6475 Christie Avenue
Emeryville, CA 94608
Attention: Treasurer
with a copy at the same address to the attention of the
General Counsel
(b) if to Kertzman, to:
Mitchell Kertzman
c/o Sybase, Inc.
6475 Christie Avenue
Emeryville, CA 94608
4.2 Survival of Representations and Warranties. All
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall survive the execution and delivery of this
Agreement and each Note and the Closings and shall in any way be affected by any
investigation of the subject matter thereof made by or on behalf of the party to
whom such representations and warranties were made.
4.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
4.4 Miscellaneous. This Agreement and the documents and
instruments and other agreements among the parties hereto (a) constitute the
entire agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof; (b) are not intended to
confer upon any other person any rights or remedies hereunder; and (c) shall not
be assigned by operation of law or otherwise except with the written consent of
the other party. This Agreement may not be modified or amended except by a
written agreement signed by the parties hereto. The words "include," "includes"
and "including" when used herein shall be deemed in each case to be followed by
the words "without limitation."
4.5 Governing Law. This Agreement shall be governed in all
respects, including validity, interpretation and effect, by the laws of the
State of California. All parties hereto agree to submit to the
3
<PAGE> 4
jurisdiction of the federal and state courts of the California, and further
agree that service of documents commencing any suit therein may be made by
certified mail to the address specified above.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
signed by themselves or their duly authorized respective officers, all as of the
date first written above.
/s/ MITCHELL E. KERTZMAN
- -------------------------------------
Mitchell E. Kertzman
Consented to:
/s/ JULIE KERTZMAN
- -------------------------------------
Julie Kertzman
SYBASE, INC.
By /s/ MITCHELL L. GAYNOR
- -------------------------------------
Name: Mitchell Gaynor
Title: Vice President, General Counsel
and Secretary
4
<PAGE> 5
SECURED PROMISSORY NOTE
Date: January 7, 1998 Principal Amount: U.S. $333,000.00
FOR VALUE RECEIVED, receipt of which is hereby acknowledged, Mitchell E.
Kertzman (the "Maker"), promises to pay Sybase, Inc., a corporation incorporated
in the State of Delaware, (the "Holder"), with its principal offices located at
6475 Christie Ave., Emeryville, CA 94608, the principal sum of $333,000.00, with
interest as specified herein.
The principal and accrued interest shall be due and payable on March 30, 1998,
except as provided otherwise below. The principal amount of this Note shall bear
interest at the rate of 10 percent (10%) per annum.
Should (i) default be made in the payment of principal or interest when due (ii)
Maker cease to be an employee or director of Sybase, Inc. or (iii) Maker apply
for or consent to the appointment of any receiver, trustee or similar officer
for it or for all or any substantial part of its property or institute any
bankruptcy, insolvency, or similar proceeding relating to it under the laws of
any jurisdiction, or any such proceeding be instituted against Maker and is not
dismissed within 60 days (each of which foregoing events is herein referred to
as an "Event of Default"), the Holder may, at its election, declare the entire
principal and accrued interest balance hereof immediately due and payable.
Should an Event of Default occur and until all amounts owing hereunder are
paid in full, the Maker consents and agrees that the Holder will be entitled to
deduct from any salary, bonus, commission, severance or other compensation now
or hereafter owing to Maker by Holder ("Compensation") amounts to be applied by
Maker to the payment of the principal and interest hereunder. Holder may make
such deductions from time to time and in such amounts as it determines in its
sole discretion.
The Maker agrees that this Note is collectible and enforceable under the laws of
the State of California and may be collected and enforced in any court of
competent jurisdiction in California.
The Maker hereby waives grace, demand, presentment, demand for presentment,
formal notice of nonpayment, notice of protest, and protest of the Note, notice
of dishonor or default, notice of intent to accelerate, notice of acceleration,
diligence in collecting and bringing of suit, trial by jury, and the right to
interpose any defense, set-off, or counterclaim to this Note
No extension of time for payment or a part of any amount owing hereon nor any
delay or omission on the part of the Holder hereof in exercising any right
hereunder at any time shall operate as a waiver of the right of the Holder to
enforce the terms of this Note or under any other document or instrument
executed or delivered in connection with this Note.
In the event of any action to collect or enforce this Note, the prevailing party
shall be entitled to an award from the losing party of reasonable attorney's
fees in addition to the other proper costs of action.
This Note and all covenants, promises and agreements contained herein shall be
binding upon the Maker and his heirs, representatives, and assigns, and shall
inure to the benefit of the Holder and its successors and assigns.
Notwithstanding any other provisions of this Note or any document or instrument
executed or delivered in connection with this Note, interest, fees and the like
shall not exceed the maximum rate permitted by applicable law.
This Note, together with the Loan and Security Agreement between Maker and
Holder dated January 7, 1998 shall constitute the complete and exclusive
agreement of Maker and Holder with respect to the payment of the amounts owing
hereunder and supersedes all prior oral or written understandings. No term or
provision of this Note may be amended, waived, discharged or terminated except
by a written instrument signed by Maker and the Holder.
<PAGE> 6
This Note shall be governed by, and construed in accordance with, the laws of
the state of California, and in the event of a dispute involving this Note, the
Maker and the Holder irrevocably agree that venue for such dispute shall lie in
any court in the State of California that the Holder has to take legal action to
enforce this Note or to remedy a default of this Note and Maker hereby accepts
the nonexclusive jurisdiction of any such court and waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the maintenance
of such action.
Payment shall be made to: Treasurer
Sybase, Inc.
6475 Christie Ave.
Emeryville, CA 94608
IN WITNESS WHEREOF, the Maker has executed this Note.
/s/ MITCHELL E. KERTZMAN
- -------------------------------------
Mitchell E. Kertzman
<PAGE> 1
EXHIBIT 10.14
Agreement of Employment Terms
This Agreement of Employment Terms ("Agreement") is made between Jack Acosta
("Employee") and Sybase, Inc., effective as of August 1, 1996.
WHEREAS, Sybase wishes to retain Employee in its employ as Chief Financial
Officer;
WHEREAS, Employee has a competing offer of employment to serve as Chief
Financial Officer of another publicly held software concern, which offer
includes terms substantially similar to those included in this Agreement;
WHEREAS, Employee is willing to remain with Sybase, in the role of Chief
Financial Officer, on the terms provided herein;
NOW, THEREFORE, the parties agree as follows:
1. Definitions. As used in this Agreement, the following terms shall have the
respective meanings indicated.
a. "Cause" shall mean:
(i) Employee personally engaging in conduct that he reasonably should
know or that he intends to be seriously injurious to Sybase or its affiliates or
employees;
(ii) Employee being convicted of a felony under the laws of the
United States or any State, or committing an act of dishonesty or fraud against,
or the misappropriation of property belonging to, Sybase or its affiliates;
(iii) Employee knowingly and intentionally breaching in any material
respect the terms of the Nondisclosure Agreement between Employee and Sybase;
(iv) Employee's commencement of employment with another employer
while he is an employee of Sybase; or
(v) continued violations by Employee of his duties as an employee of
Sybase which are demonstrably willful and deliberate on Employee's part after
there has been delivered to Employee a written demand for performance from
Sybase which describes the basis for Sybase's belief that Employee has not
substantially performed his duties.
b. "Disability" shall mean that Employee has been unable to perform his
<PAGE> 2
duties as an employee of Sybase as the result of incapacity due to physical or
mental illness, and such inability, at least 26 weeks after its commencement, is
determined to be total and permanent by a physician selected by the Company or
its insurers and reasonably acceptable to Employee or his legal representative.
2. If at any time prior to August 1, 1998, Employee's employment with Sybase is
terminated as a result of an involuntary termination other than for Cause or
Disability, then Employee shall be entitled to receive severance pay in an
amount equal to Employee's annual base salary at the time of such termination.
Such amount shall be paid semi-monthly, subject to all necessary withholding. In
addition, during the one-year period following such termination, Sybase shall
continue to make available to Employee on the same terms offered to all other
regular, similarly situated employees health, dental, vision, life, dependent
life, long-term disability, accidental death and dismemberment and other similar
insurance coverages existing on the date of Employee's termination, and
throughout such period Employee shall be entitled to participate in the Sybase,
Inc. Employee Stock Purchase Plan and Executive Deferred Compensation Plan and
Employee's stock options shall continue vesting in accordance with the terms of
their respective written option agreements.
Notwithstanding any provision of this Agreement, in the event the termination of
Employee's employment with Sybase occurs within 18 months after a Change of
Control, as such term is defined in the Statement of Employment Terms effective
as of July 29, 1996 between Employee and Sybase (the "Statement of Employment
Terms"), then Employee's rights to severance benefits shall be governed by the
terms of said Statement of Employment Terms, and no amounts shall be paid and no
benefits shall be granted to Employee under this Agreement in that event.
Section 2(b) of the Statement of Employment Terms is hereby amended so as to add
to the end of the last sentence thereof the following words: ", or as may be
provided under the Agreement of Employment Terms between the Employee and the
Company effective as of August 1, 1996."
3. If Employee's employment terminates by reason of his voluntary resignation,
then Employee shall not be entitled to any severance or other benefits except
for such benefits (if any) as may then be established under Sybase's then
existing written severance and benefits plans and written policies at the time
of such resignation.
4. Termination of Employee's employment as a result of Disability may only be
effected after 30 days' written notice by Sybase of its intention to terminate
Employee's employment. In the event that Employee resumes the performance
<PAGE> 3
of substantially all of his duties before the proposed termination becomes
effective, the notice of intent to terminate shall automatically be deemed to
have been revoked. If Sybase terminates Employee's employment as a result of his
Disability or death, then Employee shall not be entitled to receive severance or
other benefits except for those (if any) as may then be established under
Sybase's then existing written severance and benefits plans and written policies
at the time of such termination.
5. If Employee's employment is terminated involuntarily for Cause, then Employee
shall not be entitled to receive any severance or other benefits following the
date of such termination, and Sybase shall have no obligation to provide for the
continuation of any benefits or insurance plans existing on the date of such
termination, other than as required by law.
6. Any successor of Sybase (whether direct or indirect and whether by purchase,
lease, merger, consolidation liquidation or otherwise) or to all or
substantially all of Sybase's business and/or assets shall be bound by the
obligations under this Agreement. All rights of Employee under this Agreement
shall inure to the benefit of, and be enforceable by, Employee's personal or
legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
7. This Agreement and the Statement of Employment Terms constitute the entire
agreement of the parties with respect to the subject hereof.
IN WITNESS WHEREOF, each of the parties has signed this Agreement as of the date
first written above.
SYBASE, INC.
By /s/ LAURIE B. KEATING /s/ JACK ACOSTA
-------------------------------- ----------------------------
Laurie B. Keating Jack Acosta
Senior Vice President
<PAGE> 1
EXHIBIT 10.20
SYBASE, INC.
1996 STOCK PLAN
(as amended March 13, 1998)
1. Purposes of the Plan. The purposes of this Stock Plan are:
- to attract and retain the best available personnel for
positions of substantial responsibility,
- to provide additional incentive to Employees and Consultants,
and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to the
administration of stock option, restricted stock and incentive stock plans under
state corporate and securities laws and the Code.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a Committee appointed by the Board in
accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means Sybase, Inc.
(h) "Consultant" means any person, including an advisor, engaged
by the Company or a Parent or Subsidiary to render services and who is
compensated for such services. The term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
<PAGE> 2
(i) "Continuous Status as an Employee or Consultant" means that
the employment or consulting relationship with the Company, any Parent, or
Subsidiary, is not interrupted or terminated. Continuous Status as an Employee
or Consultant shall not be considered interrupted in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor. A
leave of absence approved by the Company shall include sick leave, military
leave, or any other personal leave approved by an authorized representative of
the Company. For purposes of Incentive Stock Options, no such leave may exceed
ninety (90) days, unless reemployment upon expiration of such leave is
guaranteed by statute or contract. If reemployment upon expiration of a leave of
absence approved by the Company is not so guaranteed, on the one hundred
eighty-first (181st) day of such leave any Incentive Stock Option held by the
Optionee shall cease to be treated as an Incentive Stock Option and shall be
treated for tax purposes as a Nonstatutory Stock Option.
(j) "Director" means a member of the Board.
(k) "Disability" means total and permanent disability as defined
in Section 22(e)(3) of the Code.
(l) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. Neither
service as a Director nor payment of a director's fee by the Company shall be
sufficient to constitute "employment" by the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(n) "Fair Market Value" means, as of any date, the value of Common
Stock determined as the closing sales price for such Common Stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the date of determination, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable.
(o) "Incentive Stock Option" means an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
(p) "Misconduct" means the Optionee or purchaser, as applicable,
(i) is convicted of a felony involving dishonesty or moral turpitude, (ii)
committed an act of dishonesty intended to result in substantial personal
enrichment, (iii) engaged in actions intended to cause significant injury to the
Company (including derogatory statements regarding the Company, but excluding
statements made in connection with any legal action filed against the Company),
or (iv) breached the non-disclosure, non-compete or non-solicit provisions of
any agreement between the Optionee and the Company.
(q) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
<PAGE> 3
(r) "Notice of Grant" means a written or electronic notice
evidencing certain terms and conditions of an individual Option or Right grant.
The Notice of Grant is part of the Option Agreement.
(s) "Officer" means a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(t) "Option" means a stock option granted pursuant to the Plan.
(u) "Option Agreement" means an agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
The Option Agreement is subject to the terms and conditions of the Plan.
(v) "Optioned Stock" means the Common Stock subject to an Option
or Right.
(w) "Optionee" means an Employee or Consultant who holds an
outstanding Option or Right.
(x) "Parent" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(y) "Plan" means this 1996 Stock Plan.
(z) "Restricted Stock" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 below.
(aa) "Restricted Stock Purchase Agreement" means a written
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.
(bb) "Retirement" means the termination of employment pursuant to
the Company's retirement policies for an Employee who has attained the age of
fifty-five (55) and whose Continuous Status as an Employee was not interrupted
during the previous five (5) years.
(cc) "Right" means a Stock Purchase Right granted pursuant to the
Plan.
(dd) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(ee) "Section 16(b)" means Section 16(b) of the Securities Exchange
Act of 1934, as amended.
(ff) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 14 of the Plan.
<PAGE> 4
(gg) "Stock Purchase Right" means the right to purchase Common
Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(hh) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 14
of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is 7,927,000. The Shares may be authorized, but unissued, or
reacquired Common Stock.
If an Option or Right expires or becomes unexercisable without
having been exercised in full, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated); provided, however, that Shares that have actually been issued
under the Plan, whether upon exercise of an Option or Right, shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if Shares of Restricted Stock are repurchased by the
Company at their original purchase price, and the original purchaser of such
Shares did not receive any benefits of ownership of such Shares, such Shares
shall become available for future grant under the Plan. For purposes of the
preceding sentence, voting rights shall not be considered a benefit of Share
ownership.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. If permitted by Rule
16b-3, the Plan may be administered by different bodies with respect to
Directors, Officers who are not Directors, and Employees who are neither
Directors nor Officers.
(ii) Administration With Respect to Directors and Officers
Subject to Section 16(b). With respect to Options or Rights grants made to
Employees who are also Officers or Directors subject to Section 16(b) of the
Exchange Act, the Plan shall be administered by (A) the Board, if the Board may
administer the Plan in a manner complying with the rules under Rule 16b-3
relating to the disinterested administration of employee benefit plans under
which Section 16(b) exempt discretionary grants and awards of equity securities
are to be made, or (B) a committee designated by the Board to administer the
Plan, which committee shall be constituted to comply with the rules under Rule
16b-3 relating to the disinterested administration of employee benefit plans
under which Section 16(b) exempt discretionary grants and awards of equity
securities are to be made. Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed by the Board. From
time to time the Board may increase the size of the Committee and appoint
additional members, remove members (with or without cause) and substitute new
members, fill vacancies (however caused), and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by the rules under Rule 16b-3 relating to the disinterested
administration of employee benefit plans under which Section 16(b) exempt
discretionary grants and awards of equity securities are to be made.
<PAGE> 5
(iii) Administration With Respect to Other Persons. With
respect to Options or Rights grants made to Employees or Consultants who are
neither Directors nor Officers of the Company, the Plan shall be administered by
(A) the Board or (B) a committee designated by the Board, which committee shall
be constituted to satisfy Applicable Laws. Once appointed, such Committee shall
serve in its designated capacity until otherwise directed by the Board. The
Board may increase the size of the Committee and appoint additional members,
remove members (with or without cause) and substitute new members, fill
vacancies (however caused), and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by
Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value of the Common Stock,
in accordance with Section 2(n) of the Plan;
(ii) to select the Consultants and Employees to whom Options
and Rights may be granted hereunder;
(iii) to determine whether and to what extent Options and
Rights or any combination thereof, are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each Option and Right granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options or Rights may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or Right or the shares of
Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;
(vii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(viii)to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
<PAGE> 6
(ix) to modify or amend each Option or Right (subject to
Section 16(c) of the Plan), including the discretionary authority to extend the
post-termination exercisability period of Options;
(x) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option or Right
previously granted by the Administrator;
(xi) to determine the terms and restrictions applicable to
Options and Rights and any Restricted Stock;
(xii) to determine whether and under what circumstances an
Option may be settled in cash under Section 10(f) instead of Common Stock;
(xiii)to determine whether, to what extent and under what
circumstances Common Stock and other amounts payable with respect to an award
under this Plan shall be deferred either automatically or at the election of the
participant (including providing for and determining the amount (if any) of any
deemed earnings on any deferred amount during any deferral period); and
(xiv) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options or Rights.
5. Eligibility. Nonstatutory Stock Options and Rights may be granted to
Employees and Consultants. Incentive Stock Options may be granted only to
Employees. If otherwise eligible, an Employee or Consultant who has been granted
an Option or Right may be granted additional Options or Rights.
6. Limitations.
(a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Right shall confer upon an
Optionee any right with respect to continuing the Optionee's employment or
consulting relationship with the Company, nor shall they interfere in any way
with the Optionee's right or the Company's right to terminate such employment or
consulting relationship at any time, with or without cause.
<PAGE> 7
(c) The following limitations shall apply to grants of Options to
Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than 500,000 Shares.
(ii) In connection with his or her initial employment, an
Employee may be granted Options to purchase up to an additional 500,000 Shares
which shall not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 14.
7. Term of Plan. Subject to Section 20 of the Plan, the Plan shall
become effective upon the earlier to occur of its adoption by the Board or its
approval by the stockholders of the Company as described in Section 20 of the
Plan. It shall continue in effect for a term of ten (10) years unless terminated
earlier under Section 16 of the Plan.
8. Term of Option. The term of each Option shall be stated in the
Notice of Grant and shall be ten (10) years from the date of grant or such
shorter term as may be provided in the Notice of Grant.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per
Share exercise price shall be determined by the Administrator, but in no case
shall the per Share exercise price be less than 85% of the Fair Market Value per
Share on the date of grant; provided, however, that for any calendar year, the
aggregate number of Shares subject to Nonstatutory Stock Options granted during
such calendar year with a per Share exercise price less than the Fair Market
Value per Share on the date of grant shall not exceed five percent (5%) of the
number of Shares subject to Options granted in the preceding calendar year.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised. In so doing, the Administrator may specify that an
Option may not be exercised until the completion of a service period or the
attainment of certain performance goals determined by the Administrator.
<PAGE> 8
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) other Shares which (A) in the case of Shares acquired
upon exercise of an option, have been owned by the Optionee for more than six
(6) months on the date of surrender, and (B) have a Fair Market Value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised;
(iv) delivery of a properly executed exercise notice together
with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price;
(v) a reduction in the amount of any Company liability to
the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vi) any combination of the foregoing methods of payment; or
(vi) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the stock certificate evidencing such Shares is issued (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a shareholder shall
<PAGE> 9
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. The Company shall issue (or cause to be issued) such stock certificate
promptly after the Option is exercised. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 14 of the Plan.
Exercising an Option in any manner shall decrease the number
of Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Employment or Consulting Relationship. Upon
termination of an Optionee's Continuous Status as an Employee or Consultant,
other than as provided for in Sections 10(c), 10(d) and 10(e), the Optionee may
exercise his or her Option, but only within such period of time as is specified
in the Notice of Grant, and only to the extent that the Optionee was entitled to
exercise it at the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Notice of Grant). In
the absence of a specified time in the Notice of Grant, the Option shall remain
exercisable for three (3) months following the Optionee's termination. If, on
the date of termination, the Optionee is not entitled to exercise the Optionee's
entire Option, the Shares covered by the unexercisable portion of the Option
shall revert to the Plan. If, after termination, the Optionee does not exercise
his or her Option within the time specified by the Administrator, the Option
shall terminate, and the Shares covered by such Option shall revert to the Plan.
(i) Notwithstanding the above, in the event an Optionee's
Continuous Status as an Employee or Consultant terminates and the Optionee
performs an act of Misconduct, all unexercised Options held by such Optionee
shall expire five (5) business days following written notice from the Company to
the Optionee.
(ii) Notwithstanding the above, in the event of an Optionee's
change in status from Consultant to Employee or Employee to Consultant, an
Optionee's Continuous Status as an Employee or Consultant shall not
automatically terminate solely as a result of such change in status. However, in
the event of an Optionee's change of status from Employee to Consultant, an
Incentive Stock Option held by the Optionee shall cease to be treated as an
Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory
Stock Option three (3) months and one (1) day following such change of status.
(c) Disability of Optionee. In the event that an Optionee's
Continuous Status as an Employee or Consultant terminates as a result of the
Optionee's Disability, the Optionee may exercise his or her Option at any time
within twelve (12) months from the date of such termination, but only to the
extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant). If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
<PAGE> 10
(d) Death of Optionee. In the event of the death of an Optionee,
the Option may be exercised at any time within twenty-four (24) months following
the date of death (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), by the Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or inheritance,
but only to the extent that the Optionee was entitled to exercise the Option at
the date of death. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall immediately revert to the Plan. If, after death, the
Optionee's estate or a person who acquired the right to exercise the Option by
bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Retirement. In the event that an Optionee's Continuous Status
as an Employee terminates as a result of the Optionee's Retirement, the Optionee
may exercise his or her Option at any time subject to the limitations in the
Plan and the Notice of Grant, but only to the extent that the Optionee was
entitled to exercise the Option at the time of such termination, unless
otherwise expressly provided in a written agreement between the Optionee and the
Company. However, any Incentive Stock Options not exercised within three (3)
months of the termination of the Optionee's Continuous Status as an Employee
shall be treated for tax purposes as Nonstatutory Stock Options three (3) months
and one (1) day following such Retirement.
(f) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
(g) Rule 16b-3. Options granted to individuals subject to Section
16 of the Exchange Act ("Insiders") must comply with the applicable provisions
of Rule 16b-3 and shall contain such additional conditions or restrictions as
may be required thereunder to qualify for the maximum exemption from Section 16
of the Exchange Act with respect to Plan transactions.
11. Stock Purchase Rights.
(a) Rights to Purchase. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including the number of
Shares that the offeree shall be entitled to purchase, the price to be paid, and
the time within which the offeree must accept such offer, which shall in no
event exceed six (6) months from the date upon which the Administrator made the
determination to grant the Stock Purchase Right. The offer shall be accepted by
execution of a Restricted Stock Purchase Agreement in the form determined by the
Administrator. The Administrator may grant a Stock Purchase Right at a price
equal to or in excess of the par value of the Shares; provided, however, for any
calendar year, the aggregate number of shares subject to grants of Stock
Purchase Rights granted during such calendar year with a per Share exercise
price less than the Fair Market Value per Share on the date of grant shall not
exceed ten percent (10%) of the number of Shares subject to Options granted in
the preceding calendar year.
<PAGE> 11
(b) Repurchase Option. Unless the Administrator determines
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment or in the event of the purchaser's Misconduct with
the Company for any reason (including death or Disability). The purchase price
for Shares repurchased pursuant to the Restricted Stock purchase agreement shall
be the original price paid by the purchaser and may be paid by cancellation of
any indebtedness of the purchaser to the Company. The repurchase option shall
lapse at a rate determined by the Administrator.
(c) Rule 16b-3. Stock Purchase Rights granted to Insiders, and
Shares purchased by Insiders in connection with Stock Purchase Rights, shall be
subject to any restrictions applicable thereto in compliance with Rule 16b-3. An
Insider may only purchase Shares pursuant to the grant of a Stock Purchase
Right, and may only sell Shares purchased pursuant to the grant of a Stock
Purchase Right, during such time or times as are permitted by Rule 16b-3.
(d) Other Provisions. The Restricted Stock Purchase Agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock Purchase Agreements need not be the
same with respect to each purchaser.
(e) Rights as a Shareholder. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 14
of the Plan.
12. Withholding Taxes. In accordance with any applicable administrative
guidelines it establishes, the Administrator may allow a purchaser to pay the
amount of taxes required by law to be withheld as a result of a purchase of
Shares or a lapse of restrictions in connection with Shares purchased pursuant
to an Option or Right, by withholding from any payment of Common Stock due as a
result of such purchase or lapse of restrictions, or by permitting the purchaser
to deliver to the Company, Shares having a Fair Market Value, as determined by
the Administrator, equal to the amount of such required withholding taxes.
13. Non-Transferability of Options and Rights. Unless otherwise
specified by the Administrator in the Notice of Grant, an Option or Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee.
14. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by
the stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Right, and the number of shares of Common Stock
which have been authorized for issuance under the
<PAGE> 12
Plan but as to which no Options or Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Right,
as well as the price per share of Common Stock covered by each such outstanding
Option or Right, shall be proportionately adjusted for any increase or decrease
in the number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of issued shares
of Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the Company
shall not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Board, whose determination in that respect
shall be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of shares
of Common Stock subject to an Option or Right.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option or Right until ten (10) days prior
to such transaction as to all of the Optioned Stock covered thereby, including
Shares as to which the Option or Right would not otherwise be exercisable. In
addition, the Administrator may provide that any Company repurchase rights
applicable to any Shares purchased upon exercise of an Option or Right shall
lapse as to all such Shares, provided the proposed dissolution or liquidation
takes place at the time and in the manner contemplated. To the extent it has not
been previously exercised, an Option or Right will terminate immediately prior
to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Right shall be assumed or an
equivalent option or right substituted by the successor corporation or a Parent
or Subsidiary of the successor corporation (the "Successor Corporation"), unless
the Successor Corporation refuses to assume or substitute for the Option or
Right, in which case the Optionee shall have the right to exercise the Option or
Right as to all of the Optioned Stock, including Shares as to which it would not
otherwise be exercisable. If an Option or Right is exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Right shall be fully exercisable for a period of not less than
forty-five (45) days from the date of such notice, and the Option or Right shall
terminate upon the expiration of such period. For the purposes of this
paragraph, the Option or Right shall be considered assumed if, following the
merger or sale of assets, the option or right confers the right to purchase or
receive, for each Share of Optioned Stock subject to the Option or Right
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets was not solely common stock of the Successor Corporation, the
Administrator may, with the consent of the Successor Corporation, provide for
the consideration to be received upon the exercise
<PAGE> 13
of the Option or Right, for each Share of Optioned Stock subject to the Option
or Right, to be solely common stock of the Successor Corporation equal in fair
market value to the per share consideration received by holders of Common Stock
in the merger or sale of assets.
15. Date of Grant. The date of grant of an Option or Right shall be, for
all purposes, the date on which the Administrator makes the determination
granting such Option or Right, or such other later date as is determined by the
Administrator. Notice of the determination shall be provided to each Optionee
within a reasonable time after the date of such grant.
16. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Rule 16b-3 or with Section 422 of the Code (or any successor rule or
statute or other applicable law, rule or regulation, including the requirements
of any exchange or quotation system on which the Common Stock is listed or
quoted). Such shareholder approval, if required, shall be obtained in such a
manner and to such a degree as is required by the applicable law, rule or
regulation.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
17. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option or Right unless the exercise of such Option or Right and
the issuance and delivery of such Shares shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder,
Applicable Laws, and the requirements of any stock exchange or quotation system
upon which the Shares may then be listed or quoted, and shall be further subject
to the approval of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of
an Option or Right, the Company may require the person exercising such Option or
Right to represent and warrant at the time of any such exercise that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required.
18. Liability of Company.
<PAGE> 14
(a) Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
(b) Grants Exceeding Allotted Shares. If the Optioned Stock
covered by an Option or Right exceeds, as of the date of grant, the number of
Shares which may be issued under the Plan without additional shareholder
approval, such Option or Right shall be void with respect to such excess
Optioned Stock, unless shareholder approval of an amendment sufficiently
increasing the number of Shares subject to the Plan is timely obtained in
accordance with Section 16(b) of the Plan.
19. Reservation of Shares. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
20. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the manner and to the degree required under applicable federal and state law.
<PAGE> 15
NOTICE OF GRANT OF STOCK OPTIONS SYBASE, INC. STOCK PLAN DEPT.
AND GRANT AGREEMENT ID: 94-2951005
6475 CHRISTIE AVE. , 4th Fl
EMERYVILLE, CA 94608
(510) 922-4566 FAX# 922-5502
NAME
ADDRESS
ID:
You have been granted options to buy Sybase, Inc. Common Stock as follows:
Stock Option Grant Number _________________________
Date of Grant _________________________
Stock Option Plan ______________________
Option Price per Share $_____________________
Total Number of Shares Granted _________________________
Total Price of Shares Granted $________________________
This Option is granted subject to the terms of and conditions of the 1996 Stock
Plan, as amended ("Plan"), and this Option Agreement. The "Exercise Price" is
equal to the Option Price per Share set forth above. Vesting Commencement Date
is the Date of Grant [Hire]. This Option expires ten years following the Date of
Grant. The Option may be exercised only with respect to shares that have vested
in accordance with the following vesting schedule: 1/8 of the total number of
shares granted shall vest six months after the Vesting Commencement Date, and
1/48 of the total number of shares shall vest for each month which has expired
thereafter. By accepting this Option, Optionee agrees that the vesting of the
shares hereunder is earned only by continuing employment at the will of the
Company (and not through the act of being hired, being granted this Option, or
by purchasing shares hereunder) and that all decisions or interpretations of the
Administrator with respect to questions arising under the Plan or Option are
binding, conclusive and final on Optionee. A copy of the Plan and Prospectus
relating thereto are available through electronic means. DO NOT RETURN. KEEP
THIS FOR YOUR RECORDS.
<PAGE> 16
II. AGREEMENT
1. Grant of Option. The Plan Administrator of the Company hereby grants
to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee") an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan, which is incorporated herein by reference. Subject to
Section 16(c) of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
(a) Right to Exercise. This Option is exercisable during its term
in accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement. In the event of
Optionee's death, Disability or other termination of Optionee's employment or
consulting relationship, the exercisability of the Option is governed by the
applicable provisions of the Plan and this Option Agreement.
This Option may not be exercised for a fraction of a Share.
(b) Method of Exercise. This Option is exercisable by delivery of
an exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be signed by
the Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The Exercise Notice shall be accompanied by payment of
the aggregate Exercise Price as to all Exercised Shares. This Option shall be
deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this
Option unless such issuance and exercise complies with all relevant provisions
of law and the requirements of any stock exchange or quotation service upon
which the Shares are then listed. Assuming such compliance, for income tax
purposes the Exercised Shares shall be considered transferred to the Optionee on
the date the Option is exercised with respect to such Exercised Shares.
3. Method of Payment. Payment of the aggregate Exercise Price shall be
by any of the following, or a combination thereof, at the election of the
Optionee:
(a) cash; or
(b) check; or
(c) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of
<PAGE> 17
the Option and delivery to the Company of the sale or loan proceeds required to
pay the exercise price; or
(d) surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, AND (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares.
4. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The terms
of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
5. Term of Option. This Option may be exercised only within the term
set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.
6. Restrictions on Exercise. As a condition to the exercise of this
Option, the Company may require Optionee to make any representation or warranty
to the Company as may be required by any applicable law or regulation.
7. Termination of Employment or Consulting Relationship.
(a) General. Upon termination of an Optionee's Continuous Status
as an Employee or Consultant, other than as provided for in Sections 7(b), 7(c),
7(d) and 7(e) the Optionee may exercise his or her Option within three (3)
months after the date of such termination, but only to the extent that the
Optionee was entitled to exercise it at the date of termination (and in no event
later than the expiration of the term of such Option as set forth in the Notice
of Grant). If, after termination, the Optionee does not exercise his or her
Option within the time specified by the Administrator, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
(b) Misconduct. In the event an Optionee's Continuous Status as an
Employee or Consultant terminates and the Optionee performs an act of
Misconduct, all unexercised Options held by such Optionee shall expire five (5)
business days following written notice from the Company to the Optionee.
(c) Disability of Optionee. In the event that an Optionee's
Continuous Status as an Employee or Consultant terminates as a result of the
Optionee's Disability, the Optionee may exercise his or her Option at any time
within twelve (12) months from the date of such termination, but only to the
extent that the Optionee was entitled to exercise it at the date of such
termination (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant). If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall revert to the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee,
the Option may be exercised at any time within twenty-four (24) months following
the date of death (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant), but the Optionee's estate or by a
person who acquired the right to exercise the Option by bequest of inheritance,
but only to the extent that the Optionee was entitled to exercise the Option at
the date of death. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the
<PAGE> 18
unexercisable portion of the Option shall immediately revert to the Plan. If,
after death, the Optionee's estate or a person who acquired the right to
exercise the Option by bequest or inheritance does not exercise the Option
within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
(e) Retirement. In the event that an Optionee's Continuous Status
as an Employee terminates as a result of the Optionee's Retirement, the Optionee
may exercise his or her Option at any time subject to the limitations in the
Plan and the Notice of Grant, but only to the extent that the Optionee was
entitled to exercise the Option at the time of such termination, unless
otherwise expressly provided in a written agreement between the Optionee and the
Company. However, any Incentive Stock Options not exercised within three (3)
months of the termination of the Optionee's Continuous Status as an Employee
shall be treated for tax purposes as Nonstatutory Stock Options three (3) months
and one (1) day following such Retirement.
8. Tax Consequences. Some of the federal and state tax consequences
relating to this Option, as of the date of this Option, are set forth below.
THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING
THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercising the Option.
(i) Nonstatutory Stock Option. The Optionee may incur
regular federal income tax and state income tax liability upon exercise of a
NSO. The Optionee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the Fair
Market Value of the Exercised Shares on the date of exercise over their
aggregate Exercise Price. If the Optionee is an Employee or a former Employee,
the Company will be required to withhold from his or her compensation or collect
from Optionee and pay to the applicable taxing authorities an amount in cash
equal to a percentage of this compensation income at the time of exercise, and
may refuse to honor the exercise and refuse to deliver Shares if such
withholding amounts are not delivered at the time of exercise.
(ii) Incentive Stock Option. If this Option qualifies as an
ISO, the Optionee will have no regular federal income tax or state income tax
liability upon its exercise, although the excess, if any, of the Fair Market
Value of the Exercised Shares on the date of exercise over their aggregate
Exercise Price will be treated as an adjustment to alternative minimum taxable
income for federal tax purposes and may subject the Optionee to alternative
minimum tax in the year of exercise. In the event that the Optionee undergoes a
change of status from Employee to Consultant, any Incentive Stock Option of the
Optionee that remains unexercised shall cease to qualify as an Incentive Stock
Option and will be treated for tax purposes as a Nonstatutory Stock Option three
(3) months and one (1) day following such change of status.
(b) Disposition of Shares.
(i) NSO. If the Optionee holds NSO Shares for at least one
year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least one
year after exercise and two years after the grant date, any gain or loss
realized on disposition of the Shares will be treated as long-term capital gain
or loss for federal income tax purposes. If the Optionee disposes of ISO Shares
within one year after exercise or two years after the grant date, any gain
realized on such disposition
<PAGE> 19
will be treated as compensation income (taxable at ordinary income rates) to the
extent of the excess, if any, of the lesser of (A) the difference between the
Fair Market Value of the Shares acquired on the date of exercise and the
aggregate Exercise Price, or (B) the difference between the amount realized on
the sale of such Shares and the aggregate Exercise Price.
(c) Notice of Disqualifying Disposition of ISO Shares. If the
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
an ISO on or before the later of (i) two years after the grant date, or (ii) one
year after the exercise date, the Optionee shall immediately notify the Company
in writing of such disposition. The Optionee agrees that he or she may be
subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
9. Entire Agreement; Governing Law. The Plan is incorporated herein by
reference. The Plan and this Option Agreement constitute the entire agreement of
the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by California law except for that body of
law pertaining to conflict of laws.
10. NO GUARANTEE OF EMPLOYMENT. OPTIONEE ACKNOWLEDGES AND AGREES THAT
THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY
CONTINUING SERVICE AS AN EMPLOYEE OR CONSULTANT AT THE WILL OF THE COMPANY (AND
NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS AN
EMPLOYEE OR CONSULTANT FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND
SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
OPTIONEE'S EMPLOYMENT OR CONSULTING RELATIONSHIP AT ANY TIME, WITH OR WITHOUT
CAUSE.
This Option is granted under and governed by the terms and conditions of the
Plan and this Option Agreement. Optionee has reviewed the Plan and this Option
Agreement in their entirety, has had an opportunity to obtain the advice of
counsel prior to executing this Option Agreement and fully understands all
provisions of the Plan and Option Agreement. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions relating to the Plan and Option Agreement.
Optionee further agrees to notify the Company upon any change in the residence
address indicated on the attached Notice of Grant.
<PAGE> 1
EXHIBIT 10.22
RETIREMENT AGREEMENT AND GENERAL RELEASE
1. This Retirement Agreement and General Release ("Agreement") dated as of
March 11, 1998 is entered into by and between Sybase, Inc., a Delaware
corporation with its principal headquarters in Emeryville, California, on behalf
of itself and each of its subsidiaries ("Sybase" or the "Company"), and Michael
Forster ("Employee") for the purpose of amicably concluding their employment
relationship. By entering into this Agreement neither party admits any
deficiency, wrongdoing or liability, expressly or by implication.
2. In addition to the other terms and conditions set forth in this Agreement,
Employee and Sybase agree to the following terms in connection with Employee's
continued employment with Sybase through the Termination Date (as defined
below):
(a) The effective date of Employee's termination of employment with
Sybase will be December 31, 1998 (the "Termination Date").
(b) During the period from the date hereof through the Termination Date
("Employment Period"), Employee shall remain on the Sybase payroll and shall be
paid a salary equal to $30,833.33 per month. Payments will be made semi-monthly,
and will be net of all required and authorized payroll deductions. Employee
agrees and acknowledges that Employee shall not be eligible for further vacation
accrual after March 31, 1998. Employee shall not be entitled to any other
compensation, including but not limited to, incentive compensation or bonuses
during the Employment Period. Sections 1, 2 and 8 of that certain Employment
Agreement dated as of April 1, 1996 (the "Prior Agreement") shall be of no
further force and effect.
(c) During the Employment Period, Employee shall reasonably assist
Sybase, at Sybase's request, in transition activities as mutually agreed upon by
Sybase and Employee, and Employee acknowledges that such activities may require
a significant time commitment from Employee. During the three months following
the Termination Date, Employee shall serve as a consultant to Sybase (the
"Consulting Period"). During the Consulting Period, Employee shall render at
Sybase's request up to 40 hours of consulting services per month; such services
may include customer calls and introductions and sales organization meetings.
Employee shall be compensated during the Consulting Period at the rate of
$30,833.33 per month for such services and will be reimbursed for reasonable,
substantiated out-of-pocket expenses incurred in accordance with Sybase's
expense policies and procedures.
(d) Employee's stock options shall continue to vest until the
Termination Date. It is acknowledged and agreed that the performance objectives
specified in Section 2(a)(iv)D, 2(a)(v)B, 2(a)(v)C and 2(a)(v)D of the Prior
Agreement have not and will not be met and that the portions of the options that
vest based on those performance objectives will not vest. Employee's ability to
exercise his vested options following the Termination Date shall be governed by
the provisions of Employee's stock option agreements, and the provisions of the
applicable stock option plan under which such options were granted. For purposes
of options granted under the 1996 Stock Plan, Employee shall be deemed to have
retired and such options may be exercised in accordance with such plan.
(e) As of March 31, 1998, Employee will be entitled to receive a refund
of any accrued but unused Employee Stock Purchase Plan (ESPP) contributions.
<PAGE> 2
(f) In the event Employee accepts employment or an exclusive consulting
engagement of any length with a Sybase Competitor (as defined below) prior to
April 1, 1999, Employee will notify Sybase's General Counsel immediately, and
all payments and benefits to which Employee is or would be entitled to receive
under this Agreement shall cease as of the day Employee accepts such employment
or engagement. For purposes of this Agreement, a "Sybase Competitor" shall mean
Oracle Corporation, Informix, Inc., Microsoft Corporation, Computer Associates,
or any of their respective subsidiaries or exclusive distributors.
(g) All unreimbursed travel and business expenses for which Employee is
entitled to reimbursement as of the Termination Date will be promptly paid to
Employee after submission of expense reports in accordance with standard Sybase
policy.
(h) Sybase shall pay the reasonable expenses of the final shipment of
Employee's household goods to Employee's residence in Florida and of one of
Employee's automobiles to Employee's residence in Mississippi. Employee shall
vacate the apartment leased for Employee in San Francisco on or before April 30,
1998. Sybase shall be responsible for the payment of the rent on such apartment
through the term of the lease and the rented furniture therein through April 30,
1998.
(i) For a period of 90 days following the Termination Date, Sybase shall
maintain Employee's voicemail and electronic mail address and will permit
Employee access to such addresses through the voicemail and electronic mail
systems provided that (a) Employee complies with all of Sybase's policies
relating to use of such systems and complies with the terms of Employee's
nondisclosure agreements with Sybase ("Nondisclosure Agreements") which shall
continue to be complied with by Employee with respect to all information
obtained from such voicemail and electronic mail access and (b) Employee shall,
at Sybase's request, change the greeting on the voicemail account to indicate
that Employee has retired, that all business related messages should be directed
to an individual designated by Sybase and that the caller should only leave
personal messages for the Employee.
(j) Employee shall be entitled to retain his cellular phone (although
Employee shall be responsible for all charges relating thereto after December
31, 1998) and his portable computer, it being agreed that Employee shall
continue to be bound by the confidentiality and non-disclosure provisions of his
Nondisclosure Agreements with respect to any Sybase information stored therein
throughout the Employment Period and Consulting Period. Employee agrees not to
seek reimbursement for business telephone line in the San Francisco apartment
described above, nor any utilities or other costs relating to such apartment,
other than the condominium fees.
3. Through the Termination Date, and except as otherwise expressly provided
in Section 2 above, Employee will be entitled to participate in all employee
benefit programs (except the ESPP) and policies generally available to Sybase
employees, including, health insurance, the Executive Deferred Compensation Plan
(subject to the proper elections) and Sybase's 401(k) plan (if applicable),
subject to Employee's continued regular designated payroll deductions for such
items. Employee may elect optional health insurance continuation under COBRA
following the Termination Date, as well as optional continuation of certain
other insurance benefits, all at Employee's expense. Procedures for electing to
continue such benefits will be provided to Employee under separate cover by the
Human Resources Department.
2
<PAGE> 3
4. Employee hereby agrees and acknowledges that as of the date of this
Agreement, he is the obligor on two (2) outstanding loans payable to Sybase.
Such loans are evidenced by promissory notes in the remaining principal amounts
of Four Hundred Seventy-Five Thousand Five Hundred Sixty Two Dollars and Fifty
Two Cents ($475,562.50) (the "Stock Purchase Note"), and One Hundred Fifty-Seven
Thousand Dollars ($157,000) (the "Residence Note"), respectively (collectively,
the "Notes"). The amount of accrued and unpaid principal and interest under the
Notes was $128,792.55 as of March 11, 1998 ("Unpaid Interest"). Employee shall
enter into a new promissory note in the form attached hereto as Exhibit A (the
"New Note") and the pledge agreement in the form attached hereto in the form
attached hereto as Exhibit B (the "Pledge Agreement") pursuant to which Employee
shall pledge the shares specified therein (the "Collateral"). Upon execution and
delivery of the New Note and the Pledge Agreement, Sybase shall return to
Employee the Residence Note and Stock Purchase Note and the Pledge Agreement by
and between Sybase (as successor to Micro Decisionware, Inc.) and Employee
previously entered into in 1993 will be amended and restated by the new Pledge
Agreement. Each of the stock options listed on Exhibit C hereto (the "Options")
is hereby amended by the addition of the following paragraph:
"Until such time as all outstanding principal and accrued interest under
the New Note (as defined in that certain Retirement Agreement and General
Release dated as of March 11, 1998) are paid in full, Employee agrees that upon
the exercise of this Option, Employee will cause (and hereby authorizes Sybase
to cause) the shares so purchased to be immediately sold and that any proceeds
of such sale in excess of the exercise price and any taxes resulting from such
exercise (as demonstrated by Employee to Sybase) and sale shall be immediately
delivered and paid over to Sybase by Employee or Employee's broker, or collected
by Sybase and Sybase shall apply such payment to the outstanding accrued and
unpaid interest owing under the Note, and to the extent that the payments exceed
such interest, to any outstanding principal until the New Note are paid in full.
After the New Note is paid in full any proceeds from the sale of shares
purchased hereunder shall be retained by Employee."
At any time before March 31, 1999 and upon Sybase's request from time to
time, Employee agrees that he will sell all or any part of the Collateral and
cause the proceeds to be paid to Sybase to reduce the amounts owing under the
Note if the then current market price of Sybase Common Stock equals or exceeds
$24.00 per share (as adjusted for stock splits, etc., in the same manner as the
exercise price under the Options). If the New Note has not been repaid in full
on or before March 31, 1999, then at any time on or after March 31, 1999 and
upon Sybase's request from time to time, Employee agrees that he will sell all
or any part of the Collateral and cause the proceeds to be paid to Sybase to
reduce or pay in full the amount owing under the New Note, regardless of the
then current market price of Sybase common stock. In the event that Employee
fails to sell the requested part of the Collateral within three business days
after a request from Sybase under either of the preceding sentences, Sybase
shall have the option to purchase that portion of the Collateral requested to be
sold at the then current market price. Such option may be exercised by Sybase by
giving written notice to Employee at least three days in advance. Upon
consummation of the exercise of the option, Sybase shall pay the purchase price
by offsetting the amount owed to Employee for such purchase against an equal
amount outstanding under the New Note. Except for the Collateral under the
Pledge Agreement and the proceeds of option exercises, and any products or
proceeds thereof, Sybase shall have no other recourse against the assets of
Employee. With respect to Employee's obligations under the New Note and the
Pledge Agreement (the "Loan Documents"), nothing contained in the preceding
sentence shall in any manner or way (i) constitute (or be deemed to be) a
release of any of Employee's obligations to Sybase under
3
<PAGE> 4
the Loan Documents, or impair the enforceability of the security interest
created by the Pledge Agreement or this Agreement; or (ii) affect or diminish
any written obligation, covenant or agreement of Employee under any Loan
Document; or (iii) affect or diminish any rights of Sybase against Employee
arising from failure to deliver the Collateral to Sybase or Boston Equiserve
with appropriate stock powers, or from Employee's fraud or misapplication of any
funds; or (iv) limit or restrict the right of Sybase to name Employee as a
defendant in any action or suit for a judicial foreclosure or for the exercise
of any other remedy under or with respect to any of the Loan Documents, or for
an injunction or specific performance, so long as no judgment under this clause
(iv) in the nature of a deficiency judgment or other monetary judgment shall be
enforced against Employee except as otherwise provided herein.
5. Employee acknowledges that the payments and benefits described in this
Agreement exceed any amount to which Employee would be entitled under Sybase's
standard policies, procedures and benefit programs. In consideration for
entering into this Agreement and for the payments and benefits described herein
(i) Sybase, Inc., its subsidiaries and each of their respective officers,
directors, successors and assigns, hereby release and forever discharge
Employee, his heirs, legal representatives, estates and successors in interest,
and (ii) except as otherwise provided in this Agreement, Employee, his heirs,
legal representatives, estates and successors in interest, hereby release and
forever discharge Sybase, Inc., its subsidiaries and each of their respective
officers, directors, employees, affiliates, successors and assigns, in the case
of clauses (i) and (ii) from any and all claims (excepting only any claim
Employee may have against Sybase for (i) reimbursement of relocation costs in
accordance with the terms of Employee's prior Employment Agreements and Sybase's
relocation policies, (ii) reimbursement of ordinary business expenses in
accordance Sybase's expense reimbursement policies and procedures and (iii)
vacation accrued through March 31, 1998), demands, obligations and causes of
action of any and every kind, known or unknown, which the releasing parties may
have against the released parties as of the date and time of signing this
Agreement which arise out of Employee's employment by Sybase or any of its
subsidiaries or the termination of that employment, including without limitation
all wrongful discharge actions; all actions arising under the Americans with
Disabilities Act, Title VII of the Civil Rights Act of 1991, the California Fair
Employment and Housing Act, or any other federal or state statute which may be
held applicable; all actions for breach of contract or the covenant of good
faith and fair dealing; all tort claims; and any and all claims for
compensation, wages, bonuses, severance pay, commissions, vacation pay, or
reimbursement for expenses, attorneys' fees and costs, except for claims for
workers' compensation insurance benefits.
6. At no time after the execution of this Agreement will Sybase or Employee
file or maintain, or cause or knowingly permit the filing or maintenance in any
state or federal court, or before any local, state or federal administrative
agency, or any tribunal, any charge, claim or action of any kind, nature or
character arising out of the matters released in Section 5 above, except for an
action to enforce the provisions of this Agreement. Employee and Sybase also
agree not to initiate, assist, support, join, participate in, encourage, or
actively cooperate in the pursuit of any employment-related legal claims against
one another. Nothing in this Section 6 will preclude Sybase or Employee from
testifying truthfully in any legal proceeding pursuant to subpoena or other
legal process.
7. Except as expressly modified by the terms of this Agreement, Employee
understands and acknowledges Employee's continuing obligations toward Sybase
under the Nondisclosure Agreement. Employee further agrees that any and all
nonpublic information obtained by or disclosed to Employee at any time during
Employee's employment with Sybase, including but
4
<PAGE> 5
not limited to nonpublic information concerning Sybase's customers, prospects,
partners, employees, discounts, unreleased products, methods of operation,
processes, practices, programs, compensation relating to any particular
individual and compensation practices and/or programs that are unique or
uniquely tailored to Sybase and procedures, is confidential and proprietary to
Sybase and subject to protection under the Nondisclosure Agreement and under
applicable law.
8. Each party shall bear the cost of, and shall be responsible for, its own
attorneys' and accountants' fees and costs, if any, in connection with the
negotiation and execution of this Agreement.
9. Employee further agrees that the terms and conditions of this Agreement
are strictly confidential and Employee shall not disclose, discuss with or
reveal to any other persons, whether within or outside Sybase, except (i) the
Internal Revenue Service, Franchise Tax Board or other governmental agency, (ii)
professional advisors with whom Employee may consult regarding this Agreement,
and (iii) the Employee's spouse, unless disclosure is compelled by subpoena or
other legal process.
10. This Agreement shall be governed by and construed in accordance with
California law.
11. The parties agree that any dispute of any kind whatsoever arising from the
subject matter of this Agreement, including claims regarding this Agreement
(other than claims for workers' compensation benefits), shall be resolved under
the following procedures:
A. The party claiming to be aggrieved shall furnish to the other party,
within fifteen (15) days of the disputed action, a written statement of the
grievance identifying any witnesses or documents that support the grievance and
the relief requested or proposed. Employee is required to furnish the written
statement of grievance to Sybase's VP HR.
B. If the grievance is denied, the parties agree that the dispute shall
be resolved by final and binding arbitration. A single arbitrator shall be
mutually selected by the parties. If no agreement on the selection is reached
within fifteen (15) days, then a neutral arbitrator shall be selected under the
Expedited Labor Arbitration Rules of the American Arbitration Association,
except that the arbitrator shall be selected by alternately striking names from
the panel of five (5) neutral labor or employment arbitrators designated by the
American Arbitration Association. The arbitrator shall have the authority to
grant the requested relief if authorized by law; provided, however, that nothing
herein shall limit the right of Sybase to obtain injunctive relief to prevent a
violation of the Nondisclosure Agreement.
C. Arbitration shall be the exclusive and final remedy for any dispute
between the parties, and the parties agree that no dispute shall be submitted to
arbitration where the party claiming to be aggrieved has not complied with the
preliminary steps provided for above.
D. The parties agree that any arbitration under this Section 11 shall
be held in the State of California.
12. During the Employment Period and Consulting Period, Employee agrees to
reasonably cooperate with and assist Sybase in matters relating to, or arising
in connection with, any pending or threatened securities litigation or
litigation involving compensation issues or the employment or termination of any
employee of Sybase. The Indemnification Agreement between Sybase and Employee
remains in effect to the extent provided therein.
5
<PAGE> 6
13. This Agreement constitutes the entire understanding of the parties with
respect to the subject hereof. Employee warrants that he: (a) has read and fully
understands this Agreement; (b) has had the opportunity to consult with legal
counsel of his own choosing and have the terms of this Agreement fully
explained; (iii) is not executing this Agreement in reliance on any promises,
representations or inducements other than those contained herein; and (iv) is
executing this Agreement voluntarily, free of any duress or coercion.
Dated: March 11, 1998 SYBASE, INC.
------------------------
By /s/ JACK L. ACOSTA
-------------------------------------
Its Executive Vice President
------------------------------------
I understand that this document is of serious legal consequence and that I
should consult with someone whose opinion I trust before signing it. By my
signature, I agree to the terms set forth above.
Dated: March 11, 1998 /s/ MICHAEL FORSTER
------------------------ -----------------------------------------
Michael Forster
6
<PAGE> 7
EXHIBIT A
RESTRUCTURED NOTE
Principal $761,355 Date: March 11, 1998
Emeryville, California
For value received, the undersigned ("Payor") promises to pay to Sybase, Inc., a
Delaware corporation ("Payee"), or order, in installments as set forth below,
the principal sum of Seven Hundred Sixty-One Thousand Three Hundred Fifty-Five
Dollars. Payor agrees to pay interest on the unpaid principal sum from the date
hereof until paid in full at a rate of 5.7% per year. All interest shall be
computed on the basis of the actual number of days in the year and counting the
actual number of days elapsed.
Principal and all accrued and unpaid interest shall be payable in full on March
31, 1999.
Payor has delivered to Payee's predecessor Micro Decisionware, Inc. a promissory
note dated September 1993 in the original principal amount of $250,000 (the
"Real Property Note") and another promissory note also dated September 1993 in
the original principal amount of $675,000 (the "Stock Purchase Note," and
collectively with the Real Property Note, the "Prior Notes"), each of which has
been partially repaid. This Note represents a restructuring of the terms of the
Prior Notes. This Note is issued not in payment of the debt evidenced by the
Prior Notes but as evidence of the prior debt as restructured. This Note is
secured by the Pledge Agreement of even date herewith (as amended from time to
time, the "Pledge Agreement"). This Note is non-recourse to Payor personally to
the extent set forth in the Pledge Agreement.
Payor may prepay this Note in whole or in part at any time, without premium or
penalty. Each prepayment shall be accompanied by payment of all interest accrued
on the amount of such prepayment.
Payor shall make each payment under this Note in immediately available funds,
unconditionally in full without set-off, counterclaim or other defense, on the
day when due. Each payment received hereunder shall be applied first to accrued
interest and the balance, if any, to the principal.
This Note shall bind Payor's successors and assigns.
Failure of Payor to pay the Note when due or any default by Payor under the
Pledge Agreement constitutes a default under this Note. The holder hereof shall
be entitled upon any default under this Note to demand payment of the unpaid
principal balance and all accrued interest thereon by written notice to Payor.
Payor agrees to pay any and all collection costs and reasonable attorney's fees
incurred by Payee in connection herewith.
Except as expressly provided in this Note, Payor waives presentment, protest,
notice of every kind including demand, intent to accelerate maturity, and
acceleration of maturity, set-offs and counterclaims and expressly agrees that
this Note, or any payment thereunder, may be extended from time to time without
in any way affecting the liability of the Payor thereof.
7
<PAGE> 8
This Note shall be governed by and construed in accordance with the laws of the
State of California. Any provisions hereof contrary to, prohibited by, or
invalid under applicable laws or regulations shall be inapplicable and deemed
omitted here from, but shall not invalidate the remaining provisions hereof.
