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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 26, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to ___________
Commission File Number 0-15858
IMP, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-2722142
(State or other jurisdiction (I.R.S.Employer
of incorporation or organization) Identification No.)
2830 North First Street
San Jose, California 95134
(Address of Principal Executive Offices, including Zip Code)
Registrant's telephone number, including area code:
(408) 432-9100
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
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Common Stock, $.001 par value
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. [ ]
The aggregate market value of voting stock held by
nonaffiliates of the Registrant, as of June 14, 1995 was approximately
$78,523,200 (based upon the closing price for shares of the Registrant's Common
Stock as reported by the National Market System of the National Association of
Securities Dealers, Inc. Automated Quotation System on that date). Shares of
Common Stock held by each officer, director and holder of 5% 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.
On June 14, 1995, approximately 28,044,000 shares of Common
Stock, $.001 par value, were outstanding.
Documents Incorporated by Reference
Designated portions of the following documents are
incorporated by reference into this Annual Report on Form 10-K where indicated:
IMP, Inc. Annual Report to Stockholders for the fiscal year
ended March 26, 1995, Parts II and IV.
IMP, Inc. Proxy Statement for the 1995 Annual Meeting of
Stockholders to be held on August 16, 1995, Part III.
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PART I
ITEM I. BUSINESS.
INTRODUCTION
IMP(R), Inc.* (the "Company" or "IMP") develops and manufactures
application specific standard integrated circuits ("ASSPs") for computer,
communications and industrial applications; designs, develops and manufactures
certain custom integrated circuits ("ICs"); and provides silicon foundry
services to fabless semiconductor manufacturers and other companies.
The Company was originally incorporated in California in January 1981
as International Microelectronic Products. It reincorporated in Delaware as
International Microelectronic Products, Inc. in April 1987 and the new
corporation succeeded to the business of its predecessor. The Company amended
its Certificate of Incorporation in September 1993 to change its name to IMP,
Inc.
BACKGROUND
INTRODUCTION
IMP is a supplier of high-integration, programmable analog and mixed
signal CMOS integrated circuit solutions to the communications, computer and
industrial markets. IMP is the inventor of the Electrically Programmable
Analog Circuit ("EPACTm"), the analog counterpart to the digital field
programmable gate array ("FPGA"). It is also a technology leader in the field
of programmable filters and read channel devices for mass storage applications.
Wafers are manufactured in the Company's own fabrication facility in
San Jose, California, as well as in offshore foundries licensed to the IMP
process technology. IMP also uses its facilities to provide wafer fabrication
and full IC manufacturing services to other semiconductor vendors. In this
role the Company has established a reputation as a world class supplier of
CMOS, BiCMOS and EEPROM processes for analog and mixed-signal applications.
HISTORY
IMP was founded in 1981, with a charter to design, develop and
manufacture standard-cell-based, custom CMOS integrated circuits. The Company
was a pioneer in this
___________________
*IMP is a registered trademark and Analog Magic, EPAC and NONSTOP are
trademarks of IMP, Inc. Also contained herein are trademarks of other
companies.
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segment of the business, being one of the first vendors to offer advanced CAE
software with an extensive library of pre-characterized cells and silicon
compilers to reduce design cycle times. Using these tools, IMP was an early
leader in integrating digital and analog building-block functions, such as ROMs
and operational amplifiers, into its customers' products. IMP was one of the
first vendors to introduce 1.2 micron CMOS with dual layer metal. Similarly,
IMP was the first semiconductor manufacturer to offer a library of both analog
and digital cells for integration onto the same chip at a process lithography
of 1.2 microns.
In the late 1980s, gate array technology made significant advances in
density and performance. These advances lessened the relative advantage of the
full customer mask set required by standard cells with its smaller die sizes
but more expensive NRE costs. As a result, cell-based custom business
activity was severely depressed throughout the industry for several years. To
counteract the impact of this market change, IMP focused its R&D efforts on
broadening the range of its process technology offerings in order to provide
wafer manufacturing capacity services to other semiconductor companies. This
strategy was successful in stabilizing the Company's business. To date, the
Company has manufactured more than 1,000 designs from customer databases.
Moreover, IMP serves some of the most demanding semiconductor companies, as
well as technology-leading systems manufacturers, in the industry.
APPLICATION-SPECIFIC STANDARD PRODUCTS
To diversify its business, IMP decided in 1989 to invest in standard
products that take advantage of the core design and process competencies it
created in the custom arena. These include the availability of more aggressive
process technologies than those typically employed in the linear business and
the resulting ability to design high-integration analog and mixed-signal
products. This allows IMP engineers to develop new classes of
application-specific standard products for this market segment. The Company is
already recognized as a technology leader in two areas:
. Highly integrated programmable filters and read channel ICs
for mass storage applications.
. Electrically programmable analog circuits that allow system
designers to integrate multiple low-density packages into a
single user-configurable solution.
ANALOG AND MIXED-SIGNAL MASS-STORAGE PRODUCTS
The first standard product introduced by IMP in February 1990 was also
the industry's first CMOS programmable filter chip. It replaced more than 40
discrete components and low density IC packages and provided the lowest cost
and lowest power solution for small form factor tape and disk drives. A
strategic alliance between the Company and 3M resulted in the first chip set to
integrate read/write and servo channels
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for very-high capacity, magneto-resistive head tape drives. This basic
technology was then applied to the development of devices for the lower
density, but fast growing, personal tape back-up market.
IMP also introduced the first completely integrated CMOS read-channel
IC in June 1992 for high-performance hard disk drives. It was featured on the
front cover of Electronic Design magazine as also being the first 3V solution
for the new generation of small-form factor drives aimed at low power
applications in the portable PC market.
In early 1995, IMP introduced the Super combo integrated circuit for
quarter-inch cartridge ("QIC") hard disk drive back-up and mass storage
equipment. This device integrated functions previously occupying three chips;
a preamplifier, read channel and write driver, as typically used in
floppy-interface type, tape drive back-up systems.
ELECTRICALLY-PROGRAMMABLE ANALOG CIRCUITS
IMP shipped the industry's first Electrically-Programmable Analog
Circuit ("EPAC") products and development tools early in 1995. EPAC devices,
the analog counterpart to the digital field programmable gate array, extend the
benefits of higher levels of integration, fast time-to-market, reduced
developments costs and unique user-configurable functionality to analog and
mixed signal designs.
Creation of the EPAC device required IMP engineers to innovate across
a diverse spectrum of technologies. These included developing a manufacturing
process combining EEPROM, SRAM and analog capabilities, simulating complex new
memory and analog circuit design techniques, evolving a new device architecture
and creating new CAE software tools. Called "adaptive analog," the dynamically
programmable SRAM architecture allows device functionality to be reconfigured
"on-the-fly" to meet real-time system operating needs. This is particularly
powerful when used in association with a programmable microcontroller and opens
up significant new approaches to analog systems design. Analog MagicTm
software is a Windows-based CAE design tool, which when used with IMP
programming and in-system evaluation hardware reduces the development time of
an analog sub-system from days or weeks to hours.
The first EPAC device is aimed at signal conditioning, data
acquisition, data conversion and system interface applications. IMP plans to
introduce multiple EPAC product families addressing other analog and mixed
signal market segments.
PROGRAMMABLE DEVICE CONVERSION
IMP offers high-quality, fast-turn migration services for conversion
of electrically programmable digital devices, such as FPGA, CPLD and PALs, into
low-cost, high-volume masked arrays. Customers report cost savings of 70% and
more. IMP's NONSTOPTm
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program can deliver engineering prototype units in 7 days, and up to 1 million
units in 90 days. In addition to digital conversion, the Company plans to add
services for converting its EPAC analog devices to low-cost metal masked, MPAC,
versions when customer volumes warrant.
IMP supports all popular industry netlist formats, including Actel,
Altera, AMD, Lattice, QuickLogic and Xilinx. A full range of package options,
including DIP, PLCC, QFP, SOIC, and TQFP, is available. The same base-array
family as used for PLD conversions, also provides an alternate source for other
vendor's gate arrays from 1K to 65K gates.
WAFER FABRICATION CAPABILITIES
IMP is also a supplier of analog and mixed analog/digital integrated
circuit wafer fabrication and manufacturing services to other semiconductor
companies and systems manufacturers. Over 950 GDSII formatted database
designs have been successfully manufactured by the Company. Products may be
purchased as wafers or as finished packaged and tested units. IMP's role is to
complement a customer's internal design and layout capability with wafer
manufacturing, wafer probing, packaging and final test, as required.
IMP offers nearly 15 years of high-quality manufacturing experience on
a broad range of proven CMOS processes. The Company operates a Class 10 16,000
square foot wafer fabrication plant in San Jose, California. It is currently
equipped to produce from 5 micron down to 0.8 micron technologies. Processes
in production today include 3V to 15V CMOS, EEPROM, and BiCMOS technologies.
Alliances with off-shore wafer foundries which have installed IMP process
technologies insure security of supply and access to additional manufacturing
capacity for the Company and its customers.
IMP provides design and layout rules, process models and, for some
processes, cell libraries. Engineering support is available to help convert
tooling designed for other foundries to IMP standards, if required. As the
focus of IMP's business is on analog and mixed signal products, the Company
offers its customers a unique understanding of the complex requirements of
manufacturing such designs.
IMP manufactures a broad spectrum of single/double layer metal and
single/double poly layer CMOS technologies with feature sizes from 5 micron
down to 0.8 micron. N-well and P-well versions are available with epitaxial
and non-epitaxial starting materials. Modifications of these standard modular
processes are offered for high-volume orders. Key features of IMP process
capabilities are:
. ANALOG/MIXED SIGNAL DESIGNS: IMP's double poly capability
insures maximum capacitor stability in analog circuits.
Vertical and lateral bipolar transistors minimize noise in
analog inputs and support high-drive outputs.
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. LOW VOLTAGE: An enhanced version of IMP's 1.2 micron process
is optimized for true low-voltage operation. This process
meets 3V power supply requirements and can be used for 1.5V
battery-operated IC designs.
. HIGH VOLTAGE: Utilizing a dual-gate approach, IMP's 1.2
micron, 15V process combines the density of a double-metal
digital process with high voltage drivers. This combination
makes the process attractive for applications such as LCD
display drivers, print-head drivers, etc., with significant
logic content.
. BiCMOS: These processes provide a highly-integrated solution
for users requiring the speed of bipolar and the low
power/high density of CMOS. Three processes meet various
needs: cost-sensitive applications, high-speed (7 gigahertz
cutoff frequency) designs, and 12V supplies.
. EECMOS: Electrically Erasable CMOS technology permits the
incorporation of unique user-configurable features into
digital, analog and mixed-signal designs. These features
include post-fabrication calibrations and reprogramming of
device functionality.
IMP believes that ownership and control of wafer fabrication
capability contributes to the success of an analog and mixed-signal vendor.
IMP's strategy of internal on-shore wafer manufacturing, coupled with selective
use of off-shore wafer foundries provides it with the optimum mix of security
of supply and control of process technology while minimizing capital investment
in plant and equipment.
Federal, state and local regulations impose various environmental
controls on the discharge of chemicals and gases used in the manufacturing
process. While the Company has not experienced any materially adverse effects
on its operations from such regulations, there can be no assurance that changes
in such regulations will not impose the need for additional capital equipment
or other requirements.
ALLIANCES
The Company seeks to enter into long-term technology sharing
agreements with selected companies to create a strong link between those
companies' development programs and IMP's design and process technologies.
These agreements are especially important to the Company's development of
successful products, since they provide valuable information about customer
needs. The Company's integrated chip set for magneto-resistive tape drives has
been developed and marketed through a long-term technology sharing agreement
with 3M, makers of the tape cartridges used in such drives.
In fiscal 1992 the Company announced that it had licensed its
programmable filter technology to Asahi Chemical Industry Co., Ltd. ("Asahi")
for the development, manufacture and sale of products in Japan. The agreement
gives Asahi rights to manufacture and sell
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IMP filter products in Japan, and gives Asahi other rights to IMP's filter
technology. The Company and Asahi have agreed to jointly develop advanced
integrated circuits for the mass storage industry.
The Company announced in November 1991 the signing of a wafer
fabrication agreement with SEEQ Technology, Inc. ("SEEQ"). SEEQ has closed its
fabrication facility and IMP serves as one of several outside sources for
SEEQ's manufacturing. In March 1992, IMP entered into a design and process
technology transfer agreement with South African Micro-Electronic Systems Pty,
Limited ("SAMES"). SAMES purchased process design methodology and related
technology and has qualified as a second source for IMP manufacturing. See
"Patents and Licenses."
MARKETING, SALES AND CUSTOMERS
IMP's marketing strategy is to identify the key growth areas for ICs,
attract business from market leaders, emphasize quality, service and
performance and maintain a reputation for meeting commitments and for ASSP
innovations. The Company believes that the markets for both its silicon
foundry services and its ASSPs have significant growth potential, resulting
primarily from customers whose requirements include analog/digital
capabilities.
IMP's management and engineering personnel provide significant direct
sales assistance. The Company typically engages in extensive discussions with
its customers' management and engineering personnel to understand the
customer's needs. Close relationships have evolved during the design and
prototype stages of IC development. These relationships enable the Company and
its customers to work together more effectively and efficiently on future
programs, thereby lowering the Company's selling costs and shortening sales
lead time.
The Company has relied upon its close customer relationships to assist
in the development, marketing and sales of products that are responsive to
customer needs. In addition, the Company's sales organization pursues
opportunities generated by product introductions. Therefore, the Company has
placed more emphasis on trade shows than in the past when marketing efforts
were directed solely to the custom ASIC market. In addition, IMP has developed
more extensive sales support materials for ASSPs. This provides for more
effective use of the Company s sales representatives. These sales
representatives can also obtain support from an applications group which
assists in the development and definition of new products and new applications
for the Company s customers.
The Company uses a sales force consisting of four (4) Sales Managers
and one (1) Vice President of Sales who reports to the President and Chief
Executive Officer. The sales staff manages several manufacturer's
representatives in the United States and internationally. In some cases these
representatives promote products that are competitive with those of the
Company. The Company works closely with the manufacturer's
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representatives to target their sales forces on prospective customers
identified by IMP. Potential new customers are reviewed by IMP for the
opportunities they present and for consistency with IMP s marketing strategies.
In fiscal 1995, the Company entered into distribution agreements with
three firms to distribute the Company's newly announced EPAC products. Wyle
Laboratories will cover the United States, Tekelec will cover the European
market and Macnica will distribute in Japan.
Export sales, principally in Europe and the Pacific Basin, accounted
for 21%, 18.2% and 8.5% of the Company's total revenues in fiscal 1995, 1994
and 1993, respectively. The Company's export sales are billed in United States
dollars and therefore are not subject to currency exchange fluctuations.
Although export sales are subject to certain governmental restrictions,
including the Export Administration Act of 1979, the Export Administration
Amendments Act of 1985 and regulations promulgated thereunder, the Company has
not experienced any material difficulties to date because of these
restrictions.
During fiscal 1995, IMP's largest customer was Rockwell International
Corporation accounting for approximately 34% of total sales. The arrangements
with this customer generally provide that they may be terminated at will by
either party and do not require any commitment to purchase a specific number of
products, although cancellation or rescheduling charges may be imposed in
certain circumstances. Other than Rockwell International Corporation, no
customer accounted for more than 10% of total sales during fiscal 1995.
Continuing a recent trend, the Company's product mix of component sales in
fiscal 1995 was comprised of approximately 82% for sales of foundry services,
approximately 18% for sales of ASSPs. The unanticipated loss of any of its
major customers or the unanticipated cancellation or rescheduling of orders by
them could have a material adverse impact on the Company's business,
particularly if the Company's efforts with other customers do not result in the
volume manufacturing orders anticipated by the Company. In addition, if the
ASSP products that were introduced in recent years are not successful, the
Company could be adversely affected.
The Company had a backlog of approximately $18 million as of March 26,
1995 compared to approximately $15 million at March 27, 1994. Backlog
represents only those orders released for shipment within six months. The
Company's standard customer contracts generally impose charges for cancellation
of released orders, and because its products and services cannot generally be
resold to other customers, the Company's practice is to attempt to collect such
charges in the event of such cancellations. However, because of changes in
delivery schedules or cancellations by customers, the Company's backlog as of
any particular date may not be representative of sales for any succeeding
period. The Company typically warrants its products against defects in
materials and workmanship for a period of one year.
The Company recognized revenues of approximately $800,000 in fiscal
1994 from technology licensing activity, and none in fiscal 1995. The Company
cannot predict the level
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and timing of future technology licensing activity.
RESEARCH AND DEVELOPMENT
IMP's strategy to design and manufacture ICs requires a significant
commitment to research and development. The Company's research and development
efforts consist of direct research and development expenditures, product
development work funded by customers and strategic alliances with technology
partners, which provide the Company with access to additional technologies and
design expertise. The Company's total research and development expenses were
approximately $8.6 million, $8.6 million and $9.7 million in fiscal 1995, 1994
and 1993, respectively.
The Company's research and development programs are currently focused
on development of new products, enhancing its CMOS process and developing
EECMOS, 3-volt, BiCMOS and 0.8 micron manufacturing processes. The greatest
amount of resources is concentrated in the area of product development,
especially with respect to ASSPs.
The Company has in the past, and expects in the future, to enter into
cross-licensing agreements under which it would acquire certain rights
pertaining to the technologies of its partners in exchange for the transfer of
similar rights to its partners or for other consideration. See "Marketing,
Sales and Customers" and "Patents and Licenses."
COMPETITION
The Company currently competes in the markets for silicon foundry,
programmable device conversion services and ASSPs. The silicon foundry market
is intensely competitive and IMP expects competition will increase. Currently,
the Company's principal competitors in this market include Orbit Semiconductor,
Symbios Logic, formerly NCR Microelectronics, VLSI Technology, Inc., the
Semiconductor Division of Gould/AMI and, to a lesser extent, LSI Logic
Corporation, and Texas Instruments.
The principal competitive factors in the silicon foundry market
include service, price, design consulting and manufacturing capability,
quality, and manufacturing cycle time. IMP believes its competitive strengths
arise from its experience in cell-based design methodology, CMOS process
technologies and mixed analog/digital capability. The Company also believes it
competes effectively because of its service-oriented approach and close
customer relationships, which result in flexibility and responsiveness to
customer requirements. There can be no assurance that the Company will be able
to compete successfully in the future.
The market for programmable device conversion, including gate arrays
and ROMs is also intensely competitive and the Company expects competition will
increase in that area as well. IMP's principal competitors in the United
States are similar to those in the customer-specific IC market. The Company's
competitors also include several Japanese semiconductor manufacturers. The
principal competitive factors in this market are price,
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manufacturing cycle time and service.
The market for ASSPs is also intensely competitive with the
competitive pressures expected to increase. The Company believes that it
competes effectively in this market because of its expertise in
high-integration mixed signal technology. With respect to programmable filters
and disk drive read channels, the Company's principal competitor is Silicon
Systems, Inc. In addition, the Company has licensed technology from and to
parties which have, in certain cases, the right to use the technology to
develop products competitive to those of the Company. The principal
competitive factors in the ASSP market are knowledge of the needs of system
designers, manufacturing cycle time, sales coverage, price and service. The
Company believes that it competes favorably with respect to most of these
factors.
The Company's principal competitors and many of its potential
competitors have substantially greater technical, manufacturing, financial and
marketing resources than the Company. In addition, IMP faces competition from
smaller companies, although many of such companies do not have an internal
wafer manufacturing capability.
PATENTS AND LICENSES
The Company has six United States patents, one of which is jointly
owned, and has filed 14 United States patent applications to certain of its
inventions. Although patents, patent protection and patent applications may
have value, the Company believes that other factors such as managerial and
technological experience and creative abilities of its personnel are of more
significance in the rapidly changing semiconductor industry.
The Company has entered into several joint development and technology
exchange agreements with third parties, including SAMES, Asahi Chemical
Industry Co., Ltd. and SEEQ. The Company believes these arrangements provide a
cost effective method for expanding its technology base.
The Company has also obtained licenses for certain ASSPs and
technology, and may obtain licenses to other ASSPs and technology in the
future. Because of technological developments in the semiconductor industry,
it is possible that certain of the Company's designs or processes may involve
infringement of existing patents. The Company has from time to time received
communications from third parties asserting patent rights, mask work rights,
copyrights or trademark rights on certain of the Company's products and
technologies. The Company has entered into an agreement with two such parties
pursuant to which the Company obtained a license to certain rights in exchange
for making certain royalty payments. The Company believes that, based upon
industry practice, any necessary licenses or rights under patents could be
obtained on conditions that would not have a material adverse effect on the
Company. However, there can be no assurance that such licenses could in fact
be obtained.
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The Company has also acquired software and licenses to software from a
number of software companies, primarily for CAD and CAE applications.
The Company attempts to protect its trade secrets and other
proprietary information through agreements with customers and suppliers,
proprietary information agreements with employees and other security measures.
Although the Company intends to protect its rights vigorously, there can be no
assurance that these measures will be successful.
EMPLOYEES
As of March 26, 1995, the Company employed approximately 370 persons,
including approximately 234 in manufacturing, 48 in manufacturing support, 30
in design engineering, 11 in research and development, 18 in sales and
marketing and 26 in administrative, financial and management positions.
The Company's ability to attract and retain qualified personnel is
essential to its continued success. None of the Company's employees is
represented by collective bargaining agreements, nor has the Company ever
experienced any work stoppage through employee initiated actions. The Company
believes its employee relations are good.
ITEM 2. PROPERTIES.
The Company's primary manufacturing activities and process technology
research and development activities are located in a 59,000 square foot
building in San Jose, California leased under an agreement expiring in fiscal
2000. The Company's general administrative activities and design services are
located in a nearby 22,000 square foot building leased under an agreement
expiring in fiscal 2000. The Company's design research and development
activities are performed in a 8,800 square foot office located in Pleasanton,
California subleased under an agreement expiring in fiscal 1999. The Company
believes that its existing facilities are adequate to meet its requirements for
the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS.
On or about November 7, 1994, the Company instituted an action in the
Santa Clara County Superior Court (#CV745179) against a former customer, Ideal
Semiconductor ("Ideal"), to collect approximately $92,725.65 for goods had and
received. On or about March 1, 1995, Ideal filed a cross-complaint against the
Company alleging that it was unable to fulfill a contract with Hewlett-Packard
because the Company did not timely provide the subject products. The
cross-complaint sought unspecified damages, attorneys fees and costs.
On June 14, 1995, the Company and Ideal agreed to settle the dispute.
Under the settlement, Ideal will make fifteen $4,000 monthly payments to the
Company, with the first such $4,000 monthly payment due in late June 1995. If
Ideal defaults under its payment obligations, a stipulated judgment of $75,000
will be entered in favor of the Company.
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Pursuant to this settlement, a written mutual release and stipulated judgment
will be executed by the Company and Ideal.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year ended March 26, 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
The current executive officers of the Company and their respective
ages and positions are as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Barry M. Carrington 52 President, Chief Executive Officer and Director
David A. Laws 53 Senior Vice President for Marketing and
Business Development
Charles S. Isherwood 62 Senior Vice President - Corporate Services,
Chief Financial Officer and Secretary
Robert A. Crossley 56 Vice President - Administration
</TABLE>
Mr. Carrington joined the Company in May 1982 as Vice President,
Operations. In October 1982, he was named President and Chief Operating
Officer. He has been a director since October 1982. In August 1986, he was
appointed Chief Executive Officer. Prior to joining IMP, Mr. Carrington was
employed by the Semiconductor Division of Gould/AMI for 10 years, where the
last position he held was Senior Vice President and Manufacturing Group
Manager.
Mr. Laws joined IMP in February 1995 as Senior Vice President for
Marketing and Business Development. From September 1990 to January 1994, Mr.
Laws was President and CEO of FPGA start-up QuickLogic Corporation, and from
January 1986 to September 1990 was Vice President of Marketing for PLD pioneer,
Altera Corporation, during its formative years. Prior to Altera, he worked
from May 1975 to January 1986 at Advanced Micro Devices, including
responsibilities as Managing Director of the PLD business unit and Vice
President of Business Development.
Mr. Isherwood joined the Company in August 1986 as Senior Vice
President, Chief Financial Officer and Secretary and in January 1988 was named
Executive Vice President. In April, 1991, Mr. Isherwood was named Senior Vice
President - Corporate Services. Prior to joining IMP, he was employed by
Gould/AMI for 18 years, the first ten of which were as Senior Vice President of
Manufacturing and the last eight of which were as Senior Vice President of
Corporate Services.
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Mr. Crossley joined the Company in February 1988 as Manager, Human
Resources. In June 1990 he was named Director, Human Resources and in November
1991 he was named Vice President - Administration. Prior to joining IMP, Mr.
Crossley was employed by Advanced Micro Devices for 13 years, most recently as
Director, Human Resources.
Officers are elected by and serve at the discretion of the Board of
Directors.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Incorporated by reference from page 24 of the Annual Report to
Stockholders for the fiscal year ended March 26, 1995 filed as Exhibit 13.1 to
this Annual Report on Form 10-K.
ITEM 6. SELECTED FINANCIAL DATA.
Incorporated by reference from page 24 of the Annual Report to
Stockholders for the fiscal year ended March 26, 1995 filed as Exhibit 13.1 to
this Annual Report on Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
Incorporated by reference from pages 22-23 of the Annual Report to
Stockholders for the fiscal year ended March 26, 1995 filed as Exhibit 13.1
to this Annual Report on Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Financial statements of the Company at March 26, 1995 and for each of
the three years in the period ended March 26, 1995 and the independent
accountant's report thereon are incorporated by reference from pages 9-24 of
the Annual Report to Stockholders for the fiscal year ended March 26, 1995
filed as Exhibit 13.1 to this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
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PART III
ITEM 10. DIRECTORS AND OFFICERS OF REGISTRANT
(1) Identification of Directors:
The information concerning the Company's directors and
nominees is incorporated by reference from the section entitled "Proposal No. 1
- -- Election of Directors" in the Proxy Statement for the 1995 Annual Meeting of
Stockholders to be held on August 16, 1995, a copy of which will be filed with
the Securities and Exchange Commission no later than 120 days from the end of
the Company's last fiscal year.
(2) Identification of Executive Officers:
See Part I, "Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
Incorporated by reference from the section entitled "Executive
Compensation" in the Proxy Statement for the 1995 Annual Meeting of
Stockholders to be held on August 16, 1995, a copy of which will be filed with
the Securities and Exchange Commission.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated by reference from the sections entitled "Share
Ownership" in the Proxy Statement for the 1995 Annual Meeting of Stockholders
to be held on August 16, 1995, a copy of which will be filed with the
Securities and Exchange Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated by reference from the section entitled "Certain
Relationships and Related Transactions" in the Proxy Statement for the 1995
Annual Meeting of Stockholders to be held on August 16, 1995, a copy of which
will be filed with the Securities and Exchange Commission.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Index to Financial Statements. The following
financial statements and supplemental data are included in Item 8 of this
Annual Report on Form 10-K by incorporation by reference from the Annual Report
to Stockholders for the fiscal year ended March 26, 1995 filed as Exhibit 13.1
hereto:
14.
<PAGE> 17
<TABLE>
<CAPTION>
Page(s) in
Annual Report
to Stockholders
---------------
<S> <C>
Balance Sheets at
March 26, 1995 and March 27, 1994 9
Statements of Operations
for each of the three years in the
period ended March 26, 1995 10
Statement of Stockholders'
Equity for each of the three years for
the period ended March 26, 1995 11
Statements of Cash Flows for
each of the three years for the period
ended March 27, 1994 12
Notes to Financial Statements 13-19
Report of Price Waterhouse LLP, Independent Accountants 20
Report of Ernst and Young LLP, Independent Auditors 21
</TABLE>
2. Index to Financial Statement Schedules. The
following financial statement schedules for each of the three years in the
period ended March 26, 1995, are filed as part of this Annual Report on Form
10-K:
<TABLE>
<CAPTION>
Page(s) in
Annual Report on
Description Form 10-K
----------- ----------------
<S> <C> <C>
Report of Independent Accountants II-1
II. Amounts Receivable From Related
Parties and Underwriters,
Promoters, and Employees other
than Related Parties II-2
V. Property, Plant and Equipment II-3
</TABLE>
15.
<PAGE> 18
<TABLE>
<S> <C> <C>
VI. Accumulated Depreciation and
Amortization of Property, Plant
and Equipment II-4
VIII. Valuation and Qualified Accounts II-5
IX. Short-term Borrowings II-6
X. Supplementary Income Statement Information II-7
</TABLE>
All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the consolidated
financial statements or notes thereto.
3. (a) Exhibits - see Exhibit List below.
(b) Form 8-K. The Company filed no reports on
Form 8-K during the fourth quarter of the fiscal year 1995.
EXHIBIT LIST
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
3.1(5) Restated Certificate of Incorporation.
3.2(1) Bylaws.
3.3(9) Certificate of Amendment to Restated Certificate of Incorporation.
10.21(1) Real Property Lease Agreement dated as of August 26, 1981 between
the Company and Orchard Investment Company No. 701.
10.22(1) Real Property Lease Agreement dated as of July 6, 1983 between the
Company and Orchard Investment Company No. 701.
10.23(1) Real Property Lease Agreement dated as of August 1, 1984 between the
Company and Orchard Investment Company No. 701.
10.26(1) Promissory Note dated as of April 19, 1983 executed by George Rassam.
10.28(1) Employment Agreement dated as of March 4, 1987, between the Company
and Barry Carrington.
</TABLE>
16.
<PAGE> 19
<TABLE>
<S> <C>
10.29(1) Form of Indemnification Agreement executed by the Company and its officers
and directors.
10.36(2) Promissory Note and Stock Pledge Agreement dated as of March 2, 1987 executed
by Barry Carrington.
10.39(2) Letter Agreement dated January 21, 1988 between the Company and Barry Carrington.
10.40(2) Letter Agreement dated October 19, 1987 between the Company and George Rassam.
10.47(6) Technology Agreement between the Company and IMP Europe Limited.
10.48(6) Supply Agreement between the Company and IMP Europe Limited.
10.49(6) Agreement for the sale and purchase of all the A Ordinary Shares in IMP Europe
Limited dated as of July 3, 1990, between the Company and Dialogue Semiconductor
Limited.
10.50(7)* License Agreement dated as of September 12, 1991, between the Company and Asahi
Chemical Industry Co., Ltd.
10.51(7)* Distributorship Agreement dated as of December 1, 1991 by and between the Company
and Asahi Chemical Industry Co., Ltd.
10.52(8) Business Loan Agreement dated as of August 19, 1991 by and between the Company and
Silicon Valley Bank, including Promissory Notes, dated August 19, 1991, Commercial
Pledge Agreement, dated August 19, 1991, Commercial Security Agreement, dated August
19, 1991, Agreement to Provide Insurance, dated August 19, 1991, Non-Interference
Agreement, dated December 20, 1991, Change in Terms Agreement, dated March 16, 1992,
Change in Terms Agreement, dated July 15, 1992, Change in Terms Agreement dated August
15, 1992, Modification to Loan Agreement dated February 19, 1993, Agreement dated
February 19, 1993 and Disbursement Request and Authorization dated February 19, 1993.
10.53(7)* Heads of Agreement dated as of March 27, 1992, between the Company and South African
Micro-Electronic Systems Pty Limited
</TABLE>
17.
<PAGE> 20
<TABLE>
<S> <C>
10.54(9) First Amendment dated March 11, 1994 to Real Property Lease Agreement dated August 26,
1981 between the Company and Orchard Investments Company No. 701.
10.55(9) First Amendment dated December 21, 1987, Second Amendment dated March 15, 1989, Third
Amendment dated November 25, 1991, Fourth Amendment dated December 13, 1993 and Fifth
Amendment dated March 11, 1994 to the Real Estate Lease Agreement dated July 6, 1983
between the Company and Orchard Investment Company No. 701.
10.56 Loan Modification Agreement dated September 19, 1994 by and between the Company and
Silicon Valley Bank.
10.57 Letter Agreement dated February 13, 1995 between the Company and David Laws.
10.58 Real Property Sublease Agreement dated November 9, 1992 by and between the Company and
AT&T Resource Management Corporation, and Master Lease dated September 23, 1986 by and
between AT&T Resource Management Corporation and American Telephone and Telegraph Company.
13.1 Annual Report to Stockholders.
23.1 Consent of Price Waterhouse LLP, Independent Accountants
23.2 Consent of Ernst and Young LLP, Independent Auditors
27.1 Financial Data Schedule
28.1(7) 1987 Employee Stock Purchase Plan and forms of agreements thereto.
28.2(7) 1992 Restated Stock Option Plan and forms of agreements thereto.
</TABLE>
* "*" on such exhibits indicates that portions have been omitted for
which confidential treatment has been granted by the Securities and Exchange
Commission.
(1) Incorporated by reference from an identically numbered exhibit filed
with the Company's Registration Statement on Form S-1 (File No. 33-13600)
declared effective by the Securities and Exchange Commission on June 10, 1987.
(2) Incorporated by reference from an identically numbered exhibit filed
with the
18.
<PAGE> 21
Company's Annual Report on Form 10-K for the year ended March 27, 1988 filed
with the Securities and Exchange Commission on June 25, 1988.
(3) Incorporated by reference to an identically numbered exhibit filed
with the Post-Effective Amendment No. 1 to the Company's Registration Statement
on Form S-8 (File No. 33-16624), as filed with the Securities and Exchange
Commission on November 13, 1987.
(4) Incorporated by reference to an identically numbered exhibit filed
with the Company's Registration Statement on Form S-8 (File No. 33-24635) as
filed with the Securities and Exchange Commission on September 15, 1988.
(5) Incorporated by reference from an identically numbered exhibit filed
with the Company's Annual Report on Form 10-K for the year ended March 26, 1989
filed with the Securities and Exchange Commission on June 26, 1989.
(6) Incorporated by reference from an identically numbered exhibit filed
with the Company's Annual Report on Form 10-K for the year ended March 31, 1991
filed with the Securities and Exchange Commission on July 1, 1991.
(7) Incorporated by reference from an identically numbered exhibit filed
with the Company's Annual Report on Form 10-K for the year ended March 29, 1992
filed with the Securities and Exchange Commission on June 29, 1992, as amended
by Amendment to Application or Report on Form 8 filed with the Securities and
Exchange Commission on September 16, 1992.
(8) Portions incorporated by reference from an identically numbered
exhibit filed with the Company's Annual Report on Form 10-K for the year ended
March 28, 1993 filed with the Securities and Exchange Commission on June 28,
1993.
(9) Incorporated by reference from an identically numbered exhibit filed
with the Company's Amendment to the Annual Report on Form 10-K/A for the year
ended March 27, 1994 filed with the Securities and Exchange Commission on July
6, 1994.
19.
<PAGE> 22
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 to
be signed on its behalf by the undersigned, thereunto duly authorized, in San
Jose, California on this 21st day of June, 1995.
IMP, INC.
By: /s/ Charles S. Isherwood
------------------------------------------
Senior Vice President--Corporate Services,
Chief Financial Officer
and Secretary
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Barry M. Carrington President, Chief June 21, 1995
- ---------------------------- Executive Officer
Barry M. Carrington and Director
/s/ Charles S. Isherwood Senior Vice June 21, 1995
- ---------------------------- President--Corporate
Charles S. Isherwood Services, Chief Financial
Officer and Secretary
/s/ George Rassam Controller June 21, 1995
- ---------------------------- (Principal Accounting
George Rassam Officer)
</TABLE>
<PAGE> 23
<TABLE>
<S> <C> <C>
/s/ Zvi Grinfas Director June 21, 1995
- ----------------------------
Zvi Grinfas
/s/ Peter D. Olson Director June 10, 1995
- ----------------------------
Peter D. Olson
/s/ Bernard V. Vonderschmitt Director June 21, 1995
- ----------------------------
Bernard V. Vonderschmitt
</TABLE>
<PAGE> 24
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
II-1
<PAGE> 25
SCHEDULE II
IMP, Inc.
Amounts Receivable from Related Parties and Underwriters,
Promoters, and Employees Other Than Related Parties
(In thousands)
<TABLE>
<CAPTION>
Balance Balance at End
at the of Period
Beginning Amounts ---------------------------
of Period Additions Collected Current Not Current
--------- --------- --------- ------- -----------
<S> <C> <C> <C> <C> <C>
Year ended
March 31, 1991:
Barry Carrington (1) $162 $- $79 $- $83
Year ended
March 29, 1992:
Barry Carrington (1) $ 83 $- $83 $- $-
</TABLE>
1. Principal and interest at 9% per year are due in annual installments
beginning on July 1, 1988 through July 1, 1991. Under certain
circumstances relating to termination without good cause and
non-renewal of Mr. Carrington's employment agreement upon change in
control of the Company, balances due on such notes will be forgiven.
II-2
<PAGE> 26
SCHEDULE V
IMP, Inc.
Property, Plant and Equipment
(in thousands)
<TABLE>
<CAPTION>
Balance Other Balance
at the Charges at the
Beginning at End of
of Period Additional Retirement (Deduct) Period
--------- ---------- ---------- -------- -------
<S> <C> <C> <C> <C> <C>
Year ended 3/28/93:
Leasehold improvements $ 7,662 $ 112 $- $- $ 7,774
Machinery and equipment
(including amounts under
capital lease) 50,012 1,786 - - 51,798
------- ------ ---- ---- -------
$57,674 $ 1,898 $- $- $59,572
------- ------- ---- ---- -------
Year ended 3/27/94:
Leasehold improvements $ 7,774 $ 105 $- $- $ 7,879
Machinery and equipment
(including amounts under
capital lease) 51,798 4,580 - - 56,378
------- ------- ---- ---- -------
$59,572 $44,685 $- $- $64,257
------- ------- ---- ---- -------
Year ended 3/26/95:
Leasehold improvements $ 7,879 $ 4 $- $- $ 7,883
Machinery and equipment
(including amounts under
capital lease) 56,378 5,298 - - 61,676
------- ------- ---- ---- -------
$64,257 $ 5,302 $- $- $69,559
======= ======= ==== ==== =======
</TABLE>
1. Amount relates to items classified as machinery and equipment during
their installation in the Company's facilities and reclassified to
leasehold improvements upon completion of installation.
II-3
<PAGE> 27
SCHEDULE VI
IMP, Inc.
Accumulated Depreciation and Amortization of
Property, Plant and Equipment
(In thousands)
<TABLE>
<CAPTION>
Balance Additions Balance
at the Charged to at the
Beginning Costs and End of
of Period Expenses Retirement Period
---------- -------- ---------- ------
<S> <C> <C> <C> <C>
Year ended 3/28/93:
Leasehold improvements $ 3,622 $ 789 $ - $ 4,411
Machinery and equipment
(including amounts under
capital lease) 40,312 4,301 - 44,613
------- ------ - -------
$43,934 $5,090 $ - $49,024
======= ====== ==== =======
Year ended 3/27/94:
Leasehold improvements $ 4,411 $ 941 $ - $ 5,352
Machinery and equipment
(including amounts under
capital lease) 44,613 3,360 - 47,973
------- ------ ---- -------
$49,024 $4,301 $ - $53,325
======= ====== ==== =======
Year ended 3/26/95:
Leasehold improvements $ 5,352 $ 824 $ - $ 6,176
Machinery and equipment
(including amounts under
capital lease) 47,973 4,434 - 52,407
------- ------ - -------
$53,325 $5,258 $ - $58,583
======= ====== ==== =======
</TABLE>
II-4
<PAGE> 28
SCHEDULE VIII
IMP, Inc.
Valuation and Qualifying Accounts
(In thousands)
<TABLE>
<CAPTION>
Balance Balance
at the Charged to at the
Beginning Costs and Deduction End of
of Period Expenses* Write-Offs Period
--------- --------- ---------- -------
<S> <C> <C> <C> <C>
Provisions for returns,
allowance and doubtful
accounts and returns:
Year ended March 28, 1993 $1,422 $ 565 $1,272 $715
Year ended March 27, 1994 $ 715 $ 159 $ 0 $556
Year ended March 26, 1995 $ 556 $(239) $ 0 $795
</TABLE>
*Includes amounts charged directly to revenues.
II-5
<PAGE> 29
SCHEDULE IX
IMP, Inc.
Short-term Borrowings
(In thousands)
<TABLE>
<CAPTION> Weighted
Maximum Average Average
Amount Amount Interest
Balance Weighted Outstanding Outstanding Rate
at end of Average During During During
Period Interest Rate the Period the Period the Period
------ ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Amounts payable to bank
Year ended 3/28/93 $6,000 7.25% $6,000 $2,531 8.61%
Year ended 3/27/94 $6,500 7.79% $6,500 $3,293 7.84%
Year ended 3/26/95 $6,500 10.34% $7,357 $3,763 9.54%
</TABLE>
The average amount outstanding during the period was computed by averaging the
daily balances throughout the period. The weighted average interest rate
during the period was computed by dividing interest expense by the weighted
average amount outstanding during the period.
II-6
<PAGE> 30
SCHEDULE X
IMP, Inc.
Supplementary Income Statement Information
(In thousands)
<TABLE>
<CAPTION>
Charged to Costs and Expenses
Year Ended
----------------------------------------------
March 26, March 27, March 28,
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Maintenance and repairs $1,326 $1,414 $1,443
Taxes, other than payroll
and income taxes $ 239 $ 283 $ 371
</TABLE>
II-7
<PAGE> 1
EXHIBIT 10.56
LOAN MODIFICATION AGREEMENT DATED SEPTEMBER 19, 1994 BY AND BETWEEN THE COMPANY
AND SILICON VALLEY BANK
<PAGE> 2
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of September 19,
1994, by and between IMP, Inc., formerly International Microelectronic Products,
Inc. ("Borrower") whose address is 2830 North First Street, San Jose, CA 95134,
and Silicon Valley Bank ("Lender") whose address is 3000 Lakeside Drive, Santa
Clara, CA 95054.
1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness which
may be owing by Borrower to Lender, Borrower is indebted to Lender pursuant to,
among other documents, a Promissory Note, dated August 19, 1991, in the
original principal amount of Three Million and 00/100 Dollars ($3,000,000.00)
(the "CD Secured Note"), and a Promissory Note, dated August 19, 1991, in the
original principal amount of Two Million and 00/100 Dollars ($2,000,000.00)
(the "Line of Credit Note")(hereinafter referred to jointly as the "Notes").
The CD Secured Note has been modified pursuant to that certain Change in Terms
Agreement dated July 15, 1992 and that certain Loan Modification Agreement dated
August 11, 1993. The Line of Credit Note has been modified pursuant to those
certain Change in Terms Agreements dated March 16, 1992, July 15, 1992, August
15, 1992, February 19, 1993 and that certain Modification to Loan Agreement
dated May 5, 1993 and that certain Loan Modification Agreement dated August 11,
1993 (which includes, without limitation, Borrower's acknowledgement of an
increase in the principal amount to $3,500,000.00). The Notes together with
other promissory notes from Borrower to Lender, are governed by the terms of a
Business Loan Agreement, as amended from time to time, dated August 19, 1991,
between Borrower and Lender (the "Loan Agreement").
Hereinafter, all indebtedness owing by Borrower to Lender shall be referred to
as the "Indebtedness".
2. DESCRIPTION OF COLLATERAL. Repayment of the Indebtedness is secured
by a Commercial Security Agreement, dated August 19, 1991 (the "Security
Agreement"), an Assignment of Deposit Account dated August 11, 1993 (the
"Assignment"), a Collateral Assignment of Patents dated August 19, 1991 (the
"Patent Assignment") and a Trademark Mortgage dated August 19, 1991 (the
"Trademark Mortgage").
Hereinafter, the above-described security documents, together with all other
documents securing payment of the Note (and other notes executed by Borrower in
favor of Lender) shall be referred to as the "Security Documents".
Hereinafter, the Security Documents, together with all other documents
evidencing or securing the Indebtedness shall be referred to as the "Existing
Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
A. Modification(s) to CD Secured Note.
1. Payable in one payment of all outstanding
principal plus all accrued unpaid interest on
October 1, 1995. In addition, Borrower will
pay regular monthly payments of all accrued
unpaid interest due as of each payment date,
beginning October 1, 1994, with all
subsequent interest payments to be due on the
same day of each month after that.
2. The Note is hereby amended to provide that
the interest rate upon default, at Lender's
option and if permitted under applicable law,
shall be increased to five percentage points
(5.000%) over the otherwise effective
interest rate therein.
1
<PAGE> 3
B. Modification(s) to Line of Credit Note.
1. Payable in one payment of all outstanding
principal plus all accrued unpaid interest on
October 1, 1995. In addition, Borrower will
pay regular monthly interest payments of all
accrued unpaid interest due as of each
payment date, beginning October 1, 1994, with
all subsequent interest payments to be due on
the same day of each month after that.
2. The principal amount available under the Line
of Credit shall be increased to Five Million
and 00/100 Dollars ($5,000,000.00).
3. The Note is hereby amended to provide that
the interest rate upon default, at Lender's
option and if permitted under applicable law,
shall be increased to five percentage points
(5.000%) over the otherwise effective
interest rate therein.
4. The paragraph entitled "Right of Set-Off" is
hereby deleted in its entirety and replaced
with the following: REQUEST TO DEBIT
ACCOUNTS. Borrower will regularly deposit
all funds received from its business
activities in accounts maintained by Borrower
at Silicon Valley Bank. Borrower hereby
requests and authorizes Lender to
debit any of Borrower's accounts with Lender,
specifically, without limitation, Account
Number 0341553870, for payments of principal
and interest due on the loan and any other
obligations owing by Borrower to Lender.
Lender will notify Borrower of all debits
which Lender makes against Borrower's
accounts. Any such debits against Borrower's
accounts in no way shall be deemed a setoff.