/s/ MICHAEL H. FORSTER
- ---------------------------------
Michael H. Forster
8
<PAGE> 9
EXHIBIT B
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT is made and entered into as of March 11, 1998
by and between Sybase, Inc., a Delaware corporation ("Pledgee"), and Michael H.
Forster ("Pledgor").
W I T N E S S E T H T H A T:
WHEREAS, Pledgor had executed and delivered to Micro Decisionware,
Inc. ("MDI") a promissory note in the amount of $250,000 dated September 1993
(the "Real Property Note") to evidence a loan to Pledgor by MDI, which loan was
previously secured by a mortgage on certain real property (the "Real Property");
and
WHEREAS, Pledgor had also executed and delivered to MDI a second
promissory note in the amount of $675,000 dated September 1993 (the "Stock
Purchase Note," and together with the Real Property Note, the "Prior Notes") to
evidence a purchase money obligation to Pledgor by MDI in connection with the
purchase of shares of MDI, which Stock Purchase Note was secured by a pledge of
shares of MDI owned by Pledgor pursuant to a Pledge Agreement between Pledgor
and MDI dated in September 1993 (the "1993 Pledge Agreement"); and
WHEREAS, Pledgee is the successor by merger to MDI, and the shares
of MDI previously held by Pledgor have been converted into shares of Pledgor;
and
WHEREAS, the Real Property has been sold and the mortgage thereon
has been released; and
WHEREAS, the outstanding principal and interest due under the Prior
Notes has been consolidated into a new promissory note (together with any
amendments, extensions or replacements thereof or substitutions therefor, the
"Note") in the aggregate principal amount of $761,355 dated of even date
herewith; and
WHEREAS, Pledgee holds certain options to acquire Sybase, Inc.
common stock as described in more detail on Exhibit A hereto (the "Options");
and
WHEREAS, in consideration of Pledgee's extending the time for
payment of the indebtedness evidenced by the Prior Notes, Pledgee desires to
confirm his prior pledge of stock, to have such pledge of stock apply to all
indebtedness under the Note, to pledge additional collateral for the Note, and
to amend and restate the 1993 Pledge Agreement;
NOW, THEREFORE, the parties agree as follows:
1. Pledge. As security for the due and punctual payment and performance
by Pledgor of his obligations under the Note and this Pledge Agreement (whether
for principal, interest, fees, expenses or otherwise) (collectively, the
"Obligations"), Pledgor hereby pledges with and delivers to Pledgee, and grants
to Pledgee a security interest in, the following (the "Pledged Collateral"):
9
<PAGE> 10
a) the Sybase, Inc. common stock described on Exhibit A hereto
(the "Shares") and the certificates representing the Shares, and all dividends,
cash, instruments, investment property, and other property from time to time
received, receivable or otherwise distributed in respect of, in conversion of or
in exchange for any or all of the Shares;
b) any shares of Sybase, Inc. common stock issued upon the
exercise of any Option (the "Option Shares" and together with the Shares, the
"Pledged Shares") and in all proceeds thereof, and the certificates representing
the Option Shares, and all dividends, cash, instruments, investment property and
other property from time to time received, receivable or otherwise distributed
in respect of or in exchange for any or all of such Option Shares;
c) such cash, bank accounts, certificates of deposit, investment
property, and instruments as may be pledged from time to time by the Pledgor
hereunder, together with any investments in which any such cash may be invested
from time to time;
d) all rights to convert, redeem or exchange the Pledged
Collateral, all rights to request or cause the issuer thereof to register any or
all of the Pledged Collateral under federal and state securities laws to the
maximum extent possible under any agreement for such registration rights, and
all put rights, tag-along rights or other rights pertaining to the sale or other
transfer of such Pledged Collateral, together in each case with all rights under
any agreements, articles or certificates of incorporation or otherwise
pertaining to such rights; and
e) all proceeds, products, renewals and substitutions of, and
general intangibles related to, any and all of the foregoing Pledged Collateral
(including the proceeds of any tort or other claims relating to any of the
foregoing Pledged Collateral) and, to the extent not otherwise included, all
payments under insurance or in connection with any indemnity, warranty or
guarantee payable by reason of loss or damage to or otherwise with respect to
any of the foregoing Pledged Collateral.
The inclusion of proceeds in this Pledge Agreement does not
authorize the Pledgor to sell, dispose of or otherwise use the Pledged
Collateral in any manner not specifically authorized hereby. The certificates
representing the Shares, accompanied by instruments of assignment duly executed
in blank by Pledgor and bearing signature guarantees satisfactory to permit
transfer of the Shares, have been delivered by Pledgor to Pledgee concurrently
herewith or prior hereto.
2. Sale of Option Shares. Pledgor shall exercise the Options by no
later than their respective expiration dates, provided that at the time of
exercise the then current market value of the Option Shares exceeds the
respective exercise price of the Options. For the purpose of the foregoing
sentence, all prices per share shall be adjusted for stock splits and other
matters as set forth the Options and the agreements and plans pertaining
thereto. Upon the exercise of any of the Options, Pledgor shall promptly sell
the Option Shares purchased upon such exercise and shall apply the proceeds
thereof (less (i) any taxes resulting from such exercise (as demonstrated by
Pledgor to Pledgee) and (ii) the exercise price) to the payment of the Note.
Pledgee (or Pledgee's agent) shall hold the stock certificates for such stock
pending any such sale. Concurrently herewith, Pledgor shall deliver to Pledgee
instruments of assignment duly executed in blank by Pledgor with respect to
potential Option Shares and bearing signature guarantees satisfactory to permit
the transfer of such shares.
10
<PAGE> 11
3. Representations and Warranties. Pledgor represents and warrants
that:
a) Pledgor has good title to the Shares and the Options free and
clear of all liens and encumbrances except the security interest created hereby.
b) To Pledgor's knowledge, the Shares are validly issued and are
not subject to any charter, by-law, statutory, contractual or other restrictions
governing their issuance, transfer, ownership or control.
c) Pledgor has delivered to Pledgee all stock certificates or
other instruments or documents representing or evidencing the Shares, together
with corresponding assignment or transfer powers duly executed in blank by
Pledgor and bearing signature guaranties satisfactory to permit transfer of the
Shares, and this Pledge Agreement and such powers have been duly and validly
executed and are binding and enforceable against Pledgor in accordance with
their terms; and the pledge of the Shares in accordance with the terms hereof
creates a valid and perfected first priority security interest in the Shares
securing payment of the Obligations.
d) To Pledgor's knowledge, no authorization, approval, or other
action by, and no notice to or filing with, any governmental authority or
regulatory body is required either (i) for the pledge by Pledgor of the Shares
pursuant to this Pledge Agreement or for the execution, delivery or performance
of this Pledge Agreement by Pledgor or (ii) for the exercise by Pledgee of the
voting or other rights provided for in this Pledge Agreement or the remedies in
respect of the Pledged Collateral pursuant to this Pledge Agreement (except as
may be required in connection with such disposition by laws affecting the
offering and sale of securities generally).
4. Non-Recourse Obligations. Except as may be otherwise specifically
provided in the Retirement Agreement and General Release dated as of even date
herewith between the Pledgee and the Pledgor (as it may be amended from time to
time) or in the following provisions of this Section 4, the liability of the
Pledgor hereunder and under the Note with respect to the Obligations shall be
limited to the Pledged Collateral, the Pledgee's recourse against the Pledgor
with respect to the Obligations shall be limited to the Pledged Collateral
available under this Pledge Agreement and the Pledgor shall have no personal
liability with respect to the Obligations. The Pledgor shall have no personal
liability for his Obligations except (A) for any damages, costs or other expense
suffered by the Pledgee as a result of (i) the lack of authenticity or
genuineness of any of the Pledged Collateral delivered to Pledgee hereunder or
(ii) the failure of the Pledgor to deliver the stock certificates or appropriate
instruments of assignment for the Pledged Collateral or (iii) the Pledgor's
failure to comply with Section 11 or (iv) any breach by Pledgor of the
representations and warranties contained in Section 3, or (B) for the payment of
expenses under Section 16 arising from any litigation in which the Pledgee is
the prevailing party or (C) in the event that the Note or any portion of the
indebtedness evidenced thereby or the pledge of all or any part of the Pledged
Collateral hereunder is rescinded, invalidated, declared to be fraudulent or
preferential, set aside, voided or otherwise required to be returned to Pledgor,
his estate, trustee, receiver or any other person, whether as a result of
proceedings in bankruptcy or reorganization or otherwise; provided that the
Pledgee shall have recourse against the Pledged Collateral for any amounts which
would be owing to the Pledgee from the Pledgor absent the operation of the
foregoing provisions of this Section 4.
11
<PAGE> 12
5. Right to Vote and Consents, and Dividends.
(a) Unless and until a default under the Note shall occur and be
continuing, Pledgor shall be entitled to exercise all powers of voting, waivers,
ratification and/or consents pertaining to the Pledged Collateral for all
purposes not inconsistent with the terms and conditions of the Note, but all
such rights of Pledgor to vote and give consent, waivers and ratification shall
cease so long as a default shall occur and be continuing under the Note.
(b) If a default under the Note shall have occurred and be
continuing, Pledgee shall have the sole and exclusive right to exercise all
powers of voting and/or consent pertaining to the Pledged Collateral or any part
thereof to the full extent permitted by law.
6. Dividends and Distributions. All dividends and distributions
(whether cash, stock, property or otherwise), including dividends representing
stock or liquidating dividends, or a distribution or return of capital upon or
in respect of the Pledged Collateral, or any part thereof, or resulting from a
split-up, revision or reclassification of the Pledged Collateral or any part
thereof, or received in exchange for the Pledged Collateral or any part thereof
as a result of a merger, consolidation or otherwise, shall be paid, delivered,
and transferred directly to Pledgee immediately upon receipt thereof by Pledgor,
or, if received by Pledgee or if otherwise payable by Pledgee, shall be retained
by Pledgee as part of the Pledged Collateral. In case any money shall be paid
(or payable) to Pledgor on account of any dividend or other distribution upon or
in respect of the Pledged Collateral or any part thereof, such money shall be
immediately paid to Pledgee (or shall be retained by Pledgee) and upon receipt
by Pledgee shall, so long as no default under the Note shall have occurred and
be continuing, be applied by Pledgee to the payment of the unpaid principal
balance of the Note. In order to permit Pledgee to receive all dividends and
distributions to which Pledgee may be entitled hereunder, Pledgor will, if
necessary upon Pledgee's written request, from time to time execute and deliver
to Pledgee appropriate dividend orders.
7. Default and Remedies.
(a) Any of the following events shall constitute defaults under
this Pledge Agreement and the Note: (i) Pledgor's failure to pay any principal
or interest under the Note when due; or (ii) Pledgor's failure to perform any
covenant contained in the Note or this Pledge Agreement (other than for the
payment of principal or interest on the Note) which is not cured within three
business days after notice from Pledgee.
(b) If a default hereunder shall have occurred and be continuing
and Pledgee has declared the outstanding balance on the Note due and payable,
then (in accordance with all applicable state and federal security laws) in
addition to the rights and remedies of a secured party under the Uniform
Commercial Code in effect in California, Pledgee may, without being required to
give any notice except as hereinafter provided, (i) apply the cash, if any, then
held by Pledgee as collateral security hereunder to the payment of Pledgor's
obligations under the Note and (ii) if there be no such cash or if the cash so
applied shall be insufficient to pay in full all Obligations, sell the Pledged
Collateral on the public markets or at private sale for cash, on credit or for
future delivery, and at such price or prices, as Pledgee may deem satisfactory,
and Pledgee may be the purchaser of any or all of the Pledged Collateral so sold
and thereafter hold the same, absolutely free from any claim or right of
whatsoever kind. Pledgee is authorized at any such sale, if Pledgee deems it
advisable so to do, to restrict the prospective bidders or purchasers to persons
who will represent and
12
<PAGE> 13
agree that they are purchasing for their own account for investment and not with
the view to the distribution or sale of any of such Pledged Collateral. Upon any
such sale Pledgee shall have the right to deliver, assign and transfer to the
purchaser thereof the Pledged Collateral so sold. Each purchaser at any such
sale shall hold the property sold absolutely free from any claim or right of
whatsoever kind, including any equity or right of redemption, of Pledgor, which
hereby specifically waives all rights of redemption, stay or appraisement which
it has or may have under any rule, law or statute now existing or hereafter
adopted. At any such sale, such Pledged Collateral may be sold in one lot as an
entity or in separate parcels, as Pledgee may determine. Pledgee shall give
Pledgor ten (10) days' written notice of intention to make any private sale.
Pledgee shall not be obligated to make any such private sale pursuant to any
such notice. Pledgee may, without notice or publication, adjourn any sale or
cause the same to be adjourned from time to time by announcement at the time and
place at which the same may be so adjourned. In case of any sale of all or any
part of the Pledged Collateral on credit or for future delivery, the Pledged
Collateral so sold may be retained by Pledgee until the selling price is paid by
the purchaser thereof, but Pledgee shall not incur any liability in case of the
failure of such purchaser to take up and pay for the Pledged Collateral so sold
and, in case of any such failure, such Pledged Collateral may again be sold upon
like notice. Pledgee, however, instead of exercising the powers of sale herein
conferred upon Pledgee, may proceed by a suit or suits, at law or in equity, to
foreclose the pledge and sell the Pledged Collateral, or any portion thereof,
under a judgment or decree of court or courts of competent jurisdiction.
8. Proceeds of Sale. The proceeds of any sale of all or any part of the
Pledged Collateral, and any other cash at any time held by Pledgee under this
Pledge Agreement, shall be applied to the payment of the cost and expenses of
such sale and all expenses, liabilities and advances made or incurred by Pledgee
in connection therewith, and then to the payment of any balance outstanding on
the obligations of Pledgor to Pledgee under the Note. Any excess shall be
payable by Pledgee to Pledgor.
9. Power of Attorney. Pledgee is hereby appointed the attorney-in-fact
for Pledgor for the purpose of carrying out the provisions hereof and taking any
action and executing any instrument which Pledgee may deem necessary or
advisable to accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable and coupled with an interest. Without limiting
the generality of the foregoing, in case of a default under the Note, Pledgee
shall have the right and power to receive, endorse and collect all checks made
payable to the order of Pledgor representing any dividend or other payment or
distribution in respect to the Pledged Collateral or any part thereof, and give
full discharge for the same, or, at its option, to offset any amounts owing by
Pledgee to Pledgor in respect of the Pledged Collateral without the issuance and
endorsement of any check.
10. Continuing Pledge. The obligations of Pledgor under this Pledge
Agreement shall remain in full force and effect without regard to, and shall not
be impaired or affected by, (i) any amendment or modification or addition or
supplement to the Note or any other instrument referred to herein or therein, or
any assignment or transfer of any thereof, (ii) the exercise or non-exercise by
Pledgee of any rights, remedies, powers or privileges under or in respect to the
Note or any other instrument referred to herein or therein, or any assignment or
transfer of any thereof or any waiver of any such rights, remedies, powers or
privileges, (iii) any waiver, consent, extension, indulgence or other action or
inaction in respect to the Note or any other instrument referred to herein or
therein, or any assignment or transfer of any thereof, (iv) any bankruptcy,
insolvency, reorganization, arrangement, readjustment, composition,
13
<PAGE> 14
liquidation or the like of Pledgor or of any other corporation, partnership or
person, or (v) any other circumstances, whether or not Pledgor shall have notice
or knowledge of any of the foregoing.
11. Further Assurances. Pledgor at his expense will execute, acknowledge
and deliver all such instruments and take all such actions as Pledgee from time
to time may request in order to further effectuate the purposes of this Pledge
Agreement, to continue the validity, enforceability and first-priority perfected
status of the pledge of the Pledged Collateral hereunder, and to carry out the
terms hereof.
12. Waivers. No failure on Pledgee's part to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by Pledgee of any rights,
powers or remedies hereunder preclude any further or other exercise thereof, or
the exercise of any other rights, powers or remedies. The remedies herein
provided are cumulative and are not exclusive of any remedies provided by law.
13. Termination. Upon payment in full of the balance outstanding on the
Note with all interest in accordance with its terms, the payment of any other
amounts payable by Pledgor to Pledgee under and pursuant to the terms of the
Note or any instrument securing the Note, this Pledge Agreement shall terminate
and Pledgor shall be entitled to the return, at Pledgor's expense, of the
Pledged Collateral or such thereof as shall not have theretofore been sold or
otherwise applied pursuant to the provisions of this Pledge Agreement, together
with any excess monies at that time held by Pledgee hereunder, as Pledgor's
interest may then appear.
14. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been sufficiently given if delivered or if
mailed, by United States certified or registered mail, postage prepaid, to the
parties or assignees at the following addresses, or at such other address as
shall be given in writing by either party to the other:
If to Pledgee:
Sybase, Inc.
6425 Christie Avenue, Fifth Floor
Emeryville, CA 94608
Attn: General Counsel
If to Pledgor:
Michael H. Forster
109 East Ridge Drive
Louisville, MS 39339
15. 1993 Pledge Agreement. This Pledge Agreement continues the pledge
and security interest granted by Pledgor under the 1993 Pledge Agreement, and
this Pledge Agreement shall be deemed an amendment and restatement in its
entirety of the 1993 Pledge Agreement.
16. Expenses. Pledgor will upon demand pay to Pledgee the amount of any
and all reasonable expenses, including the reasonable fees and expenses of its
counsel and of any
14
<PAGE> 15
experts and agents, which Pledgee may incur in connection with (a) the custody
or preservation of, or the sale of, collection from, or other realization upon,
any of the Pledged Collateral, (b) the exercise or enforcement of any of the
rights of Pledgee hereunder or (c) the failure by Pledgor to perform or observe
any of the provisions hereof.
17. Reaffirmation of Debt and Security Interest. Pledgor reaffirms the
outstanding indebtedness under the Prior Notes, as evidenced by the Note, and
the security interest granted in the Shares under the 1993 Pledge Agreement, as
amended and restated by this Pledge Agreement. In consideration of the extension
of time for the repayment of the indebtedness evidenced by the Prior Notes and
the nonrecourse provisions set forth in Section 4 of this Pledge Agreement,
Pledgor hereby waives and releases any and all defenses and claims (whether
known or unknown) that he may have as of the date hereof with respect to the
indebtedness evidenced by the Prior Notes and the security interest granted by
the 1993 Pledge Agreement.
18. Miscellaneous. This Pledge Agreement shall be binding upon and inure
to the benefit of and be enforceable by the respective heirs, successors and
assigns of Pledgee and Pledgor and, in addition, shall inure to the benefit of
and be enforceable by any holder at the time of the Note. Neither this Pledge
Agreement nor any provision hereof may be changed, waived, discharged or
terminated, except by an instrument in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought. This
Pledge Agreement shall be construed in accordance with and governed by the laws
of the State of California. The descriptive headings of the several sections and
paragraphs of this Pledge Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the provisions
hereof.
IN WITNESS WHEREOF, the parties have caused this Pledge Agreement to
be executed and delivered as of the date first above written.
SYBASE, INC.
By: /s/ JACK ACOSTA
--------------------------------
WITNESS:
/s/ MITCHELL L. GAYNOR
- ------------------------------------
PLEDGEE:
/s/ MICHAEL H. FORSTER
- ------------------------------------
Michael H. Forster
[Pledgor and witness should print or type
their names under their respective signatures.]
SPOUSE'S CONSENT:
15
<PAGE> 16
I, the spouse of the above-mentioned Pledgor, hereby consent to the terms
of the Note and of the above Pledge Agreement.
/s/ BETTYE B. FORSTER
- ------------------------------------
Bettye B. Forster
16
<PAGE> 17
EXHIBIT A
Options
<TABLE>
<CAPTION>
Total Number of
Shares Granted
Under the Option
Sybase Date of (Does not reflect Exercise
Option Grant of the number that may Price per Expiration
Number Option have vested) Share Date
<S> <C> <C> <C> <C>
RP0234 10/21/96 9,200 $19.25 4/18/04
RP0257 10/21/96 25,000 $19.25 4/7/05
RP1035 10/21/96 125,000 $19.25 4/18/04
RP2541 10/21/96 11,800 $19.25 3/26/06
RP2541 10/21/96 88,200 $19.25 3/26/06
018375 1/23/97 40,000 $18.75 1/23/07
</TABLE>
Description of Initial Pledged Shares
23,071 Shares of Sybase, Inc. Common Stock
17
<PAGE> 18
EXHIBIT C
Options
<TABLE>
<CAPTION>
Total Number of
Shares Granted
Under the Option
Sybase Date of (Does not reflect Exercise
Option Grant of the number that may Price per Expiration
Number Option have vested) Share Date
<S> <C> <C> <C> <C>
RP0234 10/21/96 9,200 $19.25 4/18/04
RP0257 10/21/96 25,000 $19.25 4/7/05
RP1035 10/21/96 125,000 $19.25 4/18/04
RP2541 10/21/96 11,800 $19.25 3/26/06
RP2541 10/21/96 88,200 $19.25 3/26/06
018375 1/23/97 40,000 $18.75 1/23/07
</TABLE>
18
<PAGE> 1
EXHIBIT 10.24
OFFICE LEASE
BUILDING A - BAY CENTER
Emeryville, California
LANDLORD
JS BAY CENTER ASSOCIATES
TENANT
SYBASE, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
PAGE
<S> <C>
1. Definitions..............................................................................1
1.1. Terms Defined..................................................................1
1.2. Effect of Certain Defined Terms................................................5
2. Lease of Premises........................................................................5
2.1. Premises.......................................................................6
3. Term; Condition and Acceptance of Premises...............................................6
4. Rent....................................................................................10
4.1. Obligation to Pay Base Rent...................................................10
4.2. Manner of Rent Payment........................................................10
4.3. Additional Rent...............................................................10
4.4. Late Payment of Rent; Interest................................................11
5. Calculation and Payments of Escalation Rent.............................................11
5.1. Payment of Estimated Escalation Rent..........................................11
5.2. Escalation Rent Statement and Adjustment......................................11
5.3. Proration for Partial Year....................................................12
6. Impositions Payable by Tenant...........................................................12
7. Use of Premises.........................................................................12
7.1. Permitted Use.................................................................12
7.2. No Violation of Legal and Insurance Requirements..............................12
7.3. Compliance with Legal, Insurance and Life Safety Requirements.................13
7.4. No Nuisance...................................................................13
7.5. Hazardous Substances..........................................................13
7.6. Special Provisions Relating to The Americans With Disabilities Act of 1990....15
8. Building Services.......................................................................16
8.1. Maintenance of Bay Center.....................................................16
8.2. Building Standard Services....................................................16
8.3. Interruption or Unavailability of Services....................................17
8.4. Tenant's Use of Excess Electricity and Water..................................17
8.5. Provision of Additional Services..............................................18
9. Maintenance of Premises.................................................................18
10. Alterations to Premises................................................................18
10.1. Landlord Consent; Procedure..................................................18
10.2. General Requirements.........................................................18
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10.3. Removal of Alterations.......................................................19
11. Liens..................................................................................19
12. Damage or Destruction..................................................................19
12.1. Obligation to Repair.........................................................20
12.2. Landlord's Election..........................................................20
12.3. Cost of Repairs..............................................................20
12.4. Damage at End of Term........................................................20
12.5. Waiver of Statutes...........................................................20
13. Eminent Domain.........................................................................21
13.1. Effect of Taking.............................................................21
13.2. Condemnation Proceeds........................................................21
13.3. Restoration of Premises......................................................21
13.4. Taking at End of Term........................................................22
13.5. Tenant Waiver................................................................22
14. Insurance..............................................................................22
14.1. Insurance....................................................................22
14.2. Form of Policies.............................................................22
15. Waiver of Subrogation Rights...........................................................23
16. Tenant's Waiver of Liability and Indemnification.......................................23
16.1. Waiver and Release...........................................................23
16.2. Indemnification of Landlord..................................................23
17. Assignment and Subletting..............................................................24
17.1. Compliance Required..........................................................24
17.2. Request by Tenant; Landlord Response.........................................25
17.3. Conditions for Landlord Approval.............................................25
17.4. Costs and Expenses...........................................................26
17.5. Payment of Excess Rent and Other Consideration...............................26
17.6. Assumption of Obligations; Further Restrictions on Subletting................26
17.7. No Release...................................................................26
17.8. No Encumbrance...............................................................27
18. Rules and Regulations..................................................................27
19. Entry of Premises by Landlord..........................................................27
19.1. Right to Enter...............................................................27
19.2. Tenant Waiver of Claims......................................................28
20. Default and Remedies...................................................................28
20.1. Events of Default............................................................28
</TABLE>
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20.2. Notice to Tenant.............................................................29
20.3. Remedies Upon Occurrence of Default..........................................29
20.4. Damages Upon Termination.....................................................29
20.5. Computation of Certain Rent for Purposes of Default..........................30
20.6. Landlord's Right to Cure Defaults............................................30
20.7. Remedies Cumulative..........................................................30
21. Subordination, Attornment and Nondisturbance...........................................30
21.1. Subordination and Attornment.................................................30
21.2. Nondisturbance...............................................................31
22. Sale or Transfer by Landlord; Lease Non-Recourse.......................................31
22.1. Release of Landlord on Transfer..............................................31
22.2. Lease Nonrecourse to Landlord................................................31
23. Estoppel Certificate...................................................................32
23.1. Procedure and Content........................................................32
23.2. Effect of Certificate........................................................32
24. No Light, Air, or View Easement........................................................32
25. Holding Over...........................................................................33
26. Security Deposit.......................................................................33
27. Waiver.................................................................................33
28. Notices and Consents; Tenant's Agent for Service.......................................34
29. Tenant's Authority.....................................................................34
30. Automobile Parking.....................................................................34
30.1. Tenant's Appurtenant Parking Rights..........................................34
30.2. Parking Fee..................................................................35
30.3. Allocation of Risk...........................................................35
31. Tenant to Furnish Financial Statements.................................................35
32. Tenant's Signs.........................................................................36
33. Miscellaneous..........................................................................36
33.1. No Joint Venture.............................................................36
33.2. Successors and Assigns.......................................................36
33.3. Construction and Interpretation..............................................36
33.4. Severability.................................................................37
33.5. Entire Agreement; Amendments.................................................37
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33.6. Governing Law................................................................37
33.7. Litigation Expenses..........................................................37
33.8. Standards of Performance and Approvals.......................................37
33.9. Brokers......................................................................38
33.10. Memorandum of Lease..........................................................38
33.11. Quiet Enjoyment..............................................................38
33.12. Surrender of Premises........................................................38
33.13. Building Directory...........................................................38
33.14. Name of Building; Address....................................................38
33.15. Exhibits.....................................................................38
33.16. Time of the Essence..........................................................39
</TABLE>
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OFFICE LEASE
BUILDING A - BAY CENTER
6425 Christie Avenue
Emeryville, California
BASIC LEASE INFORMATION
Lease Date: March 17, 1998
Landlord: JS Bay Center Associates,
A California limited partnership
Tenant: Sybase, Inc., a Delaware corporation
Premises: The entire 4th and 5th Floors of the Building and a
portion of the 1st Floor of the Building, as shown
on the Floor Plan(s) attached to this Lease as
Exhibit A, containing 47,600 square feet of
Rentable Area
Term: Five (5) years from the Commencement Date (the
"Initial Term"), subject to one (1) option to
extend the Term for one period of five (5) (the
"Extended Term")
Commencement Date: June 16, 1998.
Expiration Date: June 15, 2003, subject to extension pursuant to
Section 3.2 of the Lease
Base Rent: PERIOD OF TERM AMOUNT
June 16, 1998 - $107,100.00/month
June 30, 2000
June 30, 2000 - $102,340.00/month
June 15, 2003
Entire Extended Term: The greater of: (i)
$102,340.00/month plus
Escalation Rent payable
during the last month of the
Initial Term, or (ii) 95% of
the fair market rent for the
Premises, as determined in
accordance with Section 3.2
of the Lease.
Base Year: Calendar year 1998
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Tenant's
Percentage Share: 39.75%
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Permitted Use: General office use, customer training and
education, software development (but not
manufacturing or assembly) and other related or
ancillary uses approved by Landlord in Landlord's
reasonable discretion.
Security Deposit: See Article 26 below
Tenant's Address: 6475 Christie Avenue
Emeryville, CA 94608
Attention: Director of Real Estate
And 6475 Christie Avenue
Emeryville, CA 94608
Attention: General Counsel
Landlord's Address: 100 Bush Street
Suite 2600
San Francisco, California 94104
Brokers:
Landlord's Broker: None
Tenant's Broker: None
Exhibits and Addenda:
Exhibit A: Floor Plan(s) of Premises
Exhibit B: Parcel Map
Exhibit C: INTENTIONALLY OMITTED
Exhibit D: Rules and Regulations of Bay Center
Exhibit E: Building Standard Services
The Basic Lease Information is incorporated into and made a part of the Lease.
Each reference in the Lease to any Basic Lease Information shall mean the
applicable information set forth above. In the event of any conflict between an
item in the Basic Lease Information and the Lease, the Lease shall control.
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OFFICE LEASE
THIS LEASE is made and entered into by and between Landlord and
Tenant as of the Lease Date. Landlord and Tenant hereby agree as follows:
1. Definitions.
1.1. Terms Defined. The following terms have the meanings set forth
below. Certain other terms have the meanings set forth in the Basic Lease
Information or elsewhere in this Lease.
Alterations: Alterations, additions or other improvements to
the Premises made by or on behalf of Tenant.
Base Operating Expenses and Base Real Estate Taxes: The
Operating Expenses and the Real Estate Taxes paid or incurred by Landlord in the
Base Year. If at any time during the Term Landlord elects to carry earthquake
insurance on the Building ("Earthquake Insurance"), then Base Operating Expenses
shall thereafter (until Landlord discontinues the Earthquake Insurance) be
increased to include the actual premiums paid by Landlord for such Earthquake
Insurance during the first full year that Landlord maintains such Earthquake
Insurance (such amount shall be referred to as the "Allowable Earthquake
Premium").
Bay Center: The Land, the Building, the Other Buildings, the
ground floor of the enclosed parking facility adjacent to the Land (and
identified on Exhibit A) (the "Enclosed Parking Area"), landscaping, paved
walkways, driveways and all other improvements at any time located on the Land,
and all appurtenances related thereto, commonly known as Bay Center.
Building: The office building consisting of a 5-story tower
and parking at grade located on the Land, commonly known as 6425 Christie
Avenue, Emeryville, California.
Building C Lease: that certain lease between Tenant and
Landlord, dated as of even date herewith, with respect to premises located in
Building C in Bay Center.
Escalation Rent: Tenant's Percentage Share of the total dollar
increase, if any, in Operating Expenses and in Real Estate Taxes, each as paid
or incurred by Landlord in each Fiscal Year, or part thereof, after the Base
Year, over the amount of Base Operating Expenses and Base Real Estate Taxes. If
the Building or Bay Center is less than ninety-five percent (95%) occupied
during any part of any year (including the Base Year), Landlord shall make an
appropriate adjustment of the variable components of Operating Expenses and Real
Estate Taxes for that year, as reasonably determined by Landlord using sound
accounting and management principles, to determine the amount of Operating
Expenses and Real Estate Taxes that would have been incurred during such year if
the Building and Bay Center had been ninety-five percent (95%) occupied during
the entire year (and, if applicable, if the tenant improvements in the Building
had been fully constructed and the Land, Bay Center, the Building, and all
tenant improvements in the Building and Bay Center had been fully assessed for
Real Estate Tax purposes). This amount shall be considered to have been the
amount of Operating Expenses and Real Estate Taxes for that year. For purposes
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hereof, "variable components" include only those component expenses that are
affected by variations in occupancy levels.
Fiscal Year: Each period of twelve (12) calendar months
following the last day of the Base Year.
Impositions: Taxes, assessments, charges, excises and levies,
business taxes, licenses, permits, inspection and other authorization fees,
transit development fees, assessments or charges for housing funds, service
payments in lieu of taxes and any other fees or charges of any kind at any time
levied, assessed, charged or imposed by any federal, state or local entity, (i)
upon, measured by or reasonably attributable to the cost or value of Tenant's
equipment, furniture, fixtures or other personal property located in the
Premises, or the cost or value of any Alterations; (ii) upon, or measured by,
any Rent payable hereunder, including any gross receipts tax; (iii) upon, with
respect to or by reason of the development, possession, leasing, operation,
management, maintenance, alteration, repair, use or occupancy by Tenant of the
Premises, or any portion thereof; or (iv) upon this Lease transaction, or any
document to which Tenant is a party creating or transferring any interest or
estate in the Premises. Impositions do not include Real Estate Taxes, franchise,
transfer, inheritance or capital stock taxes, income taxes measured by the net
income of Landlord from all sources or any tax, assessment, charge, or other fee
imposed as a condition to the development of Bay Center or the improvement of
any space within Bay Center for any party other than Tenant. The term
"Impositions" shall not include any sums that are included in the definition of
"Real Estate Taxes".
Land: The parcel of land described on Exhibit B attached to
this Lease.
Operating Expenses: All costs of management, operation,
maintenance and repair of Bay Center, including, but not limited to, the
following: (i) salaries, wages, benefits and other payroll expenses of employees
engaged in the operation, maintenance or repair of Bay Center; (ii) reasonable
property management fees and expenses (but, during the Initial Term, the amount
of this item ii shall be deemed to equal 3% of the gross revenues from Bay
Center); (iii) rent (or rental value) and expenses for Landlord's and any
property manager's offices; (iv) electricity, natural gas, water, waste
disposal, sewer, heating, lighting, air conditioning and ventilating and other
utilities; (v) janitorial, maintenance, security, life safety and other
services, such as alarm service, window cleaning and elevator maintenance and
uniforms for personnel providing services; (vi) repair and replacement,
resurfacing or repaving of paved areas, sidewalks, curbs and gutters (except
that any such work which constitutes a capital improvement shall be included in
Operating Expenses in the manner provided in clause (xiv) below); (vii)
landscaping, ground keeping, management, operation, and maintenance and repair
of all public, private and park areas adjacent to the Building; (viii)
materials, supplies, tools and rental equipment; (ix) license, permit and
inspection fees and costs; (x) insurance premiums (but not to exceed the
Allowable Earthquake Premium with respect to any Earthquake Insurance obtained
by Landlord) and costs (including a proportionate share if Landlord insures
under a "blanket" policy), and the deductible portion of any insured loss under
Landlord's insurance (provided, however, that Tenant's Percentage Share of any
"deductible" shall not exceed Twenty-five Thousand Dollars ($25,000.00) during
any 12-month period); (xi) sales, use and excise taxes; (xii) legal, accounting
and other professional services for Bay Center, including costs, fees and
expenses of contesting the validity or applicability of any law, ordinance,
rule, regulation or order relating to the Building; (xiii) all assessments and
other amounts payable to EmeryBay Commercial Association and any similar entity
in connection with the use of the parking facilities across Christie Avenue from
the Building; (xiv) the cost of
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any capital improvements to Bay Center made at any time during the Term that are
intended in Landlord's judgment as labor saving devices (but only to the extent
of such savings), or to reduce or eliminate other Operating Expenses or to
effect other economies in the operation, maintenance, or management of Bay
Center, or that are necessary or appropriate in Landlord's judgment for the
health and safety of occupants of Bay Center, or that are required under any
law, ordinance, rule, regulation or order which was not applicable to Bay Center
at the time it was constructed, all amortized over the useful life of the
improvement in question at an interest rate of ten percent (10%) per annum, or,
if applicable, the rate paid by Landlord on funds borrowed for the purpose of
constructing or installing such capital improvements and which amortized cost is
fairly allocable to the period in question; (xv) all costs and expenses incurred
in connection with monitoring the level of methane gas at or about Bay Center,
in the manner and frequency pursuant to which the methane gas is being monitored
as of the date of this Lease; and (xvi) costs, fees and other expenses incurred
in connection with providing transportation services as required by the Owner
Participation Agreement, as amended, affecting Bay Center; provided, however,
acquisition of transportation vehicles acquired after the Commencement Date
shall be deemed to have been acquired in the Base Year. Operating Expenses shall
not include: (A) Real Estate Taxes; (B) legal fees, brokers' commissions, tenant
improvement or building improvement costs (except as specified in item (xiv)
above), or other costs incurred in the negotiation, termination, or extension of
leases or in proceedings involving a specific tenant; (C) depreciation, except
as set forth above; (D) interest, amortization or other payments on loans to
Landlord except as a component of amortization as set forth above; (E) any
ground lease rental; (F) costs of items considered capital repairs,
replacements, improvements and equipment under generally accepted accounting
principles, except as provided in item (xiv) above; (G) rentals for items which
if purchased, rather than rented, would constitute a capital improvement which
is specifically excluded in subsection (F) above; (H) costs incurred by Landlord
for the repair of damage to any portion of the Building or Bay Center, to the
extent that Landlord is actually reimbursed by insurance proceeds; (I) costs
incurred with respect to the installation of tenant or other occupants'
improvements in any portion of Bay Center or incurred in renovating or otherwise
improving, vacant space for tenants or other occupants of any portion of Bay
Center; (J) depreciation, amortization and interest payments; (K) marketing
costs including, without limitation, leasing commissions, attorneys' fees, and
other costs and expenses incurred in connection with lease, sublease and/or
assignment negotiations and transactions with present or prospective tenants or
other occupants of any portion of Bay Center; (L) expenses in connection with
services or other benefits which are not offered to Tenant or for which Tenant
is charged for directly but which are provided to another tenant or occupant of
Bay Center; (M) costs incurred by Landlord due to the violation by Landlord of
the terms and conditions of any lease of space in any portion of Bay Center; (N)
overhead and profit increment paid to Landlord or to subsidiaries or affiliates
of Landlord for goods and/or services in or to Bay Center to the extent the same
exceeds the costs of such goods and/or services rendered by unaffiliated third
parties on a competitive basis; (O) interest, principal, points and fees on
debts or amortization on any mortgage or mortgages or any other debt instrument
encumbering Bay Center; (P) Landlord's general corporate overhead and general
administrative expenses, except as included in any management fee charged by
Landlord; (Q) advertising and promotional expenditures, and costs of signs in or
on Bay Center identifying the owner of Bay Center or other tenants' signs; (R)
the cost of any electric power used by any tenant in any portion of Bay Center
in excess of the standard amount, or electric power costs for which any tenant
directly contracts with the local public service company or other utility
providers or for which any tenant is separately metered or submetered and pays
Landlord directly; (S)costs associated with the operation of the business of the
partnership or entity which constitutes Landlord as the same are distinguished
from the costs of operation of Bay Center; (T) tax penalties incurred as a
result of Landlord's negligence, inability or unwillingness to make payments
and/or to file any tax or informational returns when due; (U) costs for which
Landlord has
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been compensated by a management fee, and any management fees in
excess of those management fees which are normally and customarily charged by
third party providers of such services at comparable buildings in the vicinity
of Bay Center; (V) costs arising from the negligence or fault of other tenants
or Landlord or its agents, or any vendors, contractors, or providers of
materials or services selected, hired or engaged by Landlord or its agents
including, without limitation, the selection of buildings materials; (W)
notwithstanding any contrary provision of the Lease, including, without
limitation, any provision relating to capital expenditures, (except as specified
in item (xv) above) any and all costs arising from the presence of hazardous
substances in or about Bay Center, including, without limitation,
hazardous substances in the ground water or soil, not placed in the Premises by
Tenant; (X) costs arising from Landlord's charitable or political contributions;
(Y) costs arising from latent defects in the Building or Bay Center or other
improvements installed by Landlord or repair thereof; (Z) costs for sculpture,
paintings or other objects of art; and (AA) costs (including in connection
therewith all attorneys' fees and costs of settlement judgments and payments in
lieu thereof) arising from claims, disputes or potential disputes in connection
with potential or actual claims litigation or arbitrations pertaining to
Landlord, or Bay Center. Landlord further agrees that since one of the purposes
of the Operating Expenses provisions is to allow Landlord to require Tenant to
pay for the costs attributable to its Premises, Landlord agrees that Landlord
will not collect or be entitled to collect Operating Expenses from all of its
tenants in an amount which is in excess of one hundred percent (100%) of the
Operating Expenses actually paid by Landlord in connection with the operation of
Bay Center. Subject to the provisions of this definition, the determination of
Operating Expenses shall be made by Landlord in accordance with generally
accepted accounting principles and practices consistently applied. The term
"Operating Expenses" shall include the following (without duplication): (i) 100%
of Operating Expenses, as defined above, paid or incurred with respect to the
Building, and (ii) 37.96% of Operating Expenses, as defined above, paid or
incurred with respect to the common areas and parking areas of Bay Center in
general.
Real Estate Taxes: 100% of all taxes, assessments and charges
now or hereafter levied or assessed upon, or with respect to, the Building or
any portion thereof, or any personal property of Landlord used in the operation
thereof or located therein, or Landlord's interest in the Building or such
personal property, by any federal, state or local entity, including: (i) all
real property taxes and general and special assessments; (ii) charges, fees or
assessments for transit, housing, day care, open space, art, police, fire or
other governmental services or benefits to the Building(except to the extent any
such charges, fees or assessments were levied as a condition to any additional
improvements constructed to the Building for new rentable area, or as a
condition to the construction of any improvements for any other tenant of Bay
Center); (iii) service payments in lieu of taxes; (iv) any tax, fee or excise on
the use or occupancy of any part of Bay Center, or on rent for space in Bay
Center; (v) any other tax, fee or excise, however described, that may be levied
or assessed as a substitute for, or as an addition to, in whole or in part, any
other Real Estate Taxes; and (vi) reasonable fees and expenses, including those
of consultants or attorneys, incurred in connection with proceedings to contest,
determine or reduce Real Estate Taxes. Real Estate Taxes do not include: (A)
franchise, transfer, inheritance or capital stock taxes, or income taxes
measured by the net income of Landlord from all sources, unless any such taxes
are levied or assessed against Landlord as a substitute for, in whole or in
part, any Real Estate Tax (and such taxes are customarily charged to tenants in
triple net leases for comparable buildings in the vicinity of Bay Center); (B)
Impositions and all similar amounts payable by tenants of the Building under
their leases; and (C) penalties, fines, interest or charges due for late payment
of Real Estate Taxes by Landlord. If any Real Estate Taxes are payable, or may
at the option of the taxpayer be paid, in installments, such Real Estate Taxes
shall, together with any interest that would otherwise be payable with such
installment, be deemed to have been paid in installments, amortized over the
maximum
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time period allowed by applicable law. Upon written request by Tenant, and
reasonable approval by Landlord, and subject to Landlord's right to include as
Operating Expenses all applicable costs and expenses, Landlord shall contest any
unreasonable Real Estate Taxes.
Rent: Base Rent, Escalation Rent and all other additional
charges and amounts payable by Tenant in accordance with this Lease.
Rentable Area: As to a floor leased entirely by Tenant, all
areas within exterior permanent Building walls measured to the inside glass
surface of outer Building walls, including restrooms, janitor, telephone and
electrical closets, mechanical areas, and columns and projections necessary to
the Building, but excluding public stairs, elevator shafts, HVAC ducts and pipe
shafts. As to a floor only a portion of which is leased by Tenant, the aggregate
of (i) the Leased Area (as defined below) of the portion of the floor occupied
by Tenant, plus (ii) the result obtained by multiplying (1) the area of the
Common Area (as defined below) on such floor by (2) a fraction whose numerator
is the Leased Area of Tenant's portion of the floor and whose denominator is the
Leased Area of all tenant space on such floor, plus (iii) in the event that
Landlord must enlarge or alter in any way, shape or fashion the Common Area to
accommodate Tenant's Leased Area, the total additional Common Area space. For
purposes hereof, "Leased Area" shall mean all floor area in a tenant space,
measured to the inside glass surface of exterior Building walls, to the center
of corridors and other permanent partitions, and to the center of partitions
that separate tenant space from adjoining tenant spaces, without deduction for
columns and projections necessary to the Building; and "Common Area" shall mean
the total area on a floor consisting of restrooms, janitor, telephone and
electrical closets, mechanical areas and public corridors providing access to
tenant space on such floor, but excluding public stairs, elevator shafts, HVAC
ducts and pipe shafts.
Other Buildings: Building B and Building C located on the
Land.
Tenant's Percentage Share: The percentage figure specified in
the Basic Lease Information. Landlord and Tenant acknowledge that Tenant's
Percentage Share has been obtained by dividing the Rentable Area of the
Premises, as specified in the Basic Lease Information by the total Rentable Area
of the Building, and multiplying such quotient by one hundred (100). In the
event Tenant's Percentage Share is changed during a Fiscal Year by reason of a
change in the Rentable Area of the Premises or a change in the total Rentable
Area of the Building, Tenant's Percentage Share shall thereafter mean the result
obtained by dividing the then Rentable Area of the Premises by the then total
Rentable Area of the Building and multiplying such quotient by one hundred
(100). For the purposes of determining Tenant's Percentage Share of Escalation
Rent, Tenant's Percentage Share shall be determined on the basis of the number
of days during such Fiscal Year at each such Percentage Share.
Term: The period from the Commencement Date to the Expiration
Date (as the same may be extended pursuant to Section 3.2 hereof).
1.2. Effect of Certain Defined Terms. The parties acknowledge that
the Rentable Area of the Premises and the Building have been finally determined
by the parties as part of this Lease for all purposes, including the calculation
of Tenant's Percentage Share and will not, except as otherwise provided in this
Lease, be changed.
2. Lease of Premises.
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2.1. Premises. Landlord leases to Tenant and Tenant leases from
Landlord the Premises, together with the non-exclusive right to use, in common
with others, the lobbies, entrances, stairs, elevators, plazas, pedestrian
walkways, restrooms, and other public portions of the Building, all subject to
the terms, covenants and conditions set forth in this Lease. All the windows and
exterior walls of the Premises, the terraces adjacent to the Premises, if any,
and any space in the Premises used for shafts, columns, projections, stacks,
pipes, conduits, ducts, electric utilities, sinks or other Building facilities,
and the use thereof and access thereto through the Premises for the purposes of
management, operation, maintenance and repairs, are reserved to Landlord.
3. Term; Condition and Acceptance of Premises.
3.1 Initial Term and Acceptance of Premises. Except as hereinafter
provided, and unless sooner terminated pursuant to the provisions of this Lease,
the Term of this Lease shall commence on the Commencement Date and end on the
Expiration Date. The parties acknowledge that Tenant is currently occupying the
Premises pursuant to a lease that expires as of the Commencement Date. The
parties also acknowledge that Tenant shall lease the Premises from Landlord AS
IS, WHERE IS. Landlord shall have absolutely no obligation whatsoever to make
any alterations or improvements to the Premises.
3.2 Option to Extend.
3.2.1. Exercise of Option to Extend Term. If no "Suspension
Condition" (as hereinafter defined) exists at the time of Tenant's exercise of
an option to extend the Initial Term or at the commencement of the Extended
Term, as the case may be, Tenant shall have one (1) option (the "Extension
Option") to extend the Initial Term for an additional period of five (5) years
(the "Extended Term"). To exercise Tenant's option with respect to the Extended
Term, Tenant shall give notice to Landlord not less than nine (9) months prior
to the expiration of the Initial Term ("Election Notice"). A "Suspension
Condition" shall mean the existence of any event or condition of material
default with respect to any obligation under this Lease where notice of default
has been given by Landlord and such default has not been cured by Tenant within
the applicable notice and cure period specified in this Lease. Tenant's exercise
of the Extension Option shall in no way result in, or constitute, a waiver by
Landlord of any default by Tenant under this Lease.
3.2.2. Fair Market Rent. If Tenant properly and timely
exercises Tenant's option to extend pursuant to Section 3.2.1 above, such
extension shall be upon all of the same terms, covenants and conditions of this
Lease; provided, however, that the Base Rent applicable to the Premises for the
Extended Term shall be the greater of: (i) the sum of (A) the Base Rent as of
the last month of the Initial Term plus all Escalation Rent payable by Tenant
during the last month of the Initial Term plus (B) the Signage Value, defined
below, or (ii) the sum of (X) ninety-five percent (95%) of the "Fair Market
Rent" for space comparable to the Premises as of the commencement of the
Extended Term plus (Y) the Signage Value. "Fair Market Rent" shall mean the
annual rental being charged for space comparable to the Premises in a
steel-frame comparable first-class office building in the Emeryville area,
taking into account the terms of this Lease, location, parking, condition and
improvements to the space (excluding the value of the exterior signage on the
Building (which value shall be separately appraised in accordance with the
provisions of Section 32 below)and the value of any improvements made to the
Premises during the Term to the extent such improvements were paid for by
Tenant), and all other factors relevant in determining fair market rental value.
The Base Year shall be adjusted to be the calendar year in which the Extended
Term commences,
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unless a different treatment of base years is determined to be appropriate by
the appraisers pursuant to Section 3.2.4. Tenant shall pay all leasing
commissions and consulting fees payable in connection with such extensions,
unless such leasing commissions or consulting fees arise solely out of a
contractual relationship between Landlord and a broker or consultant. All other
terms and conditions of the Lease, which may be amended from time to time by the
parties in accordance with the provisions of the Lease, shall remain in full
force and effect and shall apply during the Extended Term, except that: (i)
there shall be no further option to extend the Term beyond a date five (5) years
after the expiration of the Initial Term, (ii) there shall be no rent
concessions, and (iii) there shall be no tenant improvement allowance and
similar provisions.
3.2.3. Determination of Rent. Within thirty (30) days after
the date of the Election Notice, Landlord and Tenant shall negotiate in good
faith in an attempt to determine Fair Market Rent and the Signage Value for the
Extended Term. If they are unable to agree within said thirty (30) day period,
then the Fair Market Rent and/or the Signage Value shall be determined as
provided in Section 3.2.4 below.
3.2.4. Appraisal. If it becomes necessary to determine the
Fair Market Rent for the Premises or the Signage Value by appraisal, the real
estate appraiser(s) indicated in this Section 3.2.4, each of whom shall be
members of the Appraisal Institute and each of whom have at least five (5) years
experience appraising office space and signage located in the vicinity of the
Premises, shall be appointed and shall act in accordance with the following
procedures:
(i) If the parties are unable to agree on the Fair
Market Rent or the Signage Value within the allowed time, either party may
demand an appraisal by giving written notice to the other party, which demand to
be effective must state the name, address and qualifications of an appraiser
selected by the party demanding the appraisal ("Notifying Party"). Within twenty
(20) days following the Notifying Party's appraisal demand, the other party
("Non-Notifying Party") shall either approve the appraiser selected by the
Notifying Party or select a second properly qualified appraiser by giving
written notice of the name, address and qualification of said appraiser to the
Notifying Party. If the Non-Notifying Party fails to select an appraiser within
the twenty (20) day period, the appraiser selected by the Notifying Party shall
be deemed selected by both parties and no other appraiser shall be selected. If
two (2) appraisers are selected, they shall select a third appropriately
qualified appraiser. If the two (2) appraisers fail to select a third qualified
appraiser, the third appraiser shall be appointed by the then presiding judge of
the county where the Premises are located upon application by either party.
(ii) If only one appraiser is selected, that appraiser
shall notify the parties in simple letter form of its determination of the Fair
Market Rent and/or the Signage Value for the Premises within fifteen (15) days
following his or her selection, which appraisal shall be conclusively
determinative and binding on the parties as the appraised Fair Market Rent
and/or Signage Value.
(iii) If multiple appraisers are selected, the
appraisers shall meet not later than ten (10) days following the selection of
the last appraiser. At such meeting, the appraisers shall attempt to determine
the Fair Market Rent for the Premises and/or the Signage Value as of the
commencement date of the Extended Term in question by the agreement of at least
two (2) of the appraisers.
(iv) If two (2) or more of the appraisers agree on the
Fair Market Rent for the Premises and/or the Signage Value at the initial
meeting, such agreement shall be determinative and binding upon the parties
hereto and the agreeing appraisers shall forthwith notify both Landlord and
Tenant of the
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amount set by such agreement. If multiple appraisers are selected and two (2)
appraisers are unable to agree on the Fair Market Rent for the Premises or the
Signage Value, each appraiser shall submit to Landlord and Tenant his or her
respective independent appraisal of the Fair Market Rent for the Premises and/or
the Signage Value, in simple letter form, within twenty (20) days following
appointment of the final appraiser. The parties shall then determine the Fair
Market Rent for the Premises by averaging the Fair Market Rent appraisals and
shall then determine the Signage Value by averaging the Signage Value
appraisals; provided that any high or low appraisal, differing from the middle
appraisal by more than ten percent (10%) of the middle appraisal, shall be
disregarded in calculating the average.
(v) If only one (1) appraiser is selected, then each
party shall pay one-half (1/2) of the fees and expenses of that appraiser. If
three (3) appraisers are selected, each party shall bear the fees and expenses
of the appraiser it selects and one-half (1/2) of the fees and expenses of the
third appraiser.
(vi) Notwithstanding anything to the contrary contained
in this Section 3.2, in no event shall the Base Rent for the Extended Term be
less than the sum of the Base Rent immediately preceding the Extended Term plus
all Escalation Rent payable by Tenant during the month immediately preceding the
Extended Term plus the Signage Value (if applicable).
3.2.5. Restriction on Assignment. The Extension Options shall
be personal to Sybase, Inc. and any Exempt Transferee, shall not be assignable
or transferable (except in connection with an Exempt Transfer or an Exempt
Sublease), and shall terminate upon any assignment or sublease of all or any
portion of the Premises greater than ten percent (10%) of the Rentable Area of
the Premises (except in connection with an Exempt Transfer or an Exempt
Sublease).
3.2.6. Amendment to Lease. Immediately after the Fair Market
Rent has been determined, the parties shall enter into an amendment to this
Lease setting forth the Base Rent for the applicable Extended Term and shall
also state the new Expiration Date of the Term of the Lease.
3.3. Right of Second Offer.
3.3.1. Grant of Right of Second Offer. As of the date of this
Lease, Tenant subleases certain space on the first and second floors of the
Building (the "ETS Space"). In addition, as of the date of this Lease, Chiron
Corporation ("Chiron") has a right of first offer to lease a portion of the ETS
Space (the "Chiron Right"). The Chiron Right grants to Chiron certain broad
rights with respect to a portion of the ETS Space. If at any time during the
Term of the Lease Landlord desires to lease any portion of the ETS Space to a
third party unaffiliated with an existing tenant of such space and unaffiliated
with anyone possessing legal rights in such space as of the date of this Lease,
and if all of Chiron's rights to lease the ETS Space pursuant to the Chiron
Right have been fully extinguished (as determined by Landlord in its sole
discretion), then Tenant shall have a Right of Second Offer with respect to such
space (the "Offered Space") on the terms described in this Section 3.3.
3.3.2. Procedure. When Landlord is prepared to lease the
Offered Space and Chiron's rights under the Chiron Right have been fully
extinguished, Landlord shall notify Tenant in writing of the lease provisions
upon which Landlord would be willing to lease the Offered Space to third parties
(the "Offer Notice"). If Tenant desires to lease the Offered Space upon the
lease provisions described by Landlord in the Offer Notice, then Tenant shall
notify Landlord within twenty (20) days
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after receipt of the Offer Notice of Tenant's election to exercise Tenant's
Right of Second Offer hereunder. If Tenant exercises its Right of Second Offer
in a timely manner, then Landlord shall deliver to Tenant a form of lease
amendment incorporating the terms of the Offer Notice and amending the Lease to
include the Offered Space. Tenant shall thereafter execute such lease amendment
within twenty (20) days following its receipt thereof. If (i) Tenant fails to
notify Landlord of its exercise of its Right of Second Offer within the required
twenty (20) day period, or (ii) if Tenant fails to execute the lease amendment
for the Offered Space within the required twenty (20) day period, then Landlord
may lease the Offered Space to a third party free and clear of any rights of
Tenant under this Section 3.3.2, provided that the net effective rent reserved
in such new lease is at least ninety percent (90%) of the net effective rent set
forth in the Offer Notice; provided, however, that if Landlord desires to lease
the Offered Space for a rent less than ninety percent (90%) of the net effective
rent set forth in the Offer Notice, then Tenant shall have forty-eight (48)
hours to accept or reject the revised terms; provided further, however, that if
Tenant accepts such revised terms, then Landlord shall provide Tenant with the
form of lease incorporating such revised terms and the preceding provisions of
this Section 3.3.2 shall apply. Upon any lease to a third party in accordance
with this Section 3.3, Tenant shall have no further rights under this Section
3.3 with respect to the applicable Offered Space until the expiration of such
new lease (and any extensions thereof).