C. Modification(s) to Loan Agreement.
1. The paragraph entitled "Accounts Receivable
and Accounts Payable" is hereby deleted in
its entirety and replaced with the following:
Provide to Lender not later than 15 days after
and as of the end of each month, with a
Borrowing Base Certificate and ages lists of
accounts receivable and accounts payable.
Semi-annual accounts receivable audits to be
performed by Lender's agent. Borrower's
deposit account will be debited for the audit
expense and a notification will be mailed to
Borrower.
2. The paragraphs entitled "Cash Collateral
Account", "Transaction Report", and "Clean-Up
Period" are hereby deleted in their entirety.
3. The paragraph entitled "Letter of Credit
Sublimit" is hereby deleted in its entirety
and replaced with the following: Subject to
the terms and conditions of the Loan
Agreement, Lender agrees to issue or cause to
be issued, commercial and/or standby letters
of credit for the account of Borrower in an
aggregate amount not to exceed $1,000,000.00.
Each such letter of credit shall have an
expiry date of no later than October 1, 1995.
All such letters of credit shall be, in form
and substance, acceptable to Lender in its
sole discretion and shall be subject to the
terms and conditions of Lender's form
application and letter of credit agreement.
4. The following paragraphs are hereby added to
the above-described agreement:
Foreign Exchange Sublimit. Subject to the
terms of the Loan Agreement, as amended from
time to time, Borrower may utilize up to
$2,000,000.00 for spot and future foreign
2
<PAGE> 4
exchange contracts (the "Exchange
Contracts"). All Exchange Contracts must
provide for delivery of settlement on or
before October 1, 1995. The limit available
at any time shall be reduced by the following
amounts (the "Foreign Exchange Reserve") on
each day (the "Determination Date"): (i) on
all outstanding Exchange Contracts on which
delivery is to be effected or settlement
allowed more than two business days from the
Determination Date, 10% of the gross amount
of the Exchange Contracts; plus (ii) on all
outstanding Exchange Contracts on which
delivery is to be effected or settlement
allowed within two business days after the
Determination Date, 100% of the gross amount
of the Exchange Contracts. In lieu of the
Foreign Exchange Reserve for 100% of the
gross amount of any Exchange Contract, the
Borrower may request that Lender debit the
Borrower's bank account with Lender for such
amount, provided Borrower has immediately
available funds in such amounts in its bank
account.
Lender may, in its discretion, terminate the
Exchange Contracts at any time (a) that an
Event of Default occurs or (b) that there is
no sufficient availability under the Credit
Limit and Borrower does not have available
funds in its bank account to satisfy the
Foreign Exchange Reserve. If Lender
terminates the Exchange Contracts, and
without limitation of the FX Indemnity
Provisions (as referred to below), Borrower
agrees to reimburse Lender for any and all
fees, costs and expenses relating thereto or
arising in connection therewith.
Borrower shall not permit the total gross
amount of all Exchange Contracts on which
delivery is to be effected and settlement
allowed in any two business day period to be
more than $1,000,000.00 nor shall Borrower
permit the total gross amount of all Exchange
Contracts to which Borrower is a party,
outstanding at any one time, to exceed
$2,000,000.00.
The Borrower shall execute all standard form
applications and agreements of Lender in
connection with the Exchange Contracts, and
without limiting any of the terms of such
applications and agreements the Borrower will
pay all standard fees and charges of Lender
in connection with the Exchange Contracts.
Without limiting any of the other terms of
this Agreement or any such standard form
applications and agreement of Lender,
Borrower agrees to indemnify Lender and hold
it harmless, from and against any and all
claims, debts, liabilities, demands,
obligations, actions, costs and expenses
(including, without limitation, attorneys
fees of counsel of Lender's choice), of every
nature and description which it may sustain
or incur, based upon, arising out of, or in
any way relating to any of the Exchange
Contracts or any transactions relating
thereto or contemplated thereby (collectively
referred to as the "FX Indemnity
Provisions").
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
wherever necessary to effect the changes described above.
5. PAYMENT OF LOAN FEE. Borrower shall pay Lender a fee in the amount of
Thirty Thousand and 00/100 Dollars ($30,000.00) ("the Loan Fee") plus all
out-of-pocket expenses.
6. NO DEFENSES OF BORROWER. Borrower (and each guarantor or pledgor
signing below) agree that, as of this date, it has no defenses against the
obligations to pay any amounts under the Indebtedness.
7. CONTINUING VALIDITY. Borrower (and each Guarantor or Pledgor signing
below) understands and agree that in modifying the existing indebtedness,
Lender is relying upon Borrower's representations, warranties, and
3
<PAGE> 5
agreements, as set forth In the Existing Loan Documents. Except as expressly
modified pursuant to this Loan Modification Agreement, the terms of the
Existing Loan Documents remain unchanged and in full force and effect.
Lender's agreement to modifications to the existing indebtedness pursuant to
this Loan, Modification Agreement in no way shall obligate Lender to make any
future modifications to the Indebtedness. Nothing in this Loan Modification
Agreement shall constitute a satisfaction of the Indebtedness. It is the
intention of Lender and Borrower to retain as liable parties all makers and
endorsers of Existing Loan Documents, unless the party is expressly released by
Lender in writing. No maker, endorser, or guarantor will be released by virtue
of this Loan Modification Agreement. The terms of this Paragraph apply not
only to this Loan Modification Agreement, but also to all subsequent loan
modification agreements.
8. CONDITIONS. The effectiveness of this Loan Modification Agreement is
conditioned upon Lender's receipt of 1) the Loan Fee; 2) executed UCC-2
Amendment; 3) executed Corporate Borrowing Resolution; and 4) executed Addendum
to Collateral Assignment of Patents.
This Loan Modification Agreement is executed as of the date first
written above.
BORROWER: LENDER:
IMP, Inc. Silicon Valley Bank
By: /s/ By: /s/ Daniel Corry
---------------------------- ---------------------
Daniel Corry
Name: C. S. Isherwood Vice President
--------------------------
Title: Sr. VP, CFO and Secretary
-------------------------
4
<PAGE> 6
ADDENDUM TO COLLATERAL ASSIGNMENT OF PATENTS
This Addendum to Collateral Assignment of Patents is made this 19th day
of September, 1994 and executed pursuant to, and is an addendum to, a
Collateral Assignment of Patents, dated August 19, 1991. This Addendum to
Collateral Assignment of Patents is presented for recordation as constructive
notice that IMP, Inc. ("Assignor"), with principal office at 2830 North First
Street, San Jose, CA 95134, is the owner of the intellectual property
identified in Exhibit "A" attached hereto, has granted to SILICON VALLEY BANK,
with principal offices at 3000 Lakeside Drive, Santa Clara, CA 95054, a
security interest in the intellectual property, and the exclusive rights
comprised in the intellectual property, to secure payment of a debt.
IN WITNESS WHEREOF, Assignor has executed this Addendum to Collateral
Assignment of Patents as of the date first written above.
IMP, INC.
By: /s/
-----------------------------------
Name: C.S. Isherwood
---------------------------------
Title: Sr. VP CFO and Secretary
--------------------------------
<PAGE> 7
ALL-PURPOSE ACKNOWLEDGEMENT
State of California
County of Santa Clara
On 9/26/94 before me, G.R. Lagomarsino, personally appeared C.S. Isherwood,
[X] proved to me on the basis of satisfactory evidence to the person whose name
is subscribed to the within instrument and acknowledged to me that he executed
the same in his authorized capacity, and that by his signature on the
instrument the person, or the entity upon behalf of which the person acted,
executed the instrument.
Witness my hand and official seal.
/s/ G.R. LAGOMARSINO
- -----------------------------------
SIGNATURE OF NOTARY
CAPACITY CLAIMED BY SIGNER
[ ] INDIVIDUAL(S)
[X] CORPORATE
---------------------
OFFICER(S) Sr. VP CFO Secretary
--------------------
TITLE(S)
[ ] PARTNER(S)
[ ] ATTORNEY-IN-FACT
[ ] TRUSTEE(S)
[ ] SUBSCRIBING WITNESS
[ ] GUARDIAN/CONSERVATOR
[ ] OTHER:
------------------------
SIGNER IS REPRESENTING:
NAME OF PERSON(S) OR ENTITY(IES)
IMP, INC.
- -----------------------------------
- -----------------------------------
- -----------------------------------
[NOTARY SEAL]
<PAGE> 8
IMP Confidential
PATENT LIST
22 September 1994
IMP Patents
1. ELECTRICALLY PROGRAMMABLE READ ONLY MEMORY
Issued: 20 May 1986 Patent No.: 4,590,589
2. METHOD AND STRUCTURE FOR USE IN DESIGNING AND BUILDING ELECTRONIC
SYSTEMS IN INTEGRATED CIRCUITS
Issued: 23 September 1986 Patent No.: 4,613,940
3. METHOD OF STORING DATA IN A READ ONLY MEMORY TO ENHANCE ACCESS TIME
Issued: 3 September 1991 Patent No.: 5,046,045
4. DIGITALLY PROGRAMMABLE LINEAR PHASE FILTER HAVING PHASE EQUALIZATION
Filed 31 July 1991 Patent No.: 5,245,565
5. DIGITALLY PROGRAMMABLE LINEAR PHASE FILTER HAVING PHASE EQUALIZATION
(Division)
Filed 12 April 1993 Status: 046,048
28 June 1994 5,325,317
6. PHASE LOCKED LOOP HAVING CONSTANT GAIN FOR RECOVERING CLOCK FROM
NONUNIFORMLY SPACED DATA
Petersen 22 September 1992 Patent No.: 5,173,664
Filed 16 September 1990
7. LOW-NOISE PREAMPLIFIER FOR MAGNETO-RESISTIVE HEADS
Klein 16 June 1992 Patent No.: 5,122,915
Filed 26 September 1990
8. WIDE-BAND DIFFERENTIAL AMPLIFIER USING GM-CANCELLATION
Klein 12 May 1992 Patent No.: 5,113,147
Filed 26 September 1990
License to use for any purpose
1. RUN LENGTH LIMITED ENCODING/DECODING SYSTEM FOR LOW POWER DISK DRIVES
Licensed from Integral Peripherals, Inc.
Filed 31 October 1992 Status Pending
IMP Applications
1. DISK DRIVE INTERFACE COMBINING A MAGNETO-RESISTIVE READ AND INDUCTIVE
WRITE CIRCUITS
Filed 18 October 1991 Status Pending
1 September 1994
<PAGE> 9
IMP Confidential
2. CMOS PROCESS AND CIRCUIT INCLUDING ZERO THRESHOLD TRANSISTORS
Filed 23 June 1992, 902,914 Status allowed
3. COMPUTER DISK DRIVE INTEGRATED DATA PATH CIRCUIT OPTIMIZED FOR HANDING
BOTH DATA & SERVO SIGNALS
Filed 29 January 1993 Status Pending
4. COMPUTER DISK DRIVE INTEGRATED DATA PATH CIRCUIT OPTIMIZED FOR HANDLING
BOTH DATA & SERVO SIGNALS
PCT Filed 16 March 1993 Status Pending
5. SELF-CASCODING CMOS DEVICE
Filed 1 December 1993 Status 160,577
6. DIGITALLY PROGRAMMABLE LINEAR PHASE FILTER HAVING PHASE EQUALIZATION
(Division for claim 11)
Filed 12 April 1993 Status: Parsons
7. CURRENT AMPLIFIER HAVING A FULLY DIFFERENTIAL OUTPUT WITHOUT A DC BIAS,
CIP of 168,435
Filed 16 February 1994 Status 198,135
8. INTEGRATED CIRCUIT HAVING PROGRAMMABLE ANALOG MODULES WITH CONFIGURABLE
INTERCONNECTS BETWEEN THEM, (IMP.3)
Filed 24 May 1994 Status 248,311
9. CURRENT AMPLIFIER HAVING A FULLY DIFFERENTIAL OUTPUT WITHOUT A DC BIAS,
CIP of 198,135 (IMP.21-1)
Filed 24 May 1994 Status 248,383
10. DIGITALLY PROGRAMMABLE LINEAR PHASE FILTER HAVING PHASE EQUALIZATION
(Division, Claim 11?)
Filed 20 June 1994 Status: 262,156
11. PEAK DETECTOR FOR AMPLITUDE MODULATED SIGNALS
Filed 13 December 1993 Status 166,247
12. PREAMPLIFIER OF A SIGNAL FROM A VARIABLE RESISTANCE SENSOR, AND A
CURRENT SOURCE
Filed 17 December 1993 Status 168,435
PTO Action 18 May 1994 rejected
1 September 1994
<PAGE> 10
IMP Confidential
Trademarks & Service Marks
1. 3MOS, Service Mark filed 291,888 2 July 1992
Abandoned
2. 3MOS, Trademark filed 291,875 2 July 1992
Abandoned
3. Bounce Barrier ? ?
4. PDML filed 20 January 1993
5. EPAC filed 29 June 1994
6. MPAC filed 29 June 1994
1 September 1994
<PAGE> 11
This STATEMENT is presented for filing pursuant to the
California Uniform Commercial Code
1. FILE NO. OF ORIG. FINANCING STATEMENT
91201571
1A. DATE OF FILING OF ORIG. FINANCING STATEMENT
9-16-91
1B. DATE OF ORIG. FINANCING STATEMENT
8-19-91
1C. PLACE OF FILING ORIG. FINANCING STATEMENT
Sacramento, CA
2B. MAILING ADDRESS
2830 North First Street
2C. CITY, STATE
San Jose, CA
2D. ZIP CODE
95134
4. SECURED PARTY
NAME Silicon Valley Bank
MAILING ADDRESS 3000 Lakeside Drive
CITY Santa Clara
STATE CA
ZIP CODE 95054
6. A [ ] CONTINUATION - The original Financing Statement between the
foregoing Debtor and Secured Party bearing the file number and date
shown above is continued. If collateral is crops or timber, check
here [ ] and insert description of real property on which growing
or to be grown in Item 7 below.
B [ ] RELEASE - From the collateral described in the Financing Statement
bearing the file number shown above, the Secured Party releases the
collateral described in item 7 below.
C [ ] ASSIGNMENT - The Secured Party certifies that the Secured Party has
assigned to the Assignee above anmed, all the Secured Party's rights
under the Financing Statement bearing the file number shown above in
the collateral described in Item 7 below.
D [ ] TERMINATION - The Secured Party certifies that the Secured Party no
longer claims a security interest under the Financing Statement
bearing the file number shown above.
E [XX] AMENDMENT - The Financing Statement bearing the file number shown
above is amended as set forth in Item 7 below. (Signature of Debtor
required on all amendments)
F [ ] OTHER
7. Change Debtor's name to: IMP, Inc.
- --------------------------------------------------------------------------------
8. (DATE) September 19, 1994
IMP, Inc.
By: /s/ Sr. VP and Secretary
------------------------------------------------------------------------
SIGNATURE OF DEBTORS (Title)
Silicon Valley Bank
By:
------------------------------------------------------------------------
(SIGNATURES OF SECURED PARTY(IES)) (Title)
10. Return Copy to:
Silicon Valley Bank
2202 N. First Street
San Jose, CA 95131
Attn: Loan Services
(1) FILING OFFICER COPY
<PAGE> 1
EXHIBIT 10.57
LETTER AGREEMENT DATED FEBRUARY 13,1995
BETWEEN THE COMPANY AND DAVID LAWS
<PAGE> 2
[IMP, INC. LETTERHEAD]
February 10, 1995
David Laws
245 Shawnee Pass
Portola Valley, CA 94028
Dear David:
We are pleased to offer you the position of Senior Vice President, reporting to
Barry Carrington. Your starting salary will be $3,077.00 per week, paid
bi-weekly. Subject to approval by our Board of Directors, you will be granted
an option to purchase 400,000 shares of IMP stock at the fair market value
price on the day your grant is approved. Further, Attachment "A" defines the
following: Scheduled increases in base salary; Incentive bonuses for which you
may be eligible, provided Corporate performance meets or exceeds certain
business plan goals, and you remain an employee in good standing of the
Company; The vesting conditions and schedule for your initial stock option
grant(s); Salary and benefit obligations of IMP should the Company terminate
your employment during the first twelve (12) months for any reason not
recognizable at law. Attachment "B" is a summary of supplemental benefits the
Company makes available to it's executive staff. We would like you to start on
February 13, 1995 or sooner as may be mutually convenient.
Our offer is contingent upon: 1) Satisfactory completion of the Form I-9 which
we will provide at your orientation; 2) Completion and return of the enclosed
Personal/Biographical Data Form; 3) Full completion of our Application for
Employment; and 4) Execution and return of the enclosed Agreement and Exhibit
A.
To accept this offer, please sign and return one copy of this letter, both
copies of the Proprietary Information Agreement and the completed W-4 within
one week.
On your starting day PLEASE REPORT TO SECURITY AT THE REAR ENTRANCE OF BUILDING
1 AT 8:30 A.M. FOR YOUR IDENTIFICATION BADGE. AT 2:00 P.M. PLEASE REPORT TO
HUMAN RESOURCES IN BUILDING 2 FOR NEW EMPLOYEE ORIENTATION. Please bring
identification (see the attached list) allowing us to verify your right to work
in the United States.
We look forward to a long and mutually rewarding relationship. Should you have
any questions regarding this offer please contact Barry Carrington or myself at
your convenience.
Sincerely, Accepted By: /s/
------------------------
Date: 2/13/95
-------------------------------
Robert J. Crossley
Vice President, Administration
Enclosures
<PAGE> 3
ATTACHMENT A Offer Letter: D. Laws 2/13/95
CASH COMPENSATION,
<TABLE>
<S> <C> <C> <C> <C> <C>
Fiscal Year '96 '97 '98 '99 2000
--- --- --- --- ----
Base sal k$ 160 167 175 187 200
Bonus k$ 40 43 45 48 50
--- --- --- --- ----
Total Cash 200 210 220 235 250
</TABLE>
FY'96 bonus is not subject to performance. Bonus for FY'97 and
beyond, is earned for Corporate performance that meets or exceeds IMP's annual
plan as approved by the Board of Directors. Audited financials are used to
determine eligibility and payment is made after the close of the fiscal year.
STOCK OPTIONS: maximum # of shares vesting in FY
<TABLE>
<S> <C> <C> <C>
Granted at hire '97 '98 '99 2000
-------------------------------------------------------
1. 200k 50k 50k 50k 50k
2. 200k 50k+4 FQ min 50k----------
</TABLE>
1. 200k shares, regular, time vesting grant.
2. 200k shares to vest as follows: a) 100k will vest in three annual
increments (F'98, F'99 and F'00) provided sales and profit objectives per the
schedule below are met. b) 50k vests when IMP's market cap reaches 2.5 times
sales. c) The final 50k will vest when the market cap has remained at a minimum
2.5 times sales for four fiscal quarters. d) The entire grant will vest on the
eighth anniversary of Laws employment, provided Laws remains an employee in
good standing of the Company.
CORPORATE PERFORMANCE SCHEDULE:
<TABLE>
<CAPTION>
FY '96 '97 '98 '99 2000
- -- --- --- --- --- ----
<S> <C> <C> <C> <C> <C>
Sales M$ 70 100 125 155 185
PTProfit% 5 10 15 15 15
Mkt Val $/Sh 5 7 10 13 15
</TABLE>
ONE YEAR CONTRACT:
Should IMP terminate Laws within the first year, for any reason not
recognizable at law, Laws will be compensated at his base salary and insured
benefits for a minimum of twelve months from the date of such termination,
subject to non-compete and proprietary information restrictions. Thereafter,
the employment relationship is "at-will".
<PAGE> 4
ATTACHMENT B Offer Letter: D. Laws
DT: February 13, 1995 CONFIDENTIAL
TO: David Laws
FR: Bob Crossley
RE: Supplemental Benefits for IMP Executives Pg. 1 of 3
- --------------------------------------------------------------------------------
Vice Presidents and Corporate Officers at IMP enjoy the following enhancements
to the company's normal benefit program:
COMPANY PAID TERM LIFE INSURANCE
Benefit: Company paid term life insurance is increased to four times
your base salary, to a maximum of $400,000.00.
Although IMP pays the premium for your additional life insurance, current tax
laws require that the premium on company paid life insurance in excess of
$50,000 be treated as income and tax withheld. This withholding will be
automatically taken care of by payroll.
MEDICAL EXPENSE REIMBURSEMENT
The Company will reimburse executives for medical and dental expenses paid by
the executive for the executive and the executives otherwise eligible
dependents, which are qualified for yet excluded from reimbursement under the
Company's various medical and dental programs. In general, this program is
intended to cover insurance premiums, deductibles and co-insurance amount
normally payable by the executive within the terms and conditions of the
various medical and dental programs which the Company makes available to its'
executives. The maximum benefit available under this program to an executive
(including dependents) is limited to three thousand dollars ($3,000.00) each
calendar year. Otherwise eligible medical and dental expenses from the
immediately preceding year are to be submitted to accounting not later than the
end of March.
continued...
<PAGE> 5
Supplemental Benefits for Executives (cont.) Pg. 2 of 3
PHYSICAL EXAMINATION REIMBURSEMENT
Benefit: Up to $500.00 to cover those costs of a physical examination
that are not covered by the participants primary medical plan.
Frequency: Every other year for participants up to and including 49 years
of age. Annually for participants 50 years of age or older.
Reporting: The Company may require a statement of health from your
private physician and/or require you to be examined by a
Company appointed physician at IMP's sole discretion and
expense.
INCOME TAX PREPARATION REIMBURSEMENT
The Company will reimburse $1,000.00 per calendar year for fees incurred in the
preparation of income tax returns. This is a "normal" limit and adequate to
cover all but the most complex tax situations. In such complex situations,
prior approval of the preparers' estimate by the president is required or
charges in excess of $1,000.00 will not be considered for reimbursement. Any
and all reimbursements in excess of $1,000.00 will be at the discretion of the
president.
CREDIT CARD FEE REIMBURSEMENT
The Company encourages it's executives who travel or otherwise incur business
related expenses to maintain a personal credit card sufficient for both
business and personal use. In consideration, and subject to annual review and
approval by the president, IMP will reimburse up to $75.00 per calendar year
should such card have an annual fee, and where business use is more than
casual.
REIMBURSEMENT
Requests for reimbursement are to be submitted for approval using an Expense
Report Form together with the appropriate supporting documentation.
continued...
<PAGE> 6
Supplemental Benefits for Executives Page 3 of 3
TAXABLE AS INCOME
IRS regulations are constantly in a state of flux. At this time, the majority
of the items above are considered taxable income to the executive.
IMP'S RIGHT TO TERMINATE THIS PROGRAM
IMP reserves the exclusive right to amend, revise or terminate this program at
anytime without prior notice to any and/or all of the participants. Should the
employment of an executive terminate at any time and for any reason prior to an
actual disbursement, of funds otherwise due under the provisions of this
program, no funds shall be paid. As this program is taxable income to the
executive, no COBRA rights whatsoever are available.