3.3.3. Right Personal; Chiron Right. The Right of Second Offer
set forth in this Section 3.3 is personal to Sybase, Inc., is not transferable
or assignable (except in connection with an Exempt Transfer or an Exempt
Sublease), and shall terminate upon any assignment of the Lease or any sublease
of any portion of the Premises (excluding subleases to Exempt Transferees or
assignments to Exempt Transferees).
3.3.4. Default. If Tenant is in material default under this
Lease at the time Tenant receives an Offer Notice (and Tenant has failed to cure
such default within any applicable grace period), Landlord shall not be
obligated to negotiate with Tenant with respect to such Offered Space, Tenant's
rights under this Section 3.3 shall automatically terminate with respect to the
applicable Offered Space, and Tenant shall have no further Right of Second Offer
as to such Offered Space. If Landlord and Tenant agree upon mutually acceptable
lease terms with respect to the Offered Space but Tenant is in default under
this Lease at the time Landlord is obligated to provide a lease amendment to
Tenant or on the date the term of such lease amendment is to commence, and if
Tenant does not cure such default within any applicable grace period, then
Landlord shall not be obligated to provide Tenant with such lease amendment, and
at Landlord's option, Tenant's rights under this Section 3.3 shall terminate
with respect to the applicable Offered Space and Tenant shall have no further
Right of Second Offer as to such Offered Space.
3.4 Tenant's Option to Terminate. If no Suspension Condition
exists at the time of Tenant's exercise of the option to terminate or at the
Termination Date, defined below, as the case may be, then Tenant shall have the
right, by delivery of written notice to Landlord on or before June 16, 1999 (the
"Termination Notice") to elect to terminate this Lease and the Building C Lease
in accordance with the following conditions and procedures. If Tenant delivers
the Termination Notice in a timely manner, and if Tenant fully complies with the
provisions of this Section 3.4, then the Lease shall terminate on June 16, 2000
(the "Termination Date"). Tenant's right to terminate this Lease and the
Building C Lease shall be subject to Tenant's payment to Landlord of a
termination fee (the "Termination Fee") in the amount of Three Million Two
Hundred Twenty-Seven Thousand Five Hundred Fifty-Three Dollars
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<PAGE> 18
($3,227,553.00). The Termination Fee shall be payable in accordance with the
following procedure. On or before delivery of the Termination Notice, Tenant
shall deposit in escrow (the "Termination Escrow") with Chicago Title Company of
Alameda ("Title Company") immediately available funds in the amount of Eight
Hundred Six Thousand Eight Hundred Eighty-Eight and 25/100s Dollars
($806,888.25) (the "Partial Payment"). The Termination Escrow shall be
established in accordance with irrevocable escrow instructions prepared by
Landlord and executed by Tenant which provide that Landlord shall be the only
party to the Termination Escrow who can issue disbursement instructions. In
addition to the initial Partial Payment, Tenant shall deposit into the
Termination Escrow three (3) additional Partial Payments on September 16, 1999,
December 16, 1999 and March 16, 2000. As a condition precedent to the
termination of the Lease on the Termination Date, the entire Termination Fee
shall, at Landlord's option, be paid by Title Company to Landlord, in
immediately available funds, on the Termination Date or used to pay other costs
and expenses designated by Landlord. In addition, if at any time Tenant defaults
in any obligation under this Lease (after the expiration of any applicable grace
period), or if Tenant fails to timely fund a Partial Payment into the
Termination Escrow, then, at Landlord's election, to be made within two (2)
business days after Tenant's default or Tenant's failure to timely fund a
Partial Payment, the following shall occur: (i) all funds in the Termination
Escrow shall immediately be paid to Landlord to be retained by Landlord as
damages for Tenant's default, without in any way limiting any of Landlord's
other rights or remedies under this Lease, and (ii) Tenant shall thereafter have
no right to terminate this Lease, and this Lease shall not terminate on the
Termination Date, except at Landlord's option. In addition to the foregoing,
Tenant's right to terminate this Lease pursuant to this Section 3.4 shall be
subject to Tenant's strict satisfaction of the following conditions and
procedures: (i) Tenant shall have no right to terminate this Lease unless Tenant
also elects to terminate the Building C Lease pursuant to the Termination
Notice, (ii) this Lease shall not terminate on the Termination Date unless the
Building C Lease also terminates on the Termination Date in accordance with the
provisions of the Building C Lease, (iii) on the Termination Date Tenant shall
deliver exclusive possession of the Premises to Landlord in the condition
required by this Lease, free and clear of the rights of Tenant and any other
persons claiming an interest in the Premises by or through Tenant, (iv) the
Premises shall be vacant as of the Termination Date, and (v) Tenant shall not be
in default of any provision of this Lease or the Building C Lease as of the
Termination Date. Landlord acknowledges that the Termination Fee payable under
this Lease represents the entire amount payable by Tenant upon termination of
both this Lease and the Building C Lease, so that payment of this Termination
Fee under the provisions of either lease also satisfies Tenant's duty to pay the
Termination Fee under the other lease. Furthermore, if pursuant to the
provisions of either this Lease or the Building C Lease there is a permanent
reduction in Base Rent, there shall be a corresponding reduction in the
Termination Fee and the Partial Payments such that the Termination Fee is equal
to nine (9) months Base Rent under both leases.
4. Rent.
4.1. Obligation to Pay Base Rent. Tenant shall pay Base Rent to
Landlord, in advance, in equal monthly installments, commencing on or before the
Commencement Date, and thereafter on or before the first day of each calendar
month during the Term. If the Commencement Date and/or Expiration Date is other
than the first day of a calendar month, the installment of Base Rent for the
first and/or last fractional month of the Term shall be prorated on a daily
basis.
4.2. Manner of Rent Payment. All Rent shall be paid by Tenant
without notice, demand, abatement, deduction or offset, in lawful money of the
United States of America, payable to
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Landlord, at Landlord's Address as set forth in the Basic Lease Information, or
to such other person or at such other place as Landlord may from time to time
designate by notice to Tenant.
4.3. Additional Rent. All Rent not characterized as Base Rent or
Escalation Rent shall constitute additional rent, and if payable to Landlord
shall, unless otherwise specified in this Lease, be due and payable twenty (20)
days after Tenant's receipt of Landlord's invoice therefor.
4.4. Late Payment of Rent; Interest. Tenant acknowledges that late
payment by Tenant of any Rent will cause Landlord to incur administrative costs
not contemplated by this Lease, the exact amount of which are extremely
difficult and impracticable to ascertain based on the facts and circumstances
pertaining as of the Lease Date. Accordingly, if any Rent is not paid by Tenant
within five (5) days after Landlord's delivery of notice of payment due, Tenant
shall pay to Landlord, with such Rent, a late charge equal to four percent (4%)
of such Rent. Any Rent, other than late charges, due Landlord under this Lease,
if not paid when due, shall also bear interest from the date due until paid, at
the rate of ten percent (10%) per annum or, if a higher rate is legally
permissible, at the highest rate legally permitted. The parties acknowledge that
such late charge and interest represent a fair and reasonable estimate of the
administrative costs and loss of use of funds Landlord will incur by reason of a
late Rent payment by Tenant, but Landlord's acceptance of such late charge
and/or interest shall not constitute a waiver of Tenant's default with respect
to such Rent or prevent Landlord from exercising any other rights and remedies
provided under this Lease, at law or in equity.
5. Calculation and Payments of Escalation Rent. During each full or
partial Fiscal Year of the Term, Tenant shall pay to Landlord Escalation Rent in
accordance with the following procedures:
5.1. Payment of Estimated Escalation Rent. During the last month of
the Base Year and the last month of each fiscal Year, or as soon thereafter as
practicable, Landlord shall give Tenant notice of its estimate of Escalation
Rent due for the next ensuing Fiscal Year. On or before the first day of each
month during such next ensuing Fiscal Year (commencing January 1, 1999), Tenant
shall pay to Landlord in advance, in addition to Base Rent, one-twelfth (1/12th)
of such estimated Escalation Rent. In the event such notice is given after
December 31st of any year during the Term, (i) Tenant shall continue to pay
Escalation Rent on the basis of the prior Fiscal Year's estimate until the month
after such notice is given, (ii) subsequent payments by Tenant shall be based of
the estimate of Escalation Rent set forth in Landlord's notice, and (iii) within
thirty (30) days after the delivery of Landlord's notice, Tenant shall also pay
the difference, if any, between the amount previously paid for such Fiscal Year
and the amount which Tenant would have paid through the month in which such
notice is given, based on Landlord's noticed estimate or, in the alternative, if
such amount previously paid by Tenant for such Fiscal Year through the month in
which such notice is given exceeds the amount which Tenant would have paid
through such month based on Landlord's noticed estimate, Landlord shall credit
such excess amount against the next monthly payments of Rent due from Tenant. If
at any time Landlord reasonably determines that the Escalation Rent for the
current Fiscal Year will vary from Landlord's estimate by more than five percent
(5%), Landlord may, by notice to Tenant, revise its estimate for such Fiscal
Year, and subsequent payments by Tenant for such Fiscal Year shall be based upon
such revised estimate.
5.2. Escalation Rent Statement and Adjustment. Within one hundred
twenty (120) days after the close of each Fiscal Year, or as soon thereafter as
practicable, Landlord shall deliver to Tenant a statement of the actual
Escalation Rent for such Fiscal Year, accompanied by a statement prepared by
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Landlord showing in reasonable detail the Operating Expenses and the Real Estate
Taxes comprising the actual Escalation Rent. If Landlord's statement shows that
Tenant owes an amount less than the payments previously made by Tenant for such
Fiscal Year, Landlord shall credit the difference first against any sums then
owed by Tenant to Landlord and then against the next payment or payments of Rent
due Landlord, except that if a credit amount is due Tenant after termination of
this Lease, Landlord shall pay to Tenant any excess remaining after Landlord
credits such amount against any sums owed by Tenant to Landlord. If Landlord's
statement shows that Tenant owes an amount more than the payments previously
made by Tenant for such Fiscal Year, Tenant shall pay the difference to Landlord
within thirty (30) days after delivery of the statement. Tenant shall have the
right to audit Landlord's calculation of Operating Expenses and Real Estate
Taxes, subject to the following limitations: (i) such audit shall be conducted
no more than one time per calendar year, (ii) such audit may not be conducted by
a person or entity whose compensation is in any way calculated based on the
results of such audit, (iii) Landlord shall pay Tenant's reasonable
out-of-pocket cost (but not to exceed $3,000.00) of any such audit undertaken by
Tenant in accordance with the foregoing which is reasonably approved by Landlord
and which discloses an overstatement of Operating Expenses of more than four
percent (4%), and (iv) if at the time of the performance of the audit the
Landlord under this Lease is Teacher's Insurance and Annuity Association
("Teachers'"), then Tenant shall only have the right to examine Teachers' books
which related to the Operating Expenses in question. Landlord shall use
reasonable due diligence to maintain complete and accurate records of Operating
Expenses and Real Estate Taxes.
5.3. Proration for Partial Year. If this Lease terminates other
than on the last day of a Fiscal Year (other than due to Tenant's default), the
amount of Escalation Rent for such fractional Fiscal Year shall be prorated on a
daily basis. Upon such termination, Landlord may, at its option, calculate the
adjustment in Escalation Rent prior to the time specified in Section 5.2 above.
Tenant's obligation to pay Escalation Rent, as set forth in Paragraph 5.2,
above, shall survive the expiration or termination of this Lease. Upon
expiration, either Landlord or Tenant, as the case may be, shall make any
payments to the other necessary to refund or pay any excess or underpayment of
Escalation Rent.
6. Impositions Payable by Tenant. Tenant shall pay all Impositions
prior to delinquency. If billed directly to Tenant, Tenant shall pay such
Impositions and concurrently deliver to Landlord evidence of such payments. If
any Impositions are billed to Landlord or included in bills to Landlord for Real
Estate Taxes or other charges, then Tenant shall pay to Landlord all such
amounts within fifteen (15) days after delivery of Landlord's invoice therefor.
If applicable law prohibits Tenant from reimbursing Landlord for an Imposition,
but Landlord may lawfully increase the Base Rent to account for Landlord's
payment of such Imposition, the Base Rent payable to Landlord shall be increased
to net to Landlord the same return without reimbursement of such Imposition as
would have been received by Landlord with reimbursement of such Imposition.
Tenant's obligation to pay Impositions which have accrued and remain unpaid upon
the expiration or earlier termination of this Lease shall survive the expiration
or earlier termination of this Lease.
7. Use of Premises.
7.1. Permitted Use. The Premises shall be used solely for the
Permitted Use and for no other use or purpose.
7.2. No Violation of Legal and Insurance Requirements. Tenant shall
not do or permit
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to be done, or bring or keep or permit to be brought or kept, in or about the
Premises, or any other portion of Bay Center, anything which (i) is prohibited
by or will in any way conflict with any law, ordinance, rule or regulation; (ii)
would invalidate or be in conflict with the provisions of any insurance policy
carried by Landlord or Tenant on any portion of Bay Center or Premises, or any
property therein; or (iii) would cause a cancellation of any such insurance,
increase the existing rate of (unless Tenant actually pays 100% of such
increased premium) or materially and adversely affect any such Landlord's
insurance, or subject Landlord to any liability or responsibility for injury to
any person or property. If Tenant does or permits anything to be done which
increases the cost of any of Landlord's insurance, or which results in the need,
in Landlord's reasonable judgment, for additional insurance by Landlord or
Tenant with respect to any portion of Bay Center or Premises, then Tenant shall
reimburse Landlord, upon demand, for any such additional costs or the costs of
such additional insurance, and/or procure such additional insurance at Tenant's
sole cost and expense. Exercise by Landlord of such right to require
reimbursement of additional costs (including the costs of procuring of
additional insurance) shall not limit or preclude Landlord from prohibiting
Tenant's impermissible use of the Premises or from invoking any other right or
remedy available to Landlord under this Lease.
7.3. Compliance with Legal, Insurance and Life Safety Requirements.
Except as provided in clauses (i) through (iii) below, Tenant, at its cost and
expense, shall promptly comply with all laws, ordinances, rules, regulations,
orders and other governmental requirements, the requirements of any board of
fire underwriters or other similar body, any directive or occupancy certificate
issued pursuant to any law by any public officer or officers, the provisions of
all recorded documents affecting any portion of Bay Center and all life safety
programs, procedures and rules implemented or promulgated by Landlord ("Laws").
Tenant shall not, however, be required to comply with Laws requiring Tenant to
make structural changes to the Premises unless necessitated, in whole or in
part, by (i) Tenant's specific use or occupancy of, or business conducted in,
the Premises, (ii) any acts or omissions of Tenant, its employees, agents,
contractors, invitees or licensees, or (iii) Alterations.
7.4. No Nuisance. Tenant shall not (i) do or permit anything to be
done in or about the Premises, or any other portion of Bay Center, which would
injure or annoy, or obstruct or interfere with the rights of, Landlord or other
occupants of Bay Center, or others lawfully in or about Bay Center; (ii) use or
allow the Premises to be used in any manner inappropriate for a Class A office
building, or for any improper or objectionable purposes; or (iii) cause,
maintain or permit any nuisance or waste in, on or about the Premises, or any
other portion of Bay Center.
7.5. Hazardous Substances. The term "hazardous substances" as used
in the Lease, is defined as follows:
Any element, compound, mixture, solution, particle or substance, which
presents danger or potential danger of damage or injury to health, welfare
or to the environment including, but not limited to: (i) those substances
which are inherently or potentially radioactive, explosive, ignitable,
corrosive, reactive, carcinogenic or toxic and (ii) those substances which
have been recognized as dangerous or potentially dangerous to health,
welfare or to the environment by any federal, municipal, state, county or
other governmental or quasi-governmental authority and/or any department
or agency thereof, including, but not limited to, hazardous substances and
materials described in CERCLA, as amended, and in any applicable state or
local laws and regulations adopted thereunder.
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Tenant represents and warrants to Landlord and agrees that at all times
during the term of this Lease and any extensions or renewals thereof, Tenant
shall:
(i) promptly comply at Tenant's sole cost and expense, with all
laws, orders, rules, regulations, certificates of occupancy, or other
requirements, as the same now exist or may hereafter be enacted, amended
or promulgated, of any federal, municipal, state, county or other
governmental or quasi-governmental authorities and/or any department or
agency thereof relating to the manufacturing, processing, distributing,
using, producing, treating, storing (above or below ground level),
disposing or allowing to be present (the "Environmental Activity") of
hazardous substances in or about the Premises (each, a "Law", and all of
them, "Laws") by Tenant , its assignees and subtenants, and their
respective agents, employees, contractors and invitees, and Tenant shall
not cause (or permit its agents, employees, subtenants or contractors to
cause) the release or escape of any hazardous substances in or about the
Building.
(ii) indemnify and hold Landlord, its agents and employees,
harmless from any and all demands, claims, causes of action, penalties,
liabilities, judgments, damages (including consequential damages) and
expenses (including, without limitation, court costs and reasonable
attorneys' fees) incurred by Landlord as a result of (a) Tenant's failure
or delay in properly complying with any Law to the extent the same relates
to Environmental Activity of Tenant in or about the Premises, or (b) any
adverse effect which results from the Environmental Activity of Tenant,
whether Tenant or Tenant's subtenants or any of their respective agents,
employees, contractors or invitees, with or without Tenant's consent has
caused, either intentionally or unintentionally, such Environmental
Activity. If any action or proceeding is brought against Landlord, its
agents or employees by reason of any such claim, Tenant, upon notice from
Landlord, will defend such claim at Tenant's expense with counsel
reasonably satisfactory to Landlord. This indemnity obligation by Tenant
of Landlord will survive the expiration or earlier termination of this
Lease.
(iii) promptly disclose to Landlord by delivering, in the manner
prescribed for delivery of notice in this Lease, a copy of any forms,
submissions, notices, reports, or other written documentation (each, a
"Communication") relating to any Environmental Activity, whether any such
Communication is delivered to Tenant or any of its subtenants or is
requested of Tenant or any of its subtenants by any federal, municipal,
state, county or other government or quasi-governmental authority and/or
any department or agency thereof.
(iv) in the event there is a release of any hazardous substance as
a result of or in connection with any Environmental Activity by Tenant or
any of Tenant's subtenants or any of their respective agents, employees,
contractors or invitees, which must be remediated under any Law, Landlord
shall perform the necessary remediation; and Tenant shall reimburse
Landlord for all costs thereby incurred within fifteen (15) days after
delivery of a written demand therefor from Landlord (which shall be
accompanied by reasonable substantiation of such costs). In the
alternative, Landlord shall have the right to require Tenant, at its sole
cost and expense, to perform the necessary remediation in accordance with
a detailed plan of remediation which shall have been approved in advance
in writing by Landlord. Landlord shall give notice to Tenant within thirty
(30) days after Landlord receives notice or obtains knowledge of the
required remediation. The rights and obligations of Landlord and Tenant
set forth in this subparagraph
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(iv) shall survive the expiration or earlier termination of this Lease.
(v) notwithstanding any other provisions of this Lease, allow
Landlord, and any authorized representative of Landlord, access and the
right to enter and inspect the Premises for Environmental Activity, at any
time deemed reasonable by Landlord, without prior notice to Tenant.
Compliance by Tenant with any provision of this Section 7.5 shall not be
deemed a waiver of any other provision of this Lease. Without limiting the
foregoing, Landlord's consent to any Environmental Activity shall not
relieve Tenant of its indemnity obligations under the terms hereof.
7.6. Special Provisions Relating to The Americans With Disabilities
Act of 1990.
7.6.1. Allocation of Responsibility to Landlord. As between
Landlord and Tenant, Landlord shall be responsible that the public entrances,
stairways, corridors, restrooms, elevators and elevator lobbies and other public
areas in the Building and in Bay Center comply with the requirements of Title
III of the Americans with Disabilities Act of 1990 (42 U.S.C. 12181, et seq.,
The Provisions Governing Public Accommodations and Services Operated by Private
Entities), and all regulations promulgated thereunder, and all amendments,
revisions or modifications thereto now or hereafter adopted or in effect in
connection therewith (hereinafter collectively referred to as the "ADA"), and to
take such actions and make such alterations and improvements as are necessary
for such compliance. All costs incurred by Landlord in discharging its
responsibilities under this Section 7.6.1 shall be included in Operating
Expenses as provided in Section 1.1. Landlord shall protect, defend, indemnify
and hold Tenant harmless from and against any claim, demand, cause of action,
obligation, liability, loss, cost or expense (including reasonable attorneys'
fees) which may be asserted against or incurred by Tenant as a result of
Landlord's failure in any respect to comply with its obligations set forth
hereinabove in this Section 7.6.1. Landlord's indemnity obligations set forth in
the immediately preceding sentence shall survive the expiration or earlier
termination of this Lease.
7.6.2. Allocation of Responsibility to Tenant. As between
Landlord and Tenant, Tenant, at its sole cost and expense, shall be responsible
that the Premises, all Alterations to the Premises, Tenant's use and occupancy
of the Premises, and Tenant's performance of its obligations under this Lease,
comply with the requirements of the ADA, and to take such actions and make such
Alterations as are necessary for such compliance; provided, however, that Tenant
shall not make any such Alterations except upon Landlord's prior written consent
pursuant to the terms and conditions of this Lease. Tenant shall protect,
defend, indemnify and hold Landlord harmless from and against any claim, demand,
cause of action, obligation, liability, loss, cost or expense (including
reasonable attorneys' fees) which may be asserted against or incurred by
Landlord as a result of Tenant's failure in any respect to comply with its
obligations set forth hereinabove in this Section 7.6.2. Tenant's indemnity
obligations set forth in the immediately preceding sentence shall survive the
expiration or earlier termination of this Lease to the extent of claims based on
events occurring before such expiration or termination.
7.6.3. General. Notwithstanding anything in this Lease to the
contrary, no act or omission of Landlord, including any approval, consent or
acceptance by Landlord or Landlord's agents, employees or other representatives,
shall be deemed an agreement, acknowledgment, warranty, or other
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representation by Landlord that Tenant has complied with the ADA or that any
action, alteration or improvement by Tenant complies or will comply with the ADA
or constitutes a waiver by Landlord of Tenant's obligations to comply with the
ADA under this Lease or otherwise. Any failure of Landlord to comply with the
obligations of the ADA shall not relieve Tenant from any obligations under this
Lease or constitute or be construed as a constructive or other eviction of
Tenant or disturbance of Tenant's use and possession of the Premises.
7.7 Special Hazardous Provisions. The Premises are located on a
portion of a parcel which is sometimes know as the "Bay Center" or as "EmeryBay"
and portions of which were formerly known as the "Delta Trucking" site and
"Garrett Trucking" site. In 1986, it was discovered that materials of concern,
including various organic compounds and metals; were deposited in and on the Bay
Center site as a result of previous activities at the Bay Center site. Since
that time, the Alameda County Health Services Unit has supervised the
remediation at Bay Center. Landlord's consultants have advised that materials of
concern in the soil have either been properly removed off-site or have been
encapsulated so as to not pose a health hazard to occupants. The remediation of
groundwater is in progress.
8. Building Services.
8.1. Maintenance of Bay Center. Landlord shall maintain Bay Center
(other than the Premises and the premises of other tenants of Bay Center) in
good order and condition, except for ordinary wear and tear, damage by casualty
or condemnation, or damage occasioned by the act or omission of Tenant or
Tenant's employees, agents, contractors, licensees or invitees, which damage
shall be repaired by Landlord at Tenant's expense (subject to the provisions of
Section 15). Landlord's maintenance of, and provision of services to, the
Building shall be performed in a manner consistent with that of comparable
office buildings in the Emeryville/Oakland, California area, but in no event
shall Landlord's maintenance of, and provision of services to, the Building be
less than the maintenance and services provided by Landlord as of the date of
this Lease unless there is a material reduction, after the Commencement Date, of
the maintenance or services generally provided to other comparable office
buildings in the Emeryville/Oakland, California area. Landlord shall have the
right in connection with its maintenance of Bay Center hereunder (i) to change
the arrangement and/or location of any amenity, installation or improvement in
the public entrances, stairways, corridors, elevators and elevator lobbies, and
other public areas in the Building, or other public areas of Bay Center, and
(ii) to utilize portions of the public areas in the Building and Bay Center from
time to time for entertainment, displays, product shows, leasing of kiosks or
such other uses that in Landlord's sole judgment tend to attract the public, so
long as such uses do not materially interfere with or impair Tenant's access to
or use or occupancy of the Premises; provided, however, that Landlord shall have
no right to make any modifications to the lobby of the Building (unless required
by applicable law) that would materially and adversely affect the overall
quality of the lobby of the Building provided further, however, that Landlord
shall have no right to make any alterations within the Premises unless required
by applicable law. Landlord shall not be in default under this Lease or liable
for any damages directly or indirectly resulting from or incidental to, nor
shall the rental reserved in this Lease be abated by reason of, Landlord's
failure to make any repair or to perform any maintenance required to be made or
performed by Landlord under this Section 8.1, unless such failure shall persist
for an unreasonable time after written notice of the need for such repair or
maintenance is given to Landlord by Tenant.
8.2. Building Standard Services. Landlord shall cause to be
furnished to Tenant:
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(i) tepid and cold water to those points of supply and in volumes provided for
general use of tenants in the Building; (ii) electricity in the amounts provided
by Landlord as of the date of this Lease for lighting and the operation of
electrically powered office equipment; (iii) heat, ventilation and air
conditioning to the extent reasonably required for the comfortable occupancy by
Tenant of the Premises during the period from 7:00 a.m. to 6:00 p.m. on
weekdays, or such shorter period as may be prescribed by any applicable
policies, regulations or guidelines adopted by any federal, state or local
governmental or quasi-governmental entities or utility suppliers; (iv) passenger
elevator service; (v) freight elevator service subject to then applicable
Building standard procedures and scheduling; (vi) lighting replacement for
Building standard lights; (vii) restroom supplies; (viii) window washing as
determined by Landlord; (ix) janitor service on a five (5) day per week basis
(excluding Building holidays), except for portions of the Premises used for
preparing or consuming food or beverages, as set forth in Exhibit E attached to
this Lease; and (x) security to the extent provide by Landlord for Bay Center as
of the date of this Lease (but not individually for Tenant or the Premises),
except that Landlord shall not be liable in any manner for acts of others,
criminal or otherwise, or for any direct, consequential or other loss, damage,
death or injury related to any interruption, discontinuance, malfunction,
circumvention or failure of such security service. Landlord shall use reasonable
efforts to cause the services described in items (i) - (iv) above to be provided
24 hours per day. Landlord may establish in the Premises or other portions of
Bay Center such measures as are required by laws, ordinances, rules or
regulations or as it deems necessary or appropriate (and are customary in
comparable buildings in the vicinity of the Building) to conserve energy,
including automatic switching of lights and/or more efficient forms of lighting.
8.3. Interruption or Unavailability of Services. Rent shall not
abate, no constructive or other eviction shall be construed to have occurred,
Tenant shall not be relieved from any of its obligations under this Lease, and
Landlord shall not be in default hereunder or liable for any damages directly or
indirectly resulting from, the failure of Landlord to furnish, or delay in
furnishing, any maintenance or services under this Article 8 as a result of
repairs, alterations, improvements or any circumstances beyond Landlord's
reasonable control. Landlord shall use reasonable diligence to remedy any
failure or interruption in the furnishing of such maintenance or services and
Landlord shall use reasonable efforts to minimize interference with Tenant's
operation in connection with any repairs, alterations, or improvements
undertaken by Landlord. Notwithstanding the foregoing, if the Premises should
become not reasonably suitable for Tenant's use as a consequence of the
cessation of utilities or other material services required to be provided to the
Premises by Landlord, unless such cessation results from the acts or omissions
of Tenant or Tenant's contractors, agents or employees, then Tenant shall be
entitled to an abatement of Rent if such cessation or interruption persists for
a continuous period of thirty (30) days or more (such abatement to commence on
the thirty-first day following such cessation and such abatement shall continue
until such utilities or material services are restored to the extent that the
Premises are reasonably suitable for Tenant's use.
8.4. Tenant's Use of Excess Electricity and Water. The parties
acknowledge that as of the date of this Lease, Tenant does not consume
quantities of electricity, water or gas in excess of the amounts customarily
consumed by users of office space (the "Customary Consumption Amounts"). Tenant
shall not, without Landlord's prior consent, which shall not be unreasonably
withheld, (i) install in the Premises (A) lighting, the aggregate average daily
power usage of which exceeds the Customary Consumption Amount, or lighting and
equipment, the aggregate average daily power usage of which exceeds the
Customary Consumption Amount, or which requires a voltage other than 110 volts
single-phase, (B) heat generating equipment which causes the Premise to exceed
the Customary Consumption
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Amount, or (C) supplementary air conditioning facilities, or (ii) permit average
occupancy levels in excess of one person per two hundred fifty (250) feet of
Rentable Area. If Tenant is likely to or does consume quantities of electricity,
gas or water in excess of the Customary Consumption Amounts, then Landlord shall
have the right, at Tenant's sole cost and expense, to install separate metering
for such utilities or to separately charge Tenant for any quantity of such
utilities consumed by Tenant beyond the Customary Consumption Amounts. Any such
charges made by Landlord to Tenant shall be reasonably determined by Landlord
and shall be promptly paid by Tenant to Landlord as Additional Rent. Landlord
may, at Landlord's sole option, elect to rate the quantity of utilities consumed
by Tenant at the Premises. Such consumption shall be determined, at Tenant's
option, by one of the following methods: (i) a rating by an appropriately
licensed engineer with costs to be computed on an average daily basis; (ii)
metering by a licensed utility company responsible for service to Bay Center; or
(iii) a rating by an appropriately licensed engineer and monitored by Landlord's
central project computer. Any charge for utilities in excess of the Customary
Consumption Amount shall be at Landlord's actual cost. In each such case, the
costs for administering such methods shall be borne by Tenant. Appropriate
adjustments shall be made to reflect the separate metering or charges.
8.5. Provision of Additional Services. If Tenant desires services
in additional amounts or at different times than set forth in Section 8.2 above,
or any other services that are not provided for in this Lease, Tenant shall make
a request for such services to Landlord with such advance notice as Landlord may
reasonably require. If Landlord provides such services to Tenant, Tenant shall
pay Landlord's actual cost for such services within thirty (30) days after
Tenant's receipt of Landlord's invoice, except that (i) electricity shall be
charged at Landlord's actual cost, (ii) the initial charge for additional HVAC
service provided by the Building central system shall be at the rate of
$20.00/hour/half-floor (the "HVAC Additional Rate"); (iii) the initial charge
for additional lighting service provided by the Building central system shall be
at the rate of $6.25/hour/half-floor (the "Lighting Additional Rate"); provided,
however, that Landlord shall have the right, from time to time during the Term,
to increase the HVAC Additional Rate and the Lighting Additional Rate to reflect
increases in Landlord's actual cost for providing additional HVAC service and
ventilation service. Notwithstanding the foregoing, if at any time Teachers
becomes the Landlord under this Lease, then during the time that Teachers is the
Landlord under this Lease the amounts charged by Landlord under items (i), (ii)
and (iii) of this Section 8.5 shall be charged at Landlord's actual cost.
9. Maintenance of Premises. Tenant shall, at all times during the Term,
at Tenant's cost and expense, keep the Premises in good condition and repair,
except for ordinary wear and tear and damage by casualty or condemnation. Except
as may be specifically set forth in this Lease, Landlord has no obligation to
alter, remodel, improve, repair, decorate or paint the Premises, or any part
thereof, or any obligation respecting the condition, maintenance and repair of
the Premises or any other portion of Bay Center. Tenant hereby waives all
rights, including those provided in California Civil Code Section 1941 or any
successor statute, to make repairs which are Landlord's obligation under this
Lease at the expense of Landlord or to receive any setoff or abatement of Rent
or in lieu thereof to vacate the Premises or terminate this Lease.
10. Alterations to Premises.
10.1. Landlord Consent; Procedure. Tenant shall not make or permit
to be made any Alterations without Landlord's prior consent, which consent shall
not be unreasonably withheld, and in
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this regard (i) Landlord's consent shall not be required for nonstructural
interior alterations costing less than $10,000.00 per work of improvement, and
(ii) Landlord's consent shall not be required for the installation of
demountable walls and partitions not affixed to the floor rendering the carpets
unuseable. Any Alterations to which Landlord has consented shall be made in
accordance with procedures as then established by Landlord and the provisions of
this Article 10.
10.2. General Requirements. All Alterations shall be made at
Tenant's cost and expense. Tenant shall be solely responsible for compliance
with applicable laws, ordinances, rules and regulations in connection with all
Alterations. Tenant shall have the right to use any contractor to perform any
Alterations, so long as such contractor is a licensed California contractor, and
so long as such contractor is bondable, as reasonably determined by Landlord.
Tenant shall be responsible for the cost of any additional alterations required
by applicable laws, ordinances, rules and regulations to be made by Landlord to
any portion of Bay Center as a result of Alterations. Tenant shall promptly
commence or cause the commencement of construction of all Alterations and
complete or cause completion of the same with due diligence as soon as possible
after commencement in order to cause the least disruption to Bay Center
operations and occupants and to continue Tenant's business in the Premises. In
connection with installing or removing Alterations, Tenant shall pay Landlord's
actual and reasonable out of pocket costs for review and approval of Tenant's
plans, specifications and working drawings, and administration by Landlord (or
its agent) of the construction, installation or removal of Alterations, and
restoration of the Premises to their previous condition.
10.3. Removal of Alterations. If requested by Landlord at any time
prior to ninety (90) days before expiration of the Term, Tenant shall, prior to
the expiration of the Term or termination of this Lease, remove such Alteration
at Tenant's cost and expense and restore the Premises to the condition existing
prior to the installation of such Alteration; provided, however, that if
Landlord's approval of such Alterations was granted pursuant to this Article 10,
then at the time of granting such approval, Landlord shall reasonably designate
whether Tenant shall be obligated to remove such Alterations at the expiration
of the Term or termination of this Lease; provided further, however, that
Landlord's failure to give such notice at such time shall constitute Landlord's
determination that such Alterations shall be removed by Tenant at the expiration
of the Term or termination of this Lease. If Tenant fails so to do, then
Landlord may remove such Alteration and perform such restoration and Tenant
shall reimburse Landlord for Landlord's cost and expense incurred to perform
such removal and restoration (which obligation of Tenant shall survive the
expiration or earlier termination of this Lease). Tenant shall repair at its
cost and expense all damage to the Premises or Bay Center caused by the removal
of such Alteration. Subject to the foregoing provisions regarding removal, all
Alterations (including any above Building standard improvements to the Premises)
shall be Landlord's property and from and after the expiration or earlier
termination of this Lease shall remain on the Premises without compensation to
Tenant. Notwithstanding the foregoing, Tenant shall have no obligation to remove
any of the tenant improvements existing in the Premises as of the Commencement
Date.
11. Liens. Tenant shall keep the Premises and Bay Center free from any
liens arising out of any work performed or obligations incurred by or for, or
materials furnished to, Tenant pursuant to this Lease or otherwise. Landlord
shall have the right to post and keep posted on the Premises any notices
required by law or which Landlord may deem to be proper for the protection of
Landlord, the Premises and Bay Center from such liens and to take any other
action at the expense of Tenant that Landlord deems necessary or appropriate to
prevent, remove or discharge such liens. Tenant shall protect, defend,
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indemnify and hold Landlord harmless from and against any claim, demand, cause
of action, obligation, liability, loss, cost or expense (including reasonable
attorneys' fees) which may be asserted against or incurred by Landlord as a
result of Tenant's failure to comply with the foregoing obligation (which
indemnity obligation shall survive the expiration or earlier termination of this
Lease).
12. Damage or Destruction.
12.1. Obligation to Repair. Except as otherwise provided in this
Article 12, if the Premises, or any other portion of Bay Center necessary for
Tenant's use and occupancy of the Premises, are damaged or destroyed by fire or
other casualty, Landlord shall, within thirty (30) days after such event, notify
Tenant of the estimated time, in Landlord's reasonable judgment, required to
repair such damage or destruction. If Landlord's estimate of time is less than
one hundred eighty (180) days after the date of damage or destruction, then (i)
Landlord shall proceed with all due diligence to repair the Premises, and/or the
portion of Bay Center necessary for Tenant's use and occupancy of the Premises,
to substantially the condition existing immediately before such damage or
destruction, as permitted by and subject to then applicable laws, ordinances,
rules and regulations; (ii) this Lease shall remain in full force and effect;
and (iii) Base Rent shall abate for such part of the Premises rendered unusable
by Tenant in the conduct of its business during the time such part is so
unusable, in the proportion that the Rentable Area contained in the unusable
part of the Premises bears to the total Rentable Area of the Premises.
12.2. Landlord's Election. If Landlord determines that the necessary
repairs cannot be completed within one hundred eighty (180) days after the date
of damage or destruction, or if such damage or destruction arises from causes
not covered by Landlord's insurance policy then in force ("Uninsured Loss") and
the Uninsured Loss exceeds 2% of the replacement cost of the Building, Landlord
may elect, in its notice to Tenant pursuant to Section 12.1, to (i) terminate
this Lease or (ii) repair the Premises or the portion of Bay Center necessary
for Tenant's use and occupancy of the Premises pursuant to the applicable
provisions of Section 12.1 above. In addition, if Landlord determines that the
necessary repairs cannot be completed within one hundred eighty (180) days after
the date of damage or destruction, then Tenant shall have the right, for a
period of twenty (20) days after receipt of Landlord's notice, to elect to
terminate this Lease. If Landlord or Tenant terminates this Lease, then this
Lease shall terminate as of the date of occurrence of the damage or destruction.
Notwithstanding the foregoing, Landlord may not terminate this Lease in
connection with an Uninsured Loss, and must restore the damage caused by the
Uninsured Loss, if (i) the Uninsured Loss exceeds 2%, but is less than 10%, of
the replacement cost of the Building, and (ii) Landlord does not covenant in
writing to Tenant that Landlord will not enter into a lease of the Premises with
another tenant within two hundred seventy (270) days after the date of such
Uninsured Loss which lease would permit such tenant to occupy the Premises
within such two hundred seventy (270) day period; provided, however, that the
terms of this sentence shall apply only to the original Landlord under this
Lease and shall not apply to any successor landlord.
12.3. Cost of Repairs. Landlord shall pay the cost for repair of Bay
Center and all improvements in the Premises, other than any Alterations. Tenant
shall pay the costs to repair all Alterations (but Landlord shall make available
to Tenant for such purpose any insurance proceeds received by Landlord for such
purpose under Landlord's insurance policy then in force).
12.4. Damage at End of Term. Notwithstanding anything to the
contrary contained in
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this Article 12, if the Premises or any portion of the Building are damaged or
destroyed by fire or other casualty within the last six (6) months of the Term,
then either Tenant or Landlord shall have the right, in its sole discretion, to
terminate this Lease by notice to the other given within ninety (90) days after
the date of such event. Such termination shall be effective on the date
specified in such party's notice to the other party, but in no event later than
the end of such 90-day period.
12.5. Waiver of Statutes. The respective rights and obligations of
Landlord and Tenant in the event of any damage to or destruction of the
Premises, or any other portion of Bay Center, are governed exclusively by this
Lease. Accordingly, Tenant hereby waives the provisions of any law to the
contrary, including California Civil Code Sections 1932(2) and 1933(4) providing
for the termination of a lease upon destruction of the leased property.
13. Eminent Domain.
13.1. Effect of Taking. Except as otherwise provided in this Article
13, if all or any part of the Premises is taken as a result of the exercise of
the power of eminent domain or condemned for any public or quasi-public purpose,
or if any transfer is made in avoidance of such exercise of the power of eminent
domain (collectively, "taken" or a "taking"), this Lease shall terminate as to
the part of the Premises so taken as of the effective date of such taking. On a
taking of a portion of the Premises, Landlord and Tenant shall each have the
right to terminate this Lease by notice to the other given within thirty (30)
days after the effective date of such taking, if the portion of the Premises
taken is of such extent and nature so as to materially impair Tenant's business
use of the balance of the Premises, as reasonably determined by the party giving
such notice. On a taking of a portion of Bay Center, Tenant shall have the right
to terminate this Lease by notice to Landlord given within thirty (30) days
after the effective date of such taking, if the portion of Bay Center (but not
the Premises) taken is of such extent and nature so as to materially impair
Tenant's ability to use the Premises, as reasonably determined by Tenant. Such
termination shall be operative as of the effective date of the taking. Landlord
may also terminate this Lease on a taking of any other portion of Bay Center if
Landlord reasonably determines that such taking is of such extent and nature as
to render the operation of the remaining Bay Center economically infeasible or
to require a substantial alteration or reconstruction of such remaining portion.
Landlord shall elect such termination by notice to Tenant given within thirty
(30) days after the effective date of such taking, and such termination shall be
operative as of the effective date of such taking. Upon a taking of the Premises
which does not result in a termination of this Lease, the Base Rent shall
thereafter be reduced as of the effective date of such taking in the proportion
that the Rentable Area of the Premises so taken bears to the total Rentable Area
of the Premises.
13.2. Condemnation Proceeds. Except as hereinafter provided, in the
event of any taking, Landlord shall have the right to all compensation, damages,
income, rent or awards made with respect thereto (collectively an "award"),
including any award for the value of the leasehold estate created by this Lease.
No award to Landlord shall be apportioned and, subject to Tenant's rights
hereinafter specified, Tenant hereby assigns to Landlord any right of Tenant in
any award made for any taking. So long as such claim will not reduce any award
otherwise payable to Landlord under this Section 13.2, Tenant may seek to
recover, at its cost and expense, as a separate claim, any damages or awards
payable on a taking of the Premises to compensate for the unamortized cost paid
by Tenant for any Alterations, or for Tenant's personal property taken, or for
interference with or interruption of Tenant's business (including goodwill), or
for Tenant's removal and relocation expenses.
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13.3. Restoration of Premises. On a taking of the Premises which
does not result in a termination of this Lease, Landlord and Tenant shall
restore the Premises as nearly as possible to the condition they were in prior
to the taking in accordance with the applicable provisions and allocation of
responsibility for repair and restoration of the Premises on damage or
destruction pursuant to Article 12 above, and both parties shall use any awards
received by such party attributable to the Premises for such purpose.
13.4. Taking at End of Term. Notwithstanding anything to the
contrary contained in this Article 13, if the Premises are taken within the last
three hundred sixty-five (365) days of the Term, then Landlord shall have the
right, in its sole discretion, to terminate this Lease by notice to Tenant given
within ninety (90) days after the date of such taking. Such termination shall be
effective on the date specified in Landlord's notice to Tenant, but in no event
later than the end of such 90-day period.
13.5. Tenant Waiver. The rights and obligations of Landlord and
Tenant on any taking of the Premises or any other portion of Bay Center are
governed exclusively by this Lease. Accordingly, Tenant hereby waives the
provisions of any law to the contrary, including California Code of Civil
Procedure Sections 1265.120 and 1265.130, or any similar successor statute.
14. Insurance.
14.1. Insurance. Landlord, with respect to Bay Center, and Tenant,
at its cost and expense with respect to the Premises, shall each maintain or
cause to be maintained, from the Lease Date and throughout the Term, a policy or
policies of Commercial General Liability insurance with limits of liability not
less than Two Million Dollars ($2,000,000.00) per occurrence and in the
aggregate. Each policy shall contain coverage for blanket contractual liability,
personal injury liability, and premises operations, coverage deleting liquor
liability exclusions and, as to Tenant's insurance, fire legal liability.
Landlord shall have the right to approve the deductible under each policy of
Tenant's liability insurance, such approval not to be unreasonably withheld. In
addition, Landlord shall, at its sole cost and expense, keep in force an
extended coverage property damage insurance policy (excluding earthquake
coverage) on the Building in an amount not less than 100% of the replacement
cost of the Building; provided, however, that if at any time during the Term
such insurance is not available at commercially reasonable rates, then Landlord
shall, to the extent such insurance is available at commercially reasonable
rates, obtain extended coverage property damage insurance with the maximum
amount of coverage that is available at commercially reasonable rates.
14.2. Form of Policies. All insurance required by this Article 14
shall be issued on an occurrence basis by solvent companies qualified to do
business in the State of California. Any insurance required under this Article
14 may be maintained under a "blanket policy", insuring other parties and other
locations, so long as the amount and coverage required to be provided hereunder
is not thereby diminished. Tenant shall provide Landlord a copy of each policy
of insurance or a certificate thereof certifying that the policies contain the
provisions required hereunder. Tenant shall deliver such policies or
certificates to Landlord within (30) days after the Lease Date, but in no event
less than ten (10) business days prior to the Commencement Date or such earlier
date as Tenant or Tenant's contractors, agents, licensees, invitees or employees
first enter the Premises and, upon renewal, not less than thirty (30) days prior
to the expiration of such coverage. All evidence of insurance provided to
Landlord shall provide (i) that Landlord, Landlord's managing agent and any
other person requested by Landlord who
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has an insurable interest, is designated as an additional insured without
limitation as to coverage afforded under such policy; (ii) for severability of
interests or that the acts or omissions of one of the insureds or additional
insureds shall not reduce or affect coverage available to any other insured or
additional insured; (iii) that the insurer agrees not to cancel or alter the
policy without at least thirty (30) days prior written notice to all additional
insureds; (iv) that the aggregate liability applies solely to the Premises and
the remainder of Bay Center; and (v) that Tenant's insurance is primary and
noncontributing with any insurance carried by Landlord.
14.3. Workers' Compensation Insurance. Tenant, at its sole cost and
expense, shall maintain Workers' Compensation insurance as required by law and
employer's liability insurance in an amount of not less than Five Hundred
Thousand Dollars ($500,000).
14.4. Additional Tenant Insurance. Tenant, at its sole cost and
expense, shall maintain such other insurance as Landlord may reasonably require
from time to time, but in no event may Landlord require any other insurance
which is (i) not then being required of comparable tenants leasing comparable
amounts of space in comparable buildings in the vicinity of the Building or (ii)
not then available at commercially reasonable rates.
15. Waiver of Subrogation Rights. Notwithstanding anything to the
contrary contained in this Lease, Landlord and Tenant, for themselves and their
respective insurers, agree to and do hereby release each other of and from any
and all claims, demands, actions and causes of action that each may have or
claim to have against the other for loss or damage to property, both real and
personal, notwithstanding that any such loss or damage may be due to or result
from the negligence of either of the parties hereto or their respective
employees or agents. Each party shall, to the extent such insurance endorsement
is lawfully available at commercially reasonable rates, obtain or cause to be
obtained, for the benefit of the other party, a waiver of any right of
subrogation (a "Subrogation Endorsement") which the insurer of such party may
acquire against the other party by virtue of the payment of any such loss
covered by such insurance; provided, however, that the waiver contained in this
Section 15 shall not be effective during any period when both Tenant and
Landlord do not have in effect a valid Subrogation Endorsement.
16. Tenant's Waiver of Liability and Indemnification.
16.1. Waiver and Release. Except to the extent due to the gross
negligence or willful misconduct of Landlord or its employees, agents, or
contractors, or Landlord's breach of its obligations under this Lease, Landlord
shall not be liable to Tenant or Tenant's employees, agents, contractors,
licenses or invitees for, and Tenant waives and releases Landlord and Landlord's
managing agent from, all claims for loss or damage to any property or injury,
illness or death of any person in, upon or about the Premises and/or any other
portion of Bay Center (including claims caused in whole or in part by the act,
omission, or neglect of other tenants, contractors, licensees, invitees or other
occupants of Bay Center or their agents or employees). The waiver and release
contained in this Section 16.1 extends to the officers, directors, shareholders,
partners, employees, agents and representatives of Landlord.
16.2. Indemnification of Landlord. Tenant shall indemnify, defend,
protect and hold Landlord harmless of and from any and all loss, liens,
liability, claims, causes of action, damage, injury, cost or expense arising out
of or in connection with (i) the making of any Alterations, or (ii) injury to or
death of persons or damage to property occurring or to the extent resulting
from: (A) the use or
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occupancy of, or the conduct of business in, the Premises by Tenant or its
subtenants or any of their respective officers, directors, employees, agents,
contractors, invitees or licensees; (B) any other occurrence or condition in or
on the Premises (excluding conditions relating to hazardous substances not
brought on the Premises by Tenant, its subtenants, and their respective agents,
employees, or contractors); and (C) acts, neglect or omissions of Tenant, or its
subtenants or any of their respective officers, directors, employees, agents,
contractors, invitees or licensees, in or about any portion of Bay Center.
Tenant's indemnity obligation includes reasonable attorneys' fees and costs,
investigation costs and all other reasonable costs and expenses incurred by
Landlord. If Landlord reasonably disapproves the legal counsel proposed by
Tenant for the defense of any claim indemnified against hereunder, Landlord
shall have the right to appoint its own legal counsel, the reasonable fees,
costs and expenses of which shall be included as part of Tenant's indemnity
obligation hereunder. The indemnification contained in this Section 16.2 shall
extend to the officers, directors, shareholders, partners, employees, agents and
representatives of Landlord.
16.3. Indemnification of Tenant. Landlord shall indemnify, defend,
protect and hold Tenant harmless of and from any and all loss, liens, liability,
claims, causes of action, damage, injury, cost or expense arising out of or in
connection with (i) any gross negligence or willful misconduct by Landlord or
any breach or default by Landlord in the performance of any of its obligations
under this Lease, or (ii) any loss or damage to property or injury to person
occurring in the public entrances, stairways, corridors, elevators and elevator
lobbies, and other public areas in the Building or the other public areas in Bay
Center (except for such loss, damage or injury for which Tenant is obligated to
indemnify Landlord under Section 16.2). The indemnification contained in this
Section 16.2 shall extend to the officers, directors, shareholders, partners,
employees, agents and representatives of Tenant.
17. Assignment and Subletting.
17.1. Compliance Required. Tenant shall not, directly or indirectly,
voluntary or by operation of law, sell, assign or otherwise transfer this Lease,
or any interest herein (collectively, "assign" or "assignment"), or sublet the
Premises, or any part thereof, or permit the occupancy of the Premises by any
person other than Tenant (collectively, "sublease" or "subletting", the assignee
or sublessee under an assignment or sublease being referred to as a
"transferee"), without Landlord's prior consent given or withheld in accordance
with the express standards and conditions of this Article 17 and compliance with
the other provisions of this Article 17. Any assignment or subletting made in
violation of this Article 17 shall be void. As used herein, an "assignment"
includes any sale or other transfer (such as by consolidation, merger or
reorganization) of a majority of the voting stock of Tenant, if Tenant is a
corporation, or any sale or other transfer of a majority of the beneficial
interest in Tenant, if Tenant is any other form of entity. Tenant acknowledges
and agrees that the limitations on Tenant's right to sublet or assign which are
set forth in this Article 17 are reasonable and, in particular, that the express
standards and conditions upon Tenant's right to assign or sublet which are set
forth in this Article 17 are reasonable as of the Lease Date. Notwithstanding
the foregoing, an assignment shall not include any of the following
(collectively, "Exempt Transfers"): (i) the sale of substantially all of the
assets of Tenant, so long as the purchaser of such assets assumes all of
Tenant's obligations under this Lease; (ii) the transfer of any stock in
connection with a public offering or at any time that the shares of Tenant are
publicly traded; (iii) any merger, consolidation or other non-bankruptcy
reorganization so long as the net worth of the survivor is the same or better as
the tenant immediately prior to the consummation of the transaction, and so long
as the survivor assumes all of Tenant's obligations under this Lease; and (iv)
any assignment
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of the Lease to an entity controlling, controlled by or under common control
with Tenant (for purposes of this Section 17.1, "control" shall mean the
applicable entity holds at least a 50% beneficial ownership in the other
entity), so long as the net worth of the assignee is the same or better than
Tenant as of the date of the transaction, and so long as the assignee assumes
all of Tenant's obligations under this Lease (without the release of Tenant). In
addition to the foregoing, Landlord shall have no right to disapprove a sublease
to any entity controlling, controlled by , or under common control with Tenant
(an "Exempt Sublease"). The transferee under an Exempt Transfer or an Exempt
Sublease shall be referred to as an "Exempt Transferee".
17.2. Request by Tenant; Landlord Response. If Tenant desires to
effect an assignment or sublease, Tenant shall submit to Landlord a request for
consent together with the identity of the parties to the transaction, the nature
of the transferee's proposed business use for the Premises, the proposed
documentation for and terms of the transaction, and all other information
reasonably requested by Landlord concerning the proposed transaction and the
parties involved therein, including certified financial information, credit
reports, the business background and references regarding the transferee, and an
opportunity to meet and interview the transferee. Within the later of twenty
(20) days after the receipt of all such information required by Landlord or five
(5) days after such interview, or within thirty (30) days after the date of
Tenant's request to Landlord if Landlord does not request additional information
or an interview, Landlord shall have the right, by notice to Tenant, to: (i)
consent to the assignment or sublease, subject to the terms of this Article 17;
(ii) decline to consent to the assignment or sublease; or (iii) terminate this
Lease as to the affected portion of the Premises as of the date specified by
Tenant as the effective date of the proposed assignment or sublease (the
"Termination Option"), in which event Tenant will be relieved of all unaccrued
obligations hereunder as to such portion as of such date, other than those
obligations which survive termination of this Lease. If Landlord elects so to
terminate, Tenant shall have the right, by notice to Landlord within five (5)
days after Landlord's exercise of such right, to rescind its request for the
proposed assignment or subletting, in which event this Lease shall not terminate
and shall remain in full force and effect. Notwithstanding the foregoing or the
following, Landlord shall have no right to exercise the Termination Option with
respect to (i) any Exempt Transfer or Exempt Sublease, or (ii) any sublease that
has an entire term (including extension options) of less than two (2) years.
Notwithstanding anything to the contrary contained in this Lease, Tenant may,
without the consent of Landlord, sublet up to ten percent (10%) of the Rentable
Area of the Premises to subtenants whose occupancy is related to Tenant's
business, provided that such subtenancy satisfies the following: (i) the
premises for such subtenant are not separately demised, (ii) the subtenant
operates its business in the Premises for the Permitted Use and in accordance
with all of the terms of this Lease, (iii) Tenant delivers written notice to
Landlord of the identity of such subtenant and a copy of any sublease with such
subtenant, (iv) the occupancy of the subtenant is related to the business of
Tenant, and (v) in no event shall any such sublease relieve Tenant of any
obligation under this Lease.
17.3. Conditions for Landlord Approval. In the event Landlord elects
not to terminate this Lease (in whole or in part) as provided in clause (iii) of
Section 17.2, Landlord shall not unreasonably withhold its consent to a proposed
subletting or assignment by Tenant. Without limiting the grounds on which it may
be reasonable for Landlord to withhold its consent to an assignment or sublease,
Tenant agrees that Landlord would be acting reasonably in withholding its
consent in the following instances: (i) if Tenant is in material default under
this Lease; (ii) if the transferee is a governmental or quasi-governmental
agency, foreign or domestic; (iii) if the transferee is an existing tenant in
the Building; (iv) if Landlord determines that the transferee's business, use
and/or occupancy of
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the Premises would (A) violate any of the terms of this Lease or the lease of
any other tenant in Bay Center, or (B) not be compatible with an office use
comparable to Tenant's office use as of the date of this Lease, (C) fall within
any category of use for which Landlord would not then lease space in the
Building under its leasing guidelines and policies then in effect, (D) require
any Alterations which would reduce the value of the existing leasehold
improvements in the Premises, or (E) result in increased density per floor or
require increased services by Landlord in excess of the limits on density and
services provided in this Lease; (v) in the case of a sublease, it would result
in more than four (4) occupancies on any floor in the Premises, including Tenant
and subtenants; (vi) in the case of an assignment, if the financial condition of
the transferee does not meet the requirements applied by Landlord for other
tenants in the Building under leases with comparable terms, or (vii) in the case
of a sublease, if Tenant has not demonstrated to Landlord that the proposed
subtenant is financially responsible, with sufficient net worth and net current
assets, properly and successfully to operate its business in the Premises and
meet the financial and other obligations of this Lease insofar as such
obligations are applicable to the subleased premises. If Landlord consents to an
assignment or sublease, the terms of such assignment or sublease transaction
shall not be modified without Landlord's prior written consent pursuant to this
Article 17. Landlord's consent to an assignment or subletting shall not be
deemed consent to any subsequent assignment or subletting.