<PAGE> 1
EXHIBIT 10.58
REAL PROPERTY SUBLEASE AGREEMENT DATED NOVEMBER 2,1992
BY AND BETWEEN THE COMPANY AND AT&T RESOURCE MANAGEMENT
CORPORATION, AND MASTER LEASE DATED SEPTEMBER 23,1986
BY AND BETWEEN AT&T RESOURCE MANAGEMENT CORPORATION AND
AMERICAN TELEPHONE AND TELEGRAPH COMPANY.
<PAGE> 2
SUBLEASE AGREEMENT
by and between
AT&T RESOURCE MANAGEMENT CORPORATION,
A New York corporation
and
INTERNATIONAL MICROELECTRONIC PRODUCTS, INC.
A Delaware corporation
<PAGE> 3
The mailing, delivery or negotiation of this Sublease Agreement by
Sublandlord or its agent or attorney shall not be deemed an offer by
Sublandlord or Master Lessor to enter into any transaction or to enter into any
other relationship, whether on the terms contained herein or on any other
terms. This Sublease Agreement shall not be binding upon Sublandlord, nor
shall Sublandlord have any obligations or liabilities or Subtenant any rights
with respect thereto, or with respect to the Property, unless and until
Sublandlord has executed and delivered this Sublease Agreement. Until such
execution and delivery of this Sublease Agreement, Sublandlord may terminate
all negotiation and discussion of the subject matter hereof, without cause and
for any reason, without recourse or liability.
* * * *
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Sublease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Condition of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4. Sublease Subject to Prime Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5. Sublandlord's Obligations and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
6. Sublease Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
7. Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
8. Base Rent and Basement Space Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
9. Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
9.1. Additional Rent - Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
10. Proration of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
11. Use of the Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
12. Use of Cafeteria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
13. Conference Facilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
14. Use of Freight Elevator and Loading Dock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
15. Hazardous Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
16. Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
17. Repair and Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
18. Damage or Destruction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
19. Eminent Domain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
(i)
<PAGE> 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
20. Indemnity and Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
21. Assignment and Subletting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
22. Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
23. Sublandlord's Right to Perform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Subtenant's Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
24. Security Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
25. Tenant Improvement Allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
26. Tenant Improvement Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
27. Surrender of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
28. Holding Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
29. Access to Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
30. Signs and Logos . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
31. Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
32. Attornment by Subtenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
33. Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
34. Transfer of the Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
35. Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
36. Mortgagee Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
37. Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
38. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
39. Parking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
40. Utilities and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
41. Quitclaim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
42. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
(ii)
<PAGE> 6
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
43. Sublandlord's Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
44. Additional Structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
45. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
46. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
</TABLE>
(iii)
<PAGE> 7
SUBLEASE AGREEMENT
THIS SUBLEASE AGREEMENT ("Sublease"), which is effective as of
the ___ day of ___________, 1992, is entered into by and between AT&T Resource
Management Corporation ("Sublandlord" or "AT&T-RMC"), a New York corporation,
and International Microelectronic Products, Inc., ("Subtenant"), a Delaware
corporation.
THIS SUBLEASE IS ENTERED on the basis of the following facts,
intentions and understandings of the parties:
A. Whereas, on September 23, 1986, AT&T-RMC entered a lease (the
"Prime Lease"), under which AT&T-RMC was landlord and the American Telephone
and Telegraph Company ("AT&T") was tenant, which lease concerned certain
premises of which the premises demised herein comprise a part; and
B. Whereas, AT&T-RMC has assigned the interest of landlord under
the Prime Lease to Rosewood Associates, a California general partnership
comprised of AT&T-RMC and The Prudential Insurance Company of America; and
C. Whereas, AT&T has assigned the interest of tenant under the
Prime Lease to AT&T-RMC; and
D. Whereas, by reason of the assignment by AT&T, the interest of
AT&T-RMC in the "Prime Lease" is that of tenant; and
E. Whereas, Sublandlord desires to sublease the Premises (as
defined in Section 2) to Subtenant, and Subtenant desires to sublease the
Premises from Sublandlord, on all the terms, covenants and conditions
hereinafter set forth.
NOW, THEREFORE, IN CONSIDERATION OF mutual covenants and
promises of the parties, the parties hereto agree as follows:
1. Sublease.
Sublandlord subleases the Premises to Subtenant, and Subtenant
subleases the Premises from Sublandlord, on all the terms, covenants and
conditions set forth in this Sublease.
<PAGE> 8
2. Definitions.
The following definitions shall be applicable to this Sublease.
a. Additional Project Buildings. The term "Additional
Project Buildings" shall mean the seven (7) buildings within the Project,
exclusive of the Building, commonly known as (i) 4410 Rosewood Drive,
Pleasanton, California, (ii) 4430 Rosewood Drive, Pleasanton, California, (iii)
4440 Rosewood Drive, Pleasanton, California, (iv) 4450 Rosewood Drive,
Pleasanton, California, (v) 4460 Rosewood Drive, Pleasanton, California, (vi)
4400 Rosewood Drive, Pleasanton, California, and (vii) 4432 Rosewood Drive,
Pleasanton, California. A diagram showing the locations of each of the
Additional Project Buildings is attached hereto as Exhibit K. For purposes of
this Sublease, Sublandlord and Subtenant agree that the Additional Project
Buildings contain One Million Twenty-One Thousand Four Hundred Ninety Eight
(1,021,498+) rentable square feet.
b. Association. The term Association shall mean the
Hacienda Business Park Owners Association, and any successor thereto.
c. AT&T Center Rules. The term "AT&T Center Rules"
shall mean the rules and regulations for the Project, as they may be amended
from time to time. The AT&T Center Rules as of the date of this Sublease are
attached as Exhibit A thereto.
d. Basement Space. The term "Basement Space" shall mean
Subtenant's prorata share of basement space in the Building or in such
Additional Project Buildings as Sublandlord may designate. Subtenant's prorata
share of Basement Space shall be determined by applying Subtenant's Percentage
Share of Project to the Twenty-Six Thousand Four Hundred Sixteen (26,416)
rentable square feet of basement space in the Project.
e. Base Rent. The term "Base Rent" shall have the
meaning set forth in Subsection 8a.
f. Base Year. The term "Base Year" shall mean the
calendar year 1993.
g. Base Year Operating Expenses. The term "Base Year
Operating Expenses" shall be comprised of Common Area Expenses, Real Property
Taxes, and Building Expenses and shall be the greater of (i) the Stabilized
Base Year Operating Expenses; or (ii) Eight Dollars and 10/100 ($8.10) per
rentable square foot of the Premises.
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h. Base Year Real Property Taxes. The term "Base Year
Real Property Taxes" shall mean the Real Property Taxes during the Base Year,
based on a fully assessed Project at ninety-five percent (95%) occupancy.
i. Brokers. The term "Brokers" shall mean Cushman
Realty Corporation and Norris Beggs & Simpson.
j. Building. The term "Building" shall mean the
building, commonly known as 4420 Rosewood Drive (Building 2), which is located
on the Property. For purposes of this Sublease, Sublandlord and Subtenant
agree that the Building contains One Hundred Sixty Three Thousand Nine Hundred
Forty Three (163,943) rentable square feet.
k. Building Expenses. The term "Building Expenses"
shall mean utilities, janitorial, maintenance and similar expenses for the
Building (to the extent they are not separately metered within the Building)
and shall be based on a Project at ninety-five percent (95%) occupancy.
l. CC&Rs. The terms "CC&Rs" shall mean the Declaration
of Covenants, Conditions and Restrictions for Hacienda Business Park (No. 2),
as amended by the First Amendment to Declaration of Covenants, Conditions and
Restrictions for Hacienda Business Park (No. 2) and Second Amendment to
Declaration of Covenants, Conditions and Restrictions for Hacienda Business
Park (No. 2), as further amended from time to time; and all rules and
regulations promulgated thereunder.
m. Cafeteria. The term "Cafeteria" shall mean the
cafeteria operated by Sublandlord within the Additional Project Building
commonly known as 4432 Rosewood Drive, Pleasanton, California. The location of
the Cafeteria is shown on Exhibit B. Sublandlord reserves the right from time
to time during the term of the Sublease to reduce the size of the Cafeteria or
to reduce the scope of the services offered. Food services will be available
throughout the term of this Sublease.
n. Common Area Expenses. The term "Common Area
Expenses" shall have the meaning set forth in Subsection 9.1(b).
o. Conference Facilities. The term "Conference
Facilities" shall mean the conference facility operated by Sublandlord within
the Additional Project Building commonly known as the Visitor Center Building.
The location of the Conference Facilities is shown on Exhibit C. Sublandlord
reserves the right from time to time during the term of the Sublease to reduce
the size of the Conference Facilities or to reduce the scope of the services
offered.
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p. Hazardous Materials. The term "Hazardous Materials"
shall have the meaning set forth in Subsection 15(c).
q. Interest Rate. The term "Interest Rate" shall have
the meaning set forth in Subsection 7(b).
r. Land. The term "Land" shall mean the real property,
described in Exhibit D, which consists of approximately Fifty-Eight and 79/100
(58.79+) acres and upon which the Building and the Additional Project Buildings
are located.
s. Landlord. The term "Landlord" shall mean Rosewood
Associates, or its successor.
t. Prime Lease. The term "Prime Lease" shall have the
meaning set forth in Recital A. A copy of the Prime Lease, and Amendment
thereto dated October 1, 1991, are attached hereto as Exhibit E. Subtenant
acknowledges that the Prime Lease provides that Sublandlord leases the Building
and Additional Project Buildings on an absolute net basis.
u. Premises. The term Premises shall mean a portion of
the second floor within the Building. For purposes of this Sublease,
Sublandlord and Subtenant agree that the Premises (prior to any expansion)
contain eight thousand four hundred and eighty-eight (8,488+/-) rentable square
feet.
v. Project. The term "Project" shall mean the project,
commonly known as "AT&T Center," consisting of the Land, the Additional Project
Buildings, and the Building.
w. Project Common Areas. The term "Project Common
Areas" shall mean all areas and facilities within the Land, but outside the
Building, and the Additional Project Buildings, provided and designated by
Sublandlord for the general use and convenience of the Subtenant and other
subtenants and occupants of the Project. The Project Common Areas shall
include, without limitation, the parking areas (exclusive of any Fenced Parking
Area which are now or may hereinafter be granted to Subtenants), access and
perimeter roads, sidewalks, landscape areas, service areas, trash disposal
facilities, and similar areas and facilities. The Project Common Areas are
subject to the AT&T Center Rules and the CC&Rs.
x. Real Property Taxes. The term "Real Property Taxes"
shall have the meaning set forth in Subsection 9.1(d).
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y. Rent. The term "Rent" shall have the meaning set
forth in Section 7(a).
z. Specified Common Area Expenses. The term "Specified
Common Area Expenses" shall mean all the Common Area Expenses other than (i)
Real Property Taxes; and (ii) utility charges specifically allocable to the
Premises.
aa. Stabilized Base Year Common Area Expenses. The term
"Stabilized Base Year Common Area Expenses" shall mean the Common Area Expenses
during the Base Year (calculated on a per rentable square foot basis). The
Stabilized Base Year Common Area Expenses shall be calculated on the basis of
the Project being ninety-five percent (95%) occupied.
bb. Standard Business Hours. The term "Standard Business
Hours" shall mean 6:00 a.m. to 6:00 p.m., Monday through Friday, except for
Building holidays as set forth on Exhibit A. Building hours of operation for
lighting shall be 8:00 a.m. to 8:00 p.m., Monday through Friday, or such other
consecutive 12 hour period as mutually agreed to, Building holidays as set
forth on Exhibit A excepted.
cc. sublease Commencement Date. The term "Sublease
Commencement Date" shall have the meaning set forth in Subsection 6(a).
dd. Sublease Expiration Date. The term "Sublease
Expiration Date" shall have the meaning set forth in Subsection 6(a).
ee. Subtenant's Percentage Share of Building. The term
"Subtenant's Percentage Share of Building" shall mean Five and Eighteen One
Hundredth percent (5.18%). Subtenant's Percentage Share of Building was
determined by dividing the rentable square footage of the Premises (i.e., Eight
Thousand Four Hundred and Eighty-Eight (8,488+/-) square feet) by the rentable
square footage of the Building (i.e., One Hundred Sixty-Three Thousand Nine
Hundred and Forty-Three (163,943+/-) square feet). Subtenant's Percentage Share
of Building shall increase if Tenant subleases additional space within the
Building.
ff. Subtenant's Percentage Share of Project. The term
"Subtenant's Percentage Share of Project" shall mean Eighty-Three One Hundredth
percent (.83%). Subtenant's Percentage Share of Project was determined by
dividing the rentable square footage of the Premises (i.e., Eight Thousand Four
Hundred and Eighty Eight (8.488+/-) square feet) by the rentable square footage
of the Building and the Additional Project Buildings (i.e., One Million
Twenty-One Thousand Four Hundred Ninety Eight) (1,021,498) square feet).
Subtenant's Percentage Share of Project may increase or decrease if
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Subtenant leases additional space within the Project, or if any Additional
Project Buildings are sold by Landlord or decreased if other Additional Project
Buildings are constructed on the Project. Further Subtenant's Percentage Share
of Project may decrease if Sublandlord reduces the size of either the Cafeteria
or the Conference Facilities and constructs additional rentable square footage
in the Additional Project Buildings.
gg. Tenant Improvement Allowance. The term "Tenant
Improvement Allowance" shall have the meaning set forth in Subsection 25(a).
hh. Tenant Improvement Work. The term "Tenant
Improvement Work" shall have the meaning set forth in Subsection 26(a).
3. Condition of Premises.
a. Physical Condition. Subtenant acknowledges that
Subtenant has conducted Subtenant's own investigation of the Premises and
Project and the physical condition thereof, (e.g., accessibility and location
of utilities, improvements, existence of Hazardous Materials), which in
Subtenant's judgment affect or influence Subtenant's use of the Premises and
Subtenant's willingness to enter this Sublease. Subtenant recognizes that
Sublandlord would not sublease the Premises except on an "as is" basis and
acknowledges that Sublandlord has made no representations of any kind in
connection with soils, improvements, or physical conditions on, or bearing on,
the use of the Premises.
b. Representations by Subtenant and Sublandlord.
Subtenant represents and warrants that Subtenant has examined and inspected all
matters with respect to taxes, income and expense data, insurance costs, bonds,
permissible uses, the Prime Lease, zoning, CC&Rs and all other matters which in
Subtenant's judgment bear upon the value and suitability of the Premises for
Subtenant's purposes. Subtenant shall rely solely on Subtenant's own
inspection and examination of such items and not on any representations of
Sublandlord, express or implied, except as otherwise provided in this Sublease.
Sublandlord represents and warrants that the Building and the Tenant
Improvement Work have been constructed in compliance with zoning requirements
and applicable building and electrical codes in conformance to the CC&R's.
Sublandlord further represents and warrants that a current Certificate of
Occupancy for the Building has been issued and has not been revoked.
4. Sublease Subject to Prime Lease.
a. Terms of Prime Lease. Subject to the further
provisions of Subsection 4.b., the Sublease shall be subject
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to the terms of Sections 1, 13 (excluding Subsections 13.e., f., and o.), 17,
19, 21, 22, 23, 24, 25, 38, 39 and 40 of the Prime Lease. To the extent that
the subject matters contained in the said provisions of the Prime Lease are
also specifically addressed in this Sublease, the provisions of each shall be
interpreted and construed such that the provisions of each shall be considered
complementary and not mutually exclusive. In the course of such construction
or interpretation, the provisions of this Sublease shall be accorded greater
deference. Subject to the foregoing, Subtenant shall assume all of the
obligations, perform all of the duties of Sublandlord as tenant and enjoy all
the rights of Sublandlord as tenant under the Prime Lease with respect to the
Premises. Subtenant shall not commit or permit to be committed any act or
omission which shall violate any terms, covenants or conditions of the Prime
Lease.
b. Terms Not Applicable. Sections 35, 42 and 49 of the
Prime Lease specifically are not incorporated into this Sublease and Subtenant
shall have no right to exercise any rights of Sublandlord under Sections 35, 42
and 49 of the Lease.
c. Warranties and Representations of Sublandlord.
Sublandlord covenants, warrants, and represents to Subtenant that: (i) attached
as Exhibit E to this Sublease, is a true, correct and complete copy of the
Prime Lease; (ii) there neither has been nor now exists any further amendment,
modification, supplement or other variation, expansion or contraction of the
Prime Lease, either oral or written; and (iii) each and every portion of the
Premises is included within the premises covered by the Prime Lease.
d. Subtenant's Rights Regarding the Prime Lease.
Sublandlord shall have no obligation to perform any of Landlord's obligations
under the Prime Lease, except as expressly provided in this Sublease, and
Subtenant shall have no rights against Sublandlord arising out of the
Landlord's failure to perform any of its obligations under the Prime Lease.
Subtenant, however, shall have the right to institute any action against the
Landlord in Sublandlord's name that Sublandlord would be entitled to institute
under the provisions of the Prime Lease. This right, however, shall not arise
until Subtenant has notified Sublandlord of Landlord's non-performance and
Sublandlord has failed to take any action within a reasonable time after the
receipt of Subtenant's notice. Subtenant agrees to reimburse Sublandlord for
any reasonable costs incurred by the latter in connection with Subtenant
instituting an action as aforesaid. Sublandlord agrees to notify Landlord of
any reasonable complaints by Subtenant that Landlord has not performed its
obligations under the Prime Lease as it affects the Premises, and to give
Subtenant copies of such notices and Landlord's response thereto.
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5. Sublandlord's obligations and Services.
a. Sublandlord shall maintain the public and common
areas of the Building including lobbies, stairs, elevators, corridors and
restrooms, mechanical, plumbing and electrical equipment and the structure
itself in reasonably good order and condition, except for damage occasioned by
the acts of Subtenant, its employees, agents, contractors or invitees which
damage shall be repaired by Sublandlord at Subtenant's expense.
b. Subject to Section 5.c below, Sublandlord shall
furnish the Premises with (1) electricity (at 3 watts per square foot in the
Base Year), (2) heat and air conditioning to the extent reasonably required for
the comfortable occupancy by Subtenant and its use of the Premises during the
Standard Business Hours as defined per Section 2bb, (3) water for drinking and
lavatory purposes, (4) elevator service, (5) lighting replacement for building
standard lights, (6) restroom supplies (7) garbage service, (8) janitorial
services as provided in Exhibit L, (9) security and (10) one access phone per
floor or portion thereof leased by Subtenant (additional access phones will be
provided by Sublandlord only at Subtenant's expense).
c. Sublandlord shall furnish lighting, electrical,
heating, ventilation and air conditioning ("HVAC") to Subtenant during Standard
Business Hours as part of the Base Rent. The Base Year electrical expense
shall be based upon normal office electrical usage of 3 watts per square foot,
during Standard Business Hours within the Project, exclusive of data and
telecommunications centers. Should Subtenant require such services at times
other than Standard Business Hours then such services shall be provided to
Subtenant at Subtenant's sole cost and expense. Such HVAC use shall be charged
at the rate of $35.00 per hour per half floor, subject to actual percentage
increases charged by the public utility company. Such lighting use shall be at
the actual costs of Subtenant's use as charged by the public utility company.
d. It shall be the obligation of Landlord to provide all
services which are listed on Exhibit F, which, has been provided by the
Sublandlord, and which purports to reflect the services to Sublandlord which
Landlord is obligated to perform under the Prime Lease. Subtenant acknowledges
that Sublandlord shall be under no obligation to provide any such services
directly to Subtenant; provided, however, Sublandlord shall diligently enforce
all obligations of Landlord under the Prime Lease. Subtenant is under no
obligation to review the Prime Lease so as to determine what services are
provided by Landlord. Landlord, through its execution of the consent to this
Sublease, acknowledges that
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<PAGE> 15
the services listed on Exhibit F are its obligation as set forth above.
6. Sublease Term.
a. Sublease Term. The term ("Sublease Term") of this
Sublease shall commence on November 1, 1992 ("Sublease Commencement Date") and
shall extend to March 7, 1998 ("Sublease Expiration Date") (ie., the date the
Prime Lease expires as to the Building).
7. Rent.
a. Components. As used in this Sublease, the term
"Rent" shall include: (i) the Base Rent; (ii) the Basement Space Rent; and
(iii) the Additional Rent.
b. Payment. All amounts of money payable by Subtenant
to Sublandlord shall be paid without prior notice or demand, deduction or
offset. Subtenant shall be permitted one late payment a year consisting of a
five (5) day grace period, before being required to pay interest on any
subsequent late payment. Any payment which is subject to interest shall bear
interest from the due date until the date paid at the rate ("Interest Rate")
which is the lesser of eleven percent (11%) per annum or the maximum rate
permitted by law.
c. Location of Payment. Subtenant shall pay Rent to
Sublandlord (or other entity designated by Sublandlord in accordance with a
notice given pursuant to Section 42), in advance, on the first day of each
calendar month of the Sublease Term, at Sublandlord's address for notices (as
set forth in Section 42 hereof) or at such other address as Sublandlord may
designate (in accordance with a notice given pursuant to Section 42), provided
that any change in Sublandlord's address shall be given upon at least thirty
(30) days prior written notice.
8. Base Rent and Basement Space Rent.
a. Base Rent - Amount. The base rent ("Base Rent") for
the Premises during the Sublease Term shall be the following amounts:
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<TABLE>
<CAPTION>
Base Rent
Square Foot Base Rent
Sublease Month per Month Square Footage per Month
-------------- --------- -------------- ---------
<S> <C> <C> <C>
01-08 $1.325 6,000 $ 7,950.00
09-Sublease
Expiration Date 1.325 8,488 $11,246.60
</TABLE>
9. Additional Rent.
a. Obligation of Subtenant. All monies required to be
paid by Subtenant pursuant to the terms of this Sublease exclusive of Base Rent
and Basement Space Rent shall be considered additional rent ("Additional Rent")
whether or not specifically so designated in any provision of this Sublease
requiring such payment. Upon Subtenant's failure to pay any amount of
Additional Rent, Sublandlord shall have all the same rights and remedies
available to Sublandlord under this Sublease or by law as may be available in
the event of non-payment of Base Rent or Basement Space Rent.
b. Payment of Additional Rent. Subtenant acknowledges
that any particular component of the Additional Rent may be paid directly by
Sublandlord or Landlord (and Subtenant then shall reimburse Sublandlord or
Landlord, as appropriate pursuant to the terms of Sections 9.c and 9.d below).
Whether a component of Additional Rent is paid by Subtenant either directly or
through reimbursement of Sublandlord or Landlord shall not reduce Subtenant's
obligation for the component.
c. Estimates of Additional Rent. During February of
each calendar year during the Term after the Base Year, or as soon thereafter
as practicable, Sublandlord shall give Subtenant written notice of
Sublandlord's estimates of the amounts of the components of the Additional Rent
and the amount which will be payable by Subtenant for the ensuing twelve (12)
months. On or before the first day of each month during the ensuing twelve (12)
months, Subtenant shall pay to Sublandlord one-twelfth (1/12) of the estimated
amount; provided, however, that if notice is not given in February, Subtenant
shall continue to pay on the basis of the then applicable Additional Rent until
the month after the notice is given. If at any time it appears to Sublandlord
that the amount payable for the current calendar year will vary from
Sublandlord's estimate by more than five percent (5%), Sublandlord may give
notice to Subtenant of Sublandlord's revised estimate for the twelve-month
period, and subsequent payments by Subtenant for the remainder of the
twelve-month period shall be based on the revised estimate; provided, however,
that Sublandlord shall not give notice of a revised estimate for any year more
frequently than once a calendar quarter.
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d. Annual Adjustment. Within sixty (60) days after the
close of each calendar year, after calendar year 1994, of the Sublease Term, or
as soon after the sixty (60) day period as practicable, Sublandlord shall
deliver to Subtenant a statement of the adjustment to the Additional Rent for
the prior calendar year. If, on the basis of the statement, Subtenant owes an
amount that is less than the estimated payments for the calendar year
previously made by Subtenant, Sublandlord shall refund the excess to Subtenant
within thirty (30) days after Sublandlord delivers its statement. If, on the
basis of the statement, Subtenant owes an amount that is more than the
estimated payments for the calendar year previously made by Subtenant,
Subtenant shall pay the deficiency to Sublandlord within thirty (30) days after
delivery of the statement. Subtenant shall have the right to audit the books
of Sublandlord relating to the operation of the Building and Project in order
to determine that Additional Rent and adjustments to Additional Rent are
correct. Sublandlord shall provide Subtenants' auditors with access to all
relevant information during normal business hours. The expense of such an
audit shall be paid by the Subtenant, except in the event that the audit
determines that said costs or adjustments have been overstated by more than
7.5%, in which case the expense of the audit shall be paid by the Sublandlord.
All adjustments shall be reconciled within thirty (30) days after completion of
the audit.
9.1. Additional Rent - Operating Expenses.
a. Responsibility for Operating Expenses. Subtenant
shall be responsible for payment of Operating Expenses in excess of the Base
Year as Additional Rent. The term "Operating Expenses" shall include
Subtenant's Percentage Share of Project of the Common Area Expenses,
Subtenant's Percentage Share of Project of the Real Property Taxes and
Subtenant's Percentage Share of Building of the Building Expenses, each of
which is more particularly defined hereinafter.
b. Definition of Common Area Expenses. The term "Common
Area Expenses" shall mean, subject to the provisions of Subsection 9.1.(c), all
of Sublandlord's direct costs and expenses of operation, repair and maintenance
of the Project and supporting facilities which are charged to, or paid by,
Sublandlord under the Prime Lease. The Common Area Expenses shall include,
without limitation, (i) janitorial services; (ii) security; (iii) garbage
collection; (iv) Common Area maintenance; (v) a property management fee; (vi)
insurance; (vii) dues of the Association; (viii) utilities; and (ix)
landscaping costs. After the 1993 calendar year, Subtenant's Percentage Share
of Project of the Common Area Expenses paid or incurred by Sublandlord during
the calendar year in excess of the Base Year Common Area Expenses shall be paid
as
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<PAGE> 18
Additional Rent. Notwithstanding anything to the contrary in the Sublease,
Common Area Expenses shall not include, and Subtenant shall not be required to
pay, any of the following: (a) legal fees, brokerage commissions, advertising
costs, or other related expenses incurred in connection with the leasing of the
Building; (b) any improvements, alterations or expenditures of a capital
nature, unless the costs are charged back over their useful life as Additional
Rent based on generally accepted accounting principles (but only for the
portion of the useful life which occurs during the remaining portion of the
Term of the Sublease); (c) damage and repairs attributable to fire or other
casualty unless caused by or the fault of Subtenant; (d) damage and repairs
necessitated by the gross negligence or willful misconduct of Landlord,
Sublandlord or their respective agents, employees, contractors or invitees; (e)
damage and repairs covered under any insurance policy carried by Landlord or
Sublandlord in connection with the Building, Project, or Project Common Areas;
(f) executive salaries or salaries of service personnel to the extent that such
service personnel perform material services other than in connection with the
management, operation, repair or maintenance of the Building or Project Common
Areas; (g) Landlord or Sublandlord's general overhead expenses not related to
the Building or Project Common Areas; (h) advertising or promotional
expenditures and other costs (including permit, license and inspection fees)
related to or incurred in renovating or otherwise improving, decorating,
painting or altering vacant space (excluding Common Area) in the Building; (i)
the cost of any service provided to Subtenant for which Landlord or Sublandlord
is entitled to be reimbursed; (j) any costs or expense related to the removal,
transportation or storage of Hazardous Materials unless caused to be on the
Premises by Subtenant.
c. Limitation On Increases In Operating Expenses.
During the term of the Sublease, in calculating the Operating Expenses for
which Subtenant shall be responsible as Additional Rent, the percentage
increase in the Operating Expenses shall not exceed eight percent (8%) over the
previous year's operating expenses.
d. Definition of Real Property Taxes. The term "Real
Property Taxes" shall mean the Property Taxes, as defined and determined
pursuant to Section 13.b of the Prime Lease (recognizing that, under the Prime
Lease, the Commencement Date for the Building has occurred).
e. Subtenant's Right of Protest. Subtenant shall have
the right to contest, in good faith, the validity or the amount of any tax or
assessment levied against the Premises (or the Project or Building of which the
Premises are a part) by such appellate or other proceedings as may be
appropriate in the taxing jurisdiction, provided that Subtenant's actions
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<PAGE> 19
of contest shall not subject Sublandlord to any penalties or otherwise
adversely affect Sublandlord's interest in the Project or the Building or under
the terms of the Prime Lease. Landlord shall cooperate in the institution and
prosecution of any such proceedings. The expense of such proceedings shall be
borne by Tenant and any refunds or rebates or portions thereof, attributable to
the Premises shall belong to Tenant. Any refunds or rebates, or portions
thereof, in excess of those attributable to the Premises shall be paid to
Sublandlord as Additional Rent.
10. Proration of Rent.
If the Sublease Commencement Date is not the first day of the
month, or if the end of the Sublease Term (e.g., Sublease Expiration Date) is
not the last day of the month, Rent shall be prorated on a monthly basis (based
upon a thirty (30) day month) for the fractional month during the month which
this Sublease commences or terminates. The termination of this Sublease shall
not affect the obligations of Sublandlord and Subtenant pursuant to Subsection
9.1., which are to be performed after the termination.
11. Use of the Premises.
a. Use. The Premises shall be used solely for general
office, engineering, and computer design and testing functions (excluding
raised floor data centers over 8% of the total rentable square feet). In
addition, the Premises shall be used in accordance with (i) the terms and
conditions of the Prime Lease, (ii) the CC&Rs (and all rules promulgated
thereunder), (iii) the AT&T Center Rules, and (iv) applicable zoning laws and
regulations.
b. Compliance. Subtenant, at its sole cost and expense,
shall promptly comply with all laws, statutes, ordinances and governmental
rules, regulations or requirements now in force or which hereinafter may be in
force, with the requirements of any board of fire underwriters or other similar
board now or hereafter constituted, with any direction or occupancy certificate
issued pursuant to any law by any public officer or officers, as well as the
provisions of all recorded documents affecting the Project, insofar as any
thereof relate to or affect the condition, manner of use or occupancy of the
Project by Subtenant. Subtenant's obligation hereunder shall include
Subtenant's compliance with all rules, laws, ordinances, and requirements
applicable to any alteration or tenant improvements to the Premises made by
Subtenant at the time such alteration or tenant improvement is made.
Notwithstanding anything to the contrary in Section 11(b), Subtenant's
responsibility to pay for structural changes or additions to the Project
required by law, and not resulting from Subtenant's particular use of the
Premises, shall be
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<PAGE> 20
limited to an annual charge prorated over the remaining portion of the Sublease
term based on the useful life of the structural change or addition multiplied
by Subtenant's Percentage Share of Building, or by Subtenant's Percentage Share
of Project if the entire Project is affected.
c. Indemnification. Subtenant shall indemnify and save
Sublandlord harmless from all costs, expenses, claims, and damages by reason of
any notice, order, rule, regulation, requirement, violation or penalty filed
against or imposed upon the Premises or Sublandlord arising from the failures
of Subtenant to comply with this covenant.
d. Right to Relocate. Sublandlord reserves the right to
relocate the Subtenant to comparable space within the Project. This right to
relocate shall be a one (1) time right only. Sublandlord will absorb all
reasonable costs involved in relocating the Subtenant including, without
limitation, the cost to change business cards and stationary, and in no event
shall Subtenant be obligated to pay more rent. In addition, Sublandlord shall
construct tenant improvements, at its cost, which are similar to the original
Tenant Improvement Work for the Premises. The Sublandlord, working with the
Subtenant, will use its reasonable best efforts, such as performing the move on
a weekend, to minimize the operational down time as a result of the relocation.
12. Use of Cafeteria.
a. Subtenant's Right to Use. During the Sublease Term,
Subtenant's employees shall-have the right to use the Cafeteria on the same
basis (e.g., subject to the same restrictions) as employees of other Project
Subtenants. For example, Sublandlord shall have the right to restrict all or a
portion of the Cafeteria for private parties and other uses.
b. Charges. The charges to Subtenant's employees for
Cafeteria services shall be the same as the charges imposed on employees of
other Project Subtenants for using the Cafeteria.
13. Conference Facilities.
a. Subtenant's Right to Use. During the Sublease Term,
Subtenant's employees shall have the right to use the Conference Facilities on
the same basis (e.g., subject to the same restrictions) as employees of other
Project Subtenants. For example, Sublandlord shall have the right to restrict
all or a portion of the Conference Facilities for private parties and other
uses.
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<PAGE> 21
b. Charges. The charges to Subtenant's employees for
using the Conference Facilities shall be the same as the charges imposed on
employees of other Project Subtenants for using the conference Facilities. The
charges shall be based on the amount of Subtenant's use of the Conference
Facilities and shall be calculated on a charge-per-use basis.
14. Use of Freight Elevator and Loading Dock.
Subtenant shall have the right throughout the Sublease Term to
use, on a non-exclusive basis and without additional charge (except as included
in the Common Area Expense), the freight elevator and loading dock within the
Building. Tenant's use shall be in accordance with the AT&T Center Rules.
15. Hazardous Materials.
a. Sublandlord's Representation. Sublandlord hereby
represents that (i) to Sublandlord's actual knowledge, there are no Hazardous
Materials located within the Project, Building and Premises; and (ii)
Sublandlord has not received any notice from any governmental authority, prior
owner or other tenant, that there are Hazardous Materials within the Premises.
b. Subtenant's Representation. Subtenant hereby
represents that Subtenant shall not (and shall not permit any employee,
representative, or agent of Subtenant, or any other person under the direct or
indirect control of Subtenant to) store, use or discharge any Hazardous
Materials within the Project and the Building. Subtenant shall also indemnify
Sublandlord and Landlord in accordance with Section 38 of the Prime Lease.
Notwithstanding the restrictions set forth in this Subsection 15(b) and Section
5 of the AT&T Center Rules, Subtenant may operate, at its expense, and in
compliance with the CC&Rs, the remainder of the AT&T Center Rules and Federal,
state and city laws and regulations then in effect, an emergency portable
gasoline, butane, diesel or other fuelpowered generator and may use the
materials listed on Exhibit M not to exceed the quantities shown on such
exhibit. The generator shall be placed in a location acceptable to Sublandlord
and shall be used only during electrical services outages or similar
emergencies.
c. Definition of Hazardous Materials. For purposes of
this Sublease, the term "Hazardous Materials" shall include, but shall not be
limited to, asbestos, petroleum or petroleum by-products, any radioactive
materials, wastes or substances or any toxic substance and other substances
defined as hazardous substances" "hazardous wastes," "extremely hazardous
wastes," "hazardous materials" or "toxic substances" in the Comprehensive
Environmental Response, Compensation and Liability Act of
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1980, as amended, 42 U.S.C. Section 9601 et seq.; the Toxic Substances Control
Act, 15 U.S.C. Section 2601, et seq.; the Hazardous Materials Transportation
Act, 49 U.S.C. Section 1801, et seq.; the Resource Conservation and Recovery
Act, 42 U.S.C. Section 6901, et seq.; the Safe Drinking Water and Toxic
Enforcement Act of 1986, Cal. Health & Safety Code Section 25249.5, et seq.;
and/or in the regulations, compliance and guidance documents promulgated
pursuant to said laws and any similar federal, state or local law. The term
"Hazardous Materials" shall not include materials used in normal office use if
the same are used in compliance with all applicable laws and regulations, and
the health, safety, disposal and other environmental instructions and
recommendations established by the manufacturer or applicable vendor are
strictly complied with.
16. Alterations.
a. Terms of Prime Lease. In addition to the
restrictions on alterations set forth in this Section, Subtenant shall comply
with the restrictions on alterations set forth in the Prime Lease (including
the indemnity provisions).
b. Permitted Alteration. Subtenant shall give
Sublandlord not less than five (5) days' notice of any alteration Subtenant
desires to make to the Premises. Subtenant shall not make any alteration in,
on or about the Premises without the prior written consent of Sublandlord.
Notwithstanding the foregoing prohibition, no written consent of Sublandlord is
required if the alteration does not affect the Building structure, the exterior
appearance of the Building, the roof, or the Building systems and the cost of
the alteration is not in excess of Five Thousand Dollars ($5,000.00). Subtenant
shall comply with all rules, laws, ordinances and requirements at the time
Subtenant makes any alteration and shall give at least same day notice to
Sublandlord's property manager of any alterations involving entry into the
telephone closet. Not later than fifteen (15) days following completion of the
work, Subtenant shall deliver to Sublandlord a complete set of "as built" plans
and specifications for each alteration costing more than $5,000 and any "as
built" plans Subtenant has or creates for alterations costing $5,000 or less.
Subtenant shall be solely responsible for maintenance and repair of all
alterations made by Subtenant. As used in this Section, the term "alteration"
shall include any alteration, addition or improvement.
c. Liens. If any liens shall at any time be filed
against the Premises, the Project or the Building for work performed, supplies
or services rendered for which Subtenant is responsible under this Sublease,
Subtenant shall either cause the liens to be discharged of record within sixty
(60)
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days after the date of filing of the liens or, if Subtenant, in good faith,
determines that the liens should be contested, Subtenant shall furnish such
security and documentation as Sublandlord shall determine to (i) prevent any
foreclosure proceedings against the Premises, the Project or the Building
during the pendency of the contest, and (ii) cause a title company selected by
Sublandlord to remove the liens as a matter affecting title to the Premises,
the Project or the Building.
d. Ownership of Alterations. Any alteration made by
Subtenant, shall, at the Termination of this Sublease, become Sublandlord's
property. Sublandlord may require Subtenant, upon surrender of the Premises
and at Subtenant's sole expense, to remove any alterations made by Subtenant
and to restore the Premises to its condition prior to the alteration but not if
at the time of Sublandlord's approval of such alteration, Subtenant requests
and Sublandlord agrees in writing not to hold Subtenant responsible for such
removal. Subtenant shall be responsible to remove all data and
telecommunications wiring, installed by Subtenant or by Sublandlord at
Subtenant's request, at expiration. Subtenant shall not be responsible for the
removal or the expense of removal of any initial Tenant Improvement Work at the
end of Sublease.
e. Assistance of Sublandlord. At no expense to
Sublandlord, Sublandlord shall fully cooperate with Subtenant in obtaining any
necessary building permits for the alterations. Sublandlord's cooperation
shall include execution of any applications, certificates or other documents
that may be required in connection with the building permits for the
alterations. Sublandlord shall also use its reasonable efforts to obtain
Landlord's full cooperation with Subtenant as described in the preceding
sentence.
17. Repair and Maintenance.
a. Building.
(i) Sublandlord's Obligations. Sublandlord shall
keep in good order, condition and repair the structural parts of the Building,
which structural parts include only the foundation, roof, the outside portions
(exclusive of the window glass, which shall be Subtenant's obligation with the
exception of the extension portion of the exterior glass which shall be
Sublandlord's obligation) of the exterior walls, and subflooring of the
Premises. However, Sublandlord shall not be responsible for (but, instead,
Subtenant shall be responsible for) any damage caused by the negligence or
willful acts or omissions of Subtenant or of Subtenant's agents, employees or
invitees, or by reason of the failure of Subtenant to perform or comply with
any terms, conditions or
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<PAGE> 24
covenants in this Sublease, or caused by alterations made by Subtenant or by
Subtenant's agents, employees or contractors, which shall be Subtenant's
responsibility.
(ii) Subtenant's Obligations. Subtenant shall at
all times and at its own expense clean, keep and maintain in good, safe and
sanitary order, condition and repair every part of the Premises which is not
within Sublandlord's obligation pursuant to Subsection 17(a).(1). Subtenant's
repair and maintenance obligations shall include, without limitation, fixtures,
interior walls, floors, ceilings, interior and exterior windows, (except where
damage or breakage to exterior windows is caused by Sublandlord or
Sublandlord's agents, employees or contractors, in which case it shall be
Sublandlord's obligation), doors, entrances, showcases, skylights, all
electrical facilities and equipment, electrical motors and all other appliances
and equipment of every kind and nature located in, upon or about the Premises,
(including lighting fixtures, lamps, fans and any exhaust equipment and
systems), which are installed by Subtenant or by Sublandlord for Subtenant's
use. All glass is at the sole risk of Subtenant, and any broken glass shall
promptly be replaced by Subtenant at Subtenant's expense with glass of the same
kind, size and quality, provided that the damage to the glass was not caused by
the negligence of Sublandlord.
b. Common Areas.
(i) Sublandlord's Obligations. Sublandlord shall
maintain the Common Areas. Sublandlord at all times shall have exclusive
control of the Common Areas and may at any time temporarily close any part
thereof, and consistent therewith, temporarily exclude and restrain anyone from
any part thereof, except the bona fide customers, employees and invitees of
Subtenant who use the Common Areas in accordance with the rules and regulations
as Sublandlord may from time to time promulgate, and may change the
configuration or location of the Common Areas. Sublandlord shall restrict
temporary closures of the Common Areas to closures necessitated by good cause,
including (but not limited to) the necessity to make repairs to or clean the
Common Areas. In exercising any such rights, Sublandlord shall make a
reasonable effort to minimize any disruption of Subtenant's business and shall
(except in the event of an emergency or minor interruption) give twenty- four
(24) hours written notice thereof to Subtenant.
18. Damage or Destruction.
a. Sublandlord's obligation to Rebuild. If the Building
is substantially damaged or destroyed, Sublandlord shall promptly and
diligently repair the Building unless (i) Landlord has the option to terminate
the Prime Lease and
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<PAGE> 25
elects to terminate the Prime Lease or (ii) Sublandlord or Subtenant has the
option to terminate this Sublease as provided herein, and Sublandlord or
Subtenant elects to so terminate.
b. Right to Terminate. Sublandlord and Subtenant each
shall have the option to terminate this Sublease if the Building is
substantially damaged or destroyed by fire or other casualty, regardless of
whether the casualty is insured against under this Sublease, if Sublandlord
reasonably determines that the repair of the Building cannot be completed
within six (6) months after a building permit for repair of the Building is
available. If a party desires to exercise the right to terminate this Sublease
as a result of a casualty, the party shall exercise the right by giving the
other party written notice of its election to terminate within sixty (60) days
after the damage or destruction, in which event this Sublease shall terminate
sixty (60) days after the date of the notice. If neither Sublandlord nor
Subtenant exercises the right to terminate this Sublease, Sublandlord shall
promptly commence the process of obtaining necessary permits and approvals, and
shall commence repair of the Building as soon as practicable and thereafter
prosecute the repair diligently to completion, in which event this Sublease
shall continue in full force and effect, except that in the event repairs are
not materially completed within the above referenced six (6) month period,
Subtenant shall have the option to terminate this Sublease.
c. Limited Obligation to Repair. Sublandlord's
obligation, should Sublandlord elect or be obligated to repair or rebuild,
shall be limited to replacement of the Building to its condition immediately
prior to the damage or destruction. Subtenant, at its option and expense,
shall replace or fully repair all trade fixtures and equipment existing as of
the Sublease Commencement Date or installed by Subtenant, existing at the time
of the damage or destruction.
d. Abatement of Rent. In the event of any damage or
destruction to the Building which does not result in termination of this
Sublease, the Base Rent shall be temporarily abated proportionately to the
degree the Premises are untenantable as a result of the damage or destruction,
commencing from the date of the damage or destruction and continuing during the
period required by Sublandlord to substantially complete its repair and
restoration of the Premises and obtain a Temporary Certificate of occupancy;
provided, however, that nothing herein shall preclude Sublandlord from being
entitled to collect the full amount of any rent loss insurance proceeds.
Subtenant shall not be entitled to any compensation or damages from Sublandlord
for loss of the use of the Premises, damage to Subtenant's personal property or
any inconvenience occasioned by any
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damage, repair or restoration. Subtenant hereby waives the provisions of
section 1932, Subdivision 2, and Section 1933, Subdivision 4, of the California
Civil Code, and the provisions of any similar law hereafter enacted.
e. Damage Near End of Term and Extensive Damage. In
addition to the rights to termination under Subsection 18(b), either
Sublandlord or Subtenant shall have the right to cancel and terminate this
Sublease as of the date of the occurrence of destruction or damage if the
Building is substantially destroyed or damaged (ie., there is damage or
destruction which Sublandlord determines would require more than six (6) months
to repair) and made untenantable during the last twelve (12) months of the
Sublease Term. Sublandlord or Subtenant shall give notice of its election to
terminate this Sublease under this Subsection 18(e) within thirty (30) days
after Sublandlord determines that the damage or destruction would require more
than six (6) months to repair. If neither Sublandlord nor Subtenant elects to
terminate this Sublease, the repair of the damage shall be governed by
Subsection 18(a) or 18(b), as the case may be.
f. Insurance Proceeds. If this Sublease is terminated,
Sublandlord may keep all the insurance proceeds resulting from the damage,
except for those proceeds which specifically insured Subtenant's personal
property and trade fixtures.
19. Eminent Domain.
If all or any part of the Project, Building or Premises is the
subject of an actual proceeding to effect the taking for public or quasi-public
use by a governmental authority under the power of eminent domain or is
conveyed to a governmental authority in lieu of such taking, and if the taking
or conveyance causes the remaining part of the Premises to be untenantable and
inadequate for use by Subtenant for the purpose for which they were leased,
then Subtenant, at its option and by giving notice within thirty (30) days
following the later of the filing or service of the Complaint in eminent
domain, may terminate this Sublease only as of the date Subtenant is required
to surrender possession of the Premises. If a part of the Premises is taken or
conveyed but the remaining part is tenantable and adequate for Subtenant's use,
then this Sublease shall be terminated as to the part taken or conveyed as of
the date Subtenant surrenders possession; Sublandlord shall make such repairs,
alterations and improvements as may be necessary to render the part not taken
or conveyed tenantable; and the Rent shall be reduced in proportion to the
part of the Premises taken or conveyed. All compensation awarded for the
taking or conveyance shall be the property of Sublandlord without any
deduction therefrom for any estate of Subtenant, and Subtenant hereby assigns
to Sublandlord all its right, title
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<PAGE> 27
and interest in and to the award. Subtenant shall have the right, however, to
recover from the governmental authority, but not from Sublandlord, such
compensation as may be awarded to Subtenant on account of the interruption of
Subtenant's business, its goodwill, moving and relocation expenses and removal
of and/or damage to Subtenant's trade fixtures and personal property.