17.4. Costs and Expenses. As a condition to the effectiveness of any
assignment or subletting under this Article 17, Tenant shall pay to Landlord all
reasonable costs and expenses, including attorneys' fees (such attorney's fees
not to exceed $3,000.00) and disbursements, incurred by Landlord in evaluating
Tenant's requests for assignment or sublease, whether or not Landlord consents
to an assignment or sublease. Tenant shall also pay to Landlord all costs and
expenses incurred by Landlord due to a transferee taking possession of the
Premises, including freight elevator operation, security service, janitorial
service and rubbish removal.
17.5. Payment of Excess Rent and Other Consideration. Tenant shall
also pay to Landlord, promptly upon Tenant's receipt thereof, forty percent
(40%) of any and all rent, sums or other consideration ("Subtenant
Consideration"), howsoever denominated realized by Tenant in connection with any
assignment or sublease transaction (other than transfers to Exempt Transferees)
in excess of the Base Rent and Escalation Rent payable hereunder (prorated to
reflect the Rent allocable to the portion of the Premises if a sublease);
provided, however, that the Subtenant Consideration shall not include payments
by a subtenant to Tenant which are reimbursements for out-of-pocket expenses
incurred by Tenant in providing services at cost to such subtenant.
17.6. Assumption of Obligations; Further Restrictions on Subletting.
Each assignee shall, concurrently with any assignment, assume all obligations of
Tenant under this Lease. Each sublease shall be made subject to this Lease and
all of the terms, covenants and conditions contained herein; and the surrender
of this Lease by Tenant, or a mutual cancellation thereof, or the termination of
this Lease in accordance with its terms, shall not work a merger and shall, at
the option of Landlord, terminate all or any existing subleases or operate as an
assignment to Landlord of any or all such subleases. No sublessee (other than
Landlord) shall have the right further to sublet unless such sublessee obtains
Landlord's prior written consent, which may be withheld in Landlord's sole and
absolute discretion. Any assignment by a sublessee of its sublease shall be
subject to Landlord's prior consent in the same manner as a sublease by Tenant.
No sublease, once consented to by Landlord, shall be modified without Landlord's
prior consent. No assignment or sublease shall be binding on Landlord
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unless the transferee delivers to Landlord a fully executed counterpart of the
assignment or sublease which contains the assumption by the assignee, or
recognition by the sublessee, of the provisions of this Section 17.6, in form
and substance satisfactory to Landlord, but the failure or refusal of a
transferee to deliver such instrument shall not release or discharge such
transferee from the provisions and obligations of this Section 17.6, but such
failure shall constitute a default by Tenant under this Lease.
17.7. No Release. No assignment or sublease shall release Tenant
from its obligations under this Lease, whether arising before or after the
assignment or sublease. The acceptance of Rent by Landlord from any other person
shall not be deemed a waiver by Landlord of any provision of this Article 17. On
a default by any assignee of Tenant in the performance of any of the terms,
covenants or conditions of this Lease, Landlord may proceed directly against
Tenant without the necessity of commencing or exhausting remedies against such
assignee. No consent by Landlord to any further assignments or sublettings of
this Lease, or any modification, amendment or termination of this Lease, or
extension, waiver or modification of payment or any other obligations under this
Lease, or any other action by Landlord with respect to any assignee or
sublessee, or the insolvency, or bankruptcy or default of any such assignee or
sublessee, shall affect the continuing liability of Tenant for its obligations
under this Lease and Tenant waives any defense arising out of or based thereon,
including any suretyship defense of exoneration. Landlord shall have no
obligation to notify Tenant or obtain Tenant's consent with respect to any of
the foregoing matters.
17.8. No Encumbrance. Notwithstanding anything to the contrary
contained in this Article 17, Tenant shall have no right to encumber, pledge,
hypothecate or otherwise transfer this Lease, or any of Tenant's interest or
rights hereunder, as security for any obligation or liability of Tenant.
18. Rules and Regulations. Tenant shall observe and comply, and shall
cause its sublessees, employees, agents, contractors, licensees and invitees to
observe and comply, with the Rules and Regulations of Bay Center, a copy of
which are attached to this Lease as Exhibit D, and, after notice thereof, with
all modifications and additions thereto from time to time promulgated in writing
by Landlord, but only to the extent such modifications and additions are
reasonable, non-discriminatory, and not materially inconsistent with any of the
rights of Tenant granted by this Lease. Provided that Landlord uses commercially
reasonable efforts to enforce the Rules and Regulations in a uniform and
nondiscriminatory manner, Landlord shall not be responsible to Tenant, or
Tenant's sublessees, employees, agents, contractors, licensees or invitees, for
noncompliance with any Rules and Regulations of Bay Center by any other tenant,
sublessee, employee, agent, contractor, licensee, invitee or other occupant of
Bay Center.
19. Entry of Premises by Landlord.
19.1. Right to Enter. Upon reasonable advance notice to Tenant
(except in emergencies or in order to provide regularly scheduled or other
routine Building standard services or additional services requested by Tenant,
or post notices of nonresponsibility or other notices permitted or required by
law when no such notice shall be required), Landlord and its authorized agents,
employees, and contractors may enter the Premises at reasonable hours to: (i)
inspect the same; (ii) determine Tenant's compliance with its obligations
hereunder; (iii) exhibit the same to prospective purchasers or lenders or,
during the final nine (9) months of the Term, exhibit the same to prospective
tenants; (iv) supply any services to be provided by Landlord hereunder; (v) post
notices of nonresponsibility or other notices
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permitted or required by law; (vi) make repairs, improvements or alterations, or
perform maintenance in or to, the Premises or any other portion of Bay Center,
including Building systems; and (vii) perform such other functions as Landlord
deems reasonably necessary or desirable. Landlord may also grant access to the
Premises to government or utility representatives and bring and use on or about
the Premises such equipment as reasonably necessary to accomplish the purposes
of Landlord's entry. Landlord shall use reasonable good faith efforts to effect
all entries and perform all work hereunder in such manner as to minimize
interference with Tenant's use and occupancy of the Premises. Landlord shall
have and retain keys with which to unlock all of the doors in or to the Premises
(excluding Tenant's vaults, safes and similar secure areas designated in writing
by Tenant in advance), and Landlord shall have the right to use any and all
means which Landlord may deem proper in an emergency in order to obtain entry to
the Premises, including secure areas.
19.2. Tenant Waiver of Claims. Tenant waives any claim for damages
for any inconvenience to or interference with Tenant's business, or any loss of
occupancy or quiet enjoyment of the Premises, or any other loss, occasioned by
any entry effected or work performed in compliance with this Article 19, and
Tenant shall not be entitled to any abatement of Rent by reason of the exercise
of any such right of entry or performance of such work. No entry to the Premises
by Landlord or anyone acting under Landlord that is in compliance with this
Article 19 shall constitute a forcible or unlawful entry into, or a detainer of,
the Premises or an eviction, actual or constructive, of Tenant from the
Premises, or any portion thereof.
20. Default and Remedies.
20.1. Events of Default. The occurrence of any of the following
events shall constitute a default by Tenant under this Lease (but Landlord may
only exercise any of its remedies with respect to such default if such default
is not cured within the applicable time periods described in Section 20.2
below):
a. Nonpayment of Rent. Failure to pay any Rent when due.
b. Unpermitted Assignment. An assignment or sublease made
in contravention of any of the provisions of Article 17 above.
c. Abandonment. Abandonment of the Premises, with
"abandonment" having the meaning provided in California Civil Code Section
1951.3.
d. Other Obligations. Failure to perform or fulfill any
other obligation, covenant, condition or agreement under this Lease.
e. Bankruptcy and Insolvency. A general assignment by
Tenant for the benefit of creditors, any action or proceeding commenced by
Tenant under any insolvency or bankruptcy act or under any other statute or
regulation for protection from creditors, or any such action commenced against
Tenant and not discharged within sixty (60) days after the date of commencement;
the employment or appointment of a receiver or trustee to take possession of all
or substantially all of Tenant's assets or the Premises where possession is not
returned to Tenant within thirty (30) days; the attachment, execution or other
judicial seizure of all or substantially all of Tenant's assets or the Premises,
if such attachment or
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other seizure remains undismissed or undischarged for a period of fifteen (15)
days after the levy thereof; the admission by Tenant in writing of its inability
to pay its debts as they become due; or the filing by Tenant of a petition
seeking any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, the filing of a petition filed against Tenant in any such proceeding
if within thirty (30) days after the commencement of any such proceeding against
Tenant, such proceeding is not dismissed. For purposes of this Section 20.1(e),
"Tenant" means Tenant and any partner of Tenant, if Tenant is a partnership, or
any person or entity comprising Tenant, if Tenant is comprised of more than one
person or entity, or any guarantor of Tenant's obligations, or any of them,
under this Lease.
f. Building C Lease. Failure to perform or fulfill any
obligation, covenant, condition or agreement under the Building C Lease, where
the same continues beyond any notice and cure period called for under the
Building C Lease.
20.2. Notice to Tenant. Upon the occurrence of any default, Landlord
shall give Tenant notice thereof. Such notice shall replace rather than
supplement any equivalent or similar statutory notice, including any notices
required by California Code of Civil Procedure Section 1161 or any similar or
successor statute; and giving of such notice in the manner required by Article
28 shall replace and satisfy any service-of-notice procedures set forth in any
statute, including those required by California Code of Civil Procedure Section
1162 or any similar or successor statute. If a time period is specified below
for cure of such default, then Tenant may cure such default within such time
period. To the fullest extent allowed by law, Tenant hereby waives any right
under law now or hereinafter enacted to any other time period for cure of
default.
a. Nonpayment of Rent. For failure to pay Rent, within five
(5) days after Landlord's notice.
b. Other Obligations. For failure to perform any
obligation, covenant, condition or agreement under this Lease (other than
nonpayment of Rent, an assignment or subletting in violation of Article 17 or
Tenant's abandonment of the Premises) within twenty (20) days after Landlord's
notice or, if the failure is of a nature requiring more than 20 days to cure,
then such additional time as is reasonably necessary to cure such default, but
only if Tenant commences such cure within such twenty (20) day period and
thereafter diligently pursues such cure to completion.
c. No Cure Period. No cure period shall apply for any other
event of default specified in Section 20.1.
20.3. Remedies Upon Occurrence of Default. On the occurrence of a
default which Tenant fails to cure after notice and expiration of the time
period for cure, if any, specified in Section 20.2 above, Landlord shall have
the right either (i) to terminate this Lease and recover possession of the
Premises, or (ii) to continue this Lease in effect and enforce all Landlord's
rights and remedies under California Civil Code Section 1951.4 (by which
Landlord may recover Rent as it becomes due, subject to Tenant's right to assign
pursuant to Article 17). Landlord may store any property of Tenant located in
the Premises at Tenant's expense or otherwise dispose of such property in the
manner provided by law. To the extent permitted under Section 1951.4 of the
California Civil Code, if Landlord does not terminate this Lease, Tenant shall
in addition to continuing to pay all Rent when due, also pay Landlord's
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costs of attempting to relet the Premises, any repairs and alterations necessary
to prepare the Premises for such reletting, and brokerage commissions and
attorneys' fees incurred in connection therewith, less the rents, if any,
actually received from such reletting. Notwithstanding Landlord's election to
continue this Lease in effect, Landlord may at any time thereafter terminate
this Lease pursuant to this Section 20.3.
20.4. Damages Upon Termination. If and when Landlord terminates this
Lease pursuant to Section 20.3, Landlord may exercise all its rights and
remedies available under California Civil Code Section 1951.2, including the
right to recover from Tenant the worth at the time of award of the amount by
which the unpaid Rent for the balance of the Term after the time of award
exceeds the amount of such Rent loss that the Tenant proves could have been
reasonably avoided. As used herein and in Civil Code Section 1951.2, "time of
award" means the date of entry of any determination, order or judgment of any
court or other legally constituted body determining the amount recoverable.
20.5. Computation of Certain Rent for Purposes of Default. For
purposes of computing unpaid Rent pursuant to Section 20.4 above, Escalation
Rent for the balance of the Term shall be determined by averaging the amounts
paid by Tenant as Escalation Rent for the Fiscal Years prior to the year in
which the default occurred (or, if the prior year is the Base Year or such
default occurs during the Base Year, Escalation Rent shall be based on
Landlord's operating budget for the Building for the Base Year), increasing such
average amount for each Fiscal Year (or portion thereof) remaining in the
balance of the Term at a per annum compounded rate equal to the mean average
rate of increase for the preceding five (5) calendar years in the United States
Department of Labor, Bureau of Labor Statistics, Consumer Price Index (All Urban
Consumers, All Items, 1982-1984 = 100) for the Metropolitan Area of which San
Francisco, California, is a part, and adding together the resulting amounts. If
such Index is discontinued or revised, such computation shall be made by
reference to the index designated as the successor or substitute index by the
United States Department of Labor, Bureau of Labor Statistics, or its successor
agency, and if none is designated, by a comparable index as determined by
Landlord in its sole discretion, which would likely achieve a comparable result
to that achieved by the use of the Consumer Price Index. If the base year of the
Consumer Price Index is changed, then the conversion factor specified by the
Bureau, or successor agency, shall be utilized to determine the Consumer Price
Index.
20.6. Landlord's Right to Cure Defaults. If Tenant fails to pay Rent
(other than Base Rent and Escalation Rent) required to be paid by it hereunder,
or fails to perform any other obligation under this Lease, and Tenant fails to
cure such default within the applicable cure period, if any, specified in
Section 20.2 above, then Landlord may, without waiving any of Landlord's rights
in connection therewith or releasing Tenant from any of its obligations or such
default, make any such payment or perform such other obligation on behalf of
Tenant. All payments so made by Landlord, and all costs and expenses incurred by
Landlord to perform such obligations, shall be due and payable by Tenant as Rent
immediately upon receipt of Landlord's demand therefor.
20.7. Remedies Cumulative. The rights and remedies of Landlord under
this Lease are cumulative and in addition to, and not in lieu of, any other
rights and remedies available to Landlord at law or in equity. Landlord's
pursuit of any such right or remedy shall not constitute a waiver or election of
remedies with respect to any other right or remedy.
21. Subordination, Attornment and Nondisturbance.
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21.1. Subordination and Attornment. This Lease and all of Tenant's
rights hereunder shall be subordinate to any ground lease or underlying lease,
and the lien of any mortgage, deed of trust, or any other security instrument
now or hereafter affecting or encumbering Bay Center, or any part thereof or
interest therein, and to any and all advances made on the security thereof or
Landlord's interest therein, and to all renewals, modifications, consolidations,
replacements and extensions thereof (an "encumbrance", the holder of the
beneficial interest thereunder being referred to as an "encumbrancer"). An
encumbrancer may, however, subordinate its encumbrance to this Lease, and if an
encumbrancer so elects by notice to Tenant, this Lease shall be deemed prior to
such encumbrance. If any encumbrance to which this Lease is subordinate is
foreclosed, or a deed in lieu of foreclosure is given to the encumbrancer
thereunder, Tenant shall attorn to the purchaser at the foreclosure sale or to
the grantee under the deed in lieu of foreclosure; and if any encumbrance
consisting of a ground lease or underlying lease to which this Lease is
subordinate is terminated, Tenant shall attorn to the lessor thereof. Tenant
shall execute, acknowledge and deliver in the form requested by Landlord or any
encumbrancer, any documents required to evidence or effectuate the subordination
hereunder, or to make this Lease prior to the lien of any encumbrance, or to
evidence such attornment, so long as any such document contains language
reasonably requested by such party agreeing that Tenant's rights under this
Lease shall not be disturbed so long as Tenant is not in default under this
Lease.
21.2. Nondisturbance. If any encumbrance to which this Lease is
subordinate is foreclosed, or a deed in lieu of foreclosure is given to the
encumbrancer thereunder, or if any encumbrance consisting of a ground lease or
underlying lease to which this Lease is subordinate is terminated, this Lease
shall not terminate, and the rights and possession of Tenant under this Lease
shall not be disturbed if (i) no default by Tenant then exists under this Lease;
(ii) Tenant attorns to the purchaser, grantee, or successor lessor as provided
in Section 21.1 above or, if requested, enters into a new lease for the balance
of the Term upon the same terms and provisions contained in this Lease; and
(iii) Tenant, upon the request of such encumbrancer, enters into a written
agreement in a form reasonably acceptable to such encumbrancer with respect to
subordination, attornment and non-disturbance.
21.3 Existing Lender. Landlord shall use reasonable efforts to
obtain a reasonable non-disturbance agreement from the existing beneficiary
under the deed of trust encumbering Bay Center as of the date of this Lease. If
Landlord is unable to obtain such non-disturbance agreement within thirty (30)
days after the date of this Lease, then Tenant's sole remedy shall be to
terminate this Lease by delivering written notice to Landlord on or before a
date forty (40) days after the date of this Lease, but Tenant shall have no
right to deliver such notice if Landlord obtains such non-disturbance agreement
before Tenant delivers such notice. If Tenant fails to deliver such notice
within such period, then Tenant shall have no further rights or remedies with
respect to Landlord's failure to obtain such non-disturbance agreement. If
Tenant timely and properly delivers such notice, then this Lease shall
automatically terminate as of the date of such notice and neither Landlord nor
Tenant shall have any further rights or obligations under this Lease.
22. Sale or Transfer by Landlord; Lease Non-Recourse.
22.1. Release of Landlord on Transfer. Landlord may at any time
transfer, in whole or in part, its right, title and interest under this Lease
and in Bay Center, or any portion thereof. If the original Landlord hereunder,
or any successor to such original Landlord, transfers (by sale, assignment or
otherwise) its right, title or interest in the Building, then, upon assumption
of all future obligations under
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this Lease by Landlord's transferee, all liabilities and obligations of the
original Landlord or such successor under this Lease accruing after such
transfer shall terminate, the original Landlord or such successor shall
automatically be released therefrom, and thereupon all such liabilities and
obligations shall be binding upon the new owner. Tenant shall attorn to each
such new owner.
22.2. Lease Nonrecourse to Landlord. Landlord shall in no event be
personally liable under this Lease, and Tenant shall look solely to Landlord's
interest in Bay Center (including proceeds from sale, refinance, or insurance),
for recovery of any damages for breach of this Lease by Landlord or on any
judgment in connection therewith. None of the persons or entities comprising or
representing Landlord (whether partners, shareholders, officers, directors,
trustees, employees, beneficiaries, agents or otherwise) shall ever be
personally liable under this Lease or liable for any such damages or judgment
and Tenant shall have no right to effect any levy of execution against any
assets of such persons or entities on account of any such liability or judgment.
Any lien obtained by Tenant to enforce any such judgment, and any levy of
execution thereon, shall be subject and subordinate to all encumbrances as
specified in Article 21 above existing as of the date that Tenant obtains and
records a proper and legal judgment lien against Bay Center. If Landlord fails
to perform any obligation of Landlord under this Lease, and such default is not
cured within twenty (20) days after receipt of written notice from Tenant of
such default, or, if the failure is of a nature requiring more than 20 days to
cure, then such additional time as is reasonably necessary to cure such default,
but only if Landlord commences such cure within such twenty (20) day period and
thereafter diligently pursues such cure to completion, then, subject to the
provisions of this Section 22.2, Tenant shall have the right to exercise any
rights or remedies available to Tenant at law or in equity
23. Estoppel Certificate.
23.1. Procedure and Content. From time to time, and within fifteen
(15) days after written notice by Landlord, Tenant shall execute, acknowledge,
and deliver to Landlord a certificate as specified by Landlord certifying: (i)
that this Lease is unmodified and in full force and effect (or, if there have
been modifications, that this Lease is in full force and effect, as modified,
and identifying each modification); (ii) the Commencement Date and Expiration
Date; (iii) that Tenant has accepted the Premises (or the reasons Tenant has not
accepted the Premises), and if Landlord has agreed to make any alterations or
improvements to the Premises, that Landlord has properly completed such
alterations or improvements (or the reasons why Landlord has not done so); (iv)
the amount of the Base Rent and current Escalation Rent, if any, and the date to
which such Rent has been paid; (v) that Tenant has not committed any event of
default, except as to any events of default specified in the certificate, and
whether there are any existing defenses against the enforcement of Tenant's
obligations under this Lease; (vi) that no default of Landlord is claimed by
Tenant, except as to any defaults specified in the certificate; and (vii) such
other information as may be reasonably requested by Landlord.
23.2. Effect of Certificate. Any such certificate may be relied upon
by any prospective purchaser of any part or interest in Bay Center or
encumbrancer (as defined in Section 21.1) and, at Landlord's request, Tenant
shall deliver such certificate to Landlord and/or to any such entity. In
addition, at Landlord's request, Tenant shall provide to Landlord for delivery
to any such entity such non- confidential public information, including
financial information, that may reasonably be requested by any such entity. Any
such certificate shall constitute a waiver by Tenant of any claims Tenant may
have in contravention to the information contained in such certificate and
Tenant shall be estopped from asserting
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any such claim. If Tenant fails or refuses to give a certificate hereunder
within the time period herein specified, then the information contained in such
certificate as submitted by Landlord shall be deemed correct for all purposes,
but Landlord shall have the right to treat such failure or refusal as a default
by Tenant.
24. No Light, Air, or View Easement. Nothing contained in this Lease
shall be deemed, either expressly or by implication, to create any easement for
light and air or access to any view. Any diminution or shutting off of light,
air or view to or from the Premises by any structure which now exists or which
may hereafter be erected, whether by Landlord or any other person, shall in no
way affect this Lease or Tenant's obligations hereunder, entitle Tenant to any
reduction of Rent, or impose any liability on Landlord.
25. Holding Over. No holding over by Tenant shall operate to extend the
Term. If Tenant remains in possession of the Premises after expiration or
termination of this Lease, unless otherwise agreed by Landlord in writing, then
(i) Tenant shall become a tenant at sufferance upon all the applicable terms and
conditions of this Lease, except that Base Rent shall be increased to equal 150%
of the Base Rent then in effect; (ii) Tenant shall indemnify, defend, protect
and hold harmless Landlord, and any tenant to whom Landlord has leased all or
part of the Premises, from any and all liability, loss, damages, costs or
expense (including loss of Rent to Landlord or additional rent payable by such
tenant and reasonable attorneys' fees) suffered or incurred by either Landlord
or such tenant resulting from Tenant's failure timely to vacate the Premises;
and (iii) such holding over by Tenant shall constitute a default by Tenant.
26. Security Deposit.
26.1 General Procedures. At any time during the Term, within three
(3) days after Landlord's written request, which request may be made in
Landlord's sole and absolute discretion, Tenant shall deposit with Landlord the
Security Deposit, in an amount equal to the monthly Base Rent as of the date of
Landlord's request. The Security Deposit shall be held by Landlord as security
for the performance by Tenant of all its obligations under this Lease. If Tenant
fails to pay any Rent due hereunder, or otherwise commits a default with respect
to any provision of this Lease, Landlord may use, apply or retain all or any
portion of the Security Deposit for the payment of any such Rent or for the
payment of any other amounts expended or incurred by Landlord by reason of
Tenant's default, or to compensate Landlord for any loss or damage which
Landlord may incur thereby (and in this regard Tenant hereby waives the
provisions of California Civil Code Section 1950.7(c) and any similar or
successor statute providing that Landlord may claim from a security deposit only
those sums reasonably necessary to remedy defaults in the payment of Rent, to
repair damage caused by Tenant, or to clean the Premises). Exercise by Landlord
of its rights hereunder shall not constitute a waiver of, or relieve Tenant from
any liability for, any default. If any portion of a cash Security Deposit is so
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 an amount equal to the monthly Base Rent as of the date of Landlord's
request. The Security Deposit, or so much thereof as has not theretofore been
applied by Landlord to cure or remedy a default by Tenant or to hold for the
purpose of restoring the Premises to the condition required by this Lease, shall
be returned, without interest, to Tenant (or, at Landlord's option, to the last
assignee, if any, of Tenant's interest under this Lease) within thirty (30) days
after the later of (i) the date of expiration or earlier termination of this
Lease, or (ii) vacation of the Premises by Tenant. Landlord's
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receipt and retention of the Security Deposit shall not create any trust or
fiduciary relationship between Landlord and Tenant and Landlord need not keep
the Security Deposit separate from its general accounts. Upon termination of the
original Landlord's (or any successor owner's) interest in the Premises, the
original Landlord (or such successor) shall be released from further liability
with respect to the Security Deposit upon the original Landlord's (or such
successor's) compliance with California Civil Code Section 1950.7(d), or
successor statute.
27. Waiver. Failure of Landlord to declare a default by Tenant upon
occurrence thereof, or delay in taking any action in connection therewith, shall
not waive such default, but Landlord shall have the right to declare such
default at any time after its occurrence. To be effective, a waiver of any
provision of this Lease, or any default, shall be in writing and signed by the
waiving party. Any waiver hereunder shall not be deemed a waiver of subsequent
performance of any such provision or subsequent defaults. The subsequent
acceptance of Rent hereunder, or endorsement of any check by Landlord, shall not
be deemed to constitute an accord and satisfaction or a waiver of any preceding
default by Tenant, except as to the particular Rent so accepted, regardless of
Landlord's knowledge of the preceding default at the time of acceptance of the
Rent. No course of conduct between Landlord and Tenant, and no acceptance of the
keys to or possession of the Premises by Landlord before the Expiration Date
shall constitute a waiver of any provision of this Lease or of any default, or
operate as a surrender of this Lease.
28. Notices and Consents; Tenant's Agent for Service. All notices,
approvals, consents, demands and other communications from one party to the
other given pursuant to this Lease shall be in writing and shall be made by
personal delivery, by use of a reputable overnight courier service or by deposit
in the United States mail, certified, registered or Express, postage prepaid and
return receipt requested. Notices shall be addressed if to Landlord, to
Landlord's Address, and if to Tenant, to Tenant's Address. Landlord and Tenant
may each change their respective Addresses from time to time by giving written
notice to the other of such change in accordance with the terms of this Article
28, at least ten (10) days before such change is to be effected. Any notice
given in accordance with this Article 28 shall be deemed to have been given (i)
on the date of personal delivery or (ii) on the date of delivery (as shown by
the return receipt or other delivery record) if sent by courier service or
mailed.
29. Tenant's Authority. Tenant, and each of the persons executing this
Lease on behalf of Tenant, represent and warrant that (i) Tenant is a duly
formed, authorized and existing corporation, partnership or trust (as the case
may be), (ii) Tenant is qualified to do business in California, (iii) Tenant has
the full right and authority to enter into this Lease and to perform all of
Tenant's obligations hereunder, and (iv) each person signing on behalf of Tenant
is authorized to do so. Tenant shall deliver to Landlord, upon Landlord's
request, such certificates, resolutions, or other written assurances authorizing
Tenant's execution and delivery of this Lease as is reasonably requested by
Landlord from time to time or at any time in order for Landlord to assess
Tenant's then authority.
30. Automobile Parking.
30.1. Tenant's Appurtenant Parking Rights. Subject to the terms and
conditions contained in this Article 30, Landlord shall make available to Tenant
parking spaces in the parking areas designated by Landlord for parking in Bay
Center, including the Enclosed Parking Area (such areas being hereinafter
collectively referred to as the "Parking Facility"). For purposes of this Lease,
the term "Minimum Spaces" shall mean an amount equal to one (1) parking space
for each 250 square feet of
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useable area leased by Tenant in Building A. Tenant shall at all times provide
to Landlord, upon Landlord's request, a list of all of the vehicle makes, colors
and license plate numbers of all vehicles of Tenant's employees. Tenant's use of
the parking spaces to be made available to Tenant shall be on a non-exclusive
basis in common with other tenants in the Bay Center; and parking in such spaces
shall be on a first-come-first-served, unassigned, non-reserved basis. The
parking spaces to be made available to Tenant shall be in locations designated
by Landlord; and Landlord reserves the right to designate different locations
from time to time without any liability to Tenant and Tenant agrees that any
such designation of a different location shall not give rise to any claims or
offset against Landlord hereunder. Without limiting the generality of the
foregoing, Landlord may restrict certain portions of the Parking Facility for
the exclusive use of one or more tenants of Bay Center (and their employees and
agents) and may designate other areas in the Parking Facility to be used at
large only by licensees, customers and invitees of tenants of Bay Center; and
Landlord may in its sole and absolute discretion restrict or prohibit the use of
the Parking Facility by any vehicles other than passenger automobiles such as
full-sized vans or trucks. Notwithstanding the foregoing, Landlord shall not
exercise any of the foregoing rights in a manner which would permanently reduce
the total number of parking spaces available to Tenant on a non-exclusive basis
to a number less than the Minimum Spaces, or in a manner which would materially
and permanently inconvenience Tenant with respect to its access to the Parking
Facility. Tenant shall not permit any vehicles belonging to Tenant or any of
Tenant's subtenants or any of their respective employees, agents, customers,
contractors or invitees to be loaded, unloaded or parked in areas other than
those designated by Landlord for such activities. In its use of the Parking
Facilities Tenant shall comply (and shall cause each of its subtenants and each
of their respective employees, agents, customers, contractors and invitees to
comply) with any and all parking regulations and rules established from time to
time by Landlord or Landlord's parking operator. Landlord or Landlord's parking
operator shall have the right to cause to be removed any vehicles of Tenant, its
subtenants or any of their respective employees, agents, licensees, customers or
invitees, that are parked in violation of any of the provisions of this Article
30 or of the regulations and rules then established by Landlord, and to charge
all of the costs incurred by Landlord in connection with such removal to Tenant
and Tenant shall pay the amount of all such costs to Landlord as additional rent
within five (5) days after receipt of written demand from Landlord. Any such
removal shall be without liability of any kind to Landlord or Landlord's parking
operator or their respective employees or agents; and Tenant shall protect,
defend, indemnify and hold Landlord and Landlord's parking operator and their
respective employees and agents from and against any and all claims, losses,
damages, demands, costs and expenses (including reasonable attorneys' fees)
which may be asserted against or incurred by any of such indemnified parties
arising out of or in connection with such removal of any automobiles, except to
the extent that such claims, losses, damages, demands, costs and expenses arise
out of the gross negligence or willful misconduct of Landlord, its agents,
employees, or contractors.
30.2. Parking Fee. During the Term, Landlord shall impose no charge
on Tenant for use of the Parking Facility; provided, however, if any
governmental authority having jurisdiction charges Landlord a fee for parking
during the Term, Landlord shall have the right to include as Operating Expenses
such parking fees.
30.3. Allocation of Risk. Landlord shall have no obligation to
monitor the use of the Parking Facility. The use of the Parking Facility by the
employees of Tenant and its subtenants shall be at the sole risk of Tenant, its
subtenants and their respective employees. Except to the extent caused by the
gross negligence or willful misconduct of Landlord, its agents, employees, or
contractors, Landlord
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shall have no responsibility or liability for any injury or damage to any person
or property by or as a result of the use of the Parking Facility by Tenant and
its subtenants and their respective employees, whether by theft, collision,
criminal activity, or otherwise; and Tenant hereby assumes, for itself, its
subtenants and their respective employees (without the obligation to indemnify
Landlord), all risks associated with any such occurrences in or about the
Parking Facility.
31. Tenant to Furnish Financial Statements. In order to induce Landlord
to enter into this Lease, Tenant agrees that it shall promptly deliver to
Landlord, from time to time, upon Landlord's written request, financial
statements (including a balance sheet and statement of income and expenses on an
annualized basis) reflecting Tenant's then current financial condition. Such
statements shall be delivered to Landlord within fifteen (15) days after
Tenant's receipt of Landlord's request. Tenant represents and warrants that all
financial statements furnished by Tenant to Landlord in connection with this
Lease are and shall be true, correct and complete in all respects. So long as
Tenant is a public company, Tenant shall have the right to satisfy the foregoing
requirement by delivering to Landlord copies of Tenant's most recent reports
filed with the SEC.
32. Tenant's Signs. Subject to the express provisions of this Section
32, without Landlord's prior written consent, which Landlord may withhold in its
sole discretion, Tenant shall not place on the Premises or on the Building any
exterior signs nor any interior signs that are visible from the exterior of the
Premises or Building. During the Initial Term, Tenant shall have the right to
continue to maintain, at Tenant's sole cost and expense, in compliance with all
applicable governmental rules, laws and regulations, the existing signage on the
exterior of the Building (the "Existing Signage"). Tenant shall pay all costs
and expenses relating to the Existing Signage and any sign approved by Landlord,
including without limitation, the cost of the installation, design construction,
transportation and maintenance of the sign. Unless the parties otherwise
mutually agree in their sole and absolute discretion, on the last day of the
Term or the earlier termination of this Lease, Tenant, at its sole cost and
expense, shall remove all signs (including the Existing Signage) and repair any
damage to the Building caused by such removal. If Tenant exercises its option to
extend the Term pursuant to Section 3.2 of this Lease, then concurrent with the
determination of the Fair Market Rent of the Premises pursuant to Section 3.2,
Landlord and Tenant shall determine the rental value of the Existing Signage
(the "Signage Value") in accordance with the provisions of Section 3.2 of this
Lease. For purposes of determining the Signage Value, the appraisers appointed
under Section 3.2 shall not value the Existing Signage as "free standing
advertising" unless it is customary at the time of such appraisal to value
leasehold signage in such manner. Subject to the foregoing sentence, the Signage
Value shall be determined to reflect the value of such Existing Signage to
Tenant as adjunct to Tenant's occupancy of the Premises and enhancing the value
of Tenant's occupancy of the Premises. If Tenant approves the Signage Value in
writing within ten (10) days after determination of the Signage Value in
accordance with the foregoing procedure, then, during the Extended Term, Tenant
shall have the right to continue to maintain, at Tenant's sole cost and expense,
in compliance with all applicable governmental rules, laws and regulations, the
Existing Signage. If Tenant does not approve the Signage Value in writing within
ten (10) days after determination of the Signage Value in accordance with the
foregoing procedure, then Landlord shall have the right to remove, at Tenant's
sole cost and expense, all Existing Signage.
33. Miscellaneous.
33.1. No Joint Venture. This Lease does not create any partnership
or joint venture or
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similar relationship between Landlord and Tenant.
33.2. Successors and Assigns. Subject to the provisions of Article
17 regarding assignment, all of the provisions, terms, covenants and conditions
contained in this Lease shall bind, and inure to the benefit of, the parties and
their respective successors and assigns.
33.3. Construction and Interpretation. The words "Landlord" and
"Tenant" include the plural as well as the singular. If there is more than one
person comprising Tenant, the obligations under this Lease imposed on Tenant are
joint and several. References to a party or parties refers to Landlord or
Tenant, or both, as the context may require. The captions preceding the
Articles, Sections and subsections of this Lease are inserted solely for
convenience of reference and shall have no effect upon, and shall be disregarded
in connection with, the construction and interpretation of this Lease. Use in
this Lease of the words "including", "such as", or words of similar import when
following a general matter, shall not be construed to limit such matter to the
enumerated items or matters whether or not language of nonlimitation (such as
"without limitation") is used with reference thereto. All provisions of this
Lease have been negotiated at arm's length between the parties and after advice
by counsel and other representatives chosen by each party and the parties are
fully informed with respect thereto. Therefore, this Lease shall not be
construed for or against either party by reason of the authorship or alleged
authorship of any provision hereof, or by reason of the status of the parties as
Landlord or Tenant, and the provisions of this Lease and the Exhibits hereto
shall be construed as a whole according to their common meaning in order to
effectuate the intent of the parties under the terms of this Lease.
33.4. Severability. If any provision of this Lease, or the
application thereof to any person or circumstance, is determined to be illegal,
invalid or unenforceable, the remainder of this Lease, or its application to
persons or circumstances other than those as to which it is illegal, invalid or
unenforceable, shall not be affected thereby and shall remain in full force and
effect, unless enforcement of this Lease as so invalidated would be unreasonable
or grossly inequitable under the circumstances, or would frustrate the purposes
of this Lease.
33.5. Entire Agreement; Amendments. This Lease, together with the
Exhibits hereto and any Addenda identified on the Basic Lease Information,
contains all the representations and the entire agreement between the parties
with respect to the subject matter hereof and any prior negotiations,
correspondence, memoranda, agreements, representations or warranties are
replaced in total by this Lease, the Exhibits hereto and such Addenda. Neither
Landlord nor Landlord's agents have made any warranties or representations with
respect to the Premises or any other portion of Bay Center, except as expressly
set forth in this Lease. This Lease may be modified or amended only by an
agreement in writing signed by both parties.
33.6. Governing Law. This Lease shall be governed by and construed
pursuant to the laws of the State of California.
33.7. Litigation Expenses. If either party brings any action or
proceeding against the other (including any cross-complaint, counterclaim or
third party claim) to enforce or interpret this Lease or otherwise arising out
of this Lease, the prevailing party in such action or proceeding shall be
entitled to its costs and expenses of suit, including reasonable attorneys' fees
and accountants' fees.
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33.8. Standards of Performance and Approvals. Unless otherwise
provided in this Lease, (i) each party shall act in a reasonable manner in
exercising or undertaking its rights, duties and obligations under this Lease
and (ii) whenever approval, consent or satisfaction (collectively, an
"approval") is required of a party pursuant to this Lease or an Exhibit hereto,
such approval shall not be unreasonably withheld or delayed. Unless provision is
made for a specific time period, approval (or disapproval) shall be given within
twenty (20) days after receipt of the request for approval. Nothing contained in
this Lease shall, however, limit the right of a party to act or exercise its
business judgment in a subjective manner with respect to any matter as to which
it has been (A) specifically granted such right, (B) granted the right to act in
its sole discretion or sole judgment, or (C) granted the right to make a
subjective judgment hereunder, whether "objectively" reasonable under the
circumstances and any such exercise shall not be deemed inconsistent with any
covenant of good faith and fair dealing implied by law to be part of this Lease.
The parties have set forth in this Lease their entire understanding with respect
to the terms, covenants, conditions and standards pursuant to which their
obligations are to be judged and their performance measured, including the
provisions of Article 17 with respect to assignments and sublettings.
33.9. Brokers. Landlord and Tenant each represent and warrant to the
other that no broker, agent, or finder has procured or was involved in the
negotiation of this Lease and no such broker, agent or finder is or may be
entitled to a commission or compensation in connection with this Lease. Landlord
and Tenant shall each indemnify, defend, protect and hold the other harmless
from and against any and all liability, loss, damages, claims, costs and
expenses (including reasonable attorneys' fees) resulting from claims that may
be asserted against the indemnified party in breach of the foregoing warranty
and representation.
33.10. Memorandum of Lease. Tenant shall, upon request of Landlord,
execute, acknowledge and deliver a short form memorandum of this Lease (and any
amendment hereto) in form suitable for recording. In no event shall this Lease
or any memorandum thereof be recorded by Tenant.
33.11. Quiet Enjoyment. Upon paying the Rent and performing all its
obligations under this Lease, Tenant may peacefully and quietly enjoy the
Premises during the Term as against all persons or entities claiming by or
through Landlord, subject, however, to the provisions of this Lease and any
encumbrances as specified in Article 21.
33.12. Surrender of Premises. Upon the Expiration Date or earlier
termination of this Lease, Tenant shall quietly and peacefully surrender the
Premises to Landlord in the condition specified in Article 9 above. On or before
the Expiration Date or earlier termination of this Lease, Tenant shall remove
all of its personal property from the Premises and repair at its cost and
expense all damage to the Premises or Bay Center caused by such removal. All
personal property of Tenant not removed hereunder shall be deemed, at Landlord's
option, to be abandoned by Tenant and Landlord may store such property in
Tenant's name at Tenant's expense and/or dispose of the same in any manner
permitted by law.
33.13. Building Directory. Landlord shall reserve on the Building
directory a reasonable number of Building Directory Spaces for purposes of
identifying Tenant's name, divisions and/or principal employees. All costs for
the initial strip of names shall be borne by Landlord and all costs for
replacement of such strips, and for installation and removal of the strips,
shall be borne by Tenant.
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33.14. Name of Building; Address. Tenant shall not use the name of
the Building or Bay Center for any purpose other than as the address of the
business conducted by Tenant in the Premises. Tenant shall, in connection with
all correspondence, mail or deliveries made to or from the Premises, use the
official Building address specified from time to time by Landlord.
33.15. Exhibits. The Exhibits specified in the Basic Lease
Information are by this reference made a part hereof.
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33.16. Time of the Essence. Time is of the essence of this Lease and
of the performance of each of the provisions contained in this Lease.
IN WITNESS WHEREOF, the parties have executed this Lease as of the
Lease Date.
LANDLORD:
JS BAY CENTER ASSOCIATES,
a California limited partnership
By: Martin/Bay Center Associates,
a California limited partnership
Its: General Partner
By: ______________________
General Partner
TENANT:
SYBASE, INC.,
a Delaware corporation
By: /s/ Mitchell L. Gaynor
---------------------------------
Its: VP, General Counsel & Secretary
---------------------------------
By: /s/Hope Spadora
---------------------------------
Its: Director, Real Estate
---------------------------------
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EXHIBIT A-1
FIRST FLOOR PLANS OF PREMISES
<PAGE> 50
EXHIBIT A-2
FOURTH FLOOR PLANS OF PREMISES
<PAGE> 51
EXHIBIT A-3
FIFTH FLOOR PLANS OF PREMISES
<PAGE> 52
EXHIBIT A-4
ENCLOSED PARKING AREA
<PAGE> 53
EXHIBIT B
DESCRIPTION OF LAND
<PAGE> 54
EXHIBIT C
INTENTIONALLY OMITTED
<PAGE> 55
EXHIBIT D
RULES AND REGULATIONS
1. The sidewalks, entrances, lobby, elevators, stairways and public
corridors shall be used only as a means of ingress and egrees and shall remain
unobstructed at all times. The entrance and exit doors of all suites are to be
kept closed at all times except as required for orderly passage to and from a
suite. Loitering in any part of the Building or obstruction of any means of
ingress or egress shall not be permitted. Doors and windows shall not be covered
or obstructed.
2. Plumbing fixtures shall not be used for any purposes other than
those for which they were constructed, and no rubbish, newspapers, trash or
other substances of any kind shall be thrown into them. Walls, floors and
ceilings shall not be defaced in any way and no one shall be permitted to mark,
drive nails, screws or drill into, paint, or in any way mar any Building
surface, except that pictures, certificates, licenses and similar items normally
used in Tenant's business may be carefully attached to the walls by Tenant in a
manner to be prescribed by Landlord. Upon removal of such items by Tenant any
damage to the walls or other surfaces, except minor nail holes, shall be
repaired by Tenant.
3. No awning, shade, sign, advertisement or notice shall be inscribed,
painted, displayed or affixed on, in or to any window, door or balcony or any
other part of the outside or inside of the Building or the demised premises. No
window displays or other public displays shall be permitted without the prior
written consent of Landlord. All tenant identification on public corridor doors
beyond building standard will be installed by Landlord for Tenant but the cost
shall be paid by Tenant. No lettering or signs other than the name of Tenant
will be permitted on public corridor door with the size and type of letters to
be prescribed by Landlord. The directory of the Building will be provided for
the display and location of Tenant and Landlord reserves the right to exclude
all other names therefrom. All requests for listing on the building directory
shall be submitted to the office of Landlord in writing. Landlord reserves the
right to approve all listings on the Building directory. Landlord reserves the
right to approve all listing requests. Any change requested by Tenant of
Landlord of the name or names posted on directory, after initial posting, will
be charged to Tenant.
4. The cost of any special electrical circuits for items such as
copying machines, computers, microwaves, etc., shall be borne by Tenant unless
the same are part of the building standard improvements. Prior to installation
of equipment Tenant must receive written approval from Landlord.
5. The weight, size and position of all safes and other unusually
heavy objects used or placed in the Building shall be prescribed by Landlord
and shall, in all cases, stand on metal plates of such size as shall be
prescribed by Landlord. Tenant shall reimburse Landlord for the cost of
Landlord's architect or structural engineer in reviewing the weight and
locations of unusually heavy equipment. The repair of any damage done to the
Building or property therein by putting in or taking out or maintaining such
safes or other unusually heavy objects shall be paid for by Tenant.
<PAGE> 56
6. All freight, furniture, fixtures and other personal property shall
be moved into, within and out of the Building at times designated by and under
the supervision of Landlord and in accordance with such regulations as may be
posted in the office of the Building manager. In no event will Landlord be
responsible for any loss or damage to such freight, furniture, fixtures or
personal property from any cause except for the willful misconduct of Landlord,
its agents, employees or contractors or a breach of Landlord's obligations
under this Lease.
7. No improper noises, vibrations or odors will be permitted in the
Building, nor shall any person be permitted to interfere in any way with
tenants or those having business with them. No person will be permitted to
bring or keep within the Building any animal, bird or bicycle or any toxic or
flammable substances without Landlord's prior permission, provided, however,
that seeing eye dogs and/or other animals used to assist the physically impaired
are allowed in the Building. No person shall throw trash, refuse, cigarrettes
or other substances of any kind any place within or out of the Building except
in the refuse containers provided therefor. Landlord reserves the right to
exclude or expel from the Building any person who, in the judgment of Landlord
is intoxicated or under the influence of liquor or drugs or who shall in any
manner do any act in violation of the rules and regulations of the Building.
8. All re-keying of office doors or changes to the card access system,
after occupancy, will be at the expense of Tenant. Tenant shall not re-key any
doors, add additional locks to doors or change the card access system in any way
without making prior arrangements with Landlord.
9. Tenant will not install or use any window coverings except those
provided by Landlord, nor shall Tenant use the balconies, if any, for storage,
barbecues, drying of laundry or any other activity which would detract from the
appearance of the Building or interfere in any way with the use of the Building
by other tenants.
10. If Tenant uses the Premises after regular business hours or on
non-business days, Tenant shall lock any entrance doors to the Building used by
Tenant or take such other steps as are necessary to secure the Building's doors
immediately after entering or leaving the Building.
11. Tenant shall provide and cause all Tenant's employees to use
protective floor mats under all desk chairs used in the Premises.
12. If Tenant requires telegraphic, telephonic, burglar or of similar
services, it shall first obtain, and comply with, Landlord's instructions in
their installation.
13. Tenant shall not waste electricity, water or air-conditioning and
agrees to cooperate fully with Landlord to assure the most effective operation
of the Building's heating and air-conditioning systems.
14. Tenant shall not install any radio or television antenna,
loudspeaker or other device on the roof or exterior walls of the Building.
Tenant shall not interfere with radio or
<PAGE> 57
television broadcasting or reception from or in the Building elsewhere.
Canvassing, soliciting and distribution of handbills or any other written
material, and peddling in the Building, are prohibited, and each tenant shall
cooperate to prevent same.
15. Tenant shall not use in any space or in the public halls of the
Building 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.
16. Tenant shall not park its vehicles in any parking areas designated by
Landlord as areas for parking by visitors to the building. Tenant shall not
leave vehicles in the Building parking areas overnight nor park any vehicles in
the Building parking areas other than automobiles, motorcycles, motor driven or
non-motor driven bicycles of four-wheeled trucks. Landlord may, in its sole
discretion, designate separate areas for bicycles and motorcycles.
17. 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.
18. Tenant shall be deemed to have read these Rules and Regulations and
to have agreed to abide by them as a condition to his occupancy of the Premises.
<PAGE> 58
EXHIBIT E
BUILDING STANDARD
SERVICES
Janitorial service will be provided five (5) days a week, Monday through Friday.
Monday through Friday
1. Empty all waste containers
2. Dust all surfaces cleared of work or equipment.
3. Vacuum all carpeted areas
4. All tile areas to be swept
5. Clean all restrooms fixtures and floors
6. Empty/clean all ash urns
Weekly
1. Vacuum carpet with beater type vacuum cleaner.
Monthly
1. Damp mop tile floors.
Quarterly
1. Clean partition glass
Semi Annually
1. Strip and wax tile floors
2. Interior and exterior window washing.
3. Clean lighting fixtures and lamps
Annually
1. Carpet Cleaning
Additionally, replacement of florescent lamps or ballasts, spot carpet cleaning
and spot wall cleaning are performed on an as needed basis.
Any cleaning of lunchrooms, cafeterias, conference rooms, etc., shall be on a
special services basis (except with respect to the removal of trash from trash
receptacles or cleaning incidental to normal cleaning.)
<PAGE> 1
EXHIBIT 10.25
OFFICE LEASE
BUILDING C - BAY CENTER
Emeryville, California
LANDLORD
JS BAY CENTER ASSOCIATES
TENANT
SYBASE, INC.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. Definitions..............................................................................1
1.1. Terms Defined..................................................................1
1.2. Effect of Certain Defined Terms................................................5
2. Lease of Premises........................................................................5
2.1. Premises.......................................................................5
3. Term; Condition and Acceptance of Premises...............................................5
4. Rent.....................................................................................8
4.1. Obligation to Pay Base Rent....................................................8
4.2. Manner of Rent Payment.........................................................8
4.3. Additional Rent................................................................8
4.4. Late Payment of Rent; Interest.................................................9
5. Calculation and Payments of Escalation Rent..............................................9
5.1. Payment of Estimated Escalation Rent...........................................9
5.2. Escalation Rent Statement and Adjustment.......................................9
5.3. Proration for Partial Year....................................................10
6. Impositions Payable by Tenant...........................................................10
7. Use of Premises.........................................................................10
7.1. Permitted Use.................................................................10
7.2. No Violation of Legal and Insurance Requirements..............................10
7.3. Compliance with Legal, Insurance and Life Safety Requirements.................11
7.4. No Nuisance...................................................................11
7.5. Hazardous Substances..........................................................11
7.6. Special Provisions Relating to The Americans With Disabilities Act of 1990....13
8. Building Services.......................................................................14
8.1. Maintenance of Bay Center.....................................................14
8.2. Building Standard Services....................................................14
8.3. Interruption or Unavailability of Services....................................15
8.4. Tenant's Use of Excess Water..................................................15
8.5. Provision of Additional Services..............................................16
9. Maintenance of Premises.................................................................16
10. Alterations to Premises.................................................................16
10.1. Landlord Consent; Procedure..................................................16
</TABLE>
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<TABLE>
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10.2. General Requirements.........................................................16
10.3. Removal of Alterations.......................................................16
11. Liens..................................................................................17
12. Damage or Destruction..................................................................17
12.1. Obligation to Repair.........................................................17
12.2. Landlord's Election..........................................................17
12.3. Cost of Repairs..............................................................18
12.4. Damage at End of Term........................................................18
12.5. Waiver of Statutes...........................................................18
13. Eminent Domain.........................................................................18
13.1. Effect of Taking.............................................................18
13.2. Condemnation Proceeds........................................................19
13.3. Restoration of Premises......................................................19
13.4. Taking at End of Term........................................................19
13.5. Tenant Waiver................................................................19
14. Insurance..............................................................................19
14.1. Insurance....................................................................19
14.2. Form of Policies.............................................................20
15. Waiver of Subrogation Rights...........................................................20
16. Tenant's Waiver of Liability and Indemnification.......................................21
16.1. Waiver and Release...........................................................21
16.2. Indemnification of Landlord..................................................21
17. Assignment and Subletting..............................................................22
17.1. Compliance Required..........................................................22
17.2. Request by Tenant; Landlord Response.........................................22
17.3. Conditions for Landlord Approval.............................................23
17.4. Costs and Expenses...........................................................23
17.5. Payment of Excess Rent and Other Consideration...............................24
17.6. Assumption of Obligations; Further Restrictions on Subletting................24
17.7. No Release...................................................................24
17.8. No Encumbrance...............................................................24
18. Rules and Regulations..................................................................25
19. Entry of Premises by Landlord..........................................................25
19.1. Right to Enter...............................................................25
19.2. Tenant Waiver of Claims......................................................25
20. Default and Remedies...................................................................26
</TABLE>
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<TABLE>
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20.1. Events of Default............................................................26
20.2. Notice to Tenant.............................................................26
20.3. Remedies Upon Occurrence of Default..........................................27
20.4. Damages Upon Termination.....................................................27
20.5. Computation of Certain Rent for Purposes of Default..........................27
20.6. Landlord's Right to Cure Defaults............................................28
20.7. Remedies Cumulative..........................................................28
21. Subordination, Attornment and Nondisturbance...........................................28
21.1. Subordination and Attornment.................................................28
21.2. Nondisturbance...............................................................28
22. Sale or Transfer by Landlord; Lease Non-Recourse.......................................29
22.1. Release of Landlord on Transfer..............................................29
22.2. Lease Nonrecourse to Landlord................................................29
23. Estoppel Certificate...................................................................30
23.1. Procedure and Content........................................................30
23.2. Effect of Certificate........................................................30
24. No Light, Air, or View Easement........................................................30
25. Holding Over...........................................................................30
26. Security Deposit.......................................................................31
27. Waiver.................................................................................31
28. Notices and Consents; Tenant's Agent for Service.......................................31
29. Tenant's Authority.....................................................................32
30. Automobile Parking.....................................................................32
30.1. Tenant's Appurtenant Parking Rights..........................................32
30.2. Parking Fee..................................................................33
30.3. Allocation of Risk...........................................................33
31. Tenant to Furnish Financial Statements.................................................33
32. Tenant's Signs.........................................................................33
33. Miscellaneous..........................................................................34
33.1. No Joint Venture.............................................................34
33.2. Successors and Assigns.......................................................34
33.3. Construction and Interpretation..............................................34
33.4. Severability.................................................................35
</TABLE>
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<TABLE>
<S> <C>
33.5. Entire Agreement; Amendments.................................................35
33.6. Governing Law................................................................35
33.7. Litigation Expenses..........................................................35
33.8. Standards of Performance and Approvals.......................................35
33.9. Brokers......................................................................35
33.10. Memorandum of Lease..........................................................36
33.11. Quiet Enjoyment..............................................................36
33.12. Surrender of Premises........................................................36
33.13. Building Directory...........................................................36
33.14. Name of Building; Address....................................................36
33.15. Exhibits.....................................................................36
33.16. Time of the Essence..........................................................37
</TABLE>
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OFFICE LEASE
BUILDING C - BAY CENTER
6475 Christie Avenue
Emeryville, California
BASIC LEASE INFORMATION
Lease Date: March 17, 1998
Landlord: JS Bay Center Associates,
a California limited partnership
Tenant: Sybase, Inc., a Delaware corporation
Premises: The entire Building, as shown on the Floor Plan(s)
attached to this Lease as Exhibit A, containing
119,770 square feet of Rentable Area
Term: Five (5) years from the Commencement Date (the
"Initial Term"), subject to one (1) option to
extend the Term for one period of five (5) years
(the "Extended Term")
Commencement Date: June 16, 1998.
Expiration Date: June 15, 2003, subject to extension pursuant to
Section 3.2 of the Lease
Base Rent: PERIOD OF TERM AMOUNT
June 16, 1998 - $251,517.00/month
June 30, 2000
June 30, 2000 - $239,540.00/month
June 15, 2003
Entire Extended Term: The greater of: (i)
$239,540.00/month plus
Escalation Rent
payable during the
last month of the
Initial Term, or (ii)
95% of the fair market
rent for the Premises,
as determined in
accordance with
Section 3.2 of the
Lease.
Base Year: Calendar year 1998
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<PAGE> 7
Permitted Use: General office use, customer training and
education, software development
(but not manufacturing or assembly) and other
related or ancillary uses approved by Landlord in
Landlord's reasonable discretion.
Security Deposit: See Article 26 below
Tenant's Address: 6475 Christie Avenue
Emeryville, CA 94608
Attention: Director of Real Estate
And 6475 Christie Avenue
Emeryville, CA 94608
Attention: General Counsel
Landlord's Address: 100 Bush Street
Suite 2600
San Francisco, California 94104
Brokers:
Landlord's Broker: None
Tenant's Broker: None
Exhibits and Addenda:
Exhibit A: Floor Plan(s) of Premises
Exhibit B: Parcel Map
Exhibit C: INTENTIONALLY OMITTED
Exhibit D: Rules and Regulations of Bay Center
Exhibit E: Building Standard Services
The Basic Lease Information is incorporated into and made a part of the Lease.
Each reference in the Lease to any Basic Lease Information shall mean the
applicable information set forth above. In the event of any conflict between an
item in the Basic Lease Information and the Lease, the Lease shall control.