20. Indemnity and Insurance.
a. Indemnity. Subtenant shall be responsible for, shall
insure against, and shall indemnify Landlord, Sublandlord and their constituent
parts and hold them harmless from any and all liability for any loss, damage or
injury occurring in, on or about the Premises, or to any property in connection
therewith, or attributable to any actions or omissions of Subtenant, its
employees, agents or contractors occurring in or about the Project or the
Building and Subtenant hereby releases Landlord, Sublandlord and their
constituent parts from any and all liability for the same. Subtenant's
obligation to indemnify Landlord, Sublandlord and their constituent parts
hereunder shall include the duty to defend against any claims asserted by
reason of any loss, damage or injury, and to pay any judgments, settlements,
costs, fees and expenses, including attorneys' fees, incurred in connection
therewith. Sublandlord shall be responsible for, shall insure against, and
shall indemnify Subtenant and hold it harmless from, any and all liability for
loss, damage or injury to person or property occurring in, on or about the
Project, Building or Premises which are the result of the negligence or willful
misconduct of Sublandlord or its agents, and Sublandlord hereby releases
Subtenant from any and all liability for the same including Subtenant's
indemnity contained in this Subsection 20(a).
b. Insurance. At all times during the Sublease Term,
Subtenant shall carry, at its own expense, for the protection of Subtenant,
Landlord, Sublandlord, and Sublandlord's management agents, as their interests
may appear, one or more policies of comprehensive general public liability and
property damage insurance, issued by one or more insurance companies acceptable
to Sublandlord, with minimum coverages of One Million Dollars ($1,000,000.00)
for injury to one person in any one accident, Three Million Dollars
($3,000,000.00) for injuries to more than one person in any one accident and
Two Million Dollars ($2,000,000.00) in property damage per accident and
insuring against any and all liability for which Subtenant is responsible under
this Sublease. The insurance policy or policies shall name Landlord,
Sublandlord and Sublandlord's management agents as additional insureds, and
shall provide that the policy or policies may not be cancelled on less than
thirty (30) days' prior written notice to Sublandlord. Subtenant shall furnish
Sublandlord with certificates evidencing the insurance. If
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<PAGE> 28
Subtenant fails to carry the insurance and furnish Sublandlord with
Certificates of such insurance after a request to do so, Sublandlord shall have
the right to obtain the insurance and collect the cost thereof from Subtenant
as additional Rent.
21. Assignment and Subletting.
a. Terms of Prime Lease. Subtenant shall not have the
right to further sublet all or any portion of the Premises, except as provided
in this Sublease and in accordance with the Prime Lease.
b. Sublandlord's Consent. In addition to complying with
the terms of the Prime Lease, Subtenant shall not assign, further sublet or
otherwise transfer (collectively, "sublet") all or any of the Premises without
Sublandlord's prior written consent, which consent shall not be unreasonably
withheld or delayed. Sublandlord and Subtenant agree that Sublandlord shall be
deemed reasonable in withholding its consent if (i) the proposed sublet could
result in all or any portion of the Premises being occupied by (A) one or more
governmental agencies (foreign or domestic) or (B) entities which Sublandlord
deems, in its sole discretion, to be competitors of Sublandlord or (ii) the
sublet could result in Hazardous Materials being used, stored or discharged
within the Project. Consent by Sublandlord to one sublet shall not be deemed
to be a consent to any subsequent sublet.
c. Effect of Sublet. Each sublet for which Sublandlord
consent is required shall be by an instrument in writing, satisfactory to
Sublandlord as evidenced by Sublandlord's written approval. Each Subtenant
shall agree in writing, for the benefit of Sublandlord, to assume, to be bound
by and to perform the terms, conditions and covenants of this Sublease to be
performed by Subtenant. Subtenant shall not be released from liability for the
performance of each term, condition and covenant of this Sublease, and
Sublandlord shall have the right to proceed against Subtenant without
proceeding against any Subtenant. In the event Sublandlord agrees to accept
the sublet and expressly releases Subtenant from the terms, conditions and
covenants of this Sublease, then Subtenant shall be released from all liability
for the performance of the terms, conditions and covenants of this Sublease
with respect to the particular sublet.
d. Information to be Furnished. If Subtenant desires to
enter into a sublet for which Sublandlord's consent is required, Subtenant
shall first notify Sublandlord of its desire to do so and shall submit in
writing to Sublandlord: (i) the name of the proposed Subtenant; (ii) the nature
of the proposed Subtenant's business to be carried on
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in the Premises; and (iii) the terms and provisions of the proposed sublease.
e. Sublandlord's Election. At any time within ten (10)
days after Sublandlord's receipt of the information specified in Subsection
21(d), Sublandlord may, by written notice to Subtenant, elect either (i) to
consent to the sublet by Subtenant; or (ii) to refuse its consent to the
sublet. If Sublandlord fails to elect either of the alternatives within the
ten (10) day period, it shall be deemed that Sublandlord has consented to the
sublet. If Sublandlord refuses its consent, Sublandlord shall deliver to
Subtenant a statement of the basis for its refusal. Any attempted sublet
without Sublandlord's consent shall not be effective.
f. Payment Upon Sublet. If Sublandlord consents to the
sublet, Subtenant may thereafter enter into a valid sublet of the Premises or
portion thereof, upon the terms and conditions set forth in the information
furnished by Subtenant to Sublandlord pursuant to Subsection 21(d), subject to
the condition that fifty percent (50%) of any excess of the monies due to
Subtenant under the sublet ("subrent") over the Rent required to be paid by
Subtenant hereunder shall be paid to Sublandlord. The calculation of such
excess monies shall include an offset for the reasonable costs Subtenant
actually expends in subletting the Premises, including broker's commissions and
advertising and tenant improvements required by the subletting. Any subrent to
be paid to Sublandlord pursuant hereto shall be payable to Sublandlord as and
with the Base Rent payable to Sublandlord hereunder pursuant to the terms of
Section 8. The term "subrent" as used herein shall include any consideration of
any kind received, or to be received, by Subtenant from Subtenant's subtenant,
if the sums are substantially related to Subtenant's interest in this Sublease
or in the Premises, including, without limitation, bonus money, and payments
(in excess of fair market value thereof) for Subtenant's assets, fixtures,
inventory, equipment, furniture and alterations of the Premises.
g. Executed Counterparts. No sublet shall be valid nor
shall any Subtenant take possession of the Premises until an executed
counterpart of the sublease has been delivered to Sublandlord and approved in
writing.
h. Permitted Assignment. Notwithstanding anything to
the contrary in Section 21 of the Sublease, Subtenant may assign this Sublease,
or sublet the Premises, without Sublandlord's or Landlord's consent to any of
the following: (1) any corporation or other entity which controls, is
controlled by, or is under common control with Subtenant; or (2) any
corporation, partnership, other entity or person which acquires Subtenant by
merger, or acquires a controlling
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<PAGE> 30
interest in the corporate stock of Subtenant or acquires substantially all of
the assets of Subtenant as a going concern of the business that is being
conducted on the Premises, provided that in either of (1) or (2) above, that
said assignee or sublessee subject to the terms of this Sublease assumes in
full the obligations of Subtenant under the Sublease and in case of (2) above,
the acquiring entity has a net worth at least 2 times that of Subtenant at the
time of the merger or acquisition or at the date of this Sublease, whichever
net worth is greater.
22. Default.
a. Subtenant's Default. At the option of Sublandlord, a
material breach of this Sublease by Subtenant shall exist if any of the
following events (severally, "Event of Default"; collectively, "Events of
Default") shall occur: (i) if, within ten (10) days after receipt of notice
from Sublandlord, Subtenant shall have failed to pay rent (including Base Rent,
Sublease Expenses, or any other sum required to be paid hereunder) when due,
together with interest at the Interest Rate, from the date the amount became
due through the date of payment, inclusive; (ii) if Subtenant shall have failed
to perform any term, covenant or condition of this Sublease except those
requiring the payment of money, and Subtenant shall have failed to cure the
breach within thirty (30) days after written notice from Sublandlord if the
breach could reasonably be cured within the thirty (30) day period; provided,
however, if the failure could not reasonably be cured within the thirty (30)
day period, then Subtenant shall not be in default unless it has failed to
promptly commence and thereafter continue to make diligent and reasonable
efforts to cure the failure as soon as practicable as reasonably determined by
Sublandlord; (iii) if Subtenant shall have assigned its assets for the benefit
of its creditors; (iv) if the sequestration of, attachment of, or execution on,
any material part of the property of Subtenant or on any property essential to
the conduct of Subtenant's business shall have occurred, and Subtenant shall
have failed to obtain a return or release of property within thirty (30) days
thereafter, or prior to sale pursuant to any sequestration, attachment or levy,
whichever is earlier; (v) if a court shall have made or entered any decree or
order adjudging Subtenant to be insolvent, or approving as properly filed a
petition seeking reorganization of Subtenant, or directing the winding up or
liquidation of Subtenant, and the decree or order shall have continued for a
period of thirty (30) days; (vi) if Subtenant shall make or suffer any transfer
which constitutes a fraudulent or otherwise avoidable transfer under any
provision of the federal Bankruptcy Laws or any applicable state law; or (vii)
if Subtenant shall have failed to comply with the provisions of Section 23(a).
An Event of Default shall constitute a default under this Sublease.
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b. Remedies Upon Subtenant's Default. Upon an Event of
Default, Sublandlord shall have the following remedies, in addition to all
other rights and remedies provided by law, equity, statute or otherwise
provided in this Sublease, to which Sublandlord may resort cumulatively or in
the alternative:
(i) Sublandlord may continue this Sublease in
full force and effect, and this Sublease shall continue in full force and
effect as long as Sublandlord does not terminate Subtenant's right to
possession, and Sublandlord shall have the right to collect Rent when due.
During the period Subtenant is in default, Sublandlord may enter the Premises
and relet it, or any part of it, to third parties for Subtenant's account,
provided that any Rent in excess of the Rent due hereunder shall be payable to
Sublandlord. Subtenant shall be liable immediately to Sublandlord for all
reasonable costs Sublandlord incurs in reletting the Premises, including,
without limitation, brokers' commissions, expenses of cleaning and redecorating
the Premises required by the reletting and like costs. Reletting may be for a
period shorter or longer than the remaining Sublease Term. Subtenant shall pay
to Sublandlord the Rent and other sums due under this Sublease on the dates the
Rent is due, less the Rent and other sums Sublandlord receives from any
reletting. No act by Sublandlord allowed by this Subsection (i) shall
terminate this Sublease unless Sublandlord notifies Subtenant in writing that
Sublandlord elects to terminate this Sublease.
(ii) Sublandlord may terminate Subtenant's right
to possession of the Premises at any time by giving written notice to that
effect. No act by Sublandlord other than giving written notice to Subtenant
shall terminate this Sublease. Acts of maintenance, efforts to relet the
Premises or the appointment of a receiver on Sublandlord's initiate to protect
Sublandlord's interest under this Sublease shall not constitute a termination
of Subtenant's right to possession. On termination, Sublandlord shall have the
right, after not less than ten (10) days notice to Subtenant, to remove all
personal property of Subtenant and store it at Subtenant's cost and to recover
from Subtenant as damages: (a) the present worth at the time of award of unpaid
Rent and other sums due and payable which had been earned at the time of
termination; plus (b) the present worth at the time of award of the amount by
which the unpaid Rent and other sums due and payable which would have been
payable after termination until the time of award exceeds the amount of Rent
loss that Subtenant proves could have been reasonably avoided; plus (c) the
present worth at the time of award of the amount by which the unpaid Rent and
other sums due and payable for the balance of the Term after the time of award
exceeds the amount of the Rent loss that
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<PAGE> 32
Subtenant proves could be reasonably avoided; plus (d) any other reasonable
amount necessary to compensate Sublandlord for all the detriment proximately
caused by Subtenant's failure to perform Subtenant's obligations under this
Sublease, or which, in the ordinary course of things, would be likely to result
therefrom, including, without limitation, any costs or expenses incurred by
Sublandlord: (1) in retaking possession of the Premises, including reasonable
attorneys' fees and costs therefor; (2) maintaining or preserving the Premises
for reletting to a new tenant, including repairs or alterations to the Premises
for the reletting; (3) leasing commissions; (4) any other costs necessary or
appropriate to relet the Premises; and (5) at Sublandlord's election, such
other amounts in addition to or in lieu of the foregoing ads may be permitted
from time to time by the laws of the State of California.
The "present worth at the time of award" of the amounts
referred to in Subsections (ii)(a) and (ii)(b) is computed by allowing interest
at the lesser of twelve percent (12%) per annum or the maximum rate permitted
by law, on the unpaid Rent and other sums due and payable from the termination
date through the date of award. The "present worth at the time of award" of
the amount referred to in Subsection (ii)(c) is computed by discounting the
amount at the prime rate of the Bank of America at the time of award.
Subtenant waives redemption or relief from forfeiture under California Code of
Civil Procedure Sections 1174 and 1179, or under any other present or future
law, if Subtenant is evicted or Sublandlord takes possession of the Premises by
reason of any default of Subtenant hereunder.
c. Sublandlord's Default. Sublandlord shall not be
deemed to be in default in the performance of any obligation required to be
performed by Sublandlord hereunder unless and until Sublandlord has failed to
perform the obligation within thirty (30) days after receipt of written notice
by Subtenant to Sublandlord specifying wherein Sublandlord has failed to
perform the obligation; within thirty (30) days after receipt of written notice
by Subtenant to Sublandlord specifying wherein Sublandlord has failed to
perform the obligation; provided, however, that if the nature of Sublandlord's
obligation is such that more than thirty (30) days are required for its
performance, then Sublandlord shall not be deemed to be in default if
Sublandlord shall commence the performance within the thirty (30) day period
and thereafter shall diligently prosecute the same to completion.
Notwithstanding the foregoing, if Sublandlord has failed to perform its
obligation, during Standard Business Hours, under this Sublease relating to the
provision of essential services, including electricity, heat, air conditioning,
HVAC, water and/or elevators, Sublandlord shall be deemed to be in default if
it fails to perform these obligations or fails to commence such repairs as may
be
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required to perform these obligations within five (5) business days after
receipt of written notice from Subtenant.
23. Sublandlord's Right to Perform Subtenant's Covenants.
a. If Subtenant shall at any time fail to make any
payment or perform any other act on its part to be made or performed under this
Sublease, Sublandlord may, but shall not be obligated to, make the payment or
perform any other act to the extent Sublandlord may deem desirable and, in
connection therewith, pay expenses and employ counsel. Except in the event of
an emergency or a risk of injury to occupants or invitees to the Project,
Sublandlord shall give Subtenant not less than thirty (30) days advance notice
prior to making a payment or performing an act upon Subtenant's failure. Any
payment or performance by Sublandlord shall not waive or release Subtenant from
any obligations of Subtenant under this Sublease. All sums so paid by
Sublandlord, and all penalties, interest and costs in connection therewith,
shall be due and payable by Subtenant three (3) days after presentation by
Sublandlord to Subtenant of the itemized amounts due, together with interest
thereon at the interest Rate, from that date to the date of payment thereof by
Subtenant to Sublandlord, plus collection costs and attorneys' fees.
Sublandlord shall also have the same rights and remedies for the nonpayment
thereof as in the case of default in the payment of Rent.
b. Sublandlord's Default Under the Prime Lease.
Sublandlord represents and warrants to Subtenant that it is not in default
under the Prime Lease and has received no notice of default. Should
Sublandlord or its assigns breach or default under the Prime Lease, then
Sublandlord shall provide written notice of the breach or default to Subtenant
within five days from the date of the breach or default. The notice shall set
forth and briefly explain the nature of the breach or default. Sublandlord
shall indemnify and hold harmless Subtenant from any liability, loss, claim,
cost, expense or damage incurred by Subtenant, including reasonable attorneys
fees, which results from such a breach or default.
24. Security Deposit.
There shall be a security deposit in the amount of Eleven Thousand
Five Hundred and 00/100 Dollars ($11,500.00) required to be paid by Subtenant
prior to occupancy or in lieu thereof Subtenant may provide Sublandlord in the
form attached hereto as Exhibit G an irrevocable letter of credit for the
Sublease term. Upon written request of Subtenant after twelve (12) months from
the Commencement Date, Sublandlord shall review Subtenant's payment history and
financial condition and make a determination, in its sole and
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absolute discretion, as to whether a release of all or any part of Subtenant's
security deposit is appropriate. Sublandlord shall notify Subtenant of its
decision within thirty (30) days after receipt of Subtenant's request.
25. Tenant Improvement Allowance.
a. Amount of Tenant Improvement Allowance. Upon
execution of this Sublease, Subtenant shall become entitled to an allowance in
the amount of Five Dollars and 00/100 ($5.00) per rentable square foot as a
tenant improvement allowance ("Tenant Improvement Allowance"). Any amount over
the Tenant Improvement Allowance (up to an additional $45,000.00) will at the
option of Subtenant on or before the Sublease Commencement Date be amortized
onto the rental rate at ten percent (10%) annual interest over the Sublease
Term or be paid in cash. This Amount will be the "Overstandard Tenant
Improvement Allowance." Any cost exceeding the Tenant Improvement Allowance
plus the Overstandard Tenant Improvement Allowance will be paid in cash by
Subtenant to Sublandlord on the Sublease Commencement Date. Provided Subtenant
does not make any changes to the Tenant Improvement Work set forth in Exhibit H
that would increase costs or delay completion, Sublandlord agrees that the cost
for such work will not exceed the Tenant Improvement Allowance plus $43,000.00.
b. Use of Tenant Improvement Allowance. The Tenant
Improvement Allowance shall be used solely by Sublandlord to pay for tenant
improvement costs, working drawings, permits, engineering and design fees,
moving costs, installation of data and telecommunications wiring, security
systems and other tenant fixtures (which shall be immovable and shall not
include personal property) as outlined in Exhibit H.
c. Furniture. Sublandlord shall contribute furniture
work stations as outlined in the preliminary space plan and shown on Exhibit I,
at no additional cost to the Subtenant. Cost of reconfiguration of the
furniture system, in addition to the preliminary plan will be a separate line
item in the total tenant improvement costs. Subtenant can either amortize the
full amount or pay the full amount in cash.
26. Tenant Improvement Work.
a. Construction By Subtenant. Subject to the terms of
the Prime Lease and this Subsection, Sublandlord will construct for Subtenant
the Tenant Improvement Work outlined in Exhibit H by November 21, 1992. The
demolition of the existing tenant improvements and the construction of the
replacement Tenant Improvements is hereinafter referred to as the "Tenant
Improvement Work." All plans and
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specifications and related documents for the Tenant Improvement Work shall be
subject to Sublandlord's prior written approval, which approval shall not be
unreasonably withheld or delayed. Sublandlord shall have the right to charge
Subtenant a fee of Five Thousand Dollars ($5,000.00) for Sublandlord's approval
and supervision of the Tenant Improvement Work. Sublandlord agrees to perform
all Tenant Improvements in a workmanlike manner. If for reasons other than
force majeure, the Tenant Improvement Work in the portion of the Premises
comprising approximately 2,488+/- rentable square feet as shown in Exhibit H is
not completed by November 20, 1992 (except for punch list items), Sublandlord
shall permit Subtenant to occupy the Premises at a Base Rent of $7,950.00 per
month (prorated on a daily basis) for the number of days commencing November
23, 1992 until the Premises are so completed (the "Reduced Rent Period"). This
Reduced Rent Period shall commence on the date the Tenant Improvement Work is
completed.
b. Punch List Items. Within seven (7) days after
Sublandlord has completed the Tenant Improvement Work with respect to the area
shown on Exhibit H comprising approximately 6,000 rentable square feet of the
Premises, and so advised Subtenant in writing, Subtenant shall deliver to
Sublandlord a list of *punch list" items required to be completed in such
portion of the Premises. Sublandlord shall proceed diligently to promptly
correct such items. Sublandlord and Subtenant shall follow the same procedure
for punch list items after Sublandlord advises Subtenant in writing that the
Tenant Improvement Work has been completed for the balance of the Premises. If
Subtenant does not advise Sublandlord within such seven (7) day period,
Subtenant shall be deemed to have fully accepted the Premises or the applicable
portion thereof.
27. Surrender of Premises.
a. Condition. On the expiration or earlier termination
of this Sublease, Subtenant shall surrender the Premises to Sublandlord in its
condition as of the Sublease Commencement Date, normal wear and tear,
condemnation, casualty and Acts of God excepted.
b. Removal. Subtenant shall remove from the Premises
any free standing HVAC systems. Subtenant also shall remove all of Subtenant's
personal property, trade fixtures and any alterations required to be removed
pursuant to Section 16. Subtenant shall repair material damage or perform any
material restoration work required by the removal. If Subtenant fails to
remove any personal property, trade fixtures or alterations after the end of
the Term, Sublandlord may remove the property and store it at Subtenant's
expense, including interest at the Interest Rate.
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c. Indemnity for Sublease. If the Premises are not so
surrendered at the expiration or earlier termination of this Sublease,
Subtenant shall indemnify Sublandlord against all loss or liability resulting
from delay by Subtenant in so surrendering the Premises.
d. Removal of Hazardous Materials. Subtenant shall
remove from the Premises, in accordance with all applicable laws and
regulations, any Hazardous Materials used by or placed on the Premises by
Subtenant during the term of this Sublease and all the materials listed on
Exhibit M.
28. Holding Over.
If Subtenant remains in possession of all or any part of the
Premises after the expiration of the Sublease Term or the termination of this
Sublease, the tenancy shall be month-to-month only and shall not constitute a
renewal or extension for any further term. In such event, Base Rent shall be
increased in an amount equal to one hundred fifty percent (150%) of the Base
Rent during the last month of the Sublease Term, and any other sums due under
this Sublease shall be payable in the amount, and at the times, specified in
this Sublease. The month-to-month tenancy shall be subject to every other
term, condition, covenant and agreement contained in this Sublease and
Subtenant shall vacate the Premises within thirty (30) days after receipt of
notice from Sublandlord requesting Subtenant to vacate.
29. Access to Premises.
Except in the event of an emergency (during which an agent or
employee of Subtenant need not be present and notice need not be given)
Sublandlord or Sublandlord's agents shall enter the Premises only when an agent
or employee of Subtenant is present at the Premises and only upon twenty-four
(24) hours prior notice to Subtenant. Notwithstanding the foregoing,
Sublandlord may enter the Premises when requested by Subtenant, its employees
or agents, without regard to whether an agent or employee of Subtenant is
present at the Premises. Subtenant shall use all reasonable efforts to make
sure that an agent or employee of Subtenant is present at the Premises at all
times during normal business hours and at times other than normal business
hours upon twenty-four (24) hours prior notice from Sublandlord. Sublandlord's
entry may be for the purpose of inspecting the Premises; posting Notices of
Nonresponsibility and similar notices; showing the Premises to interested
parties such as prospective mortgagors, purchasers and tenants of the Building
or, during the nine (9) month period prior to the Expiration Date, prospective
Subtenants of the Premises; making necessary alterations, additional,
improvements or repairs to the Premises; and discharging Subtenant's
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obligations hereunder when Subtenant has failed to do so within a reasonable
time after written notice from Sublandlord. The above rights are subject to
reasonable security regulations of Subtenant, and to the requirement that
Sublandlord shall at all times act in a manner to cause the least possible
interference with Subtenant's operations.
30. Signs and Logos.
a. Directory Lobby Signage. Sublandlord shall provide
Subtenant with directory lobby signage, and Subtenant's sign on Subtenant's
door within the Building.
b. Limitation. The size, design, color, location and
other physical aspects of any sign of Subtenant within the Project shall be
subject to (i) the CC&Rs, (ii) the AT&T Center Rules, (iii) Landlord's and
Sublandlord's approval prior to installation, and (iv) the receipt of any
appropriate municipal or other governmental approvals.
c. Costs. The costs of any permitted sign or logo and
the costs of its installation, maintenance and removal, shall be borne by
Subtenant.
31. Waiver of Subrogation.
Anything in this Sublease to the contrary notwithstanding,
Sublandlord and Subtenant each hereby waives and releases the other from any
and all rights of recovery, claim, action or cause of action against the other,
its subsidiaries, directors, agents, officers and employees, for any loss or
damage that may occur in the Premises, the Building, or the Project; to
improvements to the Premises or personal property (building contents) within
the Premises; or to any furniture, equipment, machinery, goods and supplies not
covered by this Sublease, which Subtenant may bring or obtain upon the Premises
or any additional improvements which Subtenant may construct on the Premises by
reason of fire, the elements or any other cause which is required to be insured
against under this Sublease, regardless of cause or origin, including
negligence of Sublandlord or Subtenant and their agents, subsidiaries,
directors, officers and employees, to the extent insured against under the
terms of any insurance policies carried by Sublandlord or Subtenant and in
force at the time of any such damage, but only if the insurance in question
permits such a partial release in connection with obtaining a waiver of
subrogation from the insurer and only to the extent insurance proceeds are
received by the affected party. Because this Section will preclude the
assignment of any claim mentioned in it by way of subrogation or otherwise to
an insurance company or any other person, each party to this Sublease agrees
immediately to give to each insurance company written notice of the terms of
the mutual waivers contained in this Section and to have
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<PAGE> 38
the insurance policies property endorsed, if necessary, to prevent the
invalidation of the insurance coverages by reason of the mutual waivers
contained in this Section.
32. Attornment by Subtenant.
Subtenant, at Landlord's option, shall attorn to Landlord and
waive any rights it may have to terminate this Sublease or to surrender
possession thereunder as a result of termination of the Prime Lease.
33. Subordination.
a. Subordinate Nature. In addition to being subordinate
to the Prime Lease, this Sublease is subject and subordinate to all ground and
underlying leases, mortgages and deeds of trust which now or may hereafter
affect the Property, the Building, the Premises or the Project, to the CC&Rs,
and to all renewal, modifications, consolidations, replacements and Extensions
thereof. Within fifteen (15) days after Landlord's or Sublandlord's written
request therefor, Subtenant shall execute any and all documents required by
Landlord, Sublandlord, the lessor under any ground or underlying lease
("Lessor"), or the holder or holders of any mortgage or deed of trust
("Holder") to make this Sublease subordinate to the lien of any lease, mortgage
or deed of trust, as the case may be.
b. Possible Priority of Sublease. If a Lessor or a
Holder advises Sublandlord that it desires or requires this Sublease to be
prior and superior to a lease, mortgage or deed of trust, Sublandlord may
notify Subtenant. Within fifteen (15) days after Sublandlord's notice,
Subtenant shall execute, have acknowledged and deliver to Sublandlord any and
all documents or instruments, in the form presented to Subtenant, which
Sublandlord, Lessor or Holder deems necessary or desirable to make this
Sublease prior and superior to the lease, mortgage or deed of trust.
c. Recognition or Attornment Agreement. If Lessor,
Holder or Landlord requests subtenant to execute a document subordinating
this Sublease, the document shall provide that, so long as Subtenant is not in
default, Lessor, Holder or Landlord shall agree to enter into either a
recognition or attornment agreement with Subtenant, or a new lease with
Subtenant upon the same terms and conditions as to possession of the Premises,
which shall provide that Subtenant may continue to occupy the premises so long
as Subtenant shall pay the Rent and observe and perform all the provisions of
this Sublease to be observed and performed by Subtenant.
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34. Transfer of the Property.
Upon Sublandlord transferring its interest in the Premises and
assigning this Sublease and such transferee's assumption in full of
Sublandlord's obligations under this Sublease, Sublandlord shall be entirely
freed and relieved of all liability under any and all of its covenants and
obligations contained in or derived from this Sublease occurring after the
consummation of the transfer and assignment. Subtenant shall attorn to any
entity purchasing or otherwise acquiring Sublandlord's interest in the Premises
at any sale or other proceeding.
35. Estoppel Certificates.
a. Obligation to Provide. Subject to the provisions of
Subsection 35(b), within twenty (20) days following written request by
Sublandlord, Subtenant shall execute and deliver to Sublandlord an estoppel
certificate, in the form prepared by Sublandlord. The certificate shall: (i)
certify that this Sublease is unmodified and in full force and effect or, if
modified, state the nature of the modification and certify that this Sublease,
as so modified, is in full force and effect, and the date to which the Rent and
other charges are paid in advance, if any; (ii) acknowledge that there are not,
to Subtenant's knowledge, any uncured defaults on the part of Sublandlord
hereunder, or if there are uncured defaults on the part of the Sublandlord,
state the nature of the uncured defaults; and (iii) evidence the status of the
Sublease as may be required either by a lender making a loan to Sublandlord (or
Landlord) to be secured by deed of trust or mortgage covering the Premises or a
purchaser of Landlord's or Sublandlord's interest in the Premises.
b. Frequency. Sublandlord shall not request more than
three (3) different estoppel certificates from Subtenant within any one (1)
calendar year.
36. Mortgagee Protection.
In the event of any default on the part of Sublandlord,
Subtenant will give notice by registered or certified mail to any beneficiary
of a deed of trust or mortgagee of a mortgage covering all or any portion of
the Project (whose names and addresses Sublandlord shall have provided to
Subtenant) and shall offer the beneficiary or mortgagee a reasonable
opportunity to cure the default, including time to obtain possession of all or
any portion of the Project by power of sale or a judicial foreclosure, if such
should prove necessary to effect a cure.
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37. Attorneys' Fees.
If either party shall bring any action or legal proceeding for
damages for an alleged breach of any provision of this Sublease, to recover
Rent or other sums due, to terminate the tenancy of the Premises or to enforce,
protect or establish any term, condition or covenant of this Sublease or right
of either party, the prevailing party shall be entitled to recover, as a part
of this action or proceedings, or in a separate action brought for that
purpose, reasonable attorneys' fees and court costs as may be fixed by the
court or jury. The prevailing party shall be the party which secures a final
judgment in its favor.
38. Brokers.
a. Specified Brokers. Sublandlord and Subtenant warrant
and represent that they have had no dealings with any real estate broker or
agent in connection with the negotiation of this Sublease, except for the
Brokers (i.e., Cushman Realty Corporation and Norris Beggs & Simpson, and that
they know of no other real estate broker or agent who is or might be entitled
to a commission in connection with this Sublease.
b. Indemnity. Subtenant and Sublandlord each shall
indemnify and hold harmless the other from and against any and all liabilities
or expenses arising out of claims made by any broker (other than Brokers) or
individual (other than employees and agents of Brokers) for commissions or fees
resulting from this Sublease. Each party's indemnity shall extend to those
claims which are the result of the activities of the indemnifying party.
39. Parking.
a. General Provisions. Subtenant shall have the right
to park in the Project's parking facilities, exclusive of reserved parking
areas, in common with other tenants of the Project upon terms and conditions as
may from time to time be established by Sublandlord, but in no event shall
Subtenant have a parking ratio less than four (4) spaces per one thousand
(1,000) rentable square feet of the Premises. The parking facilities as of the
date of this Sublease are shown on Exhibit J, attached hereto. There shall be
no charge for any portion of the parking facilities which is not reserved
except for such charges as may be imposed by governmental authorities
consistently applied to all Project tenants and subtenants. Subtenant agrees
not to use in excess of its proportionate share of parking facilities and
agrees to cooperate with Sublandlord and any other tenants in the use of the
parking facilities. Sublandlord reserves the right, in its absolute
discretion, to determine whether the parking facilities are becoming crowded
and to allocate and
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assign parking spaces among Subtenant and the other tenants of the Project.
Sublandlord shall not be liable to Subtenant, nor shall this Sublease be
affected, if any parking is impaired by moratorium, initiative, referendum,
law, ordinance, regulation or order passed, issued or made by any governmental
or quasi-governmental body.
40. Utilities and Services.
a. Right to Terminate. Subtenant shall have the right
to terminate this Sublease if there is a continuous interruption of the
electrical or water service for a period in excess of thirty (30) consecutive
days and the interruption was not the result of the negligence or willful
misconduct of Subtenant or any of Subtenant's employees, agents or invitees.
Subtenant shall exercise its right to terminate this Sublease pursuant to this
Subsection within ten (10) days after the service has been interrupted for
thirty (30) consecutive days. Subtenant shall have the right to abate its
rental obligations under this Sublease commencing on the eighth (8) business
day after, but only after, a continuous interpretation as set forth in this
Section 40.a, which rent abatement shall be until the earlier of the date the
services are substantially restored or the date Subtenant exercises its
termination right pursuant to this Section 40.a.
b. Separate Metering. Provided that Subtenant's
electricity use does not exceed the level of electricity defined in Section
5(b) which is normal for offices operating primarily during Standard Business
Hours, Subtenant shall only be responsible for the cost of electricity usage
during times other than Standard Business Hours. Subtenant shall have the
right, at Subtenant's sole expense, to have the electricity use of the Premises
separately metered or submetered. If Subtenant does have the electricity use
of the Premises separately metered, (i) all the costs of the electricity used
within the Premises shall be paid by Subtenant at the then current prevailing
rate charged by the public utility company and (ii) the Base Year Common Area
Expenses and Base Rent both shall be reduced by the amount attributable to the
electrical services for the Premises provided by Sublandlord during the Base
Year. If Subtenant does not have the electricity use of the Premises
separately metered, Subtenant shall reimburse Sublandlord for all costs of the
electricity used within the Premises during other than standard Business Hours.
41. Quitclaim.
Upon any termination of this Sublease, Subtenant, at
Sublandlord's request, shall execute, have acknowledged and deliver to
Sublandlord a quitclaim deed of all
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Subtenant's interest in the Premises, Building, Land and Project created by
this Sublease.
42. Notices.
Any notice or demand required or desired to be given under
this Sublease shall be in writing and shall be given by hand delivery,
electronic mail (e.g., telecopy), overnight courier or the United States mail.
Notices which are sent by electronic mail or overnight courier shall be deemed
to have been given upon receipt. Notices which are mailed shall be deemed to
have been given when seventy-two (72) hours have elapsed after the notice was
deposited in the United States mail, registered or certified, the postage
prepaid, addressed to the party to be served. As of the date of execution of
this Sublease, the addresses of Sublandlord and Subtenant are as follows:
Sublandlord: AT&T Resource Management Corporation
District Manager Real Estate -- Signature Buildings
222 Mt. Airy Road
Basking Ridge, New Jersey 07920
Subtenant: International Microelectronic Products, Inc.
Vice President-Engineering
2830 North First Street
San Jose, California 95134
Either party may change its address by giving notice of the change in
accordance with this Section.
43. Sublandlord's Exculpation.
In the event of default, breach or violation by Sublandlord
(which term includes Sublandord's partners, co-venturers and co-tenants, and
offices, directors, employees, agents and representatives of Sublandlord and
Sublandlord's partners, co-venturers and co-tenants) of any of Sublandlord's
obligations under this Sublease, Sublandlord's liability to Subtenant shall be
limited to its leasehold interest in the Building or Project. Sublandlord
shall not be personally liable, or liable in any event, for any deficiency
beyond its leasehold interest in the Building and Project.
44. Additional Structures.
Any diminution or interference with light, air or view by any
structure which may be erected on land adjacent to the Building shall in no way
alter this Sublease or impose any liability on Sublandlord.
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45. Confidentiality.
a. General Restrictions. Sublandlord and Subtenant
shall use commercially reasonable efforts to keep the specific economic terms
of this Sublease (including all Exhibits hereto) confidential, and shall not,
without the consent of the other party (which consent the other party may
withhold at its sole discretion), disclose all or any portion of the terms to
any other person or entity. This Section 45 imposes no obligation upon either
party with respect to such economic terms which are or become available to the
public through no fault of such party, its employees, agents or broker.
b. Public Disclosure. Prior to the public disclosure of
any information regarding this Sublease by either party, to the press medium or
otherwise, the party shall obtain the prior written consent of the other party,
which consent may be withheld in the other party's sole discretion.
46. General.
a. Captions. The captions and headings used in this
Sublease are for the purpose of convenience only and shall not be construed to
limit or extend the meaning of any part of this Sublease.
b. Time. Time is of the essence for the performance of
each term, condition and covenant of this Sublease.
c. Severability. If any provision of this Sublease is
held to be invalid, illegal or unenforceable, the invalidity, illegality, or
unenforceability shall not affect any other provision of this Sublease, but
this Sublease shall be construed as if the invalid, illegal or unenforceable
provision had not been contained herein.
d. Choice of Law; Construction. This Sublease shall be
construed and enforced in accordance with the laws of the State of California.
The Language in all parts of this Sublease shall in all cases be construed as a
whole according to its fair meaning and not strictly for or against either
Sublandlord or Subtenant.
e. Gender: Singular, Plural. When the context of this
Sublease requires, the neuter gender includes the masculine, the feminine, a
partnership or corporation or joint venture, and the singular includes the
plural.
f. Binding Effect. The covenants and agreements
contained in this Sublease shall be binding on the parties
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hereto and on their respective successors and assigns (to the extent this
Sublease is assignable).
g. Waiver. The waiver by Sublandlord or Subtenant of
any breach of any term, condition or covenant of this Sublease shall not be
deemed to be a waiver of the provision of any subsequent breach of the same or
any other term, condition or covenant of this Sublease. The subsequent
acceptance of Rent hereunder by Sublandlord shall not be deemed to be a waiver
of any preceding breach at the time of acceptance of the payment. No covenant,
term or condition of this Sublease shall be deemed to have been waived by
Sublandlord unless the waiver is in writing signed by Sublandlord. Similarly,
no covenant, term or condition of this Sublease shall be deemed to have been
waived by Subtenant unless the waiver is in writing signed by Subtenant.
h. Entire Agreement. This Sublease comprises the entire
agreement between the parties, and there are no agreements or representations
between the parties except as expressed herein. Except as otherwise provided
herein, no subsequent change or addition to this Sublease shall be binding
unless in writing and signed by the parties hereto.
i. Counterparts. This Sublease may be executed in
counterparts, each of which shall be an original, but all counterparts shall
constitute one (1) instrument.
j. Exhibits. The Basic Sublease Information and all
exhibits attached hereto are hereby incorporated herein and made an integral
part hereof.
k. Addendum. The Addendum, if any, attached hereto is
hereby incorporated herein and made an integral part hereof.
l. Consent. Except as otherwise specifically provided
in this Sublease, whenever the consent or approval of either party is required
under this Sublease, the consent or approval shall not be unreasonably withheld
or delayed. Except as otherwise specifically provided in this Sublease,
whenever a determination must be made by Sublandlord or Subtenant under this
Sublease, the determination shall be made on a reasonable basis and in a
reasonable manner.
m. Authority. Sublandlord and Subtenant represent and
warrant to each other that they have full right, power and authority to enter
this Sublease without the consent or approval of any entity or person other
than the consent of Rosewood Associates, as set forth on the signature page
hereof and make these representations knowing the other party will rely
thereon.
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IN WITNESS WHEREOF, the parties have executed this Sublease on
the dates set forth below, effective as of the date first above written.
SUBLANDLORD:
AT&T RESOURCE MANAGEMENT
CORPORATION
a New York corporation
By: /s/ T. F. SCHAIBLE
-------------------------------------
For Its: Development Director
--------------------------------
Date: 11/9/92
-----------------------------------
SUBTENANT:
INTERNATIONAL MICROELECTRONIC
PRODUCTS, INC.
a Delaware Corporation
By: /s/ Jerry
-------------------------------------
Its: Vice President
------------------------------------
Date: 30 October 1992
-----------------------------------
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<PAGE> 46
AMENDMENT OF LEASE
This Agreement which is effective as of the 1st day of October, 1991,
is entered by and between Rosewood Associates, a California general partnership
(Landlord) and AT&T Resource Management Corporation, a New York corporation
(AT&T-RMC or Tenant).
This Amendment of Lease is entered on the basis of the following
facts, intentions and understandings of the parties:
A. Whereas, on September 23, 1986, AT&T-RMC entered a lease (the
"Lease"), under which AT&T-RMC was landlord and the American Telephone
and Telegraph Company ("AT&T") was tenant, which lease concerns
certain premises in the Hacienda Business Park, Pleasanton,
California; and
B. Whereas, AT&T-RMC has assigned the interest of landlord under
the Lease to Landlord, a California general partnership comprised of
AT&T-RMC and The Prudential Insurance Company of America; and
C. Whereas, AT&T has assigned the interest of tenant under the
Lease to AT&T-RMC; and
D. Whereas, by reason of the assignment by AT&T, the interest of
AT&T-RMC in the "Lease" is that of tenant; and
E. Whereas, AT&T-RMC desires to sublease portions of the demised
Premises to a Subtenant; and
F. Whereas, the term required in the Sublease to the Subtenant is
greater than AT&T-RMC term in the Building containing the portions of
the demised Premises to be sublet to Subtenant.
<PAGE> 47
NOW, THEREFORE, IN CONSIDERATION of mutual covenants and promises of
the parties, the parties hereto agree as follows:
1. Exhibit G, "EXPIRATION DATE MEMORANDUM" to the Lease is
amended as follows:
(a) The date of "January 17, 1999" shall be substituted for
the date "December 6, 1997" with respect to Building AA, commonly
known as 4410 Rosewood Drive, Hacienda Business Park, Pleasanton,
California; and
(b) The date "February 22, 1998" shall be substituted for the
date "January 17, 1999" with respect to Building DD, commonly known as
4440 Rosewood Drive, Hacienda Business Park, Pleasanton, California.
IN WITNESS WHEREOF, the parties have executed this Amendment of Lease
on the dates set forth below, effective as of the date first above written.