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OFFICE LEASE
THIS LEASE is made and entered into by and between Landlord and
Tenant as of the Lease Date. Landlord and Tenant hereby agree as follows:
1. Definitions.
1.1. Terms Defined. The following terms have the meanings set forth
below. Certain other terms have the meanings set forth in the Basic Lease
Information or elsewhere in this Lease.
Alterations: Alterations, additions or other improvements to
the Premises made by or on behalf of Tenant.
Base Operating Expenses and Base Real Estate Taxes: The
Operating Expenses and the Real Estate Taxes paid or incurred by Landlord in the
Base Year. If at any time during the Term Landlord elects to carry earthquake
insurance on the Building ("Earthquake Insurance"), then Base Operating Expenses
shall thereafter (until Landlord discontinues the Earthquake Insurance) be
increased to include the actual premiums paid by Landlord for such Earthquake
Insurance during the first full year that Landlord maintains such Earthquake
Insurance (such amount shall be referred to as the "Allowable Earthquake
Premium").
Bay Center: The Land, the Building, the Other Buildings, the
ground floor of the enclosed parking facility adjacent to the Land (and
identified on Exhibit A) (the "Enclosed Parking Area"), landscaping, paved
walkways, driveways and all other improvements at any time located on the Land,
and all appurtenances related thereto, commonly known as Bay Center.
Building: The office building consisting of a 5-story tower
and parking at grade located on the Land, commonly known as 6475 Christie
Avenue, Emeryville, California.
Building A Lease: That certain lease between Tenant and
Landlord, dated as of even date herewith, with respect to premises located in
Building A in Bay Center.
Escalation Rent: The total dollar increase, if any, in
Operating Expenses and in Real Estate Taxes, each as paid or incurred by
Landlord in each Fiscal Year, or part thereof, after the Base Year, over the
amount of Base Operating Expenses and Base Real Estate Taxes.
Fiscal Year: Each period of twelve (12) calendar months
following the last day of the Base Year.
Impositions: Taxes, assessments, charges, excises and levies,
business taxes, licenses, permits, inspection and other authorization fees,
transit development fees, assessments or charges for housing funds, service
payments in lieu of taxes and any other fees or charges of any kind at any time
levied, assessed, charged or imposed by any federal, state or local entity, (i)
upon, measured by or reasonably attributable to the cost or value of Tenant's
equipment, furniture, fixtures or other personal property located in the
Premises, or the cost or value of any Alterations; (ii) upon, or measured by,
any Rent payable hereunder, including any gross receipts tax; (iii) upon, with
respect to or by reason of the development,
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<PAGE> 9
possession, leasing, operation, management, maintenance, alteration, repair, use
or occupancy by Tenant of the Premises, or any portion thereof; or (iv) upon
this Lease transaction, or any document to which Tenant is a party creating or
transferring any interest or estate in the Premises. Impositions do not include
Real Estate Taxes, franchise, transfer, inheritance or capital stock taxes,
income taxes measured by the net income of Landlord from all sources or any tax,
assessment, charge, or other fee imposed as a condition to the development of
Bay Center or the improvement of any space within Bay Center for any party other
than Tenant. The term "Impositions" shall not include any sums that are included
in the definition of "Real Estate Taxes".
Land: The parcel of land described on Exhibit B attached to
this Lease.
Operating Expenses: All costs of management, operation,
maintenance and repair of Bay Center, including, but not limited to, the
following: (i) salaries, wages, benefits and other payroll expenses of employees
engaged in the operation, maintenance or repair of Bay Center; (ii) reasonable
property management fees and expenses (but, during the Initial Term, the amount
of this item ii shall be deemed to equal 3% of the gross revenues from Bay
Center); (iii) rent (or rental value) and expenses for Landlord's and any
property manager's offices; (iv) electricity (for the exterior common areas),
natural gas (for the exterior common areas), water, waste disposal, sewer, and
other utilities serving Bay Center as a whole and for which Tenant is not
responsible under this Lease; (v) janitorial, maintenance, security, life safety
and other services, such as alarm service, window cleaning and elevator
maintenance and uniforms for personnel providing services; (vi) repair and
replacement, resurfacing or repaving of paved areas, sidewalks, curbs and
gutters (except that any such work which constitutes a capital improvement shall
be included in Operating Expenses in the manner provided in clause (xiv) below);
(vii) landscaping, ground keeping, management, operation, and maintenance and
repair of all public, private and park areas adjacent to the Building; (viii)
materials, supplies, tools and rental equipment; (ix) license, permit and
inspection fees and costs; (x) insurance premiums (but not to exceed the
Allowable Earthquake Premium with respect to any Earthquake Insurance obtained
by Landlord) and costs (including a proportionate share if Landlord insures
under a "blanket" policy), and the deductible portion of any insured loss under
Landlord's insurance (provided, however, that any "deductible" shall not exceed
Twenty-Five Thousand Dollars ($25,000.00) during any 12-month period); (xi)
sales, use and excise taxes; (xii) legal, accounting and other professional
services for Bay Center, including costs, fees and expenses of contesting the
validity or applicability of any law, ordinance, rule, regulation or order
relating to the Building; (xiii) all assessments and other amounts payable to
EmeryBay Commercial Association and any similar entity in connection with the
use of the parking facilities across Christie Avenue from the Building; (xiv)
the cost of any capital improvements to Bay Center made at any time during the
Term that are intended in Landlord's judgment as labor saving devices (but only
to the extent of such savings), or to reduce or eliminate other Operating
Expenses or to effect other economies in the operation, maintenance, or
management of Bay Center, or that are necessary or appropriate in Landlord's
judgment for the health and safety of occupants of Bay Center, or that are
required under any law, ordinance, rule, regulation or order which was not
applicable to Bay Center at the time it was constructed, all amortized over the
useful life of the improvement in question at an interest rate of ten percent
(10%) per annum, or, if applicable, the rate paid by Landlord on funds borrowed
for the purpose of constructing or installing such capital improvements and
which amortized cost is fairly allocable to the period in question; (xv) all
costs and expenses incurred in connection with monitoring the level of methane
gas at or about Bay Center, in the manner and frequency pursuant to which the
methane gas is being monitored as of the date of this Lease; and (xvi) costs,
fees and other expenses incurred in connection with providing transportation
services as required by the Owner Participation Agreement, as amended, affecting
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<PAGE> 10
Bay Center; provided, however, acquisition of transportation vehicles acquired
after the Commencement Date shall be deemed to have been acquired in the Base
Year. Operating Expenses shall not include: (A) Real Estate Taxes; (B) legal
fees, brokers' commissions, tenant improvement or building improvement costs
(except as specified in item (xiv) above), or other costs incurred in the
negotiation, termination, or extension of leases or in proceedings involving a
specific tenant; (C) depreciation, except as set forth above; (D) interest,
amortization or other payments on loans to Landlord except as a component of
amortization as set forth above; (E) any ground lease rental; (F) costs of items
considered capital repairs, replacements, improvements and equipment under
generally accepted accounting principles, except as provided in item (xiv)
above; (G) rentals for items which if purchased, rather than rented, would
constitute a capital improvement which is specifically excluded in subsection
(F) above; (H) costs incurred by Landlord for the repair of damage to any
portion of the Building or Bay Center, to the extent that Landlord is actually
reimbursed by insurance proceeds; (I) costs incurred with respect to the
installation of tenants' or other occupants' improvements in any portion of Bay
Center or incurred in renovating or otherwise improving, vacant space for
tenants or other occupants of any portion of Bay Center; (J) depreciation,
amortization and interest payments; (K) marketing costs including, without
limitation, leasing commissions, attorneys' fees, and other costs and expenses
incurred in connection with lease, sublease and/or assignment negotiations and
transactions with present or prospective tenants or other occupants of any
portion of Bay Center; (L) expenses in connection with services or other
benefits which are not offered to Tenant or for which Tenant is charged for
directly but which are provided to another tenant or occupant of Bay Center; (M)
costs incurred by Landlord due to the violation by Landlord of the terms and
conditions of any lease of space in any portion of Bay Center; (N) overhead and
profit increment paid to Landlord or to subsidiaries or affiliates of Landlord
for goods and/or services in or to Bay Center to the extent the same exceeds the
costs of such goods and/or services rendered by unaffiliated third parties on a
competitive basis; (O) interest, principal, points and fees on debts or
amortization on any mortgage or mortgages or any other debt instrument
encumbering Bay Center; (P) Landlord's general corporate overhead and general
administrative expenses, except as included in any management fee charged by
Landlord; (Q) advertising and promotional expenditures, and costs of signs in or
on Bay Center identifying the owner of Bay Center or other tenants' signs; (R)
the cost of any electric power used by any tenant in any portion of Bay Center
in excess of the standard amount, or electric power costs for which any tenant
directly contracts with the local public service company or other utility
providers or for which any tenant is separately metered or submetered and pays
Landlord directly; (S) costs associated with the operation of the business of
the partnership or entity which constitutes Landlord as the same are
distinguished from the costs of operation of Bay Center; (T) tax penalties
incurred as a result of Landlord's negligence, inability or unwillingness to
make payments and/or to file any tax or informational returns when due; (U)
costs for which Landlord has been compensated by a management fee, and any
management fees in excess of those management fees which are normally and
customarily charged by third party providers of such services at comparable
buildings in the vicinity of Bay Center; (V) costs arising from the negligence
or fault of other tenants or occupants of Bay Center or Landlord or its agents,
or any vendors, contractors, or providers of materials or services selected,
hired or engaged by Landlord or its agents including, without limitation, the
selection of buildings materials; (W) notwithstanding any contrary provision of
the Lease, including, without limitation, any provision relating to capital
expenditures, (except as specified in item (xv) above) any and all costs arising
from the presence of hazardous substances in or about Bay Center, including,
without limitation, hazardous substances in the ground water or soil, not placed
in the Premises by Tenant; (X) costs arising from Landlord's charitable or
political contributions; (Y) costs arising from latent defects in the Building
or Bay Center or other improvements installed by Landlord or repair thereof; (Z)
costs for sculptures, paintings or other objects of art; and (AA) costs
(including in connection therewith all attorneys' fees and costs of settlement
judgments and payments in lieu thereof)
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<PAGE> 11
arising from claims, disputes or potential disputes in connection with potential
or actual claims litigation or arbitrations pertaining to Landlord, or Bay
Center. Landlord further agrees that since one of the purposes of the Operating
Expenses provisions is to allow Landlord to require Tenant to pay for the costs
attributable to its Premises, Landlord agrees that Landlord will not collect or
be entitled to collect Operating Expenses from all of its tenants in an amount
which is in excess of one hundred percent (100%) of the Operating Expenses
actually paid by Landlord in connection with the operation of Bay Center.
Subject to the provisions of this definition, the determination of Operating
Expenses shall be made by Landlord in accordance with generally accepted
accounting principles and practices consistently applied. The term "Operating
Expenses" shall include the following (without duplication): (i) 100% of
Operating Expenses, as defined above, paid or incurred with respect to the
Building, and (ii) 37.96% of Operating Expenses, as defined above, paid or
incurred with respect to the common areas and parking areas of Bay Center in
general.
Other Buildings: Building A and Building B located on the
Land.
Real Estate Taxes: 100% of all taxes, assessments and charges
now or hereafter levied or assessed upon, or with respect to, the Building or
any portion thereof, or any personal property of Landlord used in the operation
thereof or located therein, or Landlord's interest in the Building or such
personal property, by any federal, state or local entity, including: (i) all
real property taxes and general and special assessments; (ii) charges, fees or
assessments for transit, housing, day care, open space, art, police, fire or
other governmental services or benefits to the Building (except to the extent
any such charges, fees or assessments were levied as a condition to any
additional improvements constructed to the Building for new rentable area, or as
a condition to the construction of any improvements for any other tenant of Bay
Center); (iii) service payments in lieu of taxes; (iv) any tax, fee or excise on
the use or occupancy of any part of Bay Center, or on rent for space in Bay
Center; (v) any other tax, fee or excise, however described, that may be levied
or assessed as a substitute for, or as an addition to, in whole or in part, any
other Real Estate Taxes; and (vi) reasonable fees and expenses, including those
of consultants or attorneys, incurred in connection with proceedings to contest,
determine or reduce Real Estate Taxes. Real Estate Taxes do not include: (A)
franchise, transfer, inheritance or capital stock taxes, or income taxes
measured by the net income of Landlord from all sources, unless any such taxes
are levied or assessed against Landlord as a substitute for, in whole or in
part, any Real Estate Tax (and such taxes are customarily charged to tenants in
triple net leases for comparable buildings in the vicinity of Bay Center); (B)
Impositions and all similar amounts payable by Tenant under this Lease; and (C)
penalties, fines, interest or charges due for late payment of Real Estate Taxes
by Landlord. If any Real Estate Taxes are payable, or may at the option of the
taxpayer be paid, in installments, such Real Estate Taxes shall, together with
any interest that would otherwise be payable with such installment, be deemed to
have been paid in installments, amortized over the maximum time period allowed
by applicable law. Upon written request by Tenant, and reasonable approval by
Landlord, and subject to Landlord's right to include as Operating Expenses all
applicable costs and expenses, Landlord shall contest any unreasonable Real
Estate Taxes.
Rent: Base Rent, Escalation Rent and all other additional
charges and amounts payable by Tenant in accordance with this Lease.
Rentable Area: All areas within exterior permanent Building
walls measured to the inside glass surface of outer Building walls, including
restrooms, janitor, telephone and electrical closets, mechanical areas, and
columns and projections necessary to the Building, but excluding public stairs,
elevator shafts, HVAC ducts and pipe shafts.
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<PAGE> 12
Term: The period from the Commencement Date to the Expiration
Date (as the same may be extended pursuant to Section 3.2 hereof).
1.2. Effect of Certain Defined Terms. The parties acknowledge that
the Rentable Area of the Premises and the Building have been finally determined
by the parties as part of this Lease for all purposes and will not, except as
otherwise provided in this Lease, be changed.
2. Lease of Premises.
2.1. Premises. Landlord leases to Tenant and Tenant leases from
Landlord the Premises, together with the exclusive right to use the lobbies,
entrances, stairs, elevators, restrooms and other public portions of the
Building, and the non-exclusive right to use the exterior plazas and pedestrian
walkways of Bay Center, all subject to the terms, covenants and conditions set
forth in this Lease. All the windows and exterior walls of the Premises, the
terraces adjacent to the Premises, if any, and any space in the Premises used
for shafts, columns, projections, stacks, pipes, conduits, ducts, electric
utilities, sinks or other Building facilities, and the use thereof and access
thereto through the Premises for the purposes of management, operation,
maintenance and repairs, are reserved to Landlord.
3. Term; Condition and Acceptance of Premises.
3.1 Initial Term and Acceptance of Premises. Except as hereinafter
provided, and unless sooner terminated pursuant to the provisions of this Lease,
the Term of this Lease shall commence on the Commencement Date and end on the
Expiration Date. The parties acknowledge that Tenant is currently occupying the
Premises pursuant to a lease that expires as of the Commencement Date. The
parties also acknowledge that Tenant shall lease the Premises from Landlord AS
IS, WHERE IS. Landlord shall have absolutely no obligation whatsoever to make
any alterations or improvements to the Premises.
3.2 Option to Extend.
3.2.1. Exercise of Option to Extend Term. If no "Suspension
Condition" (as hereinafter defined) exists at the time of Tenant's exercise of
an option to extend the Initial Term or at the commencement of the Extended
Term, as the case may be, Tenant shall have one (1) option (the "Extension
Option") to extend the Initial Term for an additional period of five (5) years
(the "Extended Term"). To exercise Tenant's option with respect to the Extended
Term, Tenant shall give notice to Landlord not less than nine (9) months prior
to the expiration of the Initial Term ("Election Notice"). A "Suspension
Condition" shall mean the existence of any event or condition of material
default with respect to any obligation under this Lease where notice of default
has been given by Landlord and such default has not been cured by Tenant within
the applicable notice and cure period specified in this Lease. Tenant's exercise
of the Extension Option shall in no way result in, or constitute, a waiver by
Landlord of any default by Tenant under this Lease.
3.2.2. Fair Market Rent. If Tenant properly and timely
exercises Tenant's option to extend pursuant to Section 3.2.1 above, such
extension shall be upon all of the same terms, covenants and conditions of this
Lease; provided, however, that the Base Rent applicable to the Premises for the
Extended Term shall be the greater of: (i) the sum of (A) the Base Rent as of
the last month of the Initial Term plus all Escalation Rent payable by Tenant
during the last month of the Initial Term plus (B) the Signage Value,
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defined below, or (ii) the sum of (X) ninety-five percent (95%) of the "Fair
Market Rent" for space comparable to the Premises as of the commencement of the
Extended Term plus (Y) the Signage Value. "Fair Market Rent" shall mean the
annual rental being charged for space comparable to the Premises in a
steel-frame comparable first-class office building in the Emeryville area,
taking into account the terms of this Lease, location, parking, condition and
improvements to the space (excluding the value of the exterior signage on the
Building (which value shall be separately appraised in accordance with the
provisions of Section 32 below)and the value of any improvements made to the
Premises during the Term to the extent such improvements were paid for by
Tenant), and all other factors relevant in determining fair market rental value.
The Base Year shall be adjusted to be the calendar year in which the Extended
Term commences, unless a different treatment of base years is determined to be
appropriate by the appraisers pursuant to Section 3.2.4. Tenant shall pay all
leasing commissions and consulting fees payable in connection with such
extensions, unless such leasing commissions or consulting fees arise solely out
of a contractual relationship between Landlord and a broker or consultant. All
other terms and conditions of the Lease, which may be amended from time to time
by the parties in accordance with the provisions of the Lease, shall remain in
full force and effect and shall apply during the Extended Term, except that: (i)
there shall be no further option to extend the Term beyond a date five (5) years
after the expiration of the Initial Term, (ii) there shall be no rent
concessions, and (iii) there shall be no tenant improvement allowance and
similar provisions.
3.2.3. Determination of Rent. Within thirty (30) days after
the date of the Election Notice, Landlord and Tenant shall negotiate in good
faith in an attempt to determine Fair Market Rent and the Signage Value for the
Extended Term. If they are unable to agree within said thirty (30) day period,
then the Fair Market Rent and/or the Signage Value shall be determined as
provided in Section 3.2.4 below.
3.2.4. Appraisal. If it becomes necessary to determine the
Fair Market Rent for the Premises or the Signage Value by appraisal, the real
estate appraiser(s) indicated in this Section 3.2.4, each of whom shall be
members of the Appraisal Institute and each of whom have at least five (5) years
experience appraising office space and signage located in the vicinity of the
Premises, shall be appointed and shall act in accordance with the following
procedures:
(i) If the parties are unable to agree on the Fair Market
Rent or the Signage Value within the allowed time, either party may demand an
appraisal by giving written notice to the other party, which demand to be
effective must state the name, address and qualifications of an appraiser
selected by the party demanding the appraisal ("Notifying Party"). Within twenty
(20) days following the Notifying Party's appraisal demand, the other party
("Non-Notifying Party") shall either approve the appraiser selected by the
Notifying Party or select a second properly qualified appraiser by giving
written notice of the name, address and qualification of said appraiser to the
Notifying Party. If the Non-Notifying Party fails to select an appraiser within
the twenty (20) day period, the appraiser selected by the Notifying Party shall
be deemed selected by both parties and no other appraiser shall be selected. If
two (2) appraisers are selected, they shall select a third appropriately
qualified appraiser. If the two (2) appraisers fail to select a third qualified
appraiser, the third appraiser shall be appointed by the then presiding judge of
the county where the Premises are located upon application by either party.
(ii) If only one appraiser is selected, that appraiser shall
notify the parties in simple letter form of its determination of the Fair Market
Rent and/or the Signage Value for the Premises within fifteen (15) days
following his or her selection, which appraisal shall be conclusively
determinative and binding on the parties as the appraised Fair Market Rent
and/or Signage Value.
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(iii) If multiple appraisers are selected, the appraisers
shall meet not later than ten (10) days following the selection of the last
appraiser. At such meeting, the appraisers shall attempt to determine the Fair
Market Rent for the Premises and/or the Signage Value as of the commencement
date of the Extended Term in question by the agreement of at least two (2) of
the appraisers.
(iv) If two (2) or more of the appraisers agree on the Fair
Market Rent for the Premises and/or the Signage Value at the initial meeting,
such agreement shall be determinative and binding upon the parties hereto and
the agreeing appraisers shall forthwith notify both Landlord and Tenant of the
amount set by such agreement. If multiple appraisers are selected and two (2)
appraisers are unable to agree on the Fair Market Rent for the Premises or the
Signage Value, each appraiser shall submit to Landlord and Tenant his or her
respective independent appraisal of the Fair Market Rent for the Premises and/or
the Signage Value, in simple letter form, within twenty (20) days following
appointment of the final appraiser. The parties shall then determine the Fair
Market Rent for the Premises by averaging the Fair Market Rent appraisals and
shall then determine the Signage Value by averaging the Signage Value
appraisals; provided that any high or low appraisal, differing from the middle
appraisal by more than ten percent (10%) of the middle appraisal, shall be
disregarded in calculating the average.
(v) If only one (1) appraiser is selected, then each party
shall pay one-half (1/2) of the fees and expenses of that appraiser. If three
(3) appraisers are selected, each party shall bear the fees and expenses of the
appraiser it selects and one-half (1/2) of the fees and expenses of the third
appraiser.
(vi) Notwithstanding anything to the contrary contained in
this Section 3.2, in no event shall the Base Rent for the Extended Term be less
than the sum of the Base Rent immediately preceding the Extended Term plus all
Escalation Rent payable by Tenant during the month immediately preceding the
Extended Term plus the Signage Value (if applicable).
3.2.5. Restriction on Assignment. The Extension Options shall
be personal to Sybase, Inc. and any Exempt Transferee, shall not be assignable
or transferable (except in connection with an Exempt Transfer or an Exempt
Sublease), and shall terminate upon any assignment or sublease of all or any
portion of the Premises greater than ten percent (10%) of the Rentable Area of
the Premises (except in connection with an Exempt Transfer or an Exempt
Sublease).
3.2.6. Amendment to Lease. Immediately after the Fair Market
Rent has been determined, the parties shall enter into an amendment to this
Lease setting forth the Base Rent for the applicable Extended Term and shall
also state the new Expiration Date of the Term of the Lease.
3.3 Tenant's Option to Terminate. If no Suspension Condition
exists at the time of Tenant's exercise of the option to terminate or at the
Termination Date, defined below, as the case may be, then Tenant shall have the
right, by delivery of written notice to Landlord on or before June 16, 1999 (the
"Termination Notice") to elect to terminate this Lease and the Building A Lease
in accordance with the following conditions and procedures. If Tenant delivers
the Termination Notice in a timely manner, and if Tenant fully complies with the
provisions of this Section 3.3, then the Lease shall terminate on June 16, 2000
(the "Termination Date"). Tenant's right to terminate this Lease and the
Building A Lease shall be subject to Tenant's payment to Landlord of a
termination fee (the "Termination Fee") in the amount of Three Million Two
Hundred Twenty-Seven Thousand Five Hundred Fifty-Three Dollars ($3,227,553.00).
The Termination Fee shall be payable in accordance with the following procedure.
On
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or before delivery of the Termination Notice, Tenant shall deposit in escrow
(the "Termination Escrow") with Chicago Title Company of Alameda ("Title
Company") immediately available funds in the amount of Eight Hundred Six
Thousand Eight Hundred Eighty-Eight and 25/100s Dollars ($806,888.25) (the
"Partial Payment"). The Termination Escrow shall be established in accordance
with irrevocable escrow instructions prepared by Landlord and executed by Tenant
which provide that Landlord shall be the only party to the Termination Escrow
who can issue disbursement instructions. In addition to the initial Partial
Payment, Tenant shall deposit into the Termination Escrow three (3) additional
Partial Payments on September 16, 1999, December 16, 1999 and March 16, 2000. As
a condition precedent to the termination of the Lease on the Termination Date,
the entire Termination Fee shall, at Landlord's option, be paid by Title Company
to Landlord, in immediately available funds, on the Termination Date or used to
pay other costs and expenses designated by Landlord. In addition, if at any time
Tenant defaults in any obligation under this Lease (after the expiration of any
applicable grace period), or if Tenant fails to timely fund a Partial Payment
into the Termination Escrow, then, at Landlord's election, to be made within two
(2) business days after Tenant's default or Tenant's failure to timely fund a
Partial Payment, the following shall occur: (i) all funds in the Termination
Escrow shall immediately be paid to Landlord to be retained by Landlord as
damages for Tenant's default, without in any way limiting any of Landlord's
other rights or remedies under this Lease, and (ii) Tenant shall thereafter have
no right to terminate this Lease, and this Lease shall not terminate on the
Termination Date, except at Landlord's option. In addition to the foregoing,
Tenant's right to terminate this Lease pursuant to this Section 3.3 shall be
subject to Tenant's strict satisfaction of the following conditions and
procedures: (i) Tenant shall have no right to terminate this Lease unless Tenant
also elects to terminate the Building A Lease pursuant to the Termination
Notice, (ii) this Lease shall not terminate on the Termination Date unless the
Building A Lease also terminates on the Termination Date in accordance with the
provisions of the Building A Lease, (iii) on the Termination Date Tenant shall
deliver exclusive possession of the Premises to Landlord in the condition
required by this Lease, free and clear of the rights of Tenant and any other
persons claiming an interest in the Premises by or through Tenant, (iv) the
Premises shall be vacant as of the Termination Date, and (v) Tenant shall not be
in default of any provision of this Lease or the Building A Lease as of the
Termination Date. Landlord acknowledges that the Termination Fee payable under
this Lease represents the entire amount payable by Tenant upon termination of
both this Lease and the Building A Lease, so that payment of this Termination
Fee under the provisions of either lease also satisfies Tenant's duty to pay the
Termination Fee under the other lease. Furthermore, if pursuant to the
provisions of either this Lease or the Building A Lease there is a permanent
reduction in Base Rent, there shall be a corresponding reduction in the
Termination Fee and the Partial Payments such that the Termination Fee is equal
to nine (9) months Base Rent under both leases.
4. Rent.
4.1. Obligation to Pay Base Rent. Tenant shall pay Base Rent to
Landlord, in advance, in equal monthly installments, commencing on or before the
Commencement Date, and thereafter on or before the first day of each calendar
month during the Term. If the Commencement Date and/or Expiration Date is other
than the first day of a calendar month, the installment of Base Rent for the
first and/or last fractional month of the Term shall be prorated on a daily
basis.
4.2. Manner of Rent Payment. All Rent shall be paid by Tenant
without notice, demand, abatement, deduction or offset, in lawful money of the
United States of America, payable to Landlord, at Landlord's Address as set
forth in the Basic Lease Information, or to such other person or at
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such other place as Landlord may from time to time designate by notice to
Tenant.
4.3. Additional Rent. All Rent not characterized as Base Rent or
Escalation Rent shall constitute additional rent, and if payable to Landlord
shall, unless otherwise specified in this Lease, be due and payable twenty (20)
days after Tenant's receipt of Landlord's invoice therefor.
4.4. Late Payment of Rent; Interest. Tenant acknowledges that late
payment by Tenant of any Rent will cause Landlord to incur administrative costs
not contemplated by this Lease, the exact amount of which are extremely
difficult and impracticable to ascertain based on the facts and circumstances
pertaining as of the Lease Date. Accordingly, if any Rent is not paid by Tenant
within five (5) days after Landlord's delivery of notice of payment due, Tenant
shall pay to Landlord, with such Rent, a late charge equal to four percent (4%)
of such Rent. Any Rent, other than late charges, due Landlord under this Lease,
if not paid when due, shall also bear interest from the date due until paid, at
the rate of ten percent (10%) per annum or, if a higher rate is legally
permissible, at the highest rate legally permitted. The parties acknowledge that
such late charge and interest represent a fair and reasonable estimate of the
administrative costs and loss of use of funds Landlord will incur by reason of a
late Rent payment by Tenant, but Landlord's acceptance of such late charge
and/or interest shall not constitute a waiver of Tenant's default with respect
to such Rent or prevent Landlord from exercising any other rights and remedies
provided under this Lease, at law or in equity.
5. Calculation and Payments of Escalation Rent. During each full or
partial Fiscal Year of the Term, Tenant shall pay to Landlord Escalation Rent in
accordance with the following procedures:
5.1. Payment of Estimated Escalation Rent. During the last month of
the Base Year and the last month of each fiscal Year, or as soon thereafter as
practicable, Landlord shall give Tenant notice of its estimate of Escalation
Rent due for the next ensuing Fiscal Year. On or before the first day of each
month during such next ensuing Fiscal Year (commencing January 1, 1999), Tenant
shall pay to Landlord in advance, in addition to Base Rent, one-twelfth (1/12th)
of such estimated Escalation Rent. In the event such notice is given after
December 31st of any year during the Term, (i) Tenant shall continue to pay
Escalation Rent on the basis of the prior Fiscal Year's estimate until the month
after such notice is given, (ii) subsequent payments by Tenant shall be based of
the estimate of Escalation Rent set forth in Landlord's notice, and (iii) within
thirty (30) days after the delivery of Landlord's notice, Tenant shall also pay
the difference, if any, between the amount previously paid for such Fiscal Year
and the amount which Tenant would have paid through the month in which such
notice is given, based on Landlord's noticed estimate or, in the alternative, if
such amount previously paid by Tenant for such Fiscal Year through the month in
which such notice is given exceeds the amount which Tenant would have paid
through such month based on Landlord's noticed estimate, Landlord shall credit
such excess amount against the next monthly payments of Rent due from Tenant. If
at any time Landlord reasonably determines that the Escalation Rent for the
current Fiscal Year will vary from Landlord's estimate by more than five percent
(5%), Landlord may, by notice to Tenant, revise its estimate for such Fiscal
Year, and subsequent payments by Tenant for such Fiscal Year shall be based upon
such revised estimate.
5.2. Escalation Rent Statement and Adjustment. Within one hundred
twenty (120) days after the close of each Fiscal Year, or as soon thereafter as
practicable, Landlord shall deliver to Tenant a statement of the actual
Escalation Rent for such Fiscal Year, accompanied by a statement prepared by
Landlord showing in reasonable detail the Operating Expenses and the Real Estate
Taxes comprising the
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actual Escalation Rent. If Landlord's statement shows that Tenant owes an amount
less than the payments previously made by Tenant for such Fiscal Year, Landlord
shall credit the difference first against any sums then owed by Tenant to
Landlord and then against the next payment or payments of Rent due Landlord,
except that if a credit amount is due Tenant after termination of this Lease,
Landlord shall pay to Tenant any excess remaining after Landlord credits such
amount against any sums owed by Tenant to Landlord. If Landlord's statement
shows that Tenant owes an amount more than the payments previously made by
Tenant for such Fiscal Year, Tenant shall pay the difference to Landlord within
thirty (30) days after delivery of the statement. Tenant shall have the right to
audit Landlord's calculation of Operating Expenses and Real Estate Taxes,
subject to the following limitations: (i) such audit shall be conducted no more
than one time per calendar year, (ii) such audit may not be conducted by a
person or entity whose compensation is in any way calculated based on the
results of such audit, (iii) Landlord shall pay Tenant's reasonable
out-of-pocket cost (but not to exceed $3,000.00) of any such audit undertaken by
Tenant in accordance with the foregoing which is reasonably approved by Landlord
and which discloses an overstatement of Operating Expenses of more than four
percent (4%), and (iv) if at the time of the performance of the audit the
Landlord under this Lease is Teacher's Insurance and Annuity Association
("Teachers'"), then Tenant shall only have the right to examine Teachers' books
which related to the Operating Expenses in question. Landlord shall use
reasonable due diligence to maintain complete and accurate records of Operating
Expenses and Real Estate Taxes.
5.3. Proration for Partial Year. If this Lease terminates other
than on the last day of a Fiscal Year (other than due to Tenant's default), the
amount of Escalation Rent for such fractional Fiscal Year shall be prorated on a
daily basis. Upon such termination, Landlord may, at its option, calculate the
adjustment in Escalation Rent prior to the time specified in Section 5.2 above.
Tenant's obligation to pay Escalation Rent, as set forth in Paragraph 5.2,
above, shall survive the expiration or termination of this Lease. Upon
expiration, either Landlord or Tenant, as the case may be, shall make any
payments to the other necessary to refund or pay any excess or underpayment of
Escalation Rent.
6. Impositions Payable by Tenant. Tenant shall pay all Impositions
prior to delinquency. If billed directly to Tenant, Tenant shall pay such
Impositions and concurrently deliver to Landlord evidence of such payments. If
any Impositions are billed to Landlord or included in bills to Landlord for Real
Estate Taxes or other charges, then Tenant shall pay to Landlord all such
amounts within fifteen (15) days after delivery of Landlord's invoice therefor.
If applicable law prohibits Tenant from reimbursing Landlord for an Imposition,
but Landlord may lawfully increase the Base Rent to account for Landlord's
payment of such Imposition, the Base Rent payable to Landlord shall be increased
to net to Landlord the same return without reimbursement of such Imposition as
would have been received by Landlord with reimbursement of such Imposition.
Tenant's obligation to pay Impositions which have accrued and remain unpaid upon
the expiration or earlier termination of this Lease shall survive the expiration
or earlier termination of this Lease.
7. Use of Premises.
7.1. Permitted Use. The Premises shall be used solely for the
Permitted Use and for no other use or purpose.
7.2. No Violation of Legal and Insurance Requirements. Tenant shall
not do or permit to be done, or bring or keep or permit to be brought or kept,
in or about the Premises, or any other
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portion of Bay Center, anything which (i) is prohibited by or will in any way
conflict with any law, ordinance, rule or regulation; (ii) would invalidate or
be in conflict with the provisions of any insurance policy carried by Landlord
or Tenant on any portion of Bay Center or Premises, or any property therein; or
(iii) would cause a cancellation of any such insurance, increase the existing
rate of (unless Tenant actually pays 100% of such increased premium) or
materially and adversely affect any such Landlord's insurance, or subject
Landlord to any liability or responsibility for injury to any person or
property. If Tenant does or permits anything to be done which increases the cost
of any of Landlord's insurance, or which results in the need, in Landlord's
reasonable judgment, for additional insurance by Landlord or Tenant with respect
to any portion of Bay Center or Premises, then Tenant shall reimburse Landlord,
upon demand, for any such additional costs or the costs of such additional
insurance, and/or procure such additional insurance at Tenant's sole cost and
expense. Exercise by Landlord of such right to require reimbursement of
additional costs (including the costs of procuring of additional insurance)
shall not limit or preclude Landlord from prohibiting Tenant's impermissible use
of the Premises or from invoking any other right or remedy available to Landlord
under this Lease.
7.3. Compliance with Legal, Insurance and Life Safety Requirements.
Except as provided in clauses (i) through (iii) below, Tenant, at its cost and
expense, shall promptly comply with all laws, ordinances, rules, regulations,
orders and other governmental requirements, the requirements of any board of
fire underwriters or other similar body, any directive or occupancy certificate
issued pursuant to any law by any public officer or officers, the provisions of
all recorded documents affecting any portion of Bay Center and all life safety
programs, procedures and rules implemented or promulgated by Landlord ("Laws").
Tenant shall not, however, be required to comply with Laws requiring Tenant to
make structural changes to the Premises unless necessitated, in whole or in
part, by (i) Tenant's specific use or occupancy of, or business conducted in,
the Premises, (ii) any acts or omissions of Tenant, its employees, agents,
contractors, invitees or licensees, or (iii) Alterations.
7.4. No Nuisance. Tenant shall not (i) do or permit anything to be
done in or about the Premises, or any other portion of Bay Center, which would
injure or annoy, or obstruct or interfere with the rights of, Landlord or other
occupants of Bay Center, or others lawfully in or about Bay Center; (ii) use or
allow the Premises to be used in any manner inappropriate for a Class A office
building, or for any improper or objectionable purposes; or (iii) cause,
maintain or permit any nuisance or waste in, on or about the Premises, or any
other portion of Bay Center.
7.5. Hazardous Substances. The term "hazardous substances" as used
in the Lease, is defined as follows:
Any element, compound, mixture, solution, particle or substance, which
presents danger or potential danger of damage or injury to health, welfare
or to the environment including, but not limited to: (i) those substances
which are inherently or potentially radioactive, explosive, ignitable,
corrosive, reactive, carcinogenic or toxic and (ii) those substances which
have been recognized as dangerous or potentially dangerous to health,
welfare or to the environment by any federal, municipal, state, county or
other governmental or quasi-governmental authority and/or any department
or agency thereof, including, but not limited to, hazardous substances and
materials described in CERCLA, as amended, and in any applicable state or
local laws and regulations adopted thereunder.
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Tenant represents and warrants to Landlord and agrees that at all times
during the term of this Lease and any extensions or renewals thereof, Tenant
shall:
(i) promptly comply at Tenant's sole cost and expense, with all
laws, orders, rules, regulations, certificates of occupancy, or other
requirements, as the same now exist or may hereafter be enacted, amended
or promulgated, of any federal, municipal, state, county or other
governmental or quasi-governmental authorities and/or any department or
agency thereof relating to the manufacturing, processing, distributing,
using, producing, treating, storing (above or below ground level),
disposing or allowing to be present (the "Environmental Activity") of
hazardous substances in or about the Premises (each, a "Law", and all of
them, "Laws") by Tenant , its assignees and subtenants, and their
respective agents, employees, contractors and invitees, and Tenant shall
not cause (or permit its agents, employees, subtenants or contractors to
cause) the release or escape of any hazardous substances in or about the
Building.
(ii) indemnify and hold Landlord, its agents and employees,
harmless from any and all demands, claims, causes of action, penalties,
liabilities, judgments, damages (including consequential damages) and
expenses (including, without limitation, court costs and reasonable
attorneys' fees) incurred by Landlord as a result of (a) Tenant's failure
or delay in properly complying with any Law to the extent the same relates
to Environmental Activity of Tenant in or about the Premises, or (b) any
adverse effect which results from the Environmental Activity of Tenant,
whether Tenant or Tenant's subtenants or any of their respective agents,
employees, contractors or invitees, with or without Tenant's consent has
caused, either intentionally or unintentionally, such Environmental
Activity. If any action or proceeding is brought against Landlord, its
agents or employees by reason of any such claim, Tenant, upon notice from
Landlord, will defend such claim at Tenant's expense with counsel
reasonably satisfactory to Landlord. This indemnity obligation by Tenant
of Landlord will survive the expiration or earlier termination of this
Lease.
(iii) promptly disclose to Landlord by delivering, in the manner
prescribed for delivery of notice in this Lease, a copy of any forms,
submissions, notices, reports, or other written documentation (each, a
"Communication") relating to any Environmental Activity, whether any such
Communication is delivered to Tenant or any of its subtenants or is
requested of Tenant or any of its subtenants by any federal, municipal,
state, county or other government or quasi-governmental authority and/or
any department or agency thereof.
(iv) in the event there is a release of any hazardous substance as
a result of or in connection with any Environmental Activity by Tenant or
any of Tenant's subtenants or any of their respective agents, employees,
contractors or invitees, which must be remediated under any Law, Landlord
shall perform the necessary remediation; and Tenant shall reimburse
Landlord for all costs thereby incurred within fifteen (15) days after
delivery of a written demand therefor from Landlord (which shall be
accompanied by reasonable substantiation of such costs). In the
alternative, Landlord shall have the right to require Tenant, at its sole
cost and expense, to perform the necessary remediation in accordance with
a detailed plan of remediation which shall have been approved in advance
in writing by Landlord. Landlord shall give notice to Tenant within thirty
(30) days after Landlord receives notice or obtains knowledge of the
required remediation. The rights and obligations of Landlord and Tenant
set forth in this subparagraph
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(iv) shall survive the expiration or earlier termination of this Lease.
(v) notwithstanding any other provisions of this Lease, allow
Landlord, and any authorized representative of Landlord, access and the
right to enter and inspect the Premises for Environmental Activity, at any
time deemed reasonable by Landlord, without prior notice to Tenant.
Compliance by Tenant with any provision of this Section 7.5 shall not be
deemed a waiver of any other provision of this Lease. Without limiting the
foregoing, Landlord's consent to any Environmental Activity shall not
relieve Tenant of its indemnity obligations under the terms hereof.
7.6. Special Provisions Relating to The Americans With Disabilities
Act of 1990.
7.6.1. Allocation of Responsibility to Landlord. As between
Landlord and Tenant, Landlord shall be responsible that the public entrances,
stairways, corridors, restrooms, elevators and elevator lobbies and other public
areas in the Building and in Bay Center comply with the requirements of Title
III of the Americans with Disabilities Act of 1990 (42 U.S.C. 12181, et seq.,
The Provisions Governing Public Accommodations and Services Operated by Private
Entities), and all regulations promulgated thereunder, and all amendments,
revisions or modifications thereto now or hereafter adopted or in effect in
connection therewith (hereinafter collectively referred to as the "ADA"), and to
take such actions and make such alterations and improvements as are necessary
for such compliance. All costs incurred by Landlord in discharging its
responsibilities under this Section 7.6.1 shall be included in Operating
Expenses as provided in Section 1.1. Landlord shall protect, defend, indemnify
and hold Tenant harmless from and against any claim, demand, cause of action,
obligation, liability, loss, cost or expense (including reasonable attorneys'
fees) which may be asserted against or incurred by Tenant as a result of
Landlord's failure in any respect to comply with its obligations set forth
hereinabove in this Section 7.6.1. Landlord's indemnity obligations set forth in
the immediately preceding sentence shall survive the expiration or earlier
termination of this Lease.
7.6.2. Allocation of Responsibility to Tenant. As between
Landlord and Tenant, Tenant, at its sole cost and expense, shall be responsible
that the Premises, all Alterations to the Premises, Tenant's use and occupancy
of the Premises, and Tenant's performance of its obligations under this Lease,
comply with the requirements of the ADA, and to take such actions and make such
Alterations as are necessary for such compliance; provided, however, that Tenant
shall not make any such Alterations except upon Landlord's prior written consent
pursuant to the terms and conditions of this Lease. Tenant shall protect,
defend, indemnify and hold Landlord harmless from and against any claim, demand,
cause of action, obligation, liability, loss, cost or expense (including
reasonable attorneys' fees) which may be asserted against or incurred by
Landlord as a result of Tenant's failure in any respect to comply with its
obligations set forth hereinabove in this Section 7.6.2. Tenant's indemnity
obligations set forth in the immediately preceding sentence shall survive the
expiration or earlier termination of this Lease to the extent of claims based on
events occurring before such expiration or termination.
7.6.3. General. Notwithstanding anything in this Lease to the
contrary, no act or omission of Landlord, including any approval, consent or
acceptance by Landlord or Landlord's agents, employees or other representatives,
shall be deemed an agreement, acknowledgment, warranty, or other
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representation by Landlord that Tenant has complied with the ADA or that any
action, alteration or improvement by Tenant complies or will comply with the ADA
or constitutes a waiver by Landlord of Tenant's obligations to comply with the
ADA under this Lease or otherwise. Any failure of Landlord to comply with the
obligations of the ADA shall not relieve Tenant from any obligations under this
Lease or constitute or be construed as a constructive or other eviction of
Tenant or disturbance of Tenant's use and possession of the Premises.
7.7 Special Hazardous Provisions. The Premises are located on a
portion of a parcel which is sometimes know as the "Bay Center" or as "EmeryBay"
and portions of which were formerly known as the "Delta Trucking" site and
"Garrett Trucking" site. In 1986, it was discovered that materials of concern,
including various organic compounds and metals; were deposited in and on the Bay
Center site as a result of previous activities at the Bay Center site. Since
that time, the Alameda County Health Services Unit has supervised the
remediation at Bay Center. Landlord's consultants have advised that materials of
concern in the soil have either been properly removed off-site or have been
encapsulated so as to not pose a health hazard to occupants. The remediation of
groundwater is in progress.
8. Building Services.
8.1. Maintenance of Bay Center. Landlord shall maintain Bay Center
(other than the Premises and the premises of other tenants of Bay Center) in
good order and condition, except for ordinary wear and tear, damage by casualty
or condemnation, or damage occasioned by the act or omission of Tenant or
Tenant's employees, agents, contractors, licensees or invitees, which damage
shall be repaired by Landlord at Tenant's expense (subject to the provisions of
Section 15). Landlord's maintenance of, and provision of services to, the
Building shall be performed in a manner consistent with that of comparable
office buildings in the Emeryville/Oakland, California area, but in no event
shall Landlord's maintenance of, and provision of services to, the Building be
less than the maintenance and services provided by Landlord as of the date of
this Lease unless there is a material reduction, after the Commencement Date, of
the maintenance or services provided to other comparable office buildings in the
Emeryville/Oakland, California area. Landlord shall have the right in connection
with its maintenance of Bay Center hereunder (i) to change the arrangement
and/or location of any amenity, installation or improvement in the public
entrances, stairways, corridors, elevators and elevator lobbies, and other
public areas in the Building, or other public areas of Bay Center, and (ii) to
utilize portions of the public areas in the Building and Bay Center from time to
time for entertainment, displays, product shows, leasing of kiosks or such other
uses that in Landlord's sole judgment tend to attract the public, so long as
such uses do not materially interfere with or impair Tenant's access to or use
or occupancy of the Premises; provided, however, that Landlord shall have no
right to make any modifications to the lobby of the Building (unless required by
applicable law) that would materially and adversely affect the overall quality
of the lobby of the Building provided further, however, that Landlord shall have
no right to make any alterations within the Premises unless required by
applicable law. Landlord shall not be in default under this Lease or liable for
any damages directly or indirectly resulting from or incidental to, nor shall
the rental reserved in this Lease be abated by reason of, Landlord's failure to
make any repair or to perform any maintenance required to be made or performed
by Landlord under this Section 8.1, unless such failure shall persist for an
unreasonable time after written notice of the need for such repair or
maintenance is given to Landlord by Tenant.
8.2. Building Standard Services. Landlord shall cause to be
furnished to Tenant:
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(i) tepid and cold water to those points of supply and in volumes provided for
general use of Tenant in the Building; (ii) electricity in the amounts provided
by Landlord as of the date of this Lease for lighting and the operation of
electrically powered office equipment; (iii) heat, ventilation and air
conditioning to the extent reasonably required for the comfortable occupancy by
Tenant of the Premises during such hours as may be required by Tenant; (iv)
passenger elevator service; (v) freight elevator service subject to then
applicable Building standard procedures and scheduling; (vi) lighting
replacement for Building standard lights; (vii) restroom supplies; (viii) window
washing as determined by Landlord; (ix) janitor service on a five (5) day per
week basis (excluding Building holidays), except for portions of the Premises
used for preparing or consuming food or beverages, as set forth in Exhibit E
attached to this Lease; and (x) security to the extent provided by Landlord for
Bay Center as of the date of this Lease (but not individually for Tenant or the
Premises), except that Landlord shall not be liable in any manner for acts of
others, criminal or otherwise, or for any direct, consequential or other loss,
damage, death or injury related to any interruption, discontinuance,
malfunction, circumvention or failure of such security service. Tenant shall be
responsible for and shall pay promptly directly to the service provider all
charges for the matters described in the foregoing items (ii) and (iii) used by
Tenant in, on or about the Premises during the Term, together with any taxes
thereon. Landlord may establish in the Premises or other portions of Bay Center
such measures as are required by laws, ordinances, rules or regulations or as it
deems necessary or appropriate (and are customary in comparable buildings in the
vicinity of the Building) to conserve energy, including automatic switching of
lights and/or more efficient forms of lighting.
8.3. Interruption or Unavailability of Services. Rent shall not
abate, no constructive or other eviction shall be construed to have occurred,
Tenant shall not be relieved from any of its obligations under this Lease, and
Landlord shall not be in default hereunder or liable for any damages directly or
indirectly resulting from, the failure of Landlord to furnish, or delay in
furnishing, any maintenance or services under this Article 8 as a result of
repairs, alterations, improvements or any circumstances beyond Landlord's
reasonable control. Landlord shall use reasonable diligence to remedy any
failure or interruption in the furnishing of such maintenance or services and
Landlord shall use reasonable efforts to minimize interference with Tenant's
operation in connection with any repairs, alterations, or improvements
undertaken by Landlord. Notwithstanding the foregoing, if the Premises should
become not reasonably suitable for Tenant's use as a consequence of the
cessation of utilities or other material services required to be provided to the
Premises by Landlord, unless such cessation results from the acts or omissions
of Tenant or Tenant's contractors, agents or employees, then Tenant shall be
entitled to an abatement of Rent if such cessation or interruption persists for
a continuous period of thirty (30) days or more (such abatement to commence on
the thirty-first day following such cessation and such abatement shall continue
until such utilities or material services are restored to the extent that the
Premises are reasonably suitable for Tenant's use.
8.4. Tenant's Use of Excess Water. The parties acknowledge that as
of the date of this Lease, Tenant does not consume quantities of water in excess
of the amounts customarily consumed by users of office space (the "Customary
Consumption Amounts"). Tenant shall not, without Landlord's prior consent, which
shall not be unreasonably withheld, permit average occupancy levels in excess of
one person per two hundred fifty (250) feet of Rentable Area. If Tenant is
likely to or does consume quantities of water in excess of the Customary
Consumption Amounts, then Landlord shall have the right, at Tenant's sole cost
and expense, to install separate metering for such utility or to separately
charge Tenant for any quantity of such utility consumed by Tenant beyond the
Customary Consumption
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Amounts. Any such charges made by Landlord to Tenant shall be reasonably
determined by Landlord and shall be promptly paid by Tenant to Landlord as
Additional Rent. Landlord may, at Landlord's sole option, elect to rate the
quantity of water consumed by Tenant at the Premises. Such consumption shall be
determined, at Tenant's option, by one of the following methods: (i) a rating by
an appropriately licensed engineer with costs to be computed on an average daily
basis; (ii) metering by a licensed utility company responsible for service to
Bay Center; or (iii) a rating by an appropriately licensed engineer and
monitored by Landlord's central project computer. Any charge for utilities in
excess of the Customary Consumption Amount shall be at Landlord's actual cost.
In each such case, the costs for administering such methods shall be borne by
Tenant. Appropriate adjustments shall be made to reflect the separate metering
or charges.
8.5. Provision of Additional Services. If Tenant desires services
in additional amounts or at different times than set forth in Section 8.2 above,
or any other services that are not provided for in this Lease, Tenant shall make
a request for such services to Landlord with such advance notice as Landlord may
reasonably require. If Landlord provides such services to Tenant, Tenant shall
pay Landlord's actual cost for such services within thirty (30) days after
Tenant's receipt of Landlord's invoice.
9. Maintenance of Premises. Tenant shall, at all times during the Term,
at Tenant's cost and expense, keep the Premises in good condition and repair,
except for ordinary wear and tear and damage by casualty or condemnation. Except
as may be specifically set forth in this Lease, Landlord has no obligation to
alter, remodel, improve, repair, decorate or paint the Premises, or any part
thereof, or any obligation respecting the condition, maintenance and repair of
the Premises or any other portion of Bay Center. Tenant hereby waives all
rights, including those provided in California Civil Code Section 1941 or any
successor statute, to make repairs which are Landlord's obligation under this
Lease at the expense of Landlord or to receive any setoff or abatement of Rent
or in lieu thereof to vacate the Premises or terminate this Lease.
10. Alterations to Premises.
10.1. Landlord Consent; Procedure. Tenant shall not make or permit
to be made any Alterations without Landlord's prior consent, which consent shall
not be unreasonably withheld, and in this regard (i) Landlord's consent shall
not be required for nonstructural interior alterations costing less than
$10,000.00 per work of improvement, and (ii) Landlord's consent shall not be
required for the installation of demountable walls and partitions not affixed to
the floor rendering the carpets unuseable. Any Alterations to which Landlord has
consented shall be made in accordance with procedures as then established by
Landlord and the provisions of this Article 10.
10.2. General Requirements. All Alterations shall be made at
Tenant's cost and expense. Tenant shall be solely responsible for compliance
with applicable laws, ordinances, rules and regulations in connection with all
Alterations. Tenant shall have the right to use any contractor to perform any
Alterations, so long as such contractor is a licensed California contractor, and
so long as such contractor is bondable, as reasonably determined by Landlord.
Tenant shall be responsible for the cost of any additional alterations required
by applicable laws, ordinances, rules and regulations to be made by Landlord to
any portion of Bay Center as a result of Alterations. Tenant shall promptly
commence or cause the commencement of construction of all Alterations and
complete or cause completion of the same
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<PAGE> 24
with due diligence as soon as possible after commencement in order to cause the
least disruption to Bay Center operations and occupants and to continue Tenant's
business in the Premises. In connection with installing or removing Alterations,
Tenant shall pay Landlord's actual and reasonable out of pocket costs for review
and approval of Tenant's plans, specifications and working drawings, and
administration by Landlord (or its agent) of the construction, installation or
removal of Alterations, and restoration of the Premises to their previous
condition.
10.3. Removal of Alterations. If requested by Landlord at any time
prior to ninety (90) days before expiration of the Term, Tenant shall, prior to
the expiration of the Term or termination of this Lease, remove such Alteration
at Tenant's cost and expense and restore the Premises to the condition existing
prior to the installation of such Alteration; provided, however, that if
Landlord's approval of such Alterations was granted pursuant to this Article 10,
then at the time of granting such approval, Landlord shall reasonably designate
whether Tenant shall be obligated to remove such Alterations at the expiration
of the Term or termination of this Lease; provided further, however, that
Landlord's failure to give such notice at such time shall constitute Landlord's
determination that such Alterations shall be removed by Tenant at the expiration
of the Term or termination of this Lease. If Tenant fails so to do, then
Landlord may remove such Alteration and perform such restoration and Tenant
shall reimburse Landlord for Landlord's cost and expense incurred to perform
such removal and restoration (which obligation of Tenant shall survive the
expiration or earlier termination of this Lease). Tenant shall repair at its
cost and expense all damage to the Premises or Bay Center caused by the removal
of such Alteration. Subject to the foregoing provisions regarding removal, all
Alterations (including any above Building standard improvements to the Premises)
shall be Landlord's property and from and after the expiration or earlier
termination of this Lease shall remain on the Premises without compensation to
Tenant. Notwithstanding the foregoing, Tenant shall have no obligation to remove
any of the tenant improvements existing in the Premises as of the Commencement
Date.
11. Liens. Tenant shall keep the Premises and Bay Center free from any
liens arising out of any work performed or obligations incurred by or for, or
materials furnished to, Tenant pursuant to this Lease or otherwise. Landlord
shall have the right to post and keep posted on the Premises any notices
required by law or which Landlord may deem to be proper for the protection of
Landlord, the Premises and Bay Center from such liens and to take any other
action at the expense of Tenant that Landlord deems necessary or appropriate to
prevent, remove or discharge such liens. Tenant shall protect, defend, indemnify
and hold Landlord harmless from and against any claim, demand, cause of action,
obligation, liability, loss, cost or expense (including reasonable attorneys'
fees) which may be asserted against or incurred by Landlord as a result of
Tenant's failure to comply with the foregoing obligation (which indemnity
obligation shall survive the expiration or earlier termination of this Lease).
12. Damage or Destruction.
12.1. Obligation to Repair. Except as otherwise provided in this
Article 12, if the Premises, or any other portion of Bay Center necessary for
Tenant's use and occupancy of the Premises, are damaged or destroyed by fire or
other casualty, Landlord shall, within thirty (30) days after such event, notify
Tenant of the estimated time, in Landlord's reasonable judgment, required to
repair such damage or destruction. If Landlord's estimate of time is less than
one hundred eighty (180) days after the date of damage or destruction, then (i)
Landlord shall proceed with all due diligence to repair the Premises, and/or the
portion of Bay Center necessary for Tenant's use and occupancy of the Premises,
to
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substantially the condition existing immediately before such damage or
destruction, as permitted by and subject to then applicable laws, ordinances,
rules and regulations; (ii) this Lease shall remain in full force and effect;
and (iii) Base Rent shall abate for such part of the Premises rendered unusable
by Tenant in the conduct of its business during the time such part is so
unusable, in the proportion that the Rentable Area contained in the unusable
part of the Premises bears to the total Rentable Area of the Premises.
12.2. Landlord's Election. If Landlord determines that the necessary
repairs cannot be completed within one hundred eighty (180) days after the date
of damage or destruction, or if such damage or destruction arises from causes
not covered by Landlord's insurance policy then in force ("Uninsured Loss") and
the Uninsured Loss exceeds 2% of the replacement cost of the Building, Landlord
may elect, in its notice to Tenant pursuant to Section 12.1, to (i) terminate
this Lease or (ii) repair the Premises or the portion of Bay Center necessary
for Tenant's use and occupancy of the Premises pursuant to the applicable
provisions of Section 12.1 above. In addition, if Landlord determines that the
necessary repairs cannot be completed within one hundred eighty (180) days after
the date of damage or destruction, then Tenant shall have the right, for a
period of twenty (20) days after receipt of Landlord's notice, to elect to
terminate this Lease. If Landlord or Tenant terminates this Lease, then this
Lease shall terminate as of the date of occurrence of the damage or destruction.
Notwithstanding the foregoing, Landlord may not terminate this Lease in
connection with an Uninsured Loss, and must restore the damage caused by the
Uninsured Loss, if (i) the Uninsured Loss exceeds 2%, but is less than 10%, of
the replacement cost of the Building, and (ii) Landlord does not covenant in
writing to Tenant that Landlord will not enter into a lease of the Premises with
another tenant within two hundred seventy (270) days after the date of such
Uninsured Loss which lease would permit such tenant to occupy the Premises
within such two hundred seventy (270) day period; provided, however, that the
terms of this sentence shall apply only to the original Landlord under this
Lease and shall not apply to any successor landlord.
12.3. Cost of Repairs. Landlord shall pay the cost for repair of Bay
Center and all improvements in the Premises, other than any Alterations. Tenant
shall pay the costs to repair all Alterations (but Landlord shall make available
to Tenant for such purpose any insurance proceeds received by Landlord for such
purpose under Landlord's insurance policy then in force).
12.4. Damage at End of Term. Notwithstanding anything to the
contrary contained in this Article 12, if the Premises or any portion of the
Building are damaged or destroyed by fire or other casualty within the last six
(6) months of the Term, then either Tenant or Landlord shall have the right, in
its sole discretion, to terminate this Lease by notice to the other given within
ninety (90) days after the date of such event. Such termination shall be
effective on the date specified in such party's notice to the other party, but
in no event later than the end of such 90-day period.
12.5. Waiver of Statutes. The respective rights and obligations of
Landlord and Tenant in the event of any damage to or destruction of the
Premises, or any other portion of Bay Center, are governed exclusively by this
Lease. Accordingly, Tenant hereby waives the provisions of any law to the
contrary, including California Civil Code Sections 1932(2) and 1933(4) providing
for the termination of a lease upon destruction of the leased property.
13. Eminent Domain.
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13.1. Effect of Taking. Except as otherwise provided in this Article
13, if all or any part of the Premises is taken as a result of the exercise of
the power of eminent domain or condemned for any public or quasi-public purpose,
or if any transfer is made in avoidance of such exercise of the power of eminent
domain (collectively, "taken" or a "taking"), this Lease shall terminate as to
the part of the Premises so taken as of the effective date of such taking. On a
taking of a portion of the Premises, Landlord and Tenant shall each have the
right to terminate this Lease by notice to the other given within thirty (30)
days after the effective date of such taking, if the portion of the Premises
taken is of such extent and nature so as to materially impair Tenant's business
use of the balance of the Premises, as reasonably determined by the party giving
such notice. On a taking of a portion of Bay Center, Tenant shall have the right
to terminate this Lease by notice to Landlord given within thirty (30) days
after the effective date of such taking, if the portion of Bay Center (but not
the Premises) taken is of such extent and nature so as to materially impair
Tenant's ability to use the Premises, as reasonably determined by Tenant. Such
termination shall be operative as of the effective date of the taking. Landlord
may also terminate this Lease on a taking of any other portion of Bay Center if
Landlord reasonably determines that such taking is of such extent and nature as
to render the operation of the remaining Bay Center economically infeasible or
to require a substantial alteration or reconstruction of such remaining portion.
Landlord shall elect such termination by notice to Tenant given within thirty
(30) days after the effective date of such taking, and such termination shall be
operative as of the effective date of such taking. Upon a taking of the Premises
which does not result in a termination of this Lease, the Base Rent shall
thereafter be reduced as of the effective date of such taking in the proportion
that the Rentable Area of the Premises so taken bears to the total Rentable Area
of the Premises.
13.2. Condemnation Proceeds. Except as hereinafter provided, in the
event of any taking, Landlord shall have the right to all compensation, damages,
income, rent or awards made with respect thereto (collectively an "award"),
including any award for the value of the leasehold estate created by this Lease.
No award to Landlord shall be apportioned and, subject to Tenant's rights
hereinafter specified, Tenant hereby assigns to Landlord any right of Tenant in
any award made for any taking. So long as such claim will not reduce any award
otherwise payable to Landlord under this Section 13.2, Tenant may seek to
recover, at its cost and expense, as a separate claim, any damages or awards
payable on a taking of the Premises to compensate for the unamortized cost paid
by Tenant for any Alterations, or for Tenant's personal property taken, or for
interference with or interruption of Tenant's business (including goodwill), or
for Tenant's removal and relocation expenses.
13.3. Restoration of Premises. On a taking of the Premises which
does not result in a termination of this Lease, Landlord and Tenant shall
restore the Premises as nearly as possible to the condition they were in prior
to the taking in accordance with the applicable provisions and allocation of
responsibility for repair and restoration of the Premises on damage or
destruction pursuant to Article 12 above, and both parties shall use any awards
received by such party attributable to the Premises for such purpose.
13.4. Taking at End of Term. Notwithstanding anything to the
contrary contained in this Article 13, if the Premises are taken within the last
three hundred sixty-five (365) days of the Term, then Landlord shall have the
right, in its sole discretion, to terminate this Lease by notice to Tenant given
within ninety (90) days after the date of such taking. Such termination shall be
effective on the date specified in Landlord's notice to Tenant, but in no event
later than the end of such 90-day period.
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13.5. Tenant Waiver. The rights and obligations of Landlord and
Tenant on any taking of the Premises or any other portion of Bay Center are
governed exclusively by this Lease. Accordingly, Tenant hereby waives the
provisions of any law to the contrary, including California Code of Civil
Procedure Sections 1265.120 and 1265.130, or any similar successor statute.
14. Insurance.
14.1. Insurance. Landlord, with respect to Bay Center, and Tenant,
at its cost and expense with respect to the Premises, shall each maintain or
cause to be maintained, from the Lease Date and throughout the Term, a policy or
policies of Commercial General Liability insurance with limits of liability not
less than Two Million Dollars ($2,000,000.00) per occurrence and in the
aggregate. Each policy shall contain coverage for blanket contractual liability,
personal injury liability, and premises operations, coverage deleting liquor
liability exclusions and, as to Tenant's insurance, fire legal liability.
Landlord shall have the right to approve the deductible under each policy of
Tenant's liability insurance, such approval not to be unreasonably withheld. In
addition, Landlord shall, at its sole cost and expense, keep in force an
extended coverage property damage insurance policy (excluding earthquake
coverage) on the Building in an amount not less than 100% of the replacement
cost of the Building; provided, however, that if at any time during the Term
such insurance is not available at commercially reasonable rates, then Landlord
shall, to the extent such insurance is available at commercially reasonable
rates, obtain extended coverage property damage insurance with the maximum
amount of coverage that is available at commercially reasonable rates.
14.2. Form of Policies. All insurance required by this Article 14
shall be issued on an occurrence basis by solvent companies qualified to do
business in the State of California. Any insurance required under this Article
14 may be maintained under a "blanket policy," insuring other parties and other
locations, so long as the amount and coverage required to be provided hereunder
is not thereby diminished. Tenant shall provide Landlord a copy of each policy
of insurance or a certificate thereof certifying that the policies contain the
provisions required hereunder. Tenant shall deliver such policies or
certificates to Landlord within (30) days after the Lease Date, but in no event
less than ten (10) business days prior to the Commencement Date or such earlier
date as Tenant or Tenant's contractors, agents, licensees, invitees or employees
first enter the Premises and, upon renewal, not less than thirty (30) days prior
to the expiration of such coverage. All evidence of insurance provided to
Landlord shall provide (i) that Landlord, Landlord's managing agent and any
other person requested by Landlord who has an insurable interest, is designated
as an additional insured without limitation as to coverage afforded under such
policy; (ii) for severability of interests or that the acts or omissions of one
of the insureds or additional insureds shall not reduce or affect coverage
available to any other insured or additional insured; (iii) that the insurer
agrees not to cancel or alter the policy without at least thirty (30) days prior
written notice to all additional insureds; (iv) that the aggregate liability
applies solely to the Premises and the remainder of Bay Center; and (v) that
Tenant's insurance is primary and noncontributing with any insurance carried by
Landlord.
14.3. Workers' Compensation Insurance. Tenant, at its sole cost and
expense, shall maintain Workers' Compensation insurance as required by law and
employer's liability insurance in an amount of not less than Five Hundred
Thousand Dollars ($500,000).
14.4. Additional Tenant Insurance. Tenant, at its sole cost and
expense, shall maintain
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such other insurance as Landlord may reasonably require from time to time, but
in no event may Landlord require any other insurance which is (i) not then being
required of comparable tenants leasing comparable amounts of space in comparable
buildings in the vicinity of the Building or (ii) not then available at
commercially reasonable rates.
15. Waiver of Subrogation Rights. Notwithstanding anything to the
contrary contained in this Lease, Landlord and Tenant, for themselves and their
respective insurers, agree to and do hereby release each other of and from any
and all claims, demands, actions and causes of action that each may have or
claim to have against the other for loss or damage to property, both real and
personal, notwithstanding that any such loss or damage may be due to or result
from the negligence of either of the parties hereto or their respective
employees or agents. Each party shall, to the extent such insurance endorsement
is lawfully available at commercially reasonable rates, obtain or cause to be
obtained, for the benefit of the other party, a waiver of any right of
subrogation (a "Subrogation Endorsement") which the insurer of such party may
acquire against the other party by virtue of the payment of any such loss
covered by such insurance; provided, however, that the waiver contained in this
Section 15 shall not be effective during any period when both Tenant and
Landlord do not have in effect a valid Subrogation Endorsement.
16. Tenant's Waiver of Liability and Indemnification.
16.1. Waiver and Release. Except to the extent due to the gross
negligence or willful misconduct of Landlord or its employees, agents, or
contractors, or Landlord's breach of its obligations under this Lease, Landlord
shall not be liable to Tenant or Tenant's employees, agents, contractors,
licenses or invitees for, and Tenant waives and releases Landlord and Landlord's
managing agent from, all claims for loss or damage to any property or injury,
illness or death of any person in, upon or about the Premises and/or any other
portion of Bay Center (including claims caused in whole or in part by the act,
omission, or neglect of other tenants, contractors, licensees, invitees or other
occupants of Bay Center or their agents or employees). The waiver and release
contained in this Section 16.1 extends to the officers, directors, shareholders,
partners, employees, agents and representatives of Landlord.
16.2. Indemnification of Landlord. Tenant shall indemnify, defend,
protect and hold Landlord harmless of and from any and all loss, liens,
liability, claims, causes of action, damage, injury, cost or expense arising out
of or in connection with (i) the making of any Alterations, or (ii) injury to or
death of persons or damage to property occurring or to the extent resulting
from: (A) the use or occupancy of, or the conduct of business in, the Premises
by Tenant or its subtenants or any of their respective officers, directors,
employees, agents, contractors, invitees or licensees; (B) any other occurrence
or condition in or on the Premises (excluding conditions relating to hazardous
substances not brought on the Premises by Tenant, its subtenants, and their
respective agents, employees, or contractors); and (C) acts, neglect or
omissions of Tenant, or its subtenants or any of their respective officers,
directors, employees, agents, contractors, invitees or licensees, in or about
any portion of Bay Center. Tenant's indemnity obligation includes reasonable
attorneys' fees and costs, investigation costs and all other reasonable costs
and expenses incurred by Landlord. If Landlord reasonably disapproves the legal
counsel proposed by Tenant for the defense of any claim indemnified against
hereunder, Landlord shall have the right to appoint its own legal counsel, the
reasonable fees, costs and expenses of which shall be included as part of
Tenant's indemnity obligation hereunder. The indemnification contained in this
Section 16.2 shall extend to the officers, directors, shareholders, partners,
employees, agents and representatives of Landlord.
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16.3. Indemnification of Tenant. Landlord shall indemnify, defend,
protect and hold Tenant harmless of and from any and all loss, liens, liability,
claims, causes of action, damage, injury, cost or expense arising out of or in
connection with (i) any gross negligence or willful misconduct by Landlord or
any breach or default by Landlord in the performance of any of its obligations
under this Lease, or (ii) any loss or damage to property or injury to person
occurring in the public entrances, stairways, corridors, elevators and elevator
lobbies, and other public areas in the Building or the other public areas in Bay
Center (except for such loss, damage or injury for which Tenant is obligated to
indemnify Landlord under Section 16.2). The indemnification contained in this
Section 16.2 shall extend to the officers, directors, shareholders, partners,
employees, agents and representatives of Tenant.
17. Assignment and Subletting.
17.1. Compliance Required. Tenant shall not, directly or indirectly,
voluntary or by operation of law, sell, assign or otherwise transfer this Lease,
or any interest herein (collectively, "assign" or "assignment"), or sublet the
Premises, or any part thereof, or permit the occupancy of the Premises by any
person other than Tenant (collectively, "sublease" or "subletting", the assignee
or sublessee under an assignment or sublease being referred to as a
"transferee"), without Landlord's prior consent given or withheld in accordance
with the express standards and conditions of this Article 17 and compliance with
the other provisions of this Article 17. Any assignment or subletting made in
violation of this Article 17 shall be void. As used herein, an "assignment"
includes any sale or other transfer (such as by consolidation, merger or
reorganization) of a majority of the voting stock of Tenant, if Tenant is a
corporation, or any sale or other transfer of a majority of the beneficial
interest in Tenant, if Tenant is any other form of entity. Tenant acknowledges
and agrees that the limitations on Tenant's right to sublet or assign which are
set forth in this Article 17 are reasonable and, in particular, that the express
standards and conditions upon Tenant's right to assign or sublet which are set
forth in this Article 17 are reasonable as of the Lease Date. Notwithstanding
the foregoing, an assignment shall not include any of the following
(collectively, "Exempt Transfers"): (i) the sale of substantially all of the
assets of Tenant, so long as the purchaser of such assets assumes all of
Tenant's obligations under this Lease; (ii) the transfer of any stock in
connection with a public offering or at any time that the shares of Tenant are
publicly traded; (iii) any merger, consolidation or other non-bankruptcy
reorganization so long as the net worth of the survivor is the same or better as
the Tenant immediately prior to the consummation of the transaction, and so long
as the survivor assumes all of Tenant's obligations under this Lease; and (iv)
any assignment of the Lease to an entity controlling, controlled by or under
common control with Tenant (for purposes of this Section 17.1, "control" shall
mean the applicable entity holds at least a 50% beneficial ownership in the
other entity), so long as the net worth of the assignee is the same or better
than Tenant as of the date of the transaction, and so long as the assignee
assumes all of Tenant's obligations under this Lease (without the release of
Tenant). In addition to the foregoing, Landlord shall have no right to
disapprove a sublease to any entity controlling, controlled by , or under common
control with Tenant (an "Exempt Sublease"). The transferee under an Exempt
Transfer or an Exempt Sublease shall be referred to as an "Exempt Transferee".
17.2. Request by Tenant; Landlord Response. If Tenant desires to
effect an assignment or sublease, Tenant shall submit to Landlord a request for
consent together with the identity of the parties to the transaction, the nature
of the transferee's proposed business use for the Premises, the proposed
documentation for and terms of the transaction, and all other information
reasonably requested by Landlord concerning the proposed transaction and the
parties involved therein, including certified
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financial information, credit reports, the business background and references
regarding the transferee, and an opportunity to meet and interview the
transferee. Within the later of twenty (20) days after the receipt of all such
information required by Landlord or five (5) days after such interview, or
within thirty (30) days after the date of Tenant's request to Landlord if
Landlord does not request additional information or an interview, Landlord shall
have the right, by notice to Tenant, to: (i) consent to the assignment or
sublease, subject to the terms of this Article 17; (ii) decline to consent to
the assignment or sublease; or (iii) terminate this Lease as to the affected
portion of the Premises as of the date specified by Tenant as the effective date
of the proposed assignment or sublease (the "Termination Option"), in which
event Tenant will be relieved of all unaccrued obligations hereunder as to such
portion as of such date, other than those obligations which survive termination
of this Lease. If Landlord elects so to terminate, Tenant shall have the right,
by notice to Landlord within five (5) days after Landlord's exercise of such
right, to rescind its request for the proposed assignment or subletting, in
which event this Lease shall not terminate and shall remain in full force and
effect. Notwithstanding the foregoing or the following, Landlord shall have no
right to exercise the Termination Option with respect to (i) any Exempt Transfer
or Exempt Sublease, or (ii) any sublease that has an entire term (including
extension options) of less than two (2) years. Notwithstanding anything to the
contrary contained in this Lease, Tenant may, without the consent of Landlord,
sublet up to ten percent (10%) of the Rentable Area of the Premises to
subtenants whose occupancy is related to Tenant's business, provided that such
subtenancy satisfies the following: (i) the premises for such subtenant are not
separately demised, (ii) the subtenant operates its business in the Premises for
the Permitted Use and in accordance with all of the terms of this Lease, (iii)
Tenant delivers written notice to Landlord of the identity of such subtenant and
a copy of any sublease with such subtenant, (iv) the occupancy of the subtenant
is related to the business of Tenant, and (v) in no event shall any such
sublease relieve Tenant of any obligation under this Lease.
17.3. Conditions for Landlord Approval. In the event Landlord elects
not to terminate this Lease (in whole or in part) as provided in clause (iii) of
Section 17.2, Landlord shall not unreasonably withhold its consent to a proposed
subletting or assignment by Tenant. Without limiting the grounds on which it may
be reasonable for Landlord to withhold its consent to an assignment or sublease,
Tenant agrees that Landlord would be acting reasonably in withholding its
consent in the following instances: (i) if Tenant is in material default under
this Lease; (ii) if the transferee is a governmental or quasi-governmental
agency, foreign or domestic; (iii) if the transferee is an existing tenant in
the Building; (iv) if Landlord determines that the transferee's business, use
and/or occupancy of the Premises would (A) violate any of the terms of this
Lease or the lease of any other tenant in Bay Center, or (B) not be compatible
with an office use comparable to Tenant's office use as of the date of this
Lease, (C) fall within any category of use for which Landlord would not then
lease space in the Building under its leasing guidelines and policies then in
effect, (D) require any Alterations which would reduce the value of the existing
leasehold improvements in the Premises, or (E) result in increased density per
floor or require increased services by Landlord in excess of the limits on
density and services provided in this Lease; (v) in the case of a sublease, it
would result in more than four (4) occupancies on any floor in the Premises,
including Tenant and subtenants; (vi) in the case of an assignment, if the
financial condition of the transferee does not meet the requirements applied by
Landlord for other tenants in the Building under leases with comparable terms,
or (vii) in the case of a sublease, if Tenant has not demonstrated to Landlord
that the proposed subtenant is financially responsible, with sufficient net
worth and net current assets, properly and successfully to operate its business
in the Premises and meet the financial and other obligations of this Lease
insofar as such obligations are applicable to the subleased premises. If
Landlord consents to an assignment or sublease, the terms of such assignment or
sublease
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transaction shall not be modified without Landlord's prior written consent
pursuant to this Article 17. Landlord's consent to an assignment or subletting
shall not be deemed consent to any subsequent assignment or subletting.
17.4. Costs and Expenses. As a condition to the effectiveness of any
assignment or subletting under this Article 17, Tenant shall pay to Landlord all
reasonable costs and expenses, including attorneys' fees (such attorney's fees
not to exceed $3,000.00) and disbursements, incurred by Landlord in evaluating
Tenant's requests for assignment or sublease, whether or not Landlord consents
to an assignment or sublease. Tenant shall also pay to Landlord all costs and
expenses incurred by Landlord due to a transferee taking possession of the
Premises, including freight elevator operation, security service, janitorial
service and rubbish removal.
17.5. Payment of Excess Rent and Other Consideration. Tenant shall
also pay to Landlord, promptly upon Tenant's receipt thereof, forty percent
(40%) of any and all rent, sums or other consideration ("Subtenant
Consideration"), howsoever denominated realized by Tenant in connection with any
assignment or sublease transaction (other than transfers to Exempt Transferees)
in excess of the Base Rent and Escalation Rent payable hereunder (prorated to
reflect the Rent allocable to the portion of the Premises if a sublease);
provided, however, that the Subtenant Consideration shall not include payments
by a subtenant to Tenant which are reimbursements for out-of-pocket expenses
incurred by Tenant in providing services at cost to such subtenant.
17.6. Assumption of Obligations; Further Restrictions on Subletting.
Each assignee shall, concurrently with any assignment, assume all obligations of
Tenant under this Lease. Each sublease shall be made subject to this Lease and
all of the terms, covenants and conditions contained herein; and the surrender
of this Lease by Tenant, or a mutual cancellation thereof, or the termination of
this Lease in accordance with its terms, shall not work a merger and shall, at
the option of Landlord, terminate all or any existing subleases or operate as an
assignment to Landlord of any or all such subleases. No sublessee (other than
Landlord) shall have the right further to sublet unless such sublessee obtains
Landlord's prior written consent, which may be withheld in Landlord's sole and
absolute discretion. Any assignment by a sublessee of its sublease shall be
subject to Landlord's prior consent in the same manner as a sublease by Tenant.
No sublease, once consented to by Landlord, shall be modified without Landlord's
prior consent. No assignment or sublease shall be binding on Landlord unless the
transferee delivers to Landlord a fully executed counterpart of the assignment
or sublease which contains the assumption by the assignee, or recognition by the
sublessee, of the provisions of this Section 17.6, in form and substance
satisfactory to Landlord, but the failure or refusal of a transferee to deliver
such instrument shall not release or discharge such transferee from the
provisions and obligations of this Section 17.6, but such failure shall
constitute a default by Tenant under this Lease.
17.7. No Release. No assignment or sublease shall release Tenant
from its obligations under this Lease, whether arising before or after the
assignment or sublease. The acceptance of Rent by Landlord from any other person
shall not be deemed a waiver by Landlord of any provision of this Article 17. On
a default by any assignee of Tenant in the performance of any of the terms,
covenants or conditions of this Lease, Landlord may proceed directly against
Tenant without the necessity of commencing or exhausting remedies against such
assignee. No consent by Landlord to any further assignments or sublettings of
this Lease, or any modification, amendment or termination of this Lease, or
extension, waiver or modification of payment or any other obligations under this
Lease, or any other
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action by Landlord with respect to any assignee or sublessee, or the insolvency,
or bankruptcy or default of any such assignee or sublessee, shall affect the
continuing liability of Tenant for its obligations under this Lease and Tenant
waives any defense arising out of or based thereon, including any suretyship
defense of exoneration. Landlord shall have no obligation to notify Tenant or
obtain Tenant's consent with respect to any of the foregoing matters.
17.8. No Encumbrance. Notwithstanding anything to the contrary
contained in this Article 17, Tenant shall have no right to encumber, pledge,
hypothecate or otherwise transfer this Lease, or any of Tenant's interest or
rights hereunder, as security for any obligation or liability of Tenant.
18. Rules and Regulations. Tenant shall observe and comply, and shall
cause its sublessees, employees, agents, contractors, licensees and invitees to
observe and comply, with the Rules and Regulations of Bay Center, a copy of
which are attached to this Lease as Exhibit D, and, after notice thereof, with
all modifications and additions thereto from time to time promulgated in writing
by Landlord, but only to the extent such modifications and additions are
reasonable, non-discriminatory, and not materially inconsistent with any of the
rights of Tenant granted by this Lease. Provided that Landlord uses commercially
reasonable efforts to enforce the Rules and Regulations in a uniform and
nondiscriminatory manner, Landlord shall not be responsible to Tenant, or
Tenant's sublessees, employees, agents, contractors, licensees or invitees, for
noncompliance with any Rules and Regulations of Bay Center by any other tenant,
sublessee, employee, agent, contractor, licensee, invitee or other occupant of
Bay Center.
19. Entry of Premises by Landlord.
19.1. Right to Enter. Upon reasonable advance notice to Tenant
(except in emergencies or in order to provide regularly scheduled or other
routine Building standard services or additional services requested by Tenant,
or post notices of nonresponsibility or other notices permitted or required by
law when no such notice shall be required), Landlord and its authorized agents,
employees, and contractors may enter the Premises at reasonable hours to: (i)
inspect the same; (ii) determine Tenant's compliance with its obligations
hereunder; (iii) exhibit the same to prospective purchasers or lenders or,
during the final nine (9) months of the Term, exhibit the same to prospective
tenants; (iv) supply any services to be provided by Landlord hereunder; (v) post
notices of nonresponsibility or other notices permitted or required by law; (vi)
make repairs, improvements or alterations, or perform maintenance in or to, the
Premises or any other portion of Bay Center, including Building systems; and
(vii) perform such other functions as Landlord deems reasonably necessary or
desirable. Landlord may also grant access to the Premises to government or
utility representatives and bring and use on or about the Premises such
equipment as reasonably necessary to accomplish the purposes of Landlord's
entry. Landlord shall use reasonable good faith efforts to effect all entries
and perform all work hereunder in such manner as to minimize interference with
Tenant's use and occupancy of the Premises. Landlord shall have and retain keys
with which to unlock all of the doors in or to the Premises (excluding Tenant's
vaults, safes and similar secure areas designated in writing by Tenant in
advance), and Landlord shall have the right to use any and all means which
Landlord may deem proper in an emergency in order to obtain entry to the
Premises, including secure areas.
19.2. Tenant Waiver of Claims. Tenant waives any claim for damages
for any inconvenience to or interference with Tenant's business, or any loss of
occupancy or quiet enjoyment of
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the Premises, or any other loss, occasioned by any entry effected or work
performed in compliance with this Article 19, and Tenant shall not be entitled
to any abatement of Rent by reason of the exercise of any such right of entry or
performance of such work. No entry to the Premises by Landlord or anyone acting
under Landlord that is in compliance with this Article 19 shall constitute a
forcible or unlawful entry into, or a detainer of, the Premises or an eviction,
actual or constructive, of Tenant from the Premises, or any portion thereof.
20. Default and Remedies.
20.1. Events of Default. The occurrence of any of the following
events shall constitute a default by Tenant under this Lease (but Landlord may
only exercise any of its remedies with respect to such default if such default
is not cured within the applicable time periods described in Section 20.2
below):
a. Nonpayment of Rent. Failure to pay any Rent when due.
b. Unpermitted Assignment. An assignment or sublease made
in contravention of any of the provisions of Article 17 above.
c. Abandonment. Abandonment of the Premises, with
"abandonment" having the meaning provided in California Civil Code Section
1951.3.
d. Other Obligations. Failure to perform or fulfill any
other obligation, covenant, condition or agreement under this Lease.
e. Bankruptcy and Insolvency. A general assignment by
Tenant for the benefit of creditors, any action or proceeding commenced by
Tenant under any insolvency or bankruptcy act or under any other statute or
regulation for protection from creditors, or any such action commenced against
Tenant and not discharged within sixty (60) days after the date of commencement;
the employment or appointment of a receiver or trustee to take possession of all
or substantially all of Tenant's assets or the Premises where possession is not
returned to Tenant within thirty (30) days; the attachment, execution or other
judicial seizure of all or substantially all of Tenant's assets or the Premises,
if such attachment or other seizure remains undismissed or undischarged for a
period of fifteen (15) days after the levy thereof; the admission by Tenant in
writing of its inability to pay its debts as they become due; or the filing by
Tenant of a petition seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, the filing of a petition filed against Tenant
in any such proceeding if within thirty (30) days after the commencement of any
such proceeding against Tenant, such proceeding is not dismissed. For purposes
of this Section 20.1(e), "Tenant" means Tenant and any partner of Tenant, if
Tenant is a partnership, or any person or entity comprising Tenant, if Tenant is
comprised of more than one person or entity, or any guarantor of Tenant's
obligations, or any of them, under this Lease.
f. Building A Lease. Failure to perform or fulfill any
obligation, covenant, condition or agreement under the Building A Lease, where
the same continues beyond any notice and cure period called for under the
Building A Lease.
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20.2. Notice to Tenant. Upon the occurrence of any default, Landlord
shall give Tenant notice thereof. Such notice shall replace rather than
supplement any equivalent or similar statutory notice, including any notices
required by California Code of Civil Procedure Section 1161 or any similar or
successor statute; and giving of such notice in the manner required by Article
28 shall replace and satisfy any service-of-notice procedures set forth in any
statute, including those required by California Code of Civil Procedure Section
1162 or any similar or successor statute. If a time period is specified below
for cure of such default, then Tenant may cure such default within such time
period. To the fullest extent allowed by law, Tenant hereby waives any right
under law now or hereinafter enacted to any other time period for cure of
default.
a. Nonpayment of Rent. For failure to pay Rent, within five
(5) days after Landlord's notice.
b. Other Obligations. For failure to perform any
obligation, covenant, condition or agreement under this Lease (other than
nonpayment of Rent, an assignment or subletting in violation of Article 17 or
Tenant's abandonment of the Premises) within twenty (20) days after Landlord's
notice or, if the failure is of a nature requiring more than 20 days to cure,
then such additional time as is reasonably necessary to cure such default, but
only if Tenant commences such cure within such twenty (20) day period and
thereafter diligently pursues such cure to completion.
c. No Cure Period. No cure period shall apply for any other
event of default specified in Section 20.1.
20.3. Remedies Upon Occurrence of Default. On the occurrence of a
default which Tenant fails to cure after notice and expiration of the time
period for cure, if any, specified in Section 20.2 above, Landlord shall have
the right either (i) to terminate this Lease and recover possession of the
Premises, or (ii) to continue this Lease in effect and enforce all Landlord's
rights and remedies under California Civil Code Section 1951.4 (by which
Landlord may recover Rent as it becomes due, subject to Tenant's right to assign
pursuant to Article 17). Landlord may store any property of Tenant located in
the Premises at Tenant's expense or otherwise dispose of such property in the
manner provided by law. To the extent permitted under Section 1951.4 of the
California Civil Code, if Landlord does not terminate this Lease, Tenant shall
in addition to continuing to pay all Rent when due, also pay Landlord's costs of
attempting to relet the Premises, any repairs and alterations necessary to
prepare the Premises for such reletting, and brokerage commissions and
attorneys' fees incurred in connection therewith, less the rents, if any,
actually received from such reletting. Notwithstanding Landlord's election to
continue this Lease in effect, Landlord may at any time thereafter terminate
this Lease pursuant to this Section 20.3.
20.4. Damages Upon Termination. If and when Landlord terminates this
Lease pursuant to Section 20.3, Landlord may exercise all its rights and
remedies available under California Civil Code Section 1951.2, including the
right to recover from Tenant the worth at the time of award of the amount by
which the unpaid Rent for the balance of the Term after the time of award
exceeds the amount of such Rent loss that the Tenant proves could have been
reasonably avoided. As used herein and in Civil Code Section 1951.2, "time of
award" means the date of entry of any determination, order or judgment of any
court or other legally constituted body determining the amount recoverable.
20.5. Computation of Certain Rent for Purposes of Default. For
purposes of computing
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unpaid Rent pursuant to Section 20.4 above, Escalation Rent for the balance of
the Term shall be determined by averaging the amounts paid by Tenant as
Escalation Rent for the Fiscal Years prior to the year in which the default
occurred (or, if the prior year is the Base Year or such default occurs during
the Base Year, Escalation Rent shall be based on Landlord's operating budget for
the Building for the Base Year), increasing such average amount for each Fiscal
Year (or portion thereof) remaining in the balance of the Term at a per annum
compounded rate equal to the mean average rate of increase for the preceding
five (5) calendar years in the United States Department of Labor, Bureau of
Labor Statistics, Consumer Price Index (All Urban Consumers, All Items,
1982-1984 = 100) for the Metropolitan Area of which San Francisco, California,
is a part, and adding together the resulting amounts. If such Index is
discontinued or revised, such computation shall be made by reference to the
index designated as the successor or substitute index by the United States
Department of Labor, Bureau of Labor Statistics, or its successor agency, and if
none is designated, by a comparable index as determined by Landlord in its sole
discretion, which would likely achieve a comparable result to that achieved by
the use of the Consumer Price Index. If the base year of the Consumer Price
Index is changed, then the conversion factor specified by the Bureau, or
successor agency, shall be utilized to determine the Consumer Price Index.
20.6. Landlord's Right to Cure Defaults. If Tenant fails to pay Rent
(other than Base Rent and Escalation Rent) required to be paid by it hereunder,
or fails to perform any other obligation under this Lease, and Tenant fails to
cure such default within the applicable cure period, if any, specified in
Section 20.2 above, then Landlord may, without waiving any of Landlord's rights
in connection therewith or releasing Tenant from any of its obligations or such
default, make any such payment or perform such other obligation on behalf of
Tenant. All payments so made by Landlord, and all costs and expenses incurred by
Landlord to perform such obligations, shall be due and payable by Tenant as Rent
immediately upon receipt of Landlord's demand therefor.
20.7. Remedies Cumulative. The rights and remedies of Landlord under
this Lease are cumulative and in addition to, and not in lieu of, any other
rights and remedies available to Landlord at law or in equity. Landlord's
pursuit of any such right or remedy shall not constitute a waiver or election of
remedies with respect to any other right or remedy.
21. Subordination, Attornment and Nondisturbance.
21.1. Subordination and Attornment. This Lease and all of Tenant's
rights hereunder shall be subordinate to any ground lease or underlying lease,
and the lien of any mortgage, deed of trust, or any other security instrument
now or hereafter affecting or encumbering Bay Center, or any part thereof or
interest therein, and to any and all advances made on the security thereof or
Landlord's interest therein, and to all renewals, modifications, consolidations,
replacements and extensions thereof (an "encumbrance", the holder of the
beneficial interest thereunder being referred to as an "encumbrancer"). An
encumbrancer may, however, subordinate its encumbrance to this Lease, and if an
encumbrancer so elects by notice to Tenant, this Lease shall be deemed prior to
such encumbrance. If any encumbrance to which this Lease is subordinate is
foreclosed, or a deed in lieu of foreclosure is given to the encumbrancer
thereunder, Tenant shall attorn to the purchaser at the foreclosure sale or to
the grantee under the deed in lieu of foreclosure; and if any encumbrance
consisting of a ground lease or underlying lease to which this Lease is
subordinate is terminated, Tenant shall attorn to the lessor thereof. Tenant
shall execute, acknowledge and deliver in the form requested by Landlord or any
encumbrancer, any documents required to evidence or effectuate the subordination
hereunder, or to make this Lease prior to
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the lien of any encumbrance, or to evidence such attornment, so long as any
such document contains language reasonably requested by such party agreeing that
Tenant's rights under this Lease shall not be disturbed so long as Tenant is not
in default under this Lease.
21.2. Nondisturbance. If any encumbrance to which this Lease is
subordinate is foreclosed, or a deed in lieu of foreclosure is given to the
encumbrancer thereunder, or if any encumbrance consisting of a ground lease or
underlying lease to which this Lease is subordinate is terminated, this Lease
shall not terminate, and the rights and possession of Tenant under this Lease
shall not be disturbed if (i) no default by Tenant then exists under this Lease;
(ii) Tenant attorns to the purchaser, grantee, or successor lessor as provided
in Section 21.1 above or, if requested, enters into a new lease for the balance
of the Term upon the same terms and provisions contained in this Lease; and
(iii) Tenant, upon the request of such encumbrancer, enters into a written
agreement in a form reasonably acceptable to such encumbrancer with respect to
subordination, attornment and non-disturbance.
21.3 Existing Lender. Landlord shall use reasonable efforts to
obtain a reasonable non-disturbance agreement from the existing beneficiary
under the deed of trust encumbering Bay Center as of the date of this Lease. If
Landlord is unable to obtain such non-disturbance agreement within thirty (30)
days after the date of this Lease, then Tenant's sole remedy shall be to
terminate this Lease by delivering written notice to Landlord on or before a
date forty (40) days after the date of this Lease, but Tenant shall have no
right to deliver such notice if Landlord obtains such non-disturbance agreement
before Tenant delivers such notice. If Tenant fails to deliver such notice
within such period, then Tenant shall have no further rights or remedies with
respect to Landlord's failure to obtain such non-disturbance agreement. If
Tenant timely and properly delivers such notice, then this Lease shall
automatically terminate as of the date of such notice and neither Landlord nor
Tenant shall have any further rights or obligations under this Lease.
22. Sale or Transfer by Landlord; Lease Non-Recourse.
22.1. Release of Landlord on Transfer. Landlord may at any time
transfer, in whole or in part, its right, title and interest under this Lease
and in Bay Center, or any portion thereof. If the original Landlord hereunder,
or any successor to such original Landlord, transfers (by sale, assignment or
otherwise) its right, title or interest in the Building, then, upon assumption
of all future obligations under this Lease by Landlord's transferee, all
liabilities and obligations of the original Landlord or such successor under
this Lease accruing after such transfer shall terminate, the original Landlord
or such successor shall automatically be released therefrom, and thereupon all
such liabilities and obligations shall be binding upon the new owner. Tenant
shall attorn to each such new owner.
22.2. Lease Nonrecourse to Landlord. Landlord shall in no event be
personally liable under this Lease, and Tenant shall look solely to Landlord's
interest in Bay Center (including proceeds from sale, refinance, or insurance),
for recovery of any damages for breach of this Lease by Landlord or on any
judgment in connection therewith. None of the persons or entities comprising or
representing Landlord (whether partners, shareholders, officers, directors,
trustees, employees, beneficiaries, agents or otherwise) shall ever be
personally liable under this Lease or liable for any such damages or judgment
and Tenant shall have no right to effect any levy of execution against any
assets of such persons or entities on account of any such liability or judgment.
Any lien obtained by Tenant to enforce any such judgment, and any levy of
execution thereon, shall be subject and subordinate to all encumbrances as
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specified in Article 21 above existing as of the date that Tenant obtains and
records a proper and legal judgment lien against Bay Center. If Landlord fails
to perform any obligation of Landlord under this Lease, and such default is not
cured within twenty (20) days after receipt of written notice from Tenant of
such default, or, if the failure is of a nature requiring more than 20 days to
cure, then such additional time as is reasonably necessary to cure such default,
but only if Landlord commences such cure within such twenty (20) day period and
thereafter diligently pursues such cure to completion, then, subject to the
provisions of this Section 22.2, Tenant shall have the right to exercise any
rights or remedies available to Tenant at law or in equity
23. Estoppel Certificate.
23.1. Procedure and Content. From time to time, and within fifteen
(15) days after written notice by Landlord, Tenant shall execute, acknowledge,
and deliver to Landlord a certificate as specified by Landlord certifying: (i)
that this Lease is unmodified and in full force and effect (or, if there have
been modifications, that this Lease is in full force and effect, as modified,
and identifying each modification); (ii) the Commencement Date and Expiration
Date; (iii) that Tenant has accepted the Premises (or the reasons Tenant has not
accepted the Premises), and if Landlord has agreed to make any alterations or
improvements to the Premises, that Landlord has properly completed such
alterations or improvements (or the reasons why Landlord has not done so); (iv)
the amount of the Base Rent and current Escalation Rent, if any, and the date to
which such Rent has been paid; (v) that Tenant has not committed any event of
default, except as to any events of default specified in the certificate, and
whether there are any existing defenses against the enforcement of Tenant's
obligations under this Lease; (vi) that no default of Landlord is claimed by
Tenant, except as to any defaults specified in the certificate; and (vii) such
other information as may be reasonably requested by Landlord.
23.2. Effect of Certificate. Any such certificate may be relied upon
by any prospective purchaser of any part or interest in Bay Center or
encumbrancer (as defined in Section 21.1) and, at Landlord's request, Tenant
shall deliver such certificate to Landlord and/or to any such entity. In
addition, at Landlord's request, Tenant shall provide to Landlord for delivery
to any such entity such non-confidential public information, including
financial information, that may reasonably be requested by any such entity. Any
such certificate shall constitute a waiver by Tenant of any claims Tenant may
have in contravention to the information contained in such certificate and
Tenant shall be estopped from asserting any such claim. If Tenant fails or
refuses to give a certificate hereunder within the time period herein specified,
then the information contained in such certificate as submitted by Landlord
shall be deemed correct for all purposes, but Landlord shall have the right to
treat such failure or refusal as a default by Tenant.
24. No Light, Air, or View Easement. Nothing contained in this Lease
shall be deemed, either expressly or by implication, to create any easement for
light and air or access to any view. Any diminution or shutting off of light,
air or view to or from the Premises by any structure which now exists or which
may hereafter be erected, whether by Landlord or any other person, shall in no
way affect this Lease or Tenant's obligations hereunder, entitle Tenant to any
reduction of Rent, or impose any liability on Landlord.
25. Holding Over. No holding over by Tenant shall operate to extend the
Term. If Tenant remains in possession of the Premises after expiration or
termination of this Lease, unless otherwise
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agreed by Landlord in writing, then (i) Tenant shall become a tenant at
sufferance upon all the applicable terms and conditions of this Lease, except
that Base Rent shall be increased to equal 150% of the Base Rent then in effect;
(ii) Tenant shall indemnify, defend, protect and hold harmless Landlord, and any
tenant to whom Landlord has leased all or part of the Premises, from any and all
liability, loss, damages, costs or expense (including loss of Rent to Landlord
or additional rent payable by such tenant and reasonable attorneys' fees)
suffered or incurred by either Landlord or such tenant resulting from Tenant's
failure timely to vacate the Premises; and (iii) such holding over by Tenant
shall constitute a default by Tenant.
26. Security Deposit.
26.1 General Procedures. At any time during the Term, within three
(3) days after Landlord's written request, which request may be made in
Landlord's sole and absolute discretion, Tenant shall deposit with Landlord the
Security Deposit, in an amount equal to the monthly Base Rent as of the date of
Landlord's request. The Security Deposit shall be held by Landlord as security
for the performance by Tenant of all its obligations under this Lease. If Tenant
fails to pay any Rent due hereunder, or otherwise commits a default with respect
to any provision of this Lease, Landlord may use, apply or retain all or any
portion of the Security Deposit for the payment of any such Rent or for the
payment of any other amounts expended or incurred by Landlord by reason of
Tenant's default, or to compensate Landlord for any loss or damage which
Landlord may incur thereby (and in this regard Tenant hereby waives the
provisions of California Civil Code Section 1950.7(c) and any similar or
successor statute providing that Landlord may claim from a security deposit only
those sums reasonably necessary to remedy defaults in the payment of Rent, to
repair damage caused by Tenant, or to clean the Premises). Exercise by Landlord
of its rights hereunder shall not constitute a waiver of, or relieve Tenant from
any liability for, any default. If any portion of a cash Security Deposit is so
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 an amount equal to the monthly Base Rent as of the date of Landlord's
request. The Security Deposit, or so much thereof as has not theretofore been
applied by Landlord to cure or remedy a default by Tenant or to hold for the
purpose of restoring the Premises to the condition required by this Lease, shall
be returned, without interest, to Tenant (or, at Landlord's option, to the last
assignee, if any, of Tenant's interest under this Lease) within thirty (30) days
after the later of (i) the date of expiration or earlier termination of this
Lease, or (ii) vacation of the Premises by Tenant. Landlord's receipt and
retention of the Security Deposit shall not create any trust or fiduciary
relationship between Landlord and Tenant and Landlord need not keep the Security
Deposit separate from its general accounts. Upon termination of the original
Landlord's (or any successor owner's) interest in the Premises, the original
Landlord (or such successor) shall be released from further liability with
respect to the Security Deposit upon the original Landlord's (or such
successor's) compliance with California Civil Code Section 1950.7(d), or
successor statute.
27. Waiver. Failure of Landlord to declare a default by Tenant upon
occurrence thereof, or delay in taking any action in connection therewith, shall
not waive such default, but Landlord shall have the right to declare such
default at any time after its occurrence. To be effective, a waiver of any
provision of this Lease, or any default, shall be in writing and signed by the
waiving party. Any waiver hereunder shall not be deemed a waiver of subsequent
performance of any such provision or subsequent defaults. The subsequent
acceptance of Rent hereunder, or endorsement of any check by Landlord, shall not
be deemed to constitute an accord and satisfaction or a waiver of any preceding
default by Tenant, except as
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<PAGE> 39
to the particular Rent so accepted, regardless of Landlord's knowledge of the
preceding default at the time of acceptance of the Rent. No course of conduct
between Landlord and Tenant, and no acceptance of the keys to or possession of
the Premises by Landlord before the Expiration Date shall constitute a waiver of
any provision of this Lease or of any default, or operate as a surrender of this
Lease.
28. Notices and Consents; Tenant's Agent for Service. All notices,
approvals, consents, demands and other communications from one party to the
other given pursuant to this Lease shall be in writing and shall be made by
personal delivery, by use of a reputable overnight courier service or by deposit
in the United States mail, certified, registered or Express, postage prepaid and
return receipt requested. Notices shall be addressed if to Landlord, to
Landlord's Address, and if to Tenant, to Tenant's Address. Landlord and Tenant
may each change their respective Addresses from time to time by giving written
notice to the other of such change in accordance with the terms of this Article
28, at least ten (10) days before such change is to be effected. Any notice
given in accordance with this Article 28 shall be deemed to have been given (i)
on the date of personal delivery or (ii) on the date of delivery (as shown by
the return receipt or other delivery record) if sent by courier service or
mailed.
29. Tenant's Authority. Tenant, and each of the persons executing this
Lease on behalf of Tenant, represent and warrant that (i) Tenant is a duly
formed, authorized and existing corporation, partnership or trust (as the case
may be), (ii) Tenant is qualified to do business in California, (iii) Tenant has
the full right and authority to enter into this Lease and to perform all of
Tenant's obligations hereunder, and (iv) each person signing on behalf of Tenant
is authorized to do so. Tenant shall deliver to Landlord, upon Landlord's
request, such certificates, resolutions, or other written assurances authorizing
Tenant's execution and delivery of this Lease as is reasonably requested by
Landlord from time to time or at any time in order for Landlord to assess
Tenant's then authority.
30. Automobile Parking.
30.1. Tenant's Appurtenant Parking Rights. Subject to the terms
and conditions contained in this Article 30, Landlord shall make available to
Tenant parking spaces in the parking areas designated by Landlord for parking in
Bay Center, including the Enclosed Parking Area (such areas being hereinafter
collectively referred to as the "Parking Facility"). For purposes of this Lease,
the term "Minimum Spaces" shall mean an amount equal to one (1) parking space
for each 250 square feet of useable area leased by Tenant in Building C. Tenant
shall at all times provide to Landlord, upon Landlord's request, a list of all
of the vehicle makes, colors and license plate numbers of all vehicles of
Tenant's employees. Tenant's use of the parking spaces to be made available to
Tenant shall be on a non-exclusive basis in common with other tenants in the Bay
Center; and parking in such spaces shall be on a first-come-first-served,
unassigned, non-reserved basis. The parking spaces to be made available to
Tenant shall be in locations designated by Landlord; and Landlord reserves the
right to designate different locations from time to time without any liability
to Tenant and Tenant agrees that any such designation of a different location
shall not give rise to any claims or offset against Landlord hereunder. Without
limiting the generality of the foregoing, Landlord may restrict certain portions
of the Parking Facility for the exclusive use of one or more tenants of Bay
Center (and their employees and agents) and may designate other areas in the
Parking Facility to be used at large only by licensees, customers and invitees
of tenants of Bay Center; and Landlord may in its sole and absolute discretion
restrict or prohibit the use of the Parking Facility by any vehicles other than
passenger automobiles such as full-sized vans or trucks. Notwithstanding the
foregoing, Landlord shall not exercise any of the foregoing rights in a
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manner which would permanently reduce the total number of parking spaces
available to Tenant on a non-exclusive basis to a number less than the Minimum
Spaces, or in a manner which would materially and permanently inconvenience
Tenant with respect to its access to the Parking Facility. Tenant shall not
permit any vehicles belonging to Tenant or any of Tenant's subtenants or any of
their respective employees, agents, customers, contractors or invitees to be
loaded, unloaded or parked in areas other than those designated by Landlord for
such activities. In its use of the Parking Facilities Tenant shall comply (and
shall cause each of its subtenants and each of their respective employees,
agents, customers, contractors and invitees to comply) with any and all parking
regulations and rules established from time to time by Landlord or Landlord's
parking operator. Landlord or Landlord's parking operator shall have the right
to cause to be removed any vehicles of Tenant, its subtenants or any of their
respective employees, agents, licensees, customers or invitees, that are parked
in violation of any of the provisions of this Article 30 or of the regulations
and rules then established by Landlord, and to charge all of the costs incurred
by Landlord in connection with such removal to Tenant and Tenant shall pay the
amount of all such costs to Landlord as Additional Rent within five (5) days
after receipt of written demand from Landlord. Any such removal shall be without
liability of any kind to Landlord or Landlord's parking operator or their
respective employees or agents; and Tenant shall protect, defend, indemnify and
hold Landlord and Landlord's parking operator and their respective employees and
agents from and against any and all claims, losses, damages, demands, costs and
expenses (including reasonable attorneys' fees) which may be asserted against or
incurred by any of such indemnified parties arising out of or in connection with
such removal of any automobiles, except to the extent that such claims, losses,
damages, demands, costs and expenses arise out of the gross negligence or
willful misconduct of Landlord, its agents, employees, or contractors.
30.2. Parking Fee. During the Term, Landlord shall impose no charge
on Tenant for use of the Parking Facility; provided, however, if any
governmental authority having jurisdiction charges Landlord a fee for parking
during the Term, Landlord shall have the right to include as Operating Expenses
such parking fees.
30.3. Allocation of Risk. Landlord shall have no obligation to
monitor the use of the Parking Facility. The use of the Parking Facility by the
employees of Tenant and its subtenants shall be at the sole risk of Tenant, its
subtenants and their respective employees. Except to the extent caused by the
gross negligence or willful misconduct of Landlord, its agents, employees, or
contractors, Landlord shall have no responsibility or liability for any injury
or damage to any person or property by or as a result of the use of the Parking
Facility by Tenant and its subtenants and their respective employees, whether by
theft, collision, criminal activity, or otherwise; and Tenant hereby assumes,
for itself, its subtenants and their respective employees (without the
obligation to indemnify Landlord), all risks associated with any such
occurrences in or about the Parking Facility.
31. Tenant to Furnish Financial Statements. In order to induce Landlord
to enter into this Lease, Tenant agrees that it shall promptly deliver to
Landlord, from time to time, upon Landlord's written request, financial
statements (including a balance sheet and statement of income and expenses on an
annualized basis) reflecting Tenant's then current financial condition. Such
statements shall be delivered to Landlord within fifteen (15) days after
Tenant's receipt of Landlord's request. Tenant represents and warrants that all
financial statements furnished by Tenant to Landlord in connection with this
Lease are and shall be true, correct and complete in all respects. So long as
Tenant is a public company, Tenant shall have the right to satisfy the foregoing
requirement by delivering to Landlord copies of Tenant's
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<PAGE> 41
most recent reports filed with the SEC.
32. Tenant's Signs. Subject to the express provisions of this Section
32, without Landlord's prior written consent, which Landlord may withhold in its
sole discretion, Tenant shall not place on the Premises or on the Building any
exterior signs nor any interior signs that are visible from the exterior of the
Premises or Building. During the Initial Term, Tenant shall have the exclusive
right to continue to maintain, at Tenant's sole cost and expense, in compliance
with all applicable governmental rules, laws and regulations, the existing
signage on the exterior of the Building (the "Existing Signage"). Tenant shall
pay all costs and expenses relating to the Existing Signage and any sign
approved by Landlord, including without limitation, the cost of the
installation, design construction, transportation and maintenance of the sign.
Unless the parties otherwise mutually agree in their sole and absolute
discretion, on the last day of the Term or the earlier termination of this
Lease, Tenant, at its sole cost and expense, shall remove all signs (including
the Existing Signage) and repair any damage to the Building caused by such
removal. If Tenant exercises its option to extend the Term pursuant to Section
3.2 of this Lease, then concurrent with the determination of the Fair Market
Rent of the Premises pursuant to Section 3.2, Landlord and Tenant shall
determine the rental value of the Existing Signage (the "Signage Value") in
accordance with the provisions of Section 3.2 of this Lease. For purposes of
determining the Signage Value, the appraisers appointed under Section 3.2 shall
not value the Existing Signage as "free standing advertising" unless it is
customary at the time of such appraisal to value leasehold signage in such
manner. Subject to the foregoing sentence, the Signage Value shall be determined
to reflect the value of such Existing Signage to Tenant as adjunct to Tenant's
occupancy of the Premises and enhancing the value of Tenant's occupancy of the
Premises. If Tenant approves the Signage Value in writing within ten (10) days
after determination of the Signage Value in accordance with the foregoing
procedure, then, during the Extended Term, Tenant shall have the exclusive right
to continue to maintain, at Tenant's sole cost and expense, in compliance with
all applicable governmental rules, laws and regulations, the Existing Signage.
If Tenant does not approve the Signage Value in writing within ten (10) days
after determination of the Signage Value in accordance with the foregoing
procedure, then Landlord shall have the right to remove, at Tenant's sole cost
and expense, all Existing Signage.
33. Miscellaneous.
33.1. No Joint Venture. This Lease does not create any partnership
or joint venture or similar relationship between Landlord and Tenant.
33.2. Successors and Assigns. Subject to the provisions of Article
17 regarding assignment, all of the provisions, terms, covenants and conditions
contained in this Lease shall bind, and inure to the benefit of, the parties and
their respective successors and assigns.
33.3. Construction and Interpretation. The words "Landlord" and
"Tenant" include the plural as well as the singular. If there is more than one
person comprising Tenant, the obligations under this Lease imposed on Tenant are
joint and several. References to a party or parties refers to Landlord or
Tenant, or both, as the context may require. The captions preceding the
Articles, Sections and subsections of this Lease are inserted solely for
convenience of reference and shall have no effect upon, and shall be disregarded
in connection with, the construction and interpretation of this Lease. Use in
this Lease of the words "including", "such as", or words of similar import when
following a general matter, shall not be construed to limit such matter to the
enumerated items or matters whether or not language of
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<PAGE> 42
nonlimitation (such as "without limitation") is used with reference thereto. All
provisions of this Lease have been negotiated at arm's length between the
parties and after advice by counsel and other representatives chosen by each
party and the parties are fully informed with respect thereto. Therefore, this
Lease shall not be construed for or against either party by reason of the
authorship or alleged authorship of any provision hereof, or by reason of the
status of the parties as Landlord or Tenant, and the provisions of this Lease
and the Exhibits hereto shall be construed as a whole according to their common
meaning in order to effectuate the intent of the parties under the terms of this
Lease.
33.4. Severability. If any provision of this Lease, or the
application thereof to any person or circumstance, is determined to be illegal,
invalid or unenforceable, the remainder of this Lease, or its application to
persons or circumstances other than those as to which it is illegal, invalid or
unenforceable, shall not be affected thereby and shall remain in full force and
effect, unless enforcement of this Lease as so invalidated would be unreasonable
or grossly inequitable under the circumstances, or would frustrate the purposes
of this Lease.
33.5. Entire Agreement; Amendments. This Lease, together with the
Exhibits hereto and any Addenda identified on the Basic Lease Information,
contains all the representations and the entire agreement between the parties
with respect to the subject matter hereof and any prior negotiations,
correspondence, memoranda, agreements, representations or warranties are
replaced in total by this Lease, the Exhibits hereto and such Addenda. Neither
Landlord nor Landlord's agents have made any warranties or representations with
respect to the Premises or any other portion of Bay Center, except as expressly
set forth in this Lease. This Lease may be modified or amended only by an
agreement in writing signed by both parties.
33.6. Governing Law. This Lease shall be governed by and construed
pursuant to the laws of the State of California.
33.7. Litigation Expenses. If either party brings any action or
proceeding against the other (including any cross-complaint, counterclaim or
third party claim) to enforce or interpret this Lease or otherwise arising out
of this Lease, the prevailing party in such action or proceeding shall be
entitled to its costs and expenses of suit, including reasonable attorneys' fees
and accountants' fees.
33.8. Standards of Performance and Approvals. Unless otherwise
provided in this Lease, (i) each party shall act in a reasonable manner in
exercising or undertaking its rights, duties and obligations under this Lease
and (ii) whenever approval, consent or satisfaction (collectively, an
"approval") is required of a party pursuant to this Lease or an Exhibit hereto,
such approval shall not be unreasonably withheld or delayed. Unless provision is
made for a specific time period, approval (or disapproval) shall be given within
twenty (20) days after receipt of the request for approval. Nothing contained in
this Lease shall, however, limit the right of a party to act or exercise its
business judgment in a subjective manner with respect to any matter as to which
it has been (A) specifically granted such right, (B) granted the right to act in
its sole discretion or sole judgment, or (C) granted the right to make a
subjective judgment hereunder, whether "objectively" reasonable under the
circumstances and any such exercise shall not be deemed inconsistent with any
covenant of good faith and fair dealing implied by law to be part of this Lease.
The parties have set forth in this Lease their entire understanding with respect
to the terms, covenants, conditions and standards pursuant to which their
obligations are to be judged and their performance measured, including the
provisions of Article 17 with respect to assignments and
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<PAGE> 43
sublettings.
33.9. Brokers. Landlord and Tenant each represent and warrant to the
other that no broker, agent, or finder has procured or was involved in the
negotiation of this Lease and no such broker, agent or finder is or may be
entitled to a commission or compensation in connection with this Lease. Landlord
and Tenant shall each indemnify, defend, protect and hold the other harmless
from and against any and all liability, loss, damages, claims, costs and
expenses (including reasonable attorneys' fees) resulting from claims that may
be asserted against the indemnified party in breach of the foregoing warranty
and representation.
33.10. Memorandum of Lease. Tenant shall, upon request of Landlord,
execute, acknowledge and deliver a short form memorandum of this Lease (and any
amendment hereto) in form suitable for recording. In no event shall this Lease
or any memorandum thereof be recorded by Tenant.
33.11. Quiet Enjoyment. Upon paying the Rent and performing all its
obligations under this Lease, Tenant may peacefully and quietly enjoy the
Premises during the Term as against all persons or entities claiming by or
through Landlord, subject, however, to the provisions of this Lease and any
encumbrances as specified in Article 21.
33.12. Surrender of Premises. Upon the Expiration Date or earlier
termination of this Lease, Tenant shall quietly and peacefully surrender the
Premises to Landlord in the condition specified in Article 9 above. On or before
the Expiration Date or earlier termination of this Lease, Tenant shall remove
all of its personal property from the Premises and repair at its cost and
expense all damage to the Premises or Bay Center caused by such removal. All
personal property of Tenant not removed hereunder shall be deemed, at Landlord's
option, to be abandoned by Tenant and Landlord may store such property in
Tenant's name at Tenant's expense and/or dispose of the same in any manner
permitted by law.
33.13. Building Directory. Landlord shall reserve on the Building
directory a reasonable number of Building Directory Spaces for purposes of
identifying Tenant's name, divisions and/or principal employees. All costs for
the initial strip of names shall be borne by Landlord and all costs for
replacement of such strips, and for installation and removal of the strips,
shall be borne by Tenant.
33.14. Name of Building; Address. Tenant shall not use the name of
the Building or Bay Center for any purpose other than as the address of the
business conducted by Tenant in the Premises. Tenant shall, in connection with
all correspondence, mail or deliveries made to or from the Premises, use the
official Building address specified from time to time by Landlord.
33.15. Exhibits. The Exhibits specified in the Basic Lease
Information are by this reference made a part hereof.
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<PAGE> 44
33.16. Time of the Essence. Time is of the essence of this Lease and
of the performance of each of the provisions contained in this Lease.
IN WITNESS WHEREOF, the parties have executed this Lease as of the
Lease Date.
LANDLORD:
JS BAY CENTER ASSOCIATES,
a California limited partnership
By: Martin/Bay Center Associates,
a California limited partnership
Its: General Partner
By: ______________________
General Partner
TENANT:
SYBASE, INC.,
a Delaware corporation
By: /s/Mitchell L. Gaynor
----------------------------------
Its: VP, General Counsel & Secretary
----------------------------------
By: /s/Hope Spadora
----------------------------------
Its: Director, Real Estate
----------------------------------
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<PAGE> 45
[BUILDING C FIRST FLOOR PLANS OF PREMISES]
<PAGE> 46
EXHIBIT A-2
Building C
Second Floor
<PAGE> 47
EXHIBIT A-3
[BUILDING C THIRD FLOOR PLANS OF PREMISES]
<PAGE> 48
EXHIBIT A-4
[BUILDING C FOURTH FLOOR PLANS OF PREMISES]
<PAGE> 49
EXHIBIT A-5
[BUILDING C FIFTH FLOOR PLANS OF PREMISES]
<PAGE> 50
EXHIBIT A-6
[ENCLOSED PARKING AREA FLOOR PLANS OF PREMISES]
<PAGE> 51
EXHIBIT B
DESCRIPTION OF LAND
<PAGE> 52
EXHIBIT C
INTENTIONALLY OMITTED
<PAGE> 53
EXHIBIT D
RULES AND REGULATIONS
1. The sidewalks, entrances, lobby, elevators, stairways and public
corridors shall be used only as a means of ingress and egrees and shall remain
unobstructed at all times. The entrance and exit doors of all suites are to be
kept closed at all times except as required for orderly passage to and from a
suite. Loitering in any part of the Building or obstruction of any means of
ingress or egress shall not be permitted. Doors and windows shall not be covered
or obstructed.
2. Plumbing fixtures shall not be used for any purposes other than
those for which they were constructed, and no rubbish, newspapers, trash or
other substances of any kind shall be thrown into them. Walls, floors and
ceilings shall not be defaced in any way and no one shall be permitted to mark,
drive nails, screws or drill into, paint, or in any way mar any Building
surface, except that pictures, certificates, licenses and similar items normally
used in Tenant's business may be carefully attached to the walls by Tenant in a
manner to be prescribed by Landlord. Upon removal of such items by Tenant any
damage to the walls or other surfaces, except minor nail holes, shall be
repaired by Tenant.
3. No awning, shade, sign, advertisement or notice shall be inscribed,
painted, displayed or affixed on, in or to any window, door or balcony or any
other part of the outside or inside of the Building or the demised premises. No
window displays or other public displays shall be permitted without the prior
written consent of Landlord. All tenant identification on public corridor doors
beyond building standard will be installed by Landlord for Tenant but the cost
shall be paid by Tenant. No lettering or signs other than the name of Tenant
will be permitted on public corridor door with the size and type of letters to
be prescribed by Landlord. The directory of the Building will be provided for
the display and location of Tenant and Landlord reserves the right to exclude
all other names therefrom. All requests for listing on the building directory
shall be submitted to the office of Landlord in writing. Landlord reserves the
right to approve all listings on the Building directory. Landlord reserves the
right to approve all listing requests. Any change requested by Tenant of
Landlord of the name or names posted on directory, after initial posting, will
be charged to Tenant.
4. The cost of any special electrical circuits for items such as
copying machines, computers, microwaves, etc., shall be borne by Tenant unless
the same are part of the building standard improvements. Prior to installation
of equipment Tenant must receive written approval from Landlord.
5. The weight, size and position of all safes and other unusually
heavy objects used or placed in the Building shall be prescribed by Landlord
and shall, in all cases, stand on metal plates of such size as shall be
prescribed by Landlord. Tenant shall reimburse Landlord for the cost of
Landlord's architect or structural engineer in reviewing the weight and
locations of unusually heavy equipment. The repair of any damage done to the
Building or property therein by putting in or taking out or maintaining such
safes or other unusually heavy objects shall be paid for by Tenant.
<PAGE> 54
6. All freight, furniture, fixtures and other personal property shall
be moved into, within and out of the Building at times designated by and under
the supervision of Landlord and in accordance with such regulations as may be
posted in the office of the Building manager. In no event will Landlord be
responsible for any loss or damage to such freight, furniture, fixtures or
personal property from any cause except for the willful misconduct of Landlord,
its agents, employees or contractors or a breach of Landlord's obligations
under this Lease.
7. No improper noises, vibrations or odors will be permitted in the
Building, nor shall any person be permitted to interfere in any way with
tenants or those having business with them. No person will be permitted to
bring or keep within the Building any animal, bird or bicycle or any toxic or
flammable substances without Landlord's prior permission, provided, however,
that seeing eye dogs and/or other animals used to assist the physically impaired
are allowed in the Building. No person shall throw trash, refuse, cigarrettes
or other substances of any kind any place within or out of the Building except
in the refuse containers provided therefor. Landlord reserves the right to
exclude or expel from the Building any person who, in the judgment of Landlord
is intoxicated or under the influence of liquor or drugs or who shall in any
manner do any act in violation of the rules and regulations of the Building.
8. All re-keying of office doors or changes to the card access system,
after occupancy, will be at the expense of Tenant. Tenant shall not re-key any
doors, add additional locks to doors or change the card access system in any way
without making prior arrangements with Landlord.
9. Tenant will not install or use any window coverings except those
provided by Landlord, nor shall Tenant use the balconies, if any, for storage,
barbecues, drying of laundry or any other activity which would detract from the
appearance of the Building or interfere in any way with the use of the Building
by other tenants.
10. If Tenant uses the Premises after regular business hours or on
non-business days, Tenant shall lock any entrance doors to the Building used by
Tenant or take such other steps as are necessary to secure the Building's doors
immediately after entering or leaving the Building.
11. Tenant shall provide and cause all Tenant's employees to use
protective floor mats under all desk chairs used in the Premises.
12. If Tenant requires telegraphic, telephonic, burglar or of similar
services, it shall first obtain, and comply with, Landlord's instructions in
their installation.
13. Tenant shall not waste electricity, water or air-conditioning and
agrees to cooperate fully with Landlord to assure the most effective operation
of the Building's heating and air-conditioning systems.
14. Tenant shall not install any radio or television antenna,
loudspeaker or other device on the roof or exterior walls of the Building.
Tenant shall not interfere with radio or
<PAGE> 55
television broadcasting or reception from or in the Building elsewhere.
Canvassing, soliciting and distribution of handbills or any other written
material, and peddling in the Building, are prohibited, and each tenant shall
cooperate to prevent same.
15. Tenant shall not use in any space or in the public halls of the
Building 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.
16. Tenant shall not park its vehicles in any parking areas designated by
Landlord as areas for parking by visitors to the building. Tenant shall not
leave vehicles in the Building parking areas overnight nor park any vehicles in
the Building parking areas other than automobiles, motorcycles, motor driven or
non-motor driven bicycles of four-wheeled trucks. Landlord may, in its sole
discretion, designate separate areas for bicycles and motorcycles.
17. 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.
18. Tenant shall be deemed to have read these Rules and Regulations and
to have agreed to abide by them as a condition to his occupancy of the Premises.
<PAGE> 56
EXHIBIT E
BUILDING STANDARD
SERVICES
Janitorial service will be provided five (5) days a week, Monday through Friday.
Monday through Friday
1. Empty all waste containers
2. Dust all surfaces cleared of work or equipment.
3. Vacuum all carpeted areas
4. All tile areas to be swept
5. Clean all restrooms fixtures and floors
6. Empty/clean all ash urns
Weekly
1. Vacuum carpet with beater type vacuum cleaner.
Monthly
1. Damp mop tile floors.
Quarterly
1. Clean partition glass
Semi Annually
1. Strip and wax tile floors
2. Interior and exterior window washing.
3. Clean lighting fixtures and lamps
Annually
1. Carpet Cleaning
Additionally, replacement of florescent lamps or ballasts, spot carpet cleaning
and spot wall cleaning are performed on an as needed basis.
Any cleaning of lunchrooms, cafeterias, conference rooms, etc., shall be on a
special services basis (except with respect to the removal of trash from trash
receptacles or cleaning incidental to normal cleaning.)
<PAGE> 1
EXHIBIT 10.26
PROMISSORY NOTE
$100,000 Emeryville, California
January 2, 1998
For value received, Eric L. Miles ("Miles"), promises to pay to Sybase,
Inc., a Delaware corporation, or order ("Payee"), at 6475 Christie Avenue,
Emeryville, California 94608, the sum of One Hundred Thousand Dollars (U.S.
$100,000), with interest in arrears on the unpaid balance at the rate of seven
percent (7%) per annum. Interest shall compound annually, and accordingly, on
each anniversary of the date of this Note, accrued interest shall be added to
the principal amount of this Note. Twenty five thousand (U.S. $25,000) of
principal shall be forgiven on each anniversary of the date of this Note,
provided Miles is an employee of Sybase, Inc. as of such date. On the date
Miles' employment with Sybase, Inc. terminates for any reason, the full amount
of unpaid principal and all accrued and unpaid interest shall become immediately
due and payable.
Principal and accrued interest not paid when due shall bear interest in
arrears at the rate of ten percent (10%) per annum, compounded monthly, from the
date such amounts became due until paid. Notwithstanding any other provisions of
this Note or any document or instrument executed or delivered in connection with
this Note, interest, fees and the like shall not exceed the maximum rate
permitted by applicable law.
Should (i) default be made in the payment of principal or interest or (ii)
Miles apply for or consent to the appointment of any receiver, trustee or
similar officer for it or for all or any substantial part of its property or
institute any bankruptcy, insolvency, or similar proceeding relating to it under
the laws of any jurisdiction, or any such proceeding be instituted against Miles
and is not dismissed within 60 days the Payee may, at its election, declare the
entire principal and accrued interest balance hereof immediately due and
payable.
Miles hereby waives grace, presentment, demand, protest, notice of
dishonor, notice of delinquency, notice of protest and nonpayment, notice of
intent to accelerate, notice of acceleration, notice of costs, expenses and
losses and interest thereon and notice of interest on interest and diligence in
taking any action to collect any amounts Miles owes under this Note. In the
event of any action to collect or enforce this Note, the prevailing party shall
be entitled to an award from the losing party of reasonable attorney's fees in
addition to the other proper costs of action. This Note shall be governed by and
construed in accordance with the laws of the State of California, Miles and
Payee each submit to the appropriate state or federal courts in California and
Miles waives, to the fullest extent permitted by law, the defense of an
inconvenient forum to the maintenance of such action.
This Note shall constitute the complete and exclusive agreement of Miles
and Payee with respect to the payment of the amounts owing hereunder and
supersedes all prior oral or written understandings. No term or provision of
this Note may be amended, waived, discharged or terminated except by a written
instrument signed by Miles and the Payee. No extension of time for payment or a
part of any amount owing hereon nor any delay or omission on the part of the
Payee hereof in exercising any right hereunder at any time shall operate as a
waiver of the right of the Payee to enforce the terms of this Note or under any
other document or instrument executed or delivered in connection with this Note.
This Note and all covenants, promises and agreements contained herein shall be
binding upon the Miles and his successors, representatives, and assigns, and
shall inure to the benefit of the Payee and its successors and assigns.
IN WITNESS WHEREOF, Miles has executed this Note as of the date first
written above.
/s/ ERIC L. MILES
-----------------------------------------
Eric L. Miles
<PAGE> 1
EXHIBIT 13.2
Sybase, Inc.
page 4
Selected Financial Data
Consolidated Statement of Operations Data
<TABLE>
<CAPTION>
(In thousands, except per share data) 1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Revenues:
License fees $471,036 $ 605,491 $615,642 $588,973 $349,131
Services 432,901 406,054 340,944 236,420 134,919
Total revenues 903,937 1,011,545 956,586 825,393 484,050
Costs and expenses:
Cost of license fees 31,356 29,859 29,736 33,446 17,658
Cost of services 248,625 246,273 205,019 140,274 69,402
Sales and marketing 469,161 523,159 481,404 350,239 210,478
Product development and engineering 138,590 164,676 151,902 114,008 71,911
General and administrative 62,607 72,561 67,888 52,844 36,675
Cost of restructuring -- 49,232 -- -- --
Cost of merger -- -- 24,017 -- --
Purchase of in-process technology -- -- 19,965 -- --
Total costs and expenses 950,339 1,085,760 979,931 690,811 406,124
Operating income (loss) (46,402) (74,215) (23,345) 134,582 77,926
Interest income and expense, net 5,646 7,507 8,603 5,694 3,728
Income (loss) before income taxes (40,756) (66,708) (14,742) 140,276 81,654
Provision for income taxes 14,668 12,298 4,760 53,223 31,056
Net income (loss) $(55,424) $ (79,006) $(19,502) $ 87,053 $ 50,598
Basic net income (loss) per share $ (0.70) $ (1.05) $ (0.27) $ 1.29 $ 0.79
Shares used in computing basic net income (loss) per share 78,794 75,160 71,292 67,458 64,143
Diluted net income (loss) per share $ (0.70) $ (1.05) $ (0.27) $ 1.18 $ 0.72
Shares used in computing diluted net income (loss) per share 78,794 75,160 71,292 73,523 70,423
</TABLE>
Consolidated Balance Sheet Data
(In Thousands)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents and cash investments $246,137 $ 174,522 $223,721 $256,001 $181,385
Working capital 67,510 93,056 140,306 200,767 170,199
Total assets 781,625 751,891 766,292 671,440 400,621
Long-term obligations 1,959 2,871 5,452 7,543 5,927
Stockholders' equity 371,515 396,808 439,649 407,615 243,953
</TABLE>
Historical Financial results of operations of Sybase contained in this annual
report have been restated to include the results of operations of Powersoft
Corporation.
<PAGE> 2
pg 5
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Overview
Sybase completed 1997 with revenue of over $900 million; down from the Company's
record high of $1 billion in 1996. There were three major factors in 1997 that
significantly impacted revenue: First, revenue growth in North America slowed
partially, the Company believes, due to companies reallocating technological
resources toward "Year 2000" compliance and away from building strategic
enterprise applications. Second, because of the uncertain economic conditions in
the Asia Pacific region, the Company has taken a more conservative approach with
respect to its business practices in the region. Consequently, while the Company
continued to win substantial new business in the region, the economic conditions
and the changes in our business practices resulted in a decrease in revenue
recognized for the year. Third, in January 1998, the Company discovered that
certain accounting practices in its Japanese subsidiary were not in accordance
with U.S. generally accepted accounting principles and the Company's policies.
As a result of these irregularities, the Company has restated its revenues and
results of operations for the quarters ended September 30, 1997, June 30, 1997
and March 31, 1997. The restatement resulted in a decrease in revenue totaling
approximately $43 million for the nine months ended September 30, 1997.
At the end of 1997, Sybase had approximately $246 million in cash, cash
equivalents and cash investments and stockholders' equity of approximately $372
million. Days sales outstanding in accounts receivable was 82 days for the
quarter ended December 31, 1997.
The Company continued to maintain its core customer base with strength in many
markets. In particular, Sybase counts as its customers 68 of the top 100 banks,
all 20 of the leading life insurance companies, 300 worldwide healthcare
organizations, and the top 25 telecommunications companies worldwide.
In 1997, the Company delivered its next generation relational database, Adaptive
Server(TM) Enterprise 11.5. Other products delivered as part of the Adaptive
Component Architecture(TM) included PowerJ(TM) Java(TM) development tool, Jaguar
CTS(TM) component transaction server, DirectConnect(TM) and OmniConnect(TM),
PowerBuilder(R) 6.0, PowerDesigner(R), Power++(TM) and PowerSite(TM). Leveraging
the strength of each product category, this comprehensive suite of innovative
technology will be the basis for revenue growth for 1998. However, as this is a
forward-looking statement, future actual results may differ based on future
product licenses and the factors described in "Future Operating Results."
The Company continues to focus resources and product/service solutions around
rapid growth market opportunities in data warehouse, Web computing and
occasionally connected computing. Sybase's services business, which includes
consulting, education and support, has grown to be a more significant part of
the Company and a critical element in our customer relationships. While the
Company has focused efforts towards increasing software sales, services will
likely continue to be an important element of our business for 1998 as we bring
complete solutions to solving customers' problems.
Furthermore, we have added depth and breadth to our management team bringing
core operational competencies, such as product lifecycle planning, unified
pricing strategies and new partner business models to Sybase.
We anticipate that the competitive environment in which Sybase operates will
remain intense. While much progress has been made in improving Sybase's product
and market competitiveness, crisp execution of product development programs,
marketing and sales execution is vital to realizing the Company's financial
goals.
Overall, we are optimistic about the future. Our refreshed product line,
strengthened management team, and sound financial base will be key to achieving
Sybase's long-term goals of profitability and sustained revenue growth.
<PAGE> 3
page 6
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
Revenues
<TABLE>
<CAPTION>
(Dollars in millions) 1997 Change 1996 Change 1995
<S> <C> <C> <C> <C> <C>
License fees $471.0 (22%) $ 605.5 (2%) $615.6
Percentage of total revenues 52% 60% 64%
Services $432.9 7% $ 406.0 19% $341.0
Percentage of total revenues 48% 40% 36%
Total revenues $903.9 (11%) $1,011.5 6% $956.6
</TABLE>
Total revenues for 1997 decreased 11 percent to $903.9 million compared to $1.0
billion recorded in 1996 compared to an increase of 6 percent in 1996 over the
$956.6 million achieved in 1995. The decline in total revenue in 1997 was the
result of the factors described above.
License fees decreased 22 percent to $471.0 million in 1997, down from $605.5
million recorded in 1996 and decreased 2 percent in 1996 from $615.6 million
recorded in 1995. The decline in license fee revenues in 1997 was the result of
the factors described above. The Company's efforts are focused on license
revenue growth opportunities for 1998 in the data warehouse, Web computing and
occasionally connected computing. The Company's strong technological base and
comprehensive marketing strategy, along with improved sales execution, will be
key drivers to the growth in the Company's software license business. However,
as this is a forward-looking statement, future actual growth results may differ
based on the factors described in "Future Operating Results."
Services revenues grew 7 percent to $432.9 million in 1997, up from $406.0
million and $341.0 million recorded in 1996 and 1995, respectively. Services
revenues consist primarily of consulting, education and other services related
to the development and deployment of applications using the Company's software
products and product support and maintenance fees. Services revenues as a
percentage of total revenues increased to 48 percent in 1997 from 40 percent in
1996 and 36 percent in 1995.
The increase in services revenues in absolute dollars resulted, in part, from
the increase in support and maintenance service fees related to the Company's
growing installed base, both in terms of directly supported sites as well as
additional users and the renewal of maintenance contracts. The increase in
services revenue also resulted from increased demand for the Company's
consulting and other services. The Company expects services revenue to continue
to increase modestly in absolute dollars in 1998, due partially to an expanding
installed base of customers. However, as this is a forward-looking statement,
future actual results may differ based on the factors described in "Future
Operating Results."
Geographical Revenues
<TABLE>
<CAPTION>
(Dollars in millions) 1997 Change 1996 Change 1995
<S> <C> <C> <C> <C> <C>
North America $ 571.5 (7%) $ 615.7 5% $ 588.8
Percentage of total revenues 63% 61% 62%
International:
European $ 232.6 (3%) $ 238.8 0% $ 239.8
Percentage of total revenues 26% 23% 25%
Intercontinental $ 99.8 (36%) $ 157.0 23% $ 127.9
Percentage of total revenues 11% 16% 13%
Total International $ 332.4 (16%) $ 395.8 8% $ 367.8
Percentage of total revenues 37% 39% 38%
Total revenue $ 903.9 (11%) $1,011.5 6% $ 956.6
</TABLE>
<PAGE> 4
page 7
Management's Discussion and Analysis of Financial Condition and Results of
Operations
North American revenues (United States, Canada and Mexico) declined 7 percent in
1997 to $571.5 million from $615.7 million and increased 5 percent in 1996 over
1995 from $588.8 million to $615.7 million. International revenues decreased 16
percent in 1997 to $332.4 million from $395.8 million in 1996, with European
revenues down 3 percent and Intercontinental revenues (principally Japan, Asia
Pacific and South America) decreasing 36 percent as a result of the factors
described above. International revenues comprised 37 percent of total revenues
in 1997, down from 39 percent in 1996 and 38 percent in 1995.
In Europe and the Intercontinental Region, most revenues and expenses are
denominated in local currencies. The U.S. dollar strengthened throughout 1997
against the major European and Intercontinental currencies, which resulted in
lower revenue and expenses recorded for these regions when translated into U.S.
dollars compared with the prior year. The substantial decrease in the value of
certain Asian currencies, particularly in Thailand, relative to the U.S. dollar
adversely impacted revenues in the fourth quarter of 1997. The effect of foreign
currency exchange rate changes was not material in 1996 or 1995.
Although the Company takes into account changes in exchange rates over time in
its pricing strategy, the Company's business and results of operations could be
materially and adversely affected by fluctuations in foreign currency exchange
rates. Changes in foreign currency exchange rates, the strength of local
economies, and the general volatility of software markets may result in a higher
or lower proportion of foreign revenues as a percentage of total revenues in the
future.
Cost and Expenses
<TABLE>
<CAPTION>
(Dollars in millions) 1997 Change 1996 Change 1995
<S> <C> <C> <C> <C> <C>
Cost of license fees $ 31.4 5% $ 29.9 0% $ 29.7
Percentage of license fees 7% 5% 5%
Cost of services $ 248.6 1% $ 246.3 20% $ 205.0
Percentage of services revenues 57% 61% 60%
Sales and marketing $ 469.2 (10%) $ 523.2 9% $ 481.4
Percentage of total revenues 52% 52% 50%
Product development and engineering $ 138.6 (16%) $ 164.7 8% $ 151.9
Percentage of total revenues 15% 16% 16%
General and administrative $ 62.6 (14%) $ 72.6 7% $ 67.9
Percentage of total revenues 7% 7% 7%
Cost of merger and purchase of in-process technology $ -- * $ -- * $ 44.0
Percentage of total revenues -- -- 5%
Cost of restructuring $ -- * $ 49.2 * $ --
Percentage of total revenues -- 5% --
</TABLE>
*Not meaningful
Cost of license fees. Cost of license fees, consisting primarily of product
costs (media and documentation), amortization of capitalized software
development costs and third-party royalty costs, increased in absolute dollar
amount in 1997 to $31.4 million, up from $29.9 million in 1996 and $29.7 million
in 1995 as a result of higher amortization of capitalized software. These costs
were 7 percent of license fees in 1997 and 5 percent of license fees in both
1996 and 1995. Amortization of capitalized software costs included in cost of
license fees was $9.7 million in 1997, $7.4 million in 1996 and $5.3 million in
1995. The increase in the amortization of capitalized software related to the
release of Adaptive Server Enterprise 11.5 and PowerBuilder 6.0 was the largest
factor in the increase of cost of license fees.
Cost of services. Cost of services, consisting primarily of maintenance,
consulting and education expenses and, to a lesser degree, services-related
product costs (media and documentation), decreased as a percentage of services
revenues to 57 percent in 1997 compared to 61 percent and 60 percent in 1996 and
1995, respectively. The small increase in absolute dollars in 1997 over 1996
reflects the continued investment in the customer support and the professional
services organizations, in order to better serve the Company's growing customer
base.
<PAGE> 5
page 8
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Sales and marketing. Sales and marketing expenses decreased 10 percent in
absolute dollars to $469.2 million in 1997 from $523.2 million in 1996 while
remaining consistent as a percentage of total revenues with 1996 at 52 percent.
In 1996, sales and marketing expense increased 9 percent in absolute dollars,
over 1995 from $481.4 million while increasing as a percentage of revenues to 52
percent. This increase in sales and marketing expense as a percentage of
revenues was primarily the result of lower than expected license revenues and,
to a lesser extent, lower services revenues realized in 1996. The decrease in
sales and marketing expense, in absolute dollars, in 1997 compared to 1996 is
the result of efforts to minimize growth in sales and marketing expenses and an
improvement in the productivity of the resources already in place.
Product development and engineering. Product development and engineering
expenses (net of capitalized software development costs) decreased slightly as a
percentage of total revenues in 1997 to 15 percent. In 1996 and 1995, the
percentage remained consistent at 16 percent. The decrease for 1997 is in part
the result of lower than anticipated license revenues and the Company's emphasis
on managing its expense base relative to expected 1997 license revenues. In
absolute dollars, product development and engineering expenses for 1997 of
$138.6 million decreased 16 percent compared to $164.7 million for 1996. Much of
the reduction in expenses between 1997 and 1996 resulted from discontinuation of
certain product lines in 1996. These product lines included interactive
television, wireless messaging and multimedia authoring tools. The Company
capitalized approximately $21.6 million of software development costs in 1997
compared to $13.8 million in 1996 and $13.4 million in 1995. During the third
and fourth quarter of 1997, the Company released Adaptive Server Enterprise 11.5
and PowerBuilder 6.0, respectively. Product development and engineering costs
incurred in connection with these releases during the period between the
achievement of technological feasibility and release have been capitalized. The
Company believes that product development and engineering expenditures are
essential to technology and product leadership and expects product development
and engineering expenditures to continue to be significant, both in absolute
dollars and as a percentage of total revenues.
General and administrative. General and administrative expenses represented 7
percent of total revenues in 1997, 1996 and 1995, while decreasing in absolute
dollars in 1997. The absolute dollar decrease to $62.6 million in 1997 from
$72.6 million in 1996 resulted primarily from the Company's emphasis on managing
general and administrative costs and improving productivity.
Cost of merger and purchase of in-process technology. In 1995, the Company
charged to operations one-time costs related to the merger with Powersoft
Corporation of approximately $24.0 million, a substantial portion of which were
nondeductible for income tax purposes. These costs consisted primarily of
investment banking and professional fees and other direct costs associated with
the merger. In 1995, the Company also charged to operations one-time costs of
approximately $20.0 million related to in-process technology acquired in the
acquisition of SDP, S.A.
Cost of restructuring. In 1996, the Company charged to operations $49.2 million
to cover the costs of a restructuring. The Company's goal in the restructuring
was to reduce on-going expenses and focus its operations. The charge included
approximately $17.0 million for severance and related items, $15.7 million for
facilities consolidation, $13.9 million for disposition expenses and write-off
of capitalized software development costs related to discontinued products, and
$2.6 million for other restructuring related items.
Operating Loss
<TABLE>
<CAPTION>
(Dollars in millions) 1997 Change 1996 Change 1995
<S> <C> <C> <C> <C> <C>
Operating loss $(46.4) * $(74.2) * $(23.3)
Percentage of total revenues 5% 7% 2%
</TABLE>
* Not meaningful
The operating loss was $46.4 million in 1997, as compared to a loss of $74.2
million in 1996. The operating loss of $46.4 million in 1997 includes charges of
$68.5 million related to the reversal of revenues recorded during 1997 in the
Company's Japanese subsidiary which were not in conformity with U.S. generally
accepted accounting principals and the Company's policies. These charges include
$43.0 million related to the restatement of revenues for the nine months ended
September 30, 1997 and $25.5 million related to adoption of more conservative
revenue recognition practices for the Japanese subsidiary under which revenue is
not recognized until cash is received from the customer for the three months
ended December 31, 1997.
<PAGE> 6
page 9
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The operating loss of $74.2 million in 1996 includes a non-recurring
restructuring charge of $49.2 million. The operating loss in 1995 of $23.3
million includes non-recurring charges of $ 44.0 million related to the cost of
merger with Powersoft Corporation and the purchases of in-process technology.
The decrease in operating income and margins results from the operating factors
described above.
<TABLE>
<CAPTION>
Interest Income and Interest Expense and Other
(Net)
(Dollars in millions) 1997 Change 1996 Change 1995
<S> <C> <C> <C> <C> <C>
Interest income $ 9.2 0% $ 9.2 3% $ 8.9
Percentage of total revenues 1% 0.9% 0.9%
Interest expense and other, net $(3.5) 106% $(1.7) 421% $(0.3)
Percentage of total revenues 0.4% 0.2% 0%
</TABLE>
Interest income consists primarily of interest earned on investments. Interest
expense and other (net) includes interest expense from capital lease obligations
incurred in prior years, bank fees and expenses, net gains and losses resulting
from the Company's foreign currency transactions and the related hedging
activities and the cost of hedging foreign currency exposures.
<TABLE>
<CAPTION>
Provision for Income Taxes
(Dollars in millions) 1997 Change 1996 Change 1995
<S> <C> <C> <C> <C> <C>
Provision for income taxes $14.7 20% $12.3 158% $4.8
</TABLE>
The Company recorded a $14.7 million provision for income taxes in 1997, up from
$12.3 million and $4.8 million recorded in 1996 and 1995, respectively. The 1997
tax provision is primarily the result of earnings generated from operations and
withholding taxes on revenues in certain international jurisdictions. The
deferred tax asset includes a valuation allowance of $33.4 million. As of
December 31, 1997, the Company has federal net operating loss carryforwards of
$38.6 million, research and development tax credits of $9.4 million and foreign
tax credits of $9.4 million. The net operating loss carryforwards expire in
years from 2003 through 2112, the research and development tax credits expire in
years from 2006 and through 2010, and the foreign tax credits expire in 1999 and
2000. The Company has a net deferred tax asset of $41.0 million at December 31,
1997. Realization of the Company's net deferred tax assets is dependent upon the
Company generating sufficient taxable income in future years in appropriate tax
jurisdictions to obtain benefit from the reversal of temporary differences and
from tax credit carryforwards. The amount of deferred tax assets considered
realizable is subject to adjustment in future periods if estimates of future
taxable income are reduced and any such adjustments could have an impact on the
Company's effective tax rate in future periods.
<TABLE>
<CAPTION>
Net Loss per Share
(Dollars in millions) 1997 Change 1996 Change 1995
<S> <C> <C> <C> <C> <C>
Net loss $(55.4) (30%) $(79.0) 305% $(19.5)
Percentage of total revenues 6% 8% 2%
Basic and Diluted:
Net loss per share $(0.70) 33% $(1.05) 289% $(0.27)
Shares used in per share computations 78.8 5% 75.2 5% 71.3
</TABLE>
The Company incurred a net loss in 1997 of $55.4 million compared to a net loss
in 1996 of $79.0 million and a net loss in 1995 of $19.5 million. The basic and
diluted net loss per share was $0.70 in 1997, $1.05 in 1996 and $0.27 in 1995.
Shares used in the per share computations increased 5 percent in both 1997 and
1996, primarily due to the exercise of employee stock options and increase of
shares under the employee stock purchase plan.
<PAGE> 7
page 10
Management's Discussion and Analysis of Financial Condition and Results of
Operations
<TABLE>
<CAPTION>
Liquidity and Capital Resources
(Dollars in millions) 1997 Change 1996 Change 1995
<S> <C> <C> <C> <C> <C>
Working capital $ 67.5 (28%) $ 93.1 (34%) $140.3
Cash, cash equivalents and cash investments $246.1 41% $174.5 (22%) $223.7
Net cash provided by operating activities $ 74.2 274% $ 19.8 (75%) $ 78.4
Net cash used for investing activities $109.6 45% $ 75.4 (24%) $ 99.1
Net cash provided by financing activities $ 73.7 116% $ 34.1 (29%) $ 47.9
</TABLE>
Net cash provided by operating activities was $74.2 million in 1997 compared to
$19.8 million in 1996 and $78.4 million in 1995. Net cash provided by operating
activities during 1997 reflects a net loss of $55.4 million compared to a loss
of $79.0 million in 1996 and a loss of $19.5 million in 1995. Depreciation and
amortization, which are included in the net losses, but do not require the use
of cash, amounted to $104.7 million in 1997 compared to $97.8 million in 1996
and $75.2 million in 1995. The increase of depreciation and amortization over
these periods reflects a larger base of depreciable long-term assets.
Additionally, increased net cash provided by operating activities in 1997
compared to 1996 reflects a decrease in accounts receivable of $25.9 million in
1997 compared to increases of $49.0 million in 1996.
Net cash used for investing activities increased to $109.6 million in 1997
compared to $75.4 million in 1996 and $99.1 million in 1995. Investing
activities included capital expenditures of $36.4 million in 1997 compared to
$82.3 million in 1996 and $121.1 million in 1995. This reflects a decrease in
capital expenditures required to support the Company's employee base around the
world as well as systems and infrastructure investments. Additionally, in 1995
investing activities included a cash use of $37.3 million (net of cash acquired)
for business combinations, whereas in 1996 and 1997 these activities resulted in
a net cash inflow of $0.2 million and net cash outflow of $4.5 million,
respectively. During 1997 there was a net increase in cash investments in the
amount of $39.5 million compared to a net decrease of $25.1 million and $61.0
million in 1996 and 1995, respectively.
Net cash provided by financing activities for 1997 was $73.7 million compared to
$34.1 million in 1996 and $47.9 million in 1995. Net cash provided by financing
activities increased in 1997 due to amounts received from Japanese financial
institutions related to revenues which were subsequently reversed as a result of
restatement of quarterly results of operations of the Japanese subsidiary
discussed above. This was partially offset by a reduction in the issuance of
common stock associated with the exercise of stock options.
The Company engages in business operations around the world and is therefore
exposed to foreign currency fluctuations. As of December 31, 1997, the Company
had identifiable assets totaling $135.9 million associated with its European
operations and $87.9 million associated with its Intercontinental operations.
The Company experiences foreign exchange transaction exposures from certain
balances denominated in different currencies. The Company hedges certain of
these short-term exposures under a plan approved by the Board of Directors (see
Note One of Notes to Consolidated Financial Statements). The Company also
experiences foreign exchange translation exposure on its net assets denominated
in different currencies. As certain of these net assets are considered by
Sybase, the U.S. parent company, to be a permanent investment in the respective
subsidiaries, the related foreign currency translation gains and losses are
reflected in accumulated foreign translation adjustments in stockholders'
equity.
Cash, cash equivalents and cash investments totaled $246.1 million at December
31, 1997, compared to $174.5 million at December 31, 1996 and $223.7 million at
December 31, 1995.
On February 18, 1998, the Board of Directors authorized the repurchase of up to
$25 million of the Company's outstanding common stock. Subject to price and
market conditions, any such purchases will be made from time to time in open
market transactions using the Company's available cash balances.
On February 26, 1998, the Company announced a restructuring plan. On February
26, 1998, the Company announced a restructuring plan. The restructuring, which
is expected to reduce Sybase's cost structure in 1998, is intended to focus the
Company's core technology strengths around three market growth initiatives in
Web computing, occasionally connected computing and data warehousing.
The restructuring plan includes the discontinuation of certain product lines,
termination of employees, vacating certain facilities and cancellation of real
estate leases as a result of the employee terminations. On February 26, 1998,
the Company terminated approximately 600 employees as a part of the
restructuring. Restructuring charges to be incurred in 1998 are estimated to be
approximately $70 million.
During 1995, the Company entered into a five-year lease of a new research and
development facility in Boulder, Colorado. Payments under this lease, which
commenced during 1997, are based on LIBOR rates applied to the $ 13,016,000 cost
of the facility funded by the lessor. The Company has an option to renew the
lease for up to two five-year extensions, subject to certain conditions. If at
the end of the lease term, whether caused by expiration, default or otherwise,
the Company does not purchase the property, the Company would guarantee a
residual value to the lessor of up to the lessor's net investment in the
property. Under this lease, the Company is required to maintain compliance with
certain Financial covenants. As a result of net losses incurred in 1997, the
Company failed to comply with certain of these covenants and such noncompliance
has been waived by the lessor. In March 1998, the Company collateralized its
obligations to the lessor by pledging $ 13,276,000 in cash deposits.
<PAGE> 8
page 11
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The Company believes that it has the financial resources needed to meet its
presently anticipated business requirements, including capital expenditures and
strategic operating programs, for the foreseeable future.
Future Operating Results
The Company's future operating results may vary substantially from period to
period. The price of the Company's common stock will fluctuate in the future,
and an investment in the Company's common stock is subject to a variety of
risks, including but not limited to the specific risks identified below. The
results of operations for the quarter and year ended December 31, 1997 are not
necessarily indicative of results for the quarter and fiscal year ending
December 31, 1998 or any other future period. Expectations, forecasts, and
projections by the Company or others are by nature forward-looking statements,
and future results cannot be guaranteed. Forward-looking statements that were
true at the time made may ultimately prove to be incorrect or false. Inevitably,
some investors in the Company's securities will experience gains while others
will experience losses depending on the prices at which they purchase and sell
securities. Prospective and existing investors are strongly urged to carefully
consider the various cautionary statements and risks set forth in this report.
The timing and amount of the Company's license fee revenues are subject to a
number of factors that make estimation of revenues and operating results prior
to the end of a quarter extremely uncertain. Sybase has experienced a seasonal
pattern of license fee decline between the fourth quarter and the succeeding
first quarter contributing to lower total revenues and operating earnings in the
first quarter compared to the prior fourth quarter. For example, the Company
currently anticipates that revenues and earnings in the first quarter of 1998
will be lower than in the fourth quarter of 1997. As a result of the seasonal
impact on revenues, an anticipated restructuring charge of approximately $70
million which the Company has announced it will incur in 1998, and forecasted
expenses, the Company anticipates it will incur both an operating loss and a net
loss in the first quarter of 1998. The Company has operated historically with
little or no backlog and, as a result, license fees in any quarter are dependent
on orders booked and shipped in that quarter. In addition, the timing of closing
of large license agreements increases the risk of quarter-to-quarter
fluctuations and the uncertainty of estimating quarterly operating results. The
Company has experienced a pattern of recording 50 percent to 70 percent of its
quarterly revenues in the third month of the quarter, with a concentration of
such revenues in the last two weeks of such third month. The Company's operating
expenses are based on projected annual and quarterly revenue levels and are
incurred approximately ratably throughout each quarter. Because the Company's
operating expenses are relatively fixed in the short term, if projected revenues
are not realized in the expected period, the Company's operating results for
that period would be adversely affected and could result in an operating loss,
as occurred in the first and second quarters of 1996. Failure to achieve
revenues, earnings, and other operating and financial results as forecast or
anticipated by brokerage firm and industry analysts could result in an immediate
and adverse effect on the market price of the Company's stock. The Company may
not achieve, in the future, the relatively high rates of growth experienced by
the Company in 1991 through 1994 or the rates of growth projected for the
software markets in which Sybase competes.
In 1998, the Company expects to make changes to the sales coverage model and
sales compensation programs, and focus on increasing the number of discrete
quota-carrying sales people. Although such changes are intended to enhance
overall revenues, such changes could, in the short-run, materially and adversely
affect the sales process and revenues. In February 1998, the Company appointed
Michael S. Gardner Senior Vice President of Worldwide Sales. In April 1998, Mr.
Gardner will assume responsibility for overseeing the Company's worldwide sales
force from Mike Forster, Senior Vice President of Worldwide Field Operations,
who will retire at the end of 1998. In the third quarter of 1997, John Chen
became the Company's President and Chief Operating Officer, and Mitchell
Kertzman, Chief Executive Officer, became Chairman of the Board. In February
1998, the Company created the office of the Chief Executive with shared
leadership responsibilities between Messrs. Kertzman and Chen, who now also
holds the title of Chief Executive Officer. The Company may make other
management and organization changes in the future. Organizational and management
changes are intended to enhance productivity and competitiveness. However, such
changes may not produce the desired results and could materially adversely
affect productivity, expenses and revenues.
The market for the Company's stock is highly volatile. The trading price of the
Company's common stock fluctuated widely in 1995, 1996 and 1997 and may in the
future continue to be subject to wide fluctuations in response to quarterly
variations in operating and financial results, announcements of technological
innovations, new products, or customer contracts won by the Company or
<PAGE> 9
page 12
Management's Discussion and Analysis of Financial Condition and Results of
Operations
its competitors. Changes in prices of the Company's or its competitors' products
and services, changes in product mix, changes in the Company's revenues and
revenue growth rates for the Company as a whole or for individual geographic
areas, business units, products or product categories, as well as other events
or factors could also affect the Company's stock prices. Statements or changes
in opinions, ratings or earnings estimates made by brokerage firms and industry
analysts relating to the market in which the Company does business, the
Company's competitors, or the Company or its products specifically, have
resulted, and could in the future result, in an immediate and adverse effect on
the market price of the Company's common stock. For example, due to a variety of
factors, the Company's stock price declined significantly during the First
quarter of 1996 and 1998. In addition, the stock market has from time to time
experienced extreme price and volume fluctuation's that have particularly
affected the market price for many high-technology companies and which often
have been unrelated to the operating performance of these companies.
An increased portion of the Company's revenues in recent quarters has been
derived from its international operations. Several of the Company's
international subsidiaries have been only recently acquired or formed. For
example, the Company recently acquired operations in Chile, Argentina, Norway
and Peru. In addition there have been several management and organizational
changes within the international operations. For example, in 1998, the country
managers in Australia, Thailand and Japan resigned or were replaced.
International revenues, in absolute dollars and as a percentage of total
revenues, may fluctuate in part due to the growth and, in some cases, the
relative immaturity of international organizations. The Company's operations and
financial results could be significantly affected by factors associated with
international operations such as changes in foreign currency exchange rates and
uncertainties relative to regional economic circumstances, political instability
in emerging markets, and difficulties in staffing and managing foreign
operations, as well as by other risks associated with international activities.
For example, the economic unrest and currency devaluations in Asia in late 1997
adversely affected collection of receivables, particularly dollar denominated
receivables, and the recognition of revenue in the fourth quarter of 1997.
The market for the Company's software products and services is extremely
competitive and characterized by dynamic customer demands, rapid technological
and marketplace changes, and frequent product enhancements and new product
introductions. The Company competes with a number of companies, including Oracle
Corporation, Informix Corporation, Microsoft Corporation, IBM Corporation and
Computer Associates, Inc. Many of the Company's competitors and potential
competitors have significantly greater financial, technical, sales and marketing
resources, and a larger installed base than the Company. New or enhanced
products, many of which have been announced and many of which are continually
introduced by existing or future competitors in the software industry, could
increase the competition faced by the Company's products from time to time and
result in greater price pressure on certain of the Company's products,
especially to the extent that market acceptance for personal computer-oriented
technologies increases. A failure by the Company to compete successfully with
its existing competitors or with new competitors could have a material adverse
effect on the Company's business and results of operations and on the market
price of the Company's common stock.
Existing and future competition or changes by the Company in its product
offerings or product pricing structure could result in an immediate reduction in
the prices of the Company's products. For example, changes to the Company's
pricing and licensing structure in the First quarter of 1996 increased prices
for certain products, and reduced prices for others. The Company will introduce
price and licensing changes from time to time in the future. If such changes or
changes in the Company's products, or existing or future competition were to
result in significant revenue declines, the Company's business and financial
results could be adversely affected.
The Company's future results will depend in part on its ability to enhance its
existing products and to introduce new products on a timely and cost-effective
basis that meet dynamic customer requirements. Customer requirements for
products can rapidly change as a result of innovations or changes within the
computer hardware and software industries. For example, the widespread use of
the Internet is rapidly giving rise to new customer requirements as well as new
methods and practices of selling, marketing, and distributing products and
services. Sybase's future results will depend in part on its success in
developing new products, making generally available products that have been
previously announced, enhancing its existing products and adapting its existing
products to changing customer requirements, and ultimately gaining market
acceptance for such new or enhanced products. The Company recently announced the
development and anticipated availability dates of several products, including
Adaptive Server Anywhere for Windows CE, which is scheduled to become generally
available in the second quarter of 1998.
The Company has experienced delays in introducing some new products in the past.
For example, the commercial shipment of Sybase IQ(TM), which became commercially
available in February 1996, had been previously planned for the second half of
1995.
<PAGE> 10
page 13
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Unanticipated delays in product availability schedules could result from various
factors including development or testing difficulties, feature changes, software
errors, shortages in appropriately skilled software engineers, and project
management problems. Delays in the scheduled availability of these or other
products, a lack of or decrease in market acceptance of new or enhanced
products, or the Company's failure to accurately anticipate customer demand or
to meet customer performance requirements or to anticipate competitive products
and developments could have a material adverse effect on the Company's business
and financial results. New products or new versions of existing products may,
despite testing, contain undetected errors or bugs that could delay the
introduction or adversely affect commercial acceptance of such products or give
rise to warranty or other customer claims, which could, in turn, adversely
affect the Company's financial results.
Sybase's results will also depend increasingly on the ability of its products to
interoperate and perform well with existing and future leading,
industry-standard application software products intended to be used in
connection with relational database management systems ("RDBMSs"). Failure to
meet existing or future interoperability and performance requirements of certain
independent vendors marketing such applications in a timely manner has in the
past and could in the future adversely affect the market for Sybase's products.
Certain leading applications will not be interoperable with Sybase RDBMSs until
certain features are added to the Company's RDBMS, and others may never be
available on Sybase's RDBMSs. In addition, the Company's application development
tools, database design tools, and certain connectivity products are designed for
use with RDBMSs offered by the Company's competitors. Vendors of non-Sybase
RDBMSs and related products may become less willing in the future to provide the
Company with access to products, technical information, and marketing and sales
support. If existing and potential customers of the Company who use non-Sybase
RDBMSs refrain from purchasing such products due to concerns that the
development, quality and support of products for non-Sybase RDBMSs will diminish
over time, the Company's business, results of operations, and financial
condition could be materially and adversely affected.
Commercial acceptance of the Company's products and services could be adversely
affected by critical or negative statements or reports by brokerage firms,
industry and financial analysts, and industry periodicals concerning the Company
and its products, business, or competitors, or by the advertising or marketing
efforts of competitors that could affect customer perception. In addition,
customer perception of Sybase and its products could be adversely affected by
financial results, particularly revenues and profitability, reported for the
1997 Fiscal year or future periods, by the market share of the Company's
products and by related press reports.
As the number of software products in the industry and the number of software
patents increase, the Company believes that software developers may become
increasingly subject to infringement claims. Third parties have in the past
asserted, and may in the future assert, that their patents or other proprietary
rights are violated by products offered or in development by the Company. Any
such claims, with or without merit, can be time consuming and expensive to
defend or settle, and could have an adverse effect on the Company's business and
results of operations.
The Company's ability to achieve its future revenues and earnings will depend in
part on the ability of its officers and key personnel to manage growth, costs,
and expenses successfully through the implementation of appropriate management
systems and controls. Failure to effectively implement or maintain such systems
and controls could adversely affect the Company's business and results of
operations. The success of the Company also depends in part on its ability to
attract and retain qualified technical, managerial, sales, and marketing
personnel. The competition for such personnel is intense in the software
industry and, Sybase believes, has increased substantially in recent years.
There were several changes in 1997 and early 1998 to the Company's executive
management team. For example, in the third quarter of 1997, John Chen became the
Company's President and Chief Operating Officer, and Mitchell Kertzman, Chief
Executive Officer, became Chairman of the Board. In February 1998, the Company
created the Office of the Chief Executive with shared leadership
responsibilities between Messrs. Kertzman and Chen, who now also holds the title
of Chief Executive Officer. Other management changes and additions were also
effected in late 1997 and early 1998, including the appointment of several new
Senior Vice Presidents in charge of several major business units. Further
changes in management, the Company's recent financial performance, and a
reduction in the overall number of Sybase employees made in February 1998 could
cause an increase in the amount of employee turnover.
The failure to effectively recruit, train, and retain qualified personnel or
high rates of employee turnover, particularly among engineering or sales staff,
could adversely affect the Company's product development efforts, product sales,
and other aspects of the Company's operations and results.
<PAGE> 11
page 14
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Sybase currently ships most of its products in North America (other than its
Powersoft(R) products) from its Emeryville, California distribution facility.
Because of the pattern of recording a high percentage of quarterly revenues
within the last week or two weeks of the quarter, the closure or inoperability
of this facility during such weeks due to natural calamity or due to a systems
or power failure could have a material adverse effect on the Company's ability
to record revenues for such quarter.
The Company has acquired a number of companies in the past. Most recently, in
February 1998, the Company acquired Intellidex Systems, a provider of meta data
management technology for deploying and managing data warehouse environments.
The Company will likely acquire other distributors, companies, products, or
technologies in the future. The achievement of the desired benefits of these and
future acquisitions will depend in part upon whether the integration of the
acquired businesses is achieved in an efficient and effective manner. The
successful combination of businesses will require, among other things,
integration of the companies' related product offerings and coordination of
their sales, marketing, and research and development efforts. The difficulties
of such coordination may be increased by the geographic distance between
separate organizations. The Company may be unable to integrate effectively these
or future acquired businesses and may not obtain the anticipated or desired
benefits of such acquisitions. Such acquisitions may result in costs,
liabilities or additional expenses that could adversely affect the Company's
results of operations and financial condition. In addition, acquisitions or
changes in business or market conditions may cause the Company to revise its
plans, which could result in unplanned expenses or a loss of anticipated
benefits from past investments.
In February 1998, the Company announced that it will incur a restructuring
charge of approximately $70 million in connection with a Company-wide
reorganization which is intended to reduce Sybase's cost structure by
approximately $100 million on an annualized basis. The Company will continue to
evaluate its business, products and results of operations, and accordingly, the
Company may incur further restructuring charges in the first quarter and in the
future. The actual amount of such charge could exceed the estimated amount and
actual expense savings in the future could be offset by other expense increases
or changes in the Company's business. However, as these are forward-looking
statements, future actual results may differ based on the factors described
above.
In October 1997, the American Institute of Certified Public Accountants issued
Statement of Position No. 97-2, "Software Revenue Recognition ("SOP 97-2"),
which supersedes SOP 91-1. The Company will be required to adopt this standard
in the first quarter of 1998. Restatement of prior financial statements is
prohibited. SOP 97-2 addresses software revenue recognition matters primarily
from a conceptual level and detailed implementation guidelines have not been
issued. Accordingly, the Company is not able to currently determine the effect,
if any, that adoption of SOP 97-2 will have on its existing revenue recognition
practices; depending on the implementation guidelines that ultimately emerge,
the amount and timing of revenue recognized could be adversely affected.
Year 2000
The Company is aware of and is addressing the issues associated with the
programming code in existing computer systems as the year 2000 approaches._
Systems that do not properly recognize such information could generate erroneous
data or cause a system to fail. . Failures of the Company's and/or third
parties' computer systems could have a material impact on the Company's ability
to conduct its business. Since the Company's infrastructure is modern, does not
depend on older Mainframe code, and its applications are based on its own
products, which are year 2000 complaint, the Company does not expect the same
level of cost or risk associated with companies who are based on older
technology.
The Company has completed an initial assessment of its worldwide infrastructure
systems (e.g. computer and telephone systems) and its business systems (e.g.
revenue, sales and marketing and finance functions) to determine what actions
are required to resolve the Year 2000 issue. As of February 1998, approximately
two-thirds of Company's systems had been tested or certified to be Year 2000
compatible. Of the remaining one-third, approximately half are scheduled for
upgrades from suppliers which will be installed over the coming year. The
Company anticipates completion of testing on the remaining systems in the second
quarter of 1998. For systems which are not either vendor-certified or internally
certified to be Year 2000 compatible, the Company will endeavor to upgrade or
modify those systems where possible, and otherwise retire systems where
necessary. The Company believes it will have identified solutions available for
all of its systems before the end of 1998, and expects to install all solutions
by April of 1999. The Company has initiated formal communications with all of
its significant suppliers and large customers to determine the extent to which
the Company's interface systems are vulnerable to those third parties' failure
to remediate their own Year 2000 Issues. There is no guarantee that the systems
of other companies on which the Company's systems rely will be timely converted
and would not have an adverse effect on the Company's systems. The Company does
not believe that the cost of such actions will have a material effect on the
Company's results of operations or financial condition. There are no assurances,
however, that there will not be a delay in, or increased cost associated with,
the implementation of such changes, and the Company's inability to implement
such changes could have an adverse effect on future results of operations.
Factors that could cause unusual costs and delays include the availability and
cost of personnel trained in this area, the ability to locate and correct all
relevant computer codes and other uncertainties.
<PAGE> 12
page 15
Report of Independent Auditors
The Board of Directors and Stockholders
Sybase, Inc.
We have audited the accompanying consolidated balance sheets of Sybase, Inc., as
of December 31, 1997 and 1996 and the related consolidated statements of
operations, stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Sybase,
Inc. at December 31, 1997 and 1996, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG
Walnut Creek, California
January 28, 1998 except for Note Thirteen
as to which the date is
February 26, 1998.
<PAGE> 13
page 16
Consolidated Balance Sheets
<TABLE>
<CAPTION>
For the years ended December 31,
(In thousands, except per share data) 1997 1996 1995
<S> <C> <C> <C>
Revenues:
License fees $ 471,036 $ 605,491 $ 615,642
Services 432,901 406,054 340,944
Total revenues 903,937 1,011,545 956,586
Costs and expenses:
Cost of license fees 31,356 29,859 29,736
Cost of services 248,625 246,273 205,019
Sales and marketing 469,161 523,159 481,404
Product development and engineering 138,590 164,676 151,902
General and administrative 62,607 72,561 67,888
Cost of restructuring -- 49,232 --
Cost of merger -- -- 24,017
Purchase of in-process technology -- -- 19,965
Total costs and expenses 950,339 1,085,760 979,931
Operating loss (46,402) (74,215) (23,345)
Interest income 9,184 9,243 8,936
Interest expense and other, net (3,538) (1,736) (333)
Loss before income taxes (40,756) (66,708) (14,742)
Provision for income taxes 14,668 12,298 4,760
Net loss $ (55,424) $ (79,006) $ (19,502)
Basic and diluted net loss per share $ (0.70) $ (1.05) $ (0.27)
Shares used in computing basic and diluted net loss per share 78,794 75,160 71,292
</TABLE>
See accompanying notes
<PAGE> 14
page 17
Consolidated Statements of Operations
<TABLE>
<CAPTION>
December 31,
(In thousands, except share data) 1997 1996
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 188,876 $ 156,796
Short-term cash investments 47,127 17,726
Total cash, cash equivalents and short-term cash investments 236,003 174,522
Accounts receivable, less allowance for doubtful accounts of $30,673 (1996 - $28,242) 204,411 239,466
Deferred income taxes 16,973 13,729
Other current assets 18,274 17,551
Total current assets 475,661 445,268
Long-term cash investments 10,134 --
Property, equipment and improvements, net 149,661 191,328
Deferred income taxes 24,077 27,406
Capitalized software, net 44,208 19,974
Other assets 77,884 67,915
Total assets $ 781,625 $ 751,891
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 19,521 $ 21,563
Accrued compensation and related expenses 43,974 47,829
Accrued income taxes 31,800 26,952
Other accrued liabilities 95,476 89,386
Deferred revenue 170,473 166,482
Other current liabilities 46,907 --
Total current liabilities 408,151 352,212
Other liabilities 1,959 2,871
Commitments and contingent liabilities
Stockholders' equity:
Preferred stock, $0.001 par value, 8,000,000 shares authorized; none issued or outstanding -- --
Common stock, $0.001 par value; 200,000,000 shares authorized; 79,998,287 shares issued
and outstanding (1996 - 76,608,794) 80 77
Additional paid-in capital 397,925 359,161
Retained earnings (9,343) 46,081
Accumulated translation adjustments (17,147) (8,511)
Total stockholders' equity 371,515 396,808
Total liabilities and stockholders' equity $ 781,625 $ 751,891
</TABLE>
See accompanying notes
<PAGE> 15
page 18
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Three years ended December 31, 1997 Additional Accumulated
Common stock paid-in Retained translation
(In thousands) Shares Amount capital earnings adjustments Total
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1994 69,359 $ 69 $ 259,158 $151,100 $ (2,712) $ 407,615
Common stock issued in connection with
business combinations 497 -- 8,051 (3,343) -- 4,708
Common stock issued under stock option
and stock purchase plans 2,790 3 34,497 -- -- 34,500
Tax benefit of exercise of stock options -- -- 13,358 -- -- 13,358
Foreign currency translation adjustments -- -- -- -- (1,030) (1,030)
Net loss -- -- -- (19,502) -- (19,502)
Balances at December 31, 1995 72,646 72 315,064 128,255 (3,742) 439,649
Common stock issued in connection with
business combinations 971 1 9,970 (3,168) -- 6,803
Common stock issued under stock option
and stock purchase plans 2,992 4 34,127 -- -- 34,131
Foreign currency translation adjustments -- -- -- -- (4,769) (4,769)
Net loss -- -- -- (79,006) -- (79,006)
Balances at December 31, 1996 76,609 77 359,161 46,081 (8,511) 396,808
Common stock issued in connection with
business combinations 750 1 11,999 -- -- 12,000
Common stock issued under stock option
and stock purchase plans 2,639 2 26,765 -- -- 26,767
Foreign currency translation adjustments -- -- -- -- (8,636) (8,636)
Net loss -- -- -- (55,424) -- (55,424)
Balances at December 31, 1997 79,998 $ 80 $ 397,925 $ (9,343) $ (17,147) $ 371,515
</TABLE>
See accompanying notes
<PAGE> 16
page 19
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the years ended December 31,
(In thousands) 1997 1996 1995
<S> <C> <C> <C>
Cash and cash equivalents, beginning of year $ 156,796 $ 180,877 $ 152,211
Cash flows from operating activities:
Net loss (55,424) (79,006) (19,502)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 104,739 97,835 75,178
Write-off of assets in restructuring -- 17,600 --
Deferred income taxes 85 (100) (21,710)
Changes in assets and liabilities:
Accounts receivable 25,876 (49,034) (9,926)
Other current assets (589) 1,378 1,413
Accounts payable (2,042) (15,551) 6,044
Accrued compensation and related expenses (3,855) 5,422 5,164
Accrued income taxes 4,848 (1,421) (5,454)
Other accrued liabilities 1,152 17,358 13,744
Deferred revenue 2,521 28,218 37,450
Other (3,130) (2,871) (4,005)
Net cash provided by operating activities 74,181 19,828 78,396
Cash flows used for investing activities:
Purchases of available-for-sale cash investments (76,652) (59,883) (143,101)
Maturity of available-for-sale cash investments 20,385 67,751 73,924
Sale of available-for-sale cash investments 16,732 17,250 130,184
Business combinations, net of cash acquired (4,533) 201 (37,342)
Purchase of property, equipment and improvements (36,362) (82,258) (121,094)
Capitalized software development costs (21,658) (13,838) (13,376)
Decrease (increase) in other assets (7,516) (4,627) 11,734
Net cash used for investing activities (109,604) (75,404) (99,071)
Cash flows provided by Financing activities:
Increase in other current liabilities 46,907 -- --
Net proceeds from issuance of common stock 26,767 34,131 34,500
Tax benefit of exercise of stock options -- -- 13,358
Net cash provided by Financing activities 73,674 34,131 47,858
Effect of exchange rate changes on cash (6,171) (2,636) 1,483
Net increase (decrease) in cash and cash equivalents 32,080 (24,081) 28,666
Cash and cash equivalents, end of year 188,876 156,796 180,877
Cash investments, end of year 57,261 17,726 42,844
Total cash, cash equivalents and cash investments, end of year $ 246,137 $ 174,522 $ 223,721
Supplemental disclosures:
Acquisition of Purchase Net, Inc. in exchange for common stock $ 12,000 $ -- $ --
Interest paid $ 1,168 $ 399 $ 410
Income taxes paid $ 15,987 $ 12,842 $ 18,546
</TABLE>
See accompanying notes
<PAGE> 17
page 20
Notes to Consolidated Financial Statements
Note One: Summary of Significant Accounting Policies
The Company Sybase, Inc. ("Sybase" or the "Company") develops, markets and
supports software products and services for client/"server, Internet and
intranet transaction processing and data mart and data warehousing applications.
Sybase's products include databases, middleware, and application development
tools and are marketed under the brand names of Sybase and Powersoft. The
Company also offers consulting and customer support and technical services;
demand for such services is predominantly dependent upon the base of customers
with installed license products.
Basis of Presentation. The consolidated financial statements include the
accounts of Sybase and its subsidiaries. All significant intercompany
transactions and balances have been eliminated in consolidation.
In January 1998, the Company discovered that certain accounting practices in its
Japanese subsidiary were not in accordance with U.S. generally accepted
accounting principles and the Company's policies. As a result of these
irregularities, the Company has restated its revenues and results of operations
for the quarters ended September 30, 1997, June 30, 1997 and March 31, 1997. The
restatement resulted in a decrease in previously reported revenues for those
quarters totaling approximately $43.0 million. Other current liabilities in the
consolidated balance sheet at December 31, 1997 represent amounts accrued
related to actual and potential liabilities to Japanese financial institutions
resulting from these irregularities.
The Company translates the accounts of its foreign subsidiaries using the local
foreign currency as the functional currency. For foreign subsidiaries in
countries with highly inflationary economies the accounts are translated as if
the U.S. dollar was the functional currency. The assets and liabilities of
foreign subsidiaries are translated into U.S. dollars using current exchange
rates, and gains and losses from this translation process are credited or
charged to the "accumulated translation adjustments" account included in
stockholders' equity. Foreign currency transaction gains and losses, which have
not been material, are included in interest expense and other in the
consolidated statements of operations.
In order to reduce the effect of foreign currency fluctuations on its results of
operations, the Company hedges its exposure on certain transactional balances
that are denominated in foreign currencies through the use of foreign currency
forward exchange contracts. For the most part, these exposures consist of
intercompany accounts receivable owed to the Company as a result of local sales
of software licenses by the Company's international subsidiaries. The majority
of these exposures are denominated in European and Asia Pacific currencies,
primarily the Dutch guilder and the Hong Kong dollar. These forward exchange
contracts are recorded at fair value and the resulting gains or losses, as well
as the associated premiums or discounts, are recorded in interest expense and
other in the consolidated statement of operations and are offset by
corresponding foreign currency gains and losses on hedged balances.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Property, Equipment and Improvements. Property, equipment and improvements are
stated at cost. Depreciation and amortization are computed using the
straight-line method over the shorter of the estimated useful life of the asset
or the lease term.
Capitalized Software. The Company capitalizes software development costs
incurred subsequent to the release of the product for acceptance testing. Upon
the general release of the product to customers, development costs for that
product are amortized over periods not exceeding three years, based on the
estimated economic life of the product. Capitalized software costs amounted to
$69,421,000, $51,831,000 and $37,911,000 at December 31, 1997, 1996 and 1995,
respectively, and related accumulated amortization was $25,213,000, $31,857,000
and $20,684,000, respectively. Software amortization charges included in cost of
license fees were $9,683,000, $7,364,000 and $5,265,000, for 1997, 1996 and
1995, respectively.
Intangible Assets. Intangible assets, which have generally resulted from
business combinations accounted for as purchases (Note Ten), are recorded at
amortized cost. Amortization is computed using the straight-line method over
periods of three to eight years. Management periodically reviews the carrying
amounts of the Company's intangible assets for indications of impairment.
<PAGE> 18
page 21
Notes to Consolidated Financial Statements
Long-Lived Assets. Effective January 1, 1996 the Company adopted Financial
Accounting Standards Board (FASB) Statement of Financial Accounting Standards
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of," which requires impairment losses to be recorded on
long-lived assets used in operations, such as property, equipment and
improvements, and intangible assets, when indicators of impairment are present
and the undiscounted cash flows estimated to be generated by those assets are
less than the carrying amount of the assets. The adoption of this statement did
not have a material effect on the Company's consolidated financial statements.
Revenue Recognition. Sybase licenses software under noncancellable license
agreements. License fee revenues are recognized when a noncancellable license
agreement is in force, the product has been shipped, the license fee is fixed or
determinable, and collectibility is reasonably assured. Sublicense fees are
recognized as reported to the Company by its licensees. License fee revenues
are for certain application development and data access tools are recognized
upon direct shipment to the end user or through an initial reseller channel to
the end user. Maintenance and support revenues are recognized ratably over the
term of the related agreements, which in most cases is one year. Revenues from
consulting services under time and materials contracts and for training are
recognized as services are performed. Revenues from other contract services are
generally recognized under the percentage-of-completion method. The Company's
revenue recognition policy is in accordance with the provisions of the American
Institute of Certified Public Accountant's Statement of Position 91-1, "Software
Revenue Recognition"(SOP 91-1).
In October 1997, the American Institute of Certified Public Accountants issued
Statement of Position No. 97-2, "Software Revenue Recognition"(SOP 97-2), which
supersedes SOP 91-1. The Company will be required to adopt this statement in the
first quarter of 1998. Restatement of prior financial statements is prohibited.
SOP 97-2 addresses software revenue recognition matters primarily from a
conceptual level and detailed implementation guidelines have not been issued.
Accordingly, the Company is not able to currently determine the effect, if any,
that adoption of SOP 97-2 will have on its existing revenue recognition
practices.
Product Development. Revenues recognized under vendor and end-user funding
arrangements amounted to $984,000 and $2,237,000 for 1996 and 1995,
respectively. There were no such revenues recognized in 1997. Company-funded
product development, calculated as total product development expenses including
amounts capitalized for financial reporting purposes, less revenues recognized
under the vendor and end-user funding arrangements discussed above, amounted to
$157,900,000, $177,613,000 and $162,278,000 for 1997, 1996 and 1995,
respectively.
Transfer of Financial Assets. The Company finances certain software license and
service agreements with customers through the sale, assignment and transfer of
the future payments under those agreements to Financing institutions,
principally on a non-recourse basis. The Company records such transfers as sales
of the related accounts receivable when it is considered to have surrendered
control of such receivables under the provisions of Statement of Financial
Accounting Standards No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," (Statement 125). The
Company adopted Statement 125 effective January 1, 1997. The adoption of this
statement did not have a material effect on the Company's consolidated financial
statements.
Stock-Based Compensation Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation," (Statement 123) encourages, but does
not require, companies to record compensation cost for stock-based employee
compensation plans at fair value. The Company has chosen to continue to account
for stock-based employee compensation using the intrinsic value method
prescribed in Accounting Principles Board (APB) Opinion No. 25, "Accounting for
Stock Issued to Employees," and related Interpretations. Accordingly,
compensation cost for stock options granted to employees is measured as the
excess, if any, of the quoted market price of the Company's stock at the date of
the grant over the amount an employee must pay to acquire the stock.
Net Income (Loss) Per Share. In 1997, the FASB issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share," (Statement 128) which
replaced the calculation of primary and fully diluted earnings per share with
basic and diluted earnings per share. Unlike primary earnings per share, basic
earnings per share excludes any dilutive effects of options, warrants and
convertible securities. Diluted earnings per share is very similar to the
previously reported fully diluted earnings per share and includes the dilutive
effect of the assumed exercise of stock options using the treasury stock method.
Shares used in computing basic and diluted net loss per share are based on the
weighted average shares outstanding in each period. The effect of outstanding
stock options (Note Six) is excluded from the calculation of diluted net loss
per share as their inclusion would be antidilutive. Net income (loss) per share
amounts for all periods have been presented, and where appropriate, restated to
conform to the Statement 128 requirements.
<PAGE> 19
page 22
Notes to Consolidated Financial Statements
Comprehensive Income. In 1997, the FASB issued Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income," (Statement 130) which
requires that all items that are required to be recognized under accounting
standards as components of comprehensive income (revenues, expenses, gains and
losses) be reported in a financial statement that is displayed with the same
prominence as other financial statements. The Company will comply with the
requirements of Statement 130 for the year ending December 31, 1998.
Disclosures about Segments of an Enterprise. In 1997, the FASB issued Statement
of Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information," (Statement 131) which establishes standards
for the way public business enterprises report information about operating
segments in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports issued to stockholders. In addition, it establishes standards for
related disclosures about products and services, geographic areas and major
customers. The Company will comply with the requirements of Statement 131 for
the year ending December 31, 1998.
Note Two: Financial Instruments
Cash and Cash Equivalents. Cash equivalents are highly liquid investments with
insignificant interest rate risk and original maturities of three months or less
and are stated at amounts which approximate fair value, based on quoted market
prices. Cash equivalents consist principally of taxable, short-term money market
instruments.
Cash Investments. Cash investments consist principally of taxable, short-term
money market instruments with maturities of up to two years and are stated at
amounts which approximate fair value, based on quoted market prices.
In accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" (Statement
115) management determines the appropriate classification of debt and equity
securities at the time of purchase and re-evaluates such designation as of each
balance sheet date. At December 31, 1997, the Company has classified all of its
debt and equity securities as available-for-sale pursuant to Statement 115. The
available-for-sale securities are recorded as follows at December 31 (in
thousands):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Cash and cash equivalents $ 99,982 $ 71,023
Short-term cash investments (maturities of one year or less) 47,127 17,726
Cash investments (maturities of one to two years) 10,134 --
$157,243 $ 88,749
</TABLE>
Unrealized gains and losses at December 31, 1997 and 1996 and realized gains and
losses for the years then ended were not material. Accordingly, the Company has
not made a provision for such amounts in its consolidated balance sheets. The
cost of securities sold is based on the specific identification method.
Foreign Currency Forward Exchange Contracts. At December 31, 1997, the Company
had outstanding forward exchange contracts, all having maturities of
approximately 30 days, to exchange various foreign currencies for U.S. dollars,
Dutch guilders and Hong Kong dollars in the amounts of $28,933,552, $40,355,396
and $6,634,436, respectively, and to exchange U.S. dollars and Dutch guilders
into various foreign currencies in the amounts of $22,821,723 and $8,152,284,
respectively. At December 31, 1996, the Company had outstanding forward exchange
contracts, all having maturities of approximately 30 days, to exchange various
foreign currencies for U.S. dollars and Dutch guilders in the amounts of
$19,830,300 and $35,681,104, respectively, and to exchange U.S. dollars and
Dutch guilders into various foreign currencies in the amounts of $14,886,528 and
$5,140,480, respectively. Neither the cost nor the fair value of these foreign
currency forward exchange contracts was material at December 31, 1997 or 1996.
One major U.S. multinational bank is counterparty to substantially all of these
contracts.
<PAGE> 20
page 23
Note Three: Property, Equipment and Improvements
The components of property, equipment and improvements are as follows at
December 31 (in thousands):
<TABLE>
<CAPTION>
Estimated
1997 1996 useful lives
<S> <C> <C> <C>
Real property $ 8,203 $ 9,899 20-25 years
Computer equipment and software 279,377 263,694 3 years
Furniture and fixtures 81,113 84,404 5 years
Leasehold improvements 47,027 46,865 lease term
415,720 404,862
Less accumulated depreciation (266,059) (213,534)
Net property, equipment and improvements $ 149,661 $191,328
Depreciation expense amounted to $81,542,000, $76,919,000 and
$57,941,000 in 1997, 1996 and 1995, respectively.
</TABLE>
Note Four: Other Assets
The components of other assets are as follows at December 31 (in thousands):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Intangible assets, less accumulated amortization of $43,488 (1996 - $28,965) $53,849 $51,408
Deposits 6,044 8,130
Other 17,991 8,377
$77,884 $67,915
</TABLE>
Note Five: Lease Obligations and Other Liabilities and Commitments
The Company leases certain office facilities and certain furniture and equipment
under operating leases expiring through 2004, which generally require Sybase to
pay operating costs, including property taxes, insurance and maintenance. These
facility leases generally contain renewal options and provisions adjusting the
lease payments based upon changes in the consumer price index, increases in real
estate taxes and operating expenses or in fixed increments. Rent expense is
reflected on a straight-line basis over the term of the lease. Capital lease
obligations incurred for equipment acquisitions have not been material.
Future minimum lease payments under noncancellable operating leases having
initial terms in excess of one year as of December 31, 1997 are as follows (in
thousands):
<TABLE>
<S> <C>
1998 $ 44,253
1999 32,037
2000 21,995
2001 17,204
2002 12,927
Thereafter 6,396
Total minimum lease payments $134,812
</TABLE>
<PAGE> 21
page 24
Notes to Consolidated Financial Statements
During 1995, the Company entered into a five-year lease of a new research and
development facility in Boulder, Colorado. Payments under this lease, which
commenced during 1997, are based on LIBOR rates applied to the $13,016,000 cost
of the facility funded by the lessor. The Company has an option to renew the
lease for up to two five-year extensions, subject to certain conditions. If at
the end of the lease term, whether caused by expiration, default or otherwise,
the Company does not purchase the property, the Company would guarantee a
residual value to the lessor of up to the lessor's net investment in the
property. Under this lease, the Company is required to maintain compliance with
certain financial covenants. As a result of net losses incurred in 1997, the
Company failed to comply with certain of these covenants and such noncompliance
has been waived by the lessor. In March 1998, the Company collateralized its
obligations to the lessor by pledging $13,276,000 in cash deposits.
Facility rent expense amounted to approximately $42,322,000, $47,389,000 and
$42,347,000 in 1997, 1996 and 1995, respectively.
At December 31, 1997, other liabilities included accrued rent expense under the
Company's facilities leases ($1,461,000), noncurrent liabilities related to
business combinations ($460,000) and other obligations ($38,000).
At December 31, 1997, the Company had outstanding letters of credit in the
amount of $4,877,000.
Note Six: Stockholders' Equity
Preferred Stock Rights. Under the Company's stockholder rights plan, each
stockholder receives one right to purchase one one-thousandth of a share of
Series A Participating Preferred Stock (a "Right") for each share of common
stock owned by the stockholder. Holders of the Rights are entitled to purchase
for $250.00 one one-thousandth of one share of the Company's Series A
Participating Preferred Stock in certain limited circumstances involving
acquisitions of, or offers for 15 percent or more of, the Company's common
stock. After any such acquisition is completed, each Right entitles its holder
to purchase for $250.00 an amount of common stock of the Company, or in certain
circumstances securities of the acquirer, having a then current market value of
two times the exercise price of the Right. In connection with the stockholder
rights plan, the Company has designated 200,000 shares of its 8,000,000 shares
of authorized but unissued Preferred Stock as "Series A Participating Preferred
Stock." Each one one-thousandth of each share of Series A Participating
Preferred Stock will generally be afforded economic rights similar to one share
of the Company's common stock. The Rights are redeemable for a specified period
at a price of $.01 per Right and expire in March 2002.
Stock Option Plans. Pursuant to the terms of the Company's 1988 Stock Option
Plan, an aggregate of 17,995,493 shares of common stock has been issued or
reserved for issuance upon the exercise of options granted to qualified
employees and consultants of the Company. The Board of Directors, directly or
through committees, administers the Plan and establishes the terms of option
grants. The exercise price per share of all incentive stock options granted
under the Plan must be at least equal to the fair market value of the shares at
the date of the grant. Options granted prior to January 1, 1997 generally expire
over terms not exceeding ten years from the grant date, one month after
termination of employment, and six months after death or permanent disability of
the optionee. Options granted subsequent to January 1, 1997 generally expire
over terms not exceeding ten years from the grant date, three months after
termination of employment, two years after death, and one year after permanent
disability of the optionee. Options, in all of these cases, are exercisable to
the extent vested. Vesting generally occurs at the rate of 12.5 percent after 6
months and the balance in equal installments over the following 42 months.
<PAGE> 22
page 25
Notes to Consolidated Financial Statements
Pursuant to the 1996 Stock Option Plan an aggregate of 5,427,000 shares of
common stock were reserved for issuance upon the exercise of options granted to
qualified employees and consultants of the Company as of December 31, 1997. The
Board of Directors, directly or through committees, administers the Plan and
establishes the terms of option grants. The exercise price per share of all
incentive stock options granted under the Plan must be at least equal to the
fair market value of the shares at the date of the grant. The exercise price of
all nonstatutory stock options granted under the 1996 Stock Option Plan must be
at least 85% of the fair market value of the Common Stock on the date granted.
Options generally expire over terms not exceeding ten years from the grant date,
three months after termination of employment, two years after death, one year
after permanent disability, or at the end of the option's term in the case of
retirement. Options are exercisable to the extent vested. Vesting generally
occurs at the rate of 12.5 percent after 6 months and the balance in equal
installments over the following 42 months.
An aggregate of 700,000 shares of common stock has been issued or reserved for
issuance under the 1992 Director Stock Option Plan. All grants of options under
the Plan are automatic and nondiscretionary and may be granted only to
nonemployee directors. The exercise price of all options granted under the Plan
must be the fair market value of the shares at the date of grant. Options expire
in ten years from the date of grant and vest ratably over four years from the
grant date.
Price data and activity for the Company's option plans, including options
assumed by Sybase in mergers with Powersoft and other companies (adjusted for
the merger exchange ratio) are summarized as follows:
<TABLE>
<CAPTION>
Outstanding options Weighted average
Number of shares Exercise price per share
<S> <C> <C>
Balance at December 31, 1994 11,240,513 $ --
Assumed in merger 33,345 13.92
Granted 8,098,360 29.98
Exercised (2,081,293) 6.70
Cancelled (5,361,881) 39.06
Balance at December 31, 1995 11,929,044 22.30
Assumed in merger 135,496 5.07
Granted 11,412,135 19.19
Exercised (1,911,037) 7.27
Cancelled (8,803,446) 27.10
Balance at December 31, 1996 12,762,192 18.27
Granted 4,090,400 14.87
Exercised (1,402,285) 7.43
Cancelled (4,764,338) 21.14
Balance at December 31, 1997 10,685,969 $17.11
</TABLE>
At December 31, 1997, options to purchase 4,500,296 shares were exercisable at
prices ranging from $2.20 to $49.38. Shares available for grant totaled
5,658,969 at December 31, 1997.
In September 1996, the Board of Directors approved a stock option repricing
program pursuant to which all employees of the Company (excluding certain
executive officers) could elect to exchange or amend their then outstanding
employee stock options for new employee stock options having an exercise price
of $19.25 per share (equal to the then fair market value), with exercisability
generally prohibited until July 21, 1997. A total of 5,259,938 options with
exercise prices ranging from $20.50 to $47.75 per share were exchanged or
amended under the program. The exchange of such options are presented in the
preceding table as cancellations and subsequent grants.
<PAGE> 23
page 26
Notes to Consolidated Financial Statements
In June 1995, the Board of Directors approved a stock option repricing program
pursuant to which employees of the Company (excluding certain executive
officers) could elect to exchange or amend their then outstanding employee stock
options for new employee stock options having an exercise price of $26.88 per
share (equal to the then fair market value), with exercisability generally
prohibited until January 30, 1996. A total of 4,298,471 options with exercise
prices ranging from $27.38 to $52.88 per share were exchanged or amended under
the program. The exchange of such options are presented in the preceding table
as cancellations and subsequent grants.
The income tax benefits that accrue to the Company from exercises of
nonqualified stock options and disqualifying dispositions of incentive stock
options are recorded as additional paid-in capital.
Employee Stock Purchase Plans. The Company has an Employee Stock Purchase Plan
and a Foreign Subsidiary Employee Stock Purchase Plan (collectively the
"Plans"), which allow eligible employees to purchase common stock through
payroll deductions. The Plans consist of consecutive 24-month offering periods
composed of four 6-month exercise periods. The shares can be purchased at the
lower of 85 percent of the fair market value of the common stock at the date of
commencement of this two-year offering period or at the last day of each 6-month
exercise period. Purchases are limited to 10 percent of an employee's eligible
compensation, subject to an annual maximum as defined in the Plans.
As of December 31, 1997, an aggregate of 6,000,000 shares of common stock had
been reserved under the Plans, of which 945,260 shares remained available for
issuance. Employees purchased 1,238,696 shares in 1997, 1,088,620 shares in 1996
and 708,785 shares in 1995.
Pro Forma Disclosures of the Effect of Stock-Based Compensation Plans. The
Company applies APB Opinion 25 and related Interpretations in accounting for
grants to employees under its stock-based compensation plans, described above.
As a result, no compensation cost has been recognized for grants to employees
under its fixed stock option plans or its employee stock purchase plan.
Compensation cost for the estimated fair value of grants to nonemployee
consultants of stock-based compensation has not been material. Had compensation
cost been charged to expense for grants to employees under the Company's fixed
stock option plans and its employee stock purchase plan based on the fair value
at the grant dates for awards under those plans, consistent with the method
encouraged by SFAS 123, the Company's net loss and net loss per share would have
been increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C> <C>
Net loss (in thousands) As reported $(55,424) $ (79,006) $(19,502
Pro forma $(63,797) $(115,399) $(36,512)
Basic and diluted
net loss per share As reported $ (0.70) $ (1.05) $ (0.27)
Pro forma $ (0.81) $ (1.54) $ (0.51)
</TABLE>
Because SFAS 123 is applicable only to options granted subsequent to December
31, 1994, its pro forma effects will not be fully reflected until 1998. The fair
value of each option grant is estimated on the date of the grant using the
Black-Scholes option-pricing model with the following weighted-average
assumption:
<TABLE>
<CAPTION>
Stock option plans Purchase plans
1997 1996 1995 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Expected volatility 54.90% 51.50% 52.00% 54.90% 51.50% 52.00%
Risk-free interest rates 6.50% 5.90% 5.90% 5.60% 5.20% 5.60%
Expected lives (years) 4.25 3.24 3.31 .05 .05 .05
Expected dividend yield -- -- -- -- -- --
</TABLE>
The weighted-average grant date fair value of options granted 1997, 1996 and
1995 was $7.52, $6.22 and $9.55, respectively.
<PAGE> 24
page 27
Notes to Consolidated Financial Statements
The following table summarizes information about fixed stock options outstanding
at December 31, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Weighted
Average Weighted Weighted
Remaining Average Average
Contractual Exercise Exercise
Ranges of Exercisable Prices Shares Life Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
$ 2.20 to $14.50 2,294,223 8.46 $12.96 637,993 $11.71
$14.69 to $15.63 2,323,388 9.05 $15.33 514,943 $15.32
$16.00 to $18.75 1,889,133 8.64 $16.86 733,482 $16.64
$19.25 to $19.25 3,464,385 7.05 $19.25 2,291,321 $19.25
$19.75 to $49.38 714,840 7.77 $26.53 322,557 $31.73
$ 2.20 to $49.38 10,685,969 8.12 $17.11 4,500,296 $18.20
</TABLE>
Note Seven: Income Taxes
The Company accounts for income taxes under the liability method. Under this
method, deferred tax assets and liabilities are determined based on differences
between financial reporting and income tax bases of assets and liabilities and
are measured using the enacted tax rates and laws that will be in effect when
the differences are expected to reverse.
The following is a geographical breakdown of consolidated income (loss) before
income taxes (including intercompany royalties and expenses) by income tax
jurisdiction (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
United States $(30,899) $(80,347) $(14,993)
Foreign (9,857) 13,639 251
Total $(40,756) $(66,708) $(14,742)
</TABLE>
The provisions (credits) for income taxes consist of the following (in
thousands):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Federal
Current $ (4,496) $ -- $ 10,118
Deferred -- -- (17,422)
(4,496) -- (7,304)
State
Current 750 560 3,340
Deferred -- (100) (3,229)
750 460 111
Foreign
Current 18,329 11,838 13,012
Deferred 85 -- (1,059)
18,414 11,838 11,953
Total $ 14,668 $ 12,298 $ 4,760
</TABLE>
<PAGE> 25
page 28
Notes to Consolidated Financial Statements
The provision for income taxes differs from the amount computed by applying the
statutory federal income tax rate to income before income taxes. The sources and
tax effects of the differences are as follows (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Tax (credit) at U.S. statutory rate $(14,265) $(23,348) $ (5,160)
State tax, net of federal benefit, before valuation allowance (401) (3,232) 72
Effect of foreign operations 21,035 9,714 5,469
Amortization of intangible assets 2,435 1,537 1,212
Tax-exempt interest -- (57) (1,919)
Nondeductible merger costs -- -- 4,415
Research and development tax credits -- -- (1,000)
Effect of valuation allowance 3,272 24,376 --
Other 2,592 3,308 1,671
Total $ 14,668 $ 12,298 $ 4,760
</TABLE>
Deferred income taxes result principally from temporary differences between
years in the recognition of certain revenue and expense items for financial and
tax reporting purposes. Significant components of the Company's net deferred tax
assets were as follows at December 31 (in thousands):
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Depreciation $ 11,531 $ 3,303
Deferred revenue 10,903 8,336
Accrued expenses 9,288 10,490
Allowance for doubtful accounts 7,163 6,882
Purchased software 2,641 5,439
Net operating loss carryovers and tax credits carryforwards 41,403 46,635
Other assets (liabilities) (8,466) (3,269)
Total before valuation allowance 74,463 77,816
Valuation allowance (33,413) (36,681)
Net deferred tax assets $ 41,050 $ 41,135
Recorded as: Current deferred tax assets $ 16,973 $ 13,729
Noncurrent deferred tax assets 24,077 27,406
$ 41,050 $ 41,135
</TABLE>
<PAGE> 26
page 29
Notes to Consolidated Financial Statements
The valuation allowance decreased by $3,268,000 in 1997, including reductions of
deferred tax assets and the related valuation allowance previously recorded
($9,189,000), additions to the valuation allowance for deferred tax assets
arising from tax benefits associated with stock option plans ($2,649,000) and
additions included in the provision for income taxes ($3,272,000). The
valuation allowance as of December 31, 1997 includes approximately $11,830,000
associated with stock option activity for which any subsequently recognized tax
benefits will be credited directly to shareholders' equity. As of December 31,
1997, the Company had federal net operating losses of $38,600,000 expiring in
years from 2003 through 2112, research and development tax credits of $9,400,000
which expire in years from 2006 through 2010 and foreign tax credits of
$9,400,000 expiring in 1999 and 2000.
Realization of the Company's net deferred tax assets is dependent upon the
Company generating sufficient taxable income in future years in appropriate tax
jurisdictions to obtain benefit from the reversal of temporary differences and
from tax credit carryforwards. The amount of deferred tax assets considered
realizable is subject to adjustment in future periods if estimates of future
taxable income are reduced
No provision has been made for federal income taxes on unremitted earnings of
certain of the Company's foreign subsidiaries (approximately $14,370,000 at
December 31, 1997) since the Company plans to permanently reinvest all such
earnings.
Note Eight: Retirement Plan
The Company has a retirement plan under Section 401(k) of the Internal Revenue
Code. Discretionary Company contributions are based on achieving certain
operating profit goals. There were no discretionary Company contributions in
1997, 1996 or 1995.
Note Nine: Segment and Geographical Information
The Company operates in one industry segment (the development and marketing of
computer software and related services) and markets its products and services
internationally through both foreign subsidiaries and distributors located in
the Americas, Europe, Asia and Australia. Interarea revenues, which are
eliminated in the consolidated financial statements, represent royalties from
license and service fees generated by the foreign operations. Intercontinental
includes operations in Asia, Australia, New Zealand and Latin America.
<PAGE> 27
page 30
Notes to Consolidated Financial Statements
The following table presents a summary of operating information and certain
year-end balance sheet information by geographic region (in thousands):
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Revenues:
Unaffiliated customers:
United States, Canada and Mexico $ 571,525 $ 615,663 $ 588,827
Europe 232,560 238,810 239,842
Intercontinental 99,852 157,072 127,917
Total $ 903,937 $ 1,011,545 $ 956,586
Interarea $ 36,592 $ 58,014 $ 52,891
Operating income (loss):
United States, Canada and Mexico $ (83,238) $ (154,116) $ (75,677)
Europe 51,215 36,241 22,673
Intercontinental (14,379) 43,660 29,659
Total $ (46,402) $ (74,215) $ (23,345)
Cash, cash equivalents and cash investments:
United States, Canada and Mexico $ 171,240 $ 110,955 $ 166,292
Europe 40,735 42,378 36,638
Intercontinental 34,162 21,189 20,791
Total $ 246,137 $ 174,522 $ 223,721
Accounts receivable, net:
United States, Canada and Mexico $ 105,308 $ 121,710 $ 105,541
Europe 69,508 69,438 60,147
Intercontinental 29,595 48,318 28,236
Total $ 204,411 $ 239,466 $ 193,924
Identifiable assets:
United States, Canada and Mexico $ 557,882 $ 514,569 $ 563,135
Europe 135,850 136,405 126,927
Intercontinental 87,893 100,917 76,230
Total $ 781,625 $ 751,891 $ 766,292
</TABLE>
<PAGE> 28
page 31
Notes to Consolidated Financial Statements
Note Ten: Business Combinations
On February 21, 1997 the Company acquired Purchase Net, Inc., a developer of
application development software. The Company issued 750,000 shares of its
common stock with a fair market value of approximately $12,000,000 for all the
outstanding shares of common stock of Purchase Net, Inc. The transaction was
accounted for as a purchase. The total purchase cost was $12,763,000, including
direct cost and expenses related to the acquisition, of which $12,693,000 was
allocated to purchased software and included in capitalized software in the
consolidated balance sheet. The results of operations of Purchase Net,
Inc., which have not been material in relation to those of the Company, have
been included in the consolidated results of operations for periods subsequent
to the acquisition date.
In February 1996, Sybase acquired Visual Components, Inc. ("Visual"), a
developer and marketer of components for software developers. Sybase issued
733,178 shares of its common stock for all the outstanding shares of common
stock of Visual Components, Inc. and assumed outstanding options to acquire
135,496 shares of Sybase common stock based on the merger exchange ratio. The
transaction has been accounted for as a pooling of interests. The operating
results of Visual Components, Inc. prior to the combination were not material in
relation to those of Sybase. Therefore, prior period Financial information of
Sybase has not been restated.
In May 1995, Sybase, through a wholly-owned subsidiary, acquired SDP, S.A.
("SDP") a French company that develops and markets database modeling and design
tools. Under the terms of the acquisition agreement, Sybase paid $32,500,000 in
cash to the stockholders of SDP (approximately $26,500,000 upon consummation of
the acquisition and approximately $6,000,000 in decreasing annual installments
through 1998, subject to satisfaction of certain conditions) for all of the
outstanding shares of the company. Approximately $12,000,000 of the purchase
price has been allocated to intangible assets, which are being amortized over
periods of three to seven years, and approximately $20,000,000 has been
allocated to in-process technology and charged to operations in 1995. Sybase
accounted for the acquisition as a purchase. The historical results of
operations of SDP, which have not been material in relation to those of Sybase,
are included in the consolidated results of operations for periods subsequent to
the acquisition date. In 1996, pursuant to the terms of the acquisition
agreement, Sybase made a payment of $1,850,000.
In February 1995, Sybase, through a wholly-owned subsidiary, merged with
Powersoft, a U.S.-based company that provides a family of scalable client/server
application development and data access tools. Sybase issued 17,801,092 shares
of its common stock for all of the outstanding common stock of Powersoft (based
on a merger exchange ratio of 1.6 shares of Sybase common stock for each share
of Powersoft common stock) and assumed all outstanding obligations for the
issuance of up to 2,840,155 additional shares of Sybase common stock based on
the merger exchange ratio. The merger was accounted for as a pooling of
interests and the historical consolidated Financial statements of Sybase for
prior periods were restated to include the Financial position, results of
operations and cash flows of Powersoft. Revenue and net income of Powersoft for
the period from January 1 through February 13, 1995 were approximately
$14,660,000 and $790,000, respectively. Costs of the merger were charged to
operations in 1995.
<PAGE> 29
page 32
Notes to Consolidated Financial Statements
In addition to the transactions discussed above, in 1995, Sybase acquired
several technology companies and distributors of their products in transactions
which were accounted for as poolings of interests. In connection with these
transactions, Sybase issued 279,045 shares of its common stock during 1995. Also
in 1997 and 1995, Sybase acquired several distributors of their products in
various countries in transactions accounted for as purchases. Sybase paid cash
for the businesses totaling $4,290,000 in 1997 and $8,270,000 in 1995, and
issued 40,880 shares of Sybase common stock in 1995. There were no such
purchases in 1996. Amounts recorded as intangible assets from these transactions
were $8,272,000 in 1997 and $14,036,000 in 1995. These intangible assets are
being amortized over periods of five to seven years, which amounts were recorded
as additional intangible assets. During 1997, Sybase paid approximately
$2,827,000 related to earn-out provisions for transactions consummated in prior
years, which were recorded as additional intangible assets. At December 31,
1997, an additional $5,030,000 may be payable by Sybase contingent upon
achievement of certain financial objectives by these businesses. The results of
operations of these entities prior to the acquisitions were not material in
relation to those of Sybase. Results of operations of these entities have been
included in the consolidated results of operations for the periods subsequent to
the respective acquisition dates.
Note Eleven: Litigation
Following the Company's announcements on January 2, 1998 and January 21, 1998
regarding its preliminary results of operations for the quarter and year ended
December 31, 1997, several class action lawsuits were filed against the Company
and certain of its officers and directors in the United States District Court,
Northern District of California. The complaints are similar and allege
violations of federal and state securities laws and request unspecified monetary
damages.
On January 27, 1998, a purported shareholder derivative action was filed in the
Superior Court of the State of California, County of Alameda. The complaint
alleges that certain of the Company's present and former officers and/or
directors breached fiduciary duties owed to the Company in connection with the
underlying circumstances alleged in the securities class action complaint
described above. Sybase is a nominal defendant in the action and no damages are
sought from it.
Following the Company's announcement on April 3, 1995, of its preliminary
results for the First Fiscal quarter ended March 31, 1995, several class action
lawsuits were filed against the Company and certain of its officers in the U.S.
District Court, Northern District of California. The complaints are similar to
one another and alleged violations of federal and state securities laws and
request unspecified monetary damages. These actions have been consolidated and a
consolidated amended class action complaint was served on August 7, 1995. The
parties are in pretrial discovery.
Management believes that the claims alleged against it in all of the foregoing
actions are without merit and intends to defend against the claims vigorously.
In the opinion of management, resolution of such litigation is not expected to
have a material adverse effect on the financial position of the Company.
However, depending on the amount and timing, an unfavorable resolution of such
litigation could materially affect the Company's future results of operations or
cash flows in a particular period.
The Company is also a party to various legal disputes and proceedings arising
from the ordinary course of business activities. In the opinion of management,
resolution of these matters is not expected to have a material adverse effect on
the financial position of the Company. However, depending on the amount and
timing, an unfavorable resolution of some or all of these matters could
materially affect the Company's future results of operations or cash flows in a
particular period.
<PAGE> 30
page 33
Notes to Consolidated Financial Statements
Note Twelve: Restructuring
In July 1996, the Company announced and implemented a restructuring plan aimed
at reducing costs, and focusing the Company's products around its core
businesses. The Company's restructuring actions consisted primarily of
terminating certain product lines, terminating employees and vacating certain
facilities, and cancelling real estate leases as a result of these employee
terminations. These actions resulted in a charge of $49,200,000, including
approximately $17,000,000 for severance and related items, $15,700,000 for
vacating facilities and cancelling real estate leases, $13,900,000 for expenses
related to discontinued products, and $2,600,000 for other restructuring related
items. Of this amount $22,300,000 was paid in 1996, $9,300,000 in 1997 and
$17,600,000 consisted of write-offs of property, equipment and improvements,
capitalized software development costs and other assets.
Note Thirteen: Subsequent Events
On February 2, 1998, Sybase acquired Intellidex Systems, LLC. (Intellidex), a
provider of data management technology for deploying and managing data warehouse
environments. Under the terms of the acquisition agreement, Sybase paid
$5,000,000 in cash for certain assets and assumed certain liabilities of
Intellidex. Of this amount paid, $3,737,000 was allocated to purchased software
and the balance of $1,263,000 was allocated to intangible assets. In addition,
pursuant to the terms of the agreement, Sybase is obligated to make contingent
payments based on certain operating performance criteria. The maximum amount
payable over a three year period is $10,000,000. The transaction has been
accounted for as a purchase. The results of operations of Intellidex, which have
not been material in relation to those of the Company will be included in the
consolidated results of operations for periods subsequent to the acquisition
date.
On February 18, 1998, the Board of Directors authorized the repurchase of up to
$25 million of the Company's outstanding common stock. Subject to price and
market conditions, these purchases will be made from time to time in open market
transactions using available cash balances.
On February 26, 1998, the Company announced a restructuring plan. On February
26, 1998, the Company announced a restructuring plan. The restructuring, which
is expected to reduce Sybase's cost structure in 1998, is intended to focus the
Company's core technology strengths around three market growth initiatives in
Web computing, occasionally connected computing and data warehousing.
The restructuring plan includes the discontinuation of certain product lines,
termination of employees, vacating certain facilities and cancellation of real
estate leases as a result of the employee terminations. On February 26, 1998,
the Company terminated approximately 600 employees as a part of the
restructuring. Restructuring charges to be incurred in 1998 are estimated to be
approximately $70 million.
<PAGE> 31
page 34
Quarterly Financial Information (Unaudited)
In January 1998, the Company discovered that certain accounting practices in its
Japanese subsidiary were not in accordance with U.S. generally accepted
accounting principles and the Company's policies. As a result of these
irregularities, the Company has restated its revenues and results of operations
for the quarters ended September 30, 1997, June 30, 1997 and March 31, 1997. The
restatement resulted in a decrease in revenues totaling approximately $43.0
million for the nine months ended September 30, 1997. Revenues, as previously
reported, were $241,902,000, $237,638,000 and $244,199,000 for the quarters
ended March 31, 1997, June 30, 1997 and September 30, 1997, respectively. Net
income, as previously reported, was $3,541,000, $4,376,000 and $5,216,000 for
the quarters ended March 31, 1997, June 30, 1997 and September 30, 1997,
respectively.
<TABLE>
<CAPTION>
(In thousands) March 31 June 30, September 30, December 31
1997 1997 1997 1997 1997
<S> <C> <C> <C> <C> <C>
Revenues:
License fees $ 127,392 $ 110,591 $ 122,550 $ 110,503 $ 471,036
Service 104,809 104,890 110,473 112,729 432,901
Total revenues: 232,201 215,481 233,023 223,232 903,937
Costs and expenses:
Cost of license fees 8,058 6,148 6,563 10,587 31,356
Cost of service fees 61,878 61,673 63,435 61,639 248,625
Sales and marketing 114,597 116,674 118,015 119,875 469,161
Product development and engineering 35,300 33,707 33,871 35,712 138,590
General and administrative 17,363 14,443 15,410 15,391 62,607
Total costs and expenses 237,196 232,645 237,294 243,204 950,339
Operating loss (4,995) (17,164) (4,271) (19,972) (46,402)
Interest income and expense, net 1,006 1,729 1,516 1,395 5,646
Loss before income taxes (3,989) (15,435) (2,755) (18,577) (40,756)
Provision for income taxes 2,171 2,357 3,195 6,945 14,668
Net loss $ (6,160) $ (17,792) $ (5,950) $ (25,522) $ (55,424)
Basic and diluted net loss per share $ (0.08) $ (0.23) $ (0.08) $ (0.32) $ (0.70)
Stock prices:
High $ 20.00 $ 16.88 $ 20.75 $ 23.50 $ 23.50
Low $ 13.25 $ 12.50 $ 12.50 $ 12.00 $ 12.00
</TABLE>
<PAGE> 32
page 35
Quarterly Financial Information (Unaudited)
page 35
<TABLE>
<CAPTION>
(In thousands) March 31 June 30, September 30, December 31,
1996 1996 1996 1996 1996
<S> <C> <C> <C> <C> <C>
Revenues:
License fees $ 147,945 $ 150,454 $ 147,219 $ 159,873 $ 605,491
Services 95,719 99,433 102,994 107,908 406,054
Total revenues: 243,664 249,887 250,213 267,781 1,011,545
Costs and expenses:
Cost of license fees 7,117 7,585 6,963 8,194 29,859
Cost of service fees 56,139 62,846 62,906 64,382 246,273
Sales and marketing 130,293 137,197 123,373 132,296 523,159
Product development and engineering 43,091 46,085 39,217 36,283 164,676
General and administrative 18,726 19,735 17,163 16,937 72,561
Cost of restructuring -- -- 49,232 -- 49,232
Total costs and expenses 255,366 273,448 298,854 258,092 1,085,760
Operating income (loss) (11,702) (23,561) (48,641) 9,689 (74,215)
Interest income and expense, net 2,494 2,197 1,112 1,704 7,507
Income (loss) before income taxes (9,208) (21,364) (47,529) 11,393 (66,708)
Provision (benefit) for income taxes (2,302) 3,200 5,100 6,300 12,298
Net income (loss) $ (6,906) $ (24,564) $ (52,629) $ 5,093 $ (79,006)
Basic net income (loss) per share $ (0.09) $ (0.33) $ (0.69) $ 0.07 $ (1.05)
Diluted net income (loss) per share $ (0.09) $ (0.33) $ (0.69) $ 0.07 $ (1.05)
Stock prices:
High $ 37.13 $ 27.38 $ 20.00 $ 20.50 $ 37.13
Low $ 22.25 $ 21.50 $ 14.38 $ 13.88 $ 13.88
</TABLE>
<PAGE> 33
Corporate Information
Board of Directors
Mitchell E. Kertzman
Chairman of the Board and Chief
Executive officer
Director since 1995
John S. Chen
President and Chief Executive Officer
Director since 1997
Robert S. Epstein
Executive Vice President and
Chief Information Officer
Director since 1984
Richard C. Alberding(1)
Retired, Executive Vice President
Hewlett-Packard Company
Director since 1993
L. William Krause(1)
President and Chief Executive Officer
Storm Technology, Inc.
Director since 1995
David E. Liddle, Ph.D.(1)
President and Chief Executive Officer
Interval Research Corporation
Director since 1984
Alan B. Salisbury(2)
President and General Manager
Learning Tree International USA, Inc.
Director since 1993
Robert P. Wayman(2)
Executive Vice President
Finance and Administration, and Chief
Financial Officer
Hewlett-Packard Company
Director since 1995
Jeffrey T. Webber(2)
President
R.B. Webber & Company, Inc.
Director since 1993
Corporate Officers
Mitchell E. Kertzman
Chairman of the Board and Chief
Executive Officer
John S. Chen
President and Chief Executive Officer
Jack L. Acosta
Executive Vice President and Chief
Financial Officer
Robert S. Epstein
Executive Vice President and Chief
Information Officer
Steven M. Capelli
Senior Vice President,
Business Development
Michael Gardner
Senior Vice President,
Worldwide Sales
Richard N. LaBarbera
Senior Vice President,
Worldwide Customer Service and Support
Eric L. Miles
Senior Vice President, Product Operations
Raj Nathan
Senior Vice President,
Corporate Programs Office
L. Mindi Butterfield
Vice President, Marketing
Mitchell L. Gaynor
Vice President,
General Counsel, and Secretary
Michael Regan
Vice President,
Worldwide Professional Services
Pieter Van der Vorst
Vice President and Corporate Controller
Nita C. White-Ivy,
Vice President,
Worldwide Human Resources
Stockholder Information
A copy of the Company's Annual Report, Form 10-K, and other financial documents
will be on file as of March 31, 1998, with the Securities and Exchange
Commission and are available on request. Please direct your request to any of
the following:
By written request:
Sybase, Inc.
Investor Relations Department
6475 Christie Avenue
Emeryville, California 94608 U.S.A.
By telephone:
+1 510 922 5399
Via the World Wide Web:
www.sybase.com
Registrar and Transfer Agent
Equiserve
Shareholder Services
Mail Stop: 45-01-23
P.O. Box 644
Boston, Massachusetts 02102 U.S.A.
+1 617 575 3120
www.equiserve.com
Annual Meeting
The annual meeting of stockholders will be held at 10:00 a.m. on May 27, 1998,
at the Company's offices at 6425 Christie Avenue, Emeryville, California.
Stock Information
As of December 31, 1997, the Company had 2,003 stockholders of record. The
Company has never paid cash dividends.
Stock Listing
Sybase, Inc., is traded on the
NASDAQ/National Market System, NASDAQ Symbol: SYBS
Independent Auditors
Ernst & Young LLP
Walnut Creek, California
1 Member of Compensation Committee
2 Member of Audit Committee
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
(AS OF 12/31/97)
SUBSIDIARY NAME JURISDICTION OF INCORPORATION
Corporacion Sybven, C.A. Venezuela
Henco Software FSC, Ltd. Virgin Islands
OASiS Group Ltd. United Kingdom
Powersoft Holding France SARL France
Powersoft K.K. Japan
SDP S.N.C. France
Sybase Argentina S.A. Argentina
Sybase Australia Pty Limited Australia
Sybase Canada Limited Canada
Sybase China Limited Hong Kong
Sybase de Mexico, S.A. de C.V. Mexico
Sybase Do Brasil Software Ltda. Brazil
Sybase Eastern Europe B.V. The Netherlands
Sybase Europe B.V. The Netherlands
Sybase Financial Services, Inc. Delaware
Sybase Foreign Sales Corporation Virgin Islands
Sybase France S.a.r.l. France
Sybase GmbH Germany
Sybase Hong Kong Limited Hong Kong
Sybase Iberia S.A. Spain
Sybase India, Ltd. Delaware
Sybase Informatica Chile Limitada Chile
Sybase International Holdings Corporation Delaware
Sybase International Limited United Kingdom
Sybase Italia S.r.l. Italy
Sybase Korea, Ltd. South Korea
Sybase KK Japan
Sybase Luxembourg Luxembourg
Sybase Nederland B.V. The Netherlands
Sybase Norge AS Norway
Sybase N.V./S.A. Belgium
Sybase (N.Z.) Limited New Zealand
Sybase Peru S.A. Peru
Sybase Philippines, Inc. Philippines
Sybase (Schweiz) AG Switzerland
Sybase (Singapore) Pte Ltd. Singapore
Sybase Software (Beijing) Co., Ltd. People's Republic of China
Sybase Software (Malaysia) Sdn Bhd Malaysia
Sybase Solutions s.r.o. Czech Republic
Sybase Sverige AB Sweden
Sybase Taiwan Co., Ltd. Republic of China
Sybase (Thailand) Limited Thailand
Sybase UK Limited United Kingdom
Tecnologia Cliente/Servidor Informatica S.A. Brazil
Visual Components, Inc. Kansas
WATCOM Europe Limited United Kingdom
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Sybase, Inc. of our reports dated January 28, 1998, except for Note Thirteen,
as to which the date is February 26, 1998, included in the 1997 Annual Report to
Shareholders of Sybase, Inc.
Our audits also included the financial statement schedule of Sybase, Inc. listed
in Item 14(a). 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.
We also consent to the incorporation by reference in the Registration Statements
(Forms S-3) pertaining to the resale of Sybase, Inc. common stock by certain
former stockholders of Purchase Net, Inc., and Visual Components, Inc. and
related Prospectuses, and in the Registration Statements (Forms S-8) and related
Prospectuses pertaining to the 1996 Stock Plan, the 1988 Stock Option Plan, the
1992 Director Stock Option Plan, the 1991 Employee Stock Purchase Plan, the 1991
Foreign Subsidiary Employee Stock Purchase Plan, the Gain Technology, Inc. 1990
Stock Option Plan and Employee Stock Purchase Agreement, the Powersoft
Corporation 1984 Incentive Stock Option Plan, the Powersoft Corporation 1994
Amended and Restated Incentive and Non-Qualified Stock Option Plan, the Letter
Agreement between Powersoft Corporation and William P. Miller dated April 5,
1991, the Complex Architectures, Inc. Stock Option Plan and the Letter Agreement
dated February 25, 1994 between Complex Architectures, Inc. and Frank A. Sola,
the Expressway Technologies 1987 Stock Option Plan, the Micro Decisionware, Inc.
Stock Option Plan, and the Visual Tools, Inc. 1993 Stock Option Plan, of our
reports dated January 28, 1998, except for Note Thirteen, as to which the date
is February 26, 1998, with respect to the consolidated financial statements and
schedule of Sybase, Inc. included and incorporated by reference in its Annual
Report (Form 10-K) for the year ended December 31, 1997.
/s/ ERNST & YOUNG
Walnut Creek, California
March 26, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
CONSOLIDATED FINANCIAL STATEMENTS OF SYBASE INC. AS OF DECEMBER 31, 1997 AND
1996 AND FOR THE YEARS THEN ENDED.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1996
<PERIOD-START> JAN-01-1997 JAN-01-1996
<PERIOD-END> DEC-31-1997 DEC-31-1996
<CASH> 188,876 156,796
<SECURITIES> 57,261 17,726
<RECEIVABLES> 235,084 267,708
<ALLOWANCES> 30,673 28,242
<INVENTORY> 0 0
<CURRENT-ASSETS> 475,661 445,268
<PP&E> 415,720 404,862
<DEPRECIATION> 266,059 213,534
<TOTAL-ASSETS> 781,625 751,891
<CURRENT-LIABILITIES> 408,151 352,212
<BONDS> 0 0
0 0
0 0
<COMMON> 80 77
<OTHER-SE> 371,435 396,731
<TOTAL-LIABILITY-AND-EQUITY> 781,625 751,891
<SALES> 471,036 605,491
<TOTAL-REVENUES> 903,937 1,011,545
<CGS> 31,356 29,859
<TOTAL-COSTS> 749,142 799,291
<OTHER-EXPENSES> 201,197 286,469
<LOSS-PROVISION> 1,484 11,713
<INTEREST-EXPENSE> 1,168 399
<INCOME-PRETAX> (40,756) (66,708)
<INCOME-TAX> 14,668 12,298
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (55,424) (79,006)
<EPS-PRIMARY> (.70) (1.05)
<EPS-DILUTED> (.70) (1.05)
</TABLE>