ROSEWOOD ASSOCIATES, a California
General Partnership
By: /s/ Warren
-------------------------------------
Its: Managing Agent
------------------------------------
Date: 12/3/91
-----------------------------------
AT&T RESOURCE MANAGEMENT CORPORATION,
a New York corporation
By: /s/ Stephanie
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For Its: Real Estate Vice President
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Date: 1/3/92
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HACIENDA BUSINESS PARK
ABSOLUTE NET LEASE
Between
AT&T RESOURCE MANAGEMENT CORPORATION
A New York corporation
"Landlord"
and
AMERICAN TELEPHONE & TELEGRAPH COMPANY
a New York corporation
"Tenant"
<PAGE> 49
ABSOLUTE NET LEASE
TABLE OF CONTENTS
<TABLE>
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RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2. Lease of the Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
3. Design and Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
4. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
a. Lease Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
b. Commencement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
c. Required Commencement Date for PBX Facility . . . . . . . . . . . . . . . . . . . . . 6
d. Early Entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
e. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
f. Commencement Date Memorandum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
g. Tenant Delays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
h. Calculation of Tenant Delays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
i. Acceptance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5. Adjustment of Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
a. Adjustment Upon Commencement Date . . . . . . . . . . . . . . . . . . . . . . . . . . 10
b. Expiration Date for Special Purposes Buildings . . . . . . . . . . . . . . . . . . . . 10
c. Effect of Adjustments Upon Extension . . . . . . . . . . . . . . . . . . . . . . . . 10
d. Expiration Date Memorandum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
6. Substitution of Expiration Dates of Buildings . . . . . . . . . . . . . . . . . . . . . . 11
a. Buildings Subject to Substitution . . . . . . . . . . . . . . . . . . . . . . . . . . 11
b. Right to Substitute . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
c. Exercise of Substitution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
d. Restrictions on Substitution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
e. Substitution Date Memorandum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
7. Fixed Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
a. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
b. Amount of Fixed Rent Per Building . . . . . . . . . . . . . . . . . . . . . . . . . . 12
c. Escalation in Fixed Rent-Other Than Basement Space . . . . . . . . . . . . . . . . . . 12
d. No Escalation in Fixed Rent-Basement Space . . . . . . . . . . . . . . . . . . . . . . 12
8. Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
a. Obligation of Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
b. Payment of Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
c. General Rule Regarding Proration of Additional Rent . . . . . . . . . . . . . . . . . 13
d. Real Property Taxes For Land and Assessments... . . . . . . . . . . . . . . . . . . . 13
e. Proration of Real Property Taxes Attributable to Buildings . . . . . . . . . . . . . . 14
f. Proration of Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
g. Items and Manner of Proration Based Solely on Usage . . . . . . . . . . . . . . . . . 14
9. Additional Rent Upon Excess Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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10. Interest Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
a. Payment of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
b. Interest on Delinquent Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
11. Absolute Net Nature of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
a. Rent Absolutely Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
b. No Abatement or Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
c. Waiver of Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
d. Exceptions to Absolute Net Nature . . . . . . . . . . . . . . . . . . . . . . . . . . 17
12. Security Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
13. Property Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
a. Property Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
b. Definition of Property Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
c. Definition of Assessments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
d. Assessment Districts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
e. Tenant's Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
f. Limitation on Tenant's Obligations
For Assessment District Liens . . . . . . . . . . . . . . . . . . . . . . . . . 19
g. Landlord's Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
h. Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
i. Removal of Project From Tax Rolls . . . . . . . . . . . . . . . . . . . . . . . . . . 21
j. Increases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
k. Proration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
l. Calculation of Assessments Due From Tenant . . . . . . . . . . . . . . . . . . . . . 22
m. Personal Property Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
n. Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
o. Increases in Real Property Taxes as a Result of Sale . . . . . . . . . . . . . . . . . 23
14. Utilities & Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
a. obligation of Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
b. Intention of Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
15. Management Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
16. Fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
17. Use of the Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
a. Tenant's Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
b. CC&R's.... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
c. Conflict Within Applicable Restrictions . . . . . . . . . . . . . . . . . . . . . . . 26
d. Uses Prohibited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
e. Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
f. Sewage Capacity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
g. Easement to PBX Facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
18. PUD, Design Approval and Development Agreement . . . . . . . . . . . . . . . . . . . . . . 30
a. PUD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
b. Design Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
c. Subsequent PUD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
d. Development Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
e. Subsequent Development Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
f. Consent and Waiver of Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
g. Tenant's Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
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19. Repair and Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
a. Tenant's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
b. Right of Landlord to Make Repairs . . . . . . . . . . . . . . . . . . . . . . . . . . 32
c. Limitation on Obligation of Landlord . . . . . . . . . . . . . . . . . . . . . . . . . 33
d. Amortization of Certain Capital Expenditures . . . . . . . . . . . . . . . . . . . . . 33
e. Standard of Repairs and Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . 35
f. Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
g. Inspection of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
20. Amortization of Costs With Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
a. Applicability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
b. Prepayment of Amortized Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
c. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
21. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
a. Right of Tenant to Self-Insure . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
b. Premises Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
c. Liability Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
d. Personal Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
e. Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
f. Increased Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
g. Co-Insurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
h. No Limitation of Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
i. Insurance Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
j. Tenant's Failure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
k. Landlord's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
l. Additional insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
m. Insurance Unavailable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
22. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
23. Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
24. Damage or Destruction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
a. Tenant's Obligation to Repair . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
b. Insurance Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
c. No Abatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
d. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
e. Restoration of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
25. Eminent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
a. Rights and obligations Governed by Lease . . . . . . . . . . . . . . . . . . . . . . . 46
b. Total Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
c. Partial Condemnation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
d. Award . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
e. Delivery of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
f. Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
26. Assignment and Subletting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
a. Landlord's Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
b. Sublet Form . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
c. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
d. Information to be Furnished . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
e. Landlord's Options -- Sublet Not After
Nine (9) or Eighteen (18) years . . . . . . . . . . . . . . . . . . . . . . . . 48
f. Landlord's Options -- Sublet After Nine (9) or
Eighteen (18) Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
g. Landlord's Right to Cancel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
h. Failure of Landlord to Elect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
i. Revisions to Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
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j. No Consent of Landlord; Provisions of Sublet . . . . . . . . . . . . . . . . . . . . . 50
k. After Landlord's Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
l. Subletting to Parent or Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . 50
m. Subrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
n. Scope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
o. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
p. Executed Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
q. Transfer to Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
27. Alterations, Additions and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . 52
a. Permitted Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
b. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
c. Indemnification By Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
d. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
28. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
a. Payment by Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
b. Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
c. Failure to Remove . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
29. Surrender of the Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
a. Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
b. Tenant's Failure to Remove . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
c. Indemnity For Failure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
30. Holding Over . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
31. Landlord's Right to Enter the Project . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
32. Landlord's Reserved Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
33. Signs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
a. General Restriction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
b. Signs Visible outside of Building . . . . . . . . . . . . . . . . . . . . . . . . . . 56
c. Costs of Signs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
34. Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
a. Tenant's Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
b. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
c. Assignment of Rights and Monies . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
d. Additional Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
e. Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
f. Rights Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
g. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
h. After Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
i. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
35. Option to Extend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
a. Conditions to Exercise of Right . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
b. Exercise of Option to Extend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
c. Initial Fixed Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
d. Methods of Determining Fixed Rent
During Extension Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
e. Fixed Rent If Appraisal Not Completed . . . . . . . . . . . . . . . . . . . . . . . . 62
f. Increases In Fixed Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
g. Tenant's Right to Terminate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
36. Option to Extend As to Portion of Basement . . . . . . . . . . . . . . . . . . . . . . . . 64
a. Right to Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
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<S> <C> <C>
b. Areas Subject to Extension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
c. Condition to Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
d. Exercise of option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
e. Effect of Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
f. Fixed Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
g. Incidental Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
37. Multi-Tenant occupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
a. Applicability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
b. Landlord's Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
c. Tenant's Percentage Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
d. Tenant's Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
e. Landlord's Percentage Share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
f. Project Common Area Operating Expenses . . . . . . . . . . . . . . . . . . . . . . . . 68
g. Payment by Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
h. Annual Revision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
i. Comparison of Actual and Estimated
Project Common Area Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 69
j. Proration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
k. Failure to Pay . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
l. Landlord's Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
m. Allocation of Parking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
n. Rules and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
38. Toxic Materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
a. Compliance With Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
b. Tenant's Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
c. Inspection Rights; Costs of Monitoring . . . . . . . . . . . . . . . . . . . . . . . . 71
d. Further Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
e. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
39. Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
a. Subordinate Nature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
b. Attornment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
40. Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
a. Delivery Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
b. Failure of Tenant to Deliver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
c. Revised Estoppel Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
d. Financial Statements of Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
41. Landlord Conveyance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
a. Assignment to Joint Venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
b. Further Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
42. Right of First Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
a. Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
b. Acceptance of Offer; Agreement of Purchase and Sale . . . . . . . . . . . . . . . . . 74
c. Deemed Rejection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
d. Release of Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
43. Landlord's Right to Perform Tenant's Covenants . . . . . . . . . . . . . . . . . . . . . . 75
44. Escrow Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
a. Establishment of Escrow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
b. Excess or Insufficient Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
45. Mortgagee Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
</TABLE>
v.
<PAGE> 54
<TABLE>
<CAPTION>
Page
<S> <C> <C>
46. Brokerage Commission . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
47. Recording . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
48. Substantiation of Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
49. Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
a. Matters Subject to Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
b. Establishing Method of Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . 77
c. instituting Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
d. Arbitration Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
e. Basis of Decision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
f. Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
50. General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
a. Executive Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
b. Waiver By Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
c. No Waiver By Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
d. Accord and Satisfaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
e. Limitation of Landlord's Liability . . . . . . . . . . . . . . . . . . . . . . . . . . 80
f. Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
g. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
h. Portion and Whole . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
i. Singular and Plural . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
j. Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
k. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
l. Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
m. Captions and Article Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
n. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
o. Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
p. Examination of Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
q. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
r. Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
s. Relationship of Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
t. No Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
u. No Surrender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
v. Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
w. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
x. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
y. Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
z. Reasonableness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
</TABLE>
vi.
<PAGE> 55
EXHIBITS
--------
<TABLE>
<S> <C> <C>
EXHIBIT A -- Description of Phase II
EXHIBIT B -- Existing Leases of Tenant Within Phase I
EXHIBIT C -- Construction Procedures
EXHIBIT C-1 -- Building Shell Definition
EXHIBIT C-2 -- Basement Spaces
EXHIBIT C-3 -- Footprints of Building Shells
EXHIBIT D -- Square Footage Calculations
EXHIBIT E -- Early Entry Agreement
EXHIBIT F -- Commencement Date Memorandum
EXHIBIT G -- Expiration Date Memorandum
EXHIBIT G-1 -- Substitution of Expiration Memorandum
EXHIBIT H -- Rules and Regulations
EXHIBIT I -- Conditions to PUD 85-8
EXHIBIT I-1 -- Conditions to PUD 85-8-1D
EXHIBIT J -- Development Agreement
EXHIBIT K -- Form of Estoppel Agreement
EXHIBIT L -- Form of Release
EXHIBIT M -- Approval Acknowledgement
EXHIBIT N -- Contract Attachments
</TABLE>
vii.
<PAGE> 56
ABSOLUTE NET LEASE
THIS ABSOLUTE NET LEASE ("Lease") is entered as of the 23rd day of
September , 1986, by and between AT&T RESOURCE MANAGEMENT CORPORATION
("Landlord"), a New York corporation, and AMERICAN TELEPHONE & TELEGRAPH
COMPANY ("Tenant"), a New York corporation.
THIS LEASE IS ENTERED on the basis of the following facts, intentions
and understandings of the parties:
A. The Prudential Insurance Company of America ("Prudential") is
the owner of certain unimproved real property ("Land") located in the Hacienda
Business Park in the City of Pleasanton, County of Alameda, State of
California. The Land, which is within what is known as Phase II of the
Hacienda Business Park, is more particularly described in Exhibit A, attached
hereto.
B. Tenant presently occupies seven (7) buildings on five (5)
parcels of real property within what is known as Phase I of the Hacienda
Business Park. A list of the leases for the improved real property presently
occupied by Tenant in Phase I of the Hacienda Business Park is attached hereto
as Exhibit B.
C. Landlord and Prudential have entered a joint venture
agreement. Pursuant to the joint venture agreement, Prudential will contribute
the Land to the joint venture and Landlord will contribute this Lease and the
Building CC Lease, as defined below, to the joint venture. The Land then will
be improved with eight (8) buildings. Pursuant to this Lease, Tenant will
lease seven (7) of the buildings and will have the right to use the Land. The
seven (7) buildings to be leased to Tenant pursuant to this Lease are
hereinafter collectively referred to as the "Buildings;" and are individually
referred to as a "Building." The Buildings are known as Building AA, Building
BB, Building DD, Building EE, Building FF, Special Purpose Building No. 1 and
Special Purpose Building No. 2.
D. Pursuant to an Absolute Net Lease (Building CC) ("Building CC
Lease"), Tenant will lease the eighth of the eight (8) buildings to be
constructed on the Land and will have the right to use the Land. The building
to be leased to Tenant pursuant to the Building CC Lease is hereinafter
referred to as "Building CC." The seven (7) Buildings, Building CC and the Land
are hereinafter collectively referred to as the "Project."
E. Landlord and Tenant desire to enter this Lease pursuant to
which Landlord will lease the Buildings to Tenant on an absolute net-basis.
Concurrently, Landlord and Tenant will enter the Building CC Lease pursuant to
which Tenant will lease Building CC to Tenant also on an absolute net basis.
F. Although this Lease and the Building CC Lease are separate and
distinct leases, Landlord and Tenant also desire that, except as otherwise
specifically provided in
1.
<PAGE> 57
the Building CC Lease or this Lease, the Building CC Lease and this Lease are
to be administered as if they were one lease. Landlord and Tenant also desire
that, except as specifically provided in this Lease or the Building CC Lease,
the terms of this Lease shall be incorporated into the Building CC Lease.
G. During the term of this Lease and the term of the Building CC
Lease, Tenant will have the right to use the Project Common Areas, as
hereinafter defined.
H. Landlord and Tenant also desire that completion of
construction of the PBX Facility, as hereinafter defined, be completed prior to
occupancy of any of the Buildings or Building CC.
I. Landlord and Tenant also desire to provide that expiration of
the term of this Lease be staggered over a period of time in order that
expiration of this Lease shall not occur as to more than one (1) Building (or
one (1) Building and Building CC) during any three (3) month period; provided,
however, that this restriction on expiration will not apply to Special Purpose
Building No. 1 and Special Purpose Building No. 2.
J. Landlord and Tenant further desire to provide that the term of
this Lease for the Buildings and the term of the Building CC Lease be
coordinated such that the term of this Lease for all the Buildings and the term
of the Building CC Lease, collectively, shall average ten (10) years from the
commencement of this Lease for each Building and Building CC.
K. Landlord and Tenant also desire to provide that Tenant shall
have the right to substitute the expiration date for a Building or Building CC
for the expiration date for another Building or Building CC.
NOW, THEREFORE, IN ACCORDANCE with the facts, intentions and
understandings of the parties, the parties hereby agree as follows:
1. Definitions. The following terms shall have the following
meanings when used in this Lease:
a. Additional Rent. The term "Additional Rent" shall
have the meaning set forth in Subsection 8.a.
b. Architect. The term "Architect" shall mean Hellmuth,
Obata and Kassabaum, Inc., or such other architect that Landlord and Tenant may
agree upon.
c. Assessment Districts. The term "Assessment
Districts" shall have the meaning set forth in Subsection 13.c.
d. Assessments. The term "Assessments" shall have the
meaning set forth in Subsection 13.c.
e. Association. The term "Association" shall have the
meaning set forth in Subsection 17.b.
2.
<PAGE> 58
f. BOMA - The term "BOMA" shall mean the Building owners
and Managers Association international "Standard Method for Measuring Floor
Area Office Buildings" (ANSI Z65.1-1980), as amended from time to time. The
BOMA standard for calculating the square footages of the Buildings and Building
CC shall only be applicable during the period of multi-tenant occupancy of the
Project (see Section 37).
g. BOMA Square Footage. The term "BOMA Square Footage"
shall mean the square footage of the Buildings and Building CC calculated in
accordance with BOMA. As of the date of this Lease, it is not possible for the
BOMA Square Footages to be determined. At such time as the BOMA Square
Footages can be calculated, a schedule of the BOMA Square Footages of the
Buildings and Building CC shall be inserted in this Lease as Exhibit D-1. The
BOMA Square Footages shall only be applicable during the period of multi-tenant
occupancy of the Project (see Section 37).
h. Building; Buildings. The terms "Building" and
"Buildings" shall have the meanings set forth in Recital C, as further
described in Exhibit C and Exhibits C-1 through C-3.
i. Building CC. The term "Building CC" shall have the
meaning set forth in Recital D.
j. Building CC Lease. The term "Building CC Lease"
shall have the meaning set forth in Recital D.
k. Building Shell. The term "Building Shell" when used
in connection with a Building shall have the meaning set forth in Exhibit C and
Exhibits C-1 through C-3.
l. CC&Rs. The term "CC&Rs" shall mean the Covenants,
Conditions and Restrictions that apply to Phase II of the Hacienda Business
Park, as amended from time to time.
m. City. The term "City" shall mean the City of
Pleasanton.
n. Commencement Date. The term "Commencement Date" as
it relates to any particular Building shall have the meaning set forth in
Subsection 4.b.
o. Condemnation. The term "Condemnation" shall have the
meaning set forth in Subsection 25.a.
p. Consumer Price Index. The term "Consumer Price
Index" shall mean the Consumer Price Index ("CPI") for All Urban Consumers, All
Items, for the San Francisco-Oakland Metropolitan Area, as published by the
Bureau of Labor Statistics of the U.S. Department of Labor, using the year 1967
as a base of 100.
q. Events of Default. The term "Events of Default"
shall have the meaning set forth in Subsection 34.a.
3.
<PAGE> 59
r. Extension Term. The term "Extension Term" shall have
the meaning set forth in Subsection 35.a.
s. Fixed Rent. The term "Fixed Rent" shall have the
meaning set forth in Subsection 7.a.
t. Force Majeure. The term "Force Majeure" shall mean
delays caused by strikes, lockouts, inability to obtain materials, governmental
regulations, floods, earthquakes, acts of God, riots, insurrections,
archaeological findings, court orders and other acts beyond Landlord's
reasonable control (as to those matters relating to Landlord) or Tenant's
reasonable control (as to those matters relating to Tenant).
u. Improvements. The term "Improvements" when used in
connection with a Building shall mean the Building Shell for the Building and
Tenant Improvements to be constructed by Landlord for the Building in
accordance with the terms of Exhibit C and Exhibits C-1 through C-3.
v. Initial Commencement Date. The term "Initial
Commencement Date" shall mean the first Commencement Date which occurs as to
any one (1) of the Buildings or Building CC.
w. Interest Rate. The term "Interest Rate" shall mean
the Prime Rate plus one and one-half percent (1-1/2%) per annum; provided,
however, that the Interest Rate shall not exceed the maximum rate permitted by
law and that the payment of interest upon a default by Tenant under this Lease
shall not excuse or cure the default by Tenant.
x. Land. The term "Land" shall have the meaning set
forth in Recital A and shall be subject to all easements thereon and other
exceptions to title applicable thereto.
y. Landlord's Address. The term "Landlord's Address"
shall have the meaning set forth in Subsection 50.q.
z. Landlord's Compliance Costs. The term "Landlord's
Compliance Costs" shall have the meaning set forth in Subsection 17.e.
aa. Lease Year. The term "Lease Year" as to any
particular Building shall mean each twelve (12) month period during the Term
commencing on the Commencement Date for the Building and continuing on each
anniversary of the Commencement Date.
bb. PBX Facility. The term "PBX Facility" shall mean the
telecommunications facility to be constructed in Building CC, which shall
include Tenant's center for communications within the Project and which may
serve users outside the Project. The PBX Facility shall not be limited to a
"private branch exchange."
cc. Prime Rate. The term "Prime Rate" shall mean on any
given date the rate of interest quoted by the then largest (in terms of assets)
national bank conducting banking business in California, at its principal San
4.
<PAGE> 60
Francisco office, as its "prime rate" or equivalent base rate for unsecured
commercial loans, as defined at the time. Adjustments in the Prime Rate shall
be effective as of the date quoted by the Bank.
dd. Project. The term "Project" shall have the meaning
set forth in Recital D.
ee. Project Common Areas. The term "Project Common
Areas" shall mean all of the Project other than the Buildings and Building CC.
ff. Property Tax. The term "Property Tax" shall have the
meaning set forth in Subsection 13.b.
gg. Punch-list Items. The term "Punch-list Items" shall
have the meaning set forth in Subsection 4.i.
hh. Rent. The term "Rent" shall mean the Fixed Rent and
the Additional Rent.
ii. Square Footage. The term "Square Footage" of a
Building shall mean the areas contained within the exterior walls of the
Building, measured to the interior surface of the exterior walls or the
interior face of the windows if the windows comprise over fifty percent (50%)
of the wall areas. Included in the calculation of the Square Footage are the
basements and the arcade areas designated on Exhibit D. Excluded from the
calculation of Square Footage are any overhangs at the entrances and perimeters
of the Building, mechanical penthouse areas and vent shaft areas. A
preliminary calculation of the Square Footage of the Buildings and Building CC
(setting forth a Square Footage of approximately one million eighty thousand
(1,080,000) square feet), and a preliminary calculation of the Square Footage
of each of the Buildings and Building CC, are contained in Exhibit D. A final
determination of the stated Square Footage of a particular Building shall not
be made until completion of the Building. In calculating the Square Footage,
the stated Square Footage of a Building which is set forth in Exhibit D shall
be reduced by the area of the vent shaft areas for the Building after the area
of the vent shaft areas is determined.
jj. Subrent. The term "Subrent" shall have the meaning
set forth in Subsection 26.m.
kk. Tenant Improvements. The term "Tenant Improvements"
shall have the meaning set forth in Exhibit C and Exhibits C-1 through C-3.
ll. Term. The term "Term" shall have the meaning set
forth in Subsection 4.a.
mm. Working Drawings. The term "Working Drawings" shall
have the meaning set forth in Exhibit C and Exhibits C-1 through C-3.
2. Lease of the Buildings. Landlord hereby leases the Buildings
to Tenant, and Tenant hereby leases the Buildings from Landlord, on the mutual
terms, covenants and
5.
<PAGE> 61
conditions set forth herein. The lease shall include the right, together with
the occupant(s) of Building CC, to use the Project Common Areas.
3. Design and Construction. The Building Shells and the
Tenant Improvements shall be designed and constructed in accordance with
Exhibit C.
4. Term.
a. Lease Term. The term ("Term") of this Lease shall be
determined on a Building by Building basis. Except as provided in Sections 5, 6
and 35, the Term of this Lease for any particular Building shall be a period of
ten (10) years, commencing on the Commencement Date for the Building.
b. Commencement Date. Subject to the provisions of
Subsection 4.c., the "Commencement Date" of this Lease for a particular
Building shall be the earliest to occur of the following for the Building:
(i) Sign-off By City. The date the City approves
the Building Shell and Tenant Improvements for the Building in accordance with
its building code, evidenced by its completion of a final inspection and
approval of the Building Shell and Tenant Improvements as completed in
accordance with the building permit(s) issued for the Building Shell and Tenant
Improvements based on the Working Drawings for the Building approved by Tenant
(including any revision to the Working Drawings approved by Tenant); provided,
however, that the Commencement Date for a particular Building shall not be
deemed to have occurred if, at the time the City approves the Building Shell
and Tenant Improvements for the Building, there are Tenant Improvements to be
constructed by Landlord which have not been completed and the lack of
completion makes the Building not ready for occupancy (determined on the basis
of whether tenants of office space in the Pleasanton-San Ramon area generally
commence occupancy of buildings in the then condition of the Building) or makes
it impossible for Tenant to use the Building;
(ii) Date Lease Would Have Commenced. The date
Landlord substantiates and designates in a written notice to Tenant that this
Lease would have commenced but for any delays caused by Tenant, as described in
Subsection 4.g. or Exhibit C; or
(iii) Occupancy or Operation. The date Tenant
commences occupancy or operations in any portion of the Building other than
early entry as provided in Subsection 4.d.
c. Required Commencement Date for PBX Facility. The
Commencement Date shall not occur for any Building until the Landlord has
completed construction of the Tenant Improvements for which Landlord is
responsible within the PBX Facility, unless the Tenant Improvements within the
PBX Facility for which Landlord is responsible have not been completed because
of delays caused by Tenant or Force Majeure.
6.
<PAGE> 62
d. Early Entry. If Tenant is permitted to enter a
Building prior to the Commencement Date for the Building for the purpose of
fixturing or any other purpose permitted by Landlord, Tenant's entry shall be
subject to all the terms and provisions hereof, except for the payment of Rent,
which shall commence on the Commencement Date for the Building. If requested
by Landlord, Tenant shall execute an Early Entry Agreement in the form attached
hereto as Exhibit E. Tenant shall not use the Building for storage of inventory
or otherwise conduct business without the express prior written consent of
Landlord. Landlord's determination that Tenant's early entry is not in
compliance with this Subsection 4.d. shall be final, and Tenant shall vacate
the Building immediately upon Landlord's notice of the determination.
e. Termination.
(i) Failure to Commence As to Any Building.
Tenant may terminate this Lease, by written notice of its election to terminate
given to Landlord prior to February 1, 1991, if the Initial Commencement Date
has not occurred on or before January 1, 1991. The February 1, 1991 date and
the January 1, 1991 date each shall be extended by the number of days of delay
which are caused by Tenant (as described in Subsection 4.g. and 4.h.) and, if
so determined by the arbitrator, the period of any arbitration pursuant to
Section 49.
(ii) Failure to Commence As to All Buildings.
Tenant may terminate this Lease, by written notice of its election given to
Landlord prior to February 1, 1994, if the Commencement Date for each of the
Buildings has not occurred prior to January 1, 1994. The February 1, 1994 date
and the January 1, 1994 date each shall be extended by the number of days of
delay which are caused by Tenant (as described in Subsection 4.g. and 4.h.)
and, if so determined by the arbitrator, the period of any arbitration pursuant
to Section 49.
f. Commencement Date Memorandum. When the Commencement
Date for a Building is determined, the parties shall execute a Commencement
Date Memorandum, in the form attached hereto as Exhibit F, setting forth the
Commencement Date.
g. Tenant Delays. Delays attributable to Tenant shall
include those delays that would not have occurred but for the fault or delay of
Tenant including, without limitation, the faults or delays caused by:
(i) Failure to Provide Working Drawings. Tenant's
failure to timely furnish Working Drawings for the Improvements in accordance
with Exhibit C;
(ii) Special Materials. Tenant's request for
special materials, finishes or installations which are not available in a time
period which permits construction in accordance with the construction schedule
determined pursuant to Exhibit C;
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(iii) Failure to Approve Plans. Tenant's failure
to reasonably approve plans and working drawings in a timely manner in
accordance with Exhibit C;
(iv) Change Requests. Tenant's change requests
pursuant to Exhibit C that result in delays;
(v) Failure to Approve Estimates. Tenant's
failure to approve cost estimates in a timely manner in accordance with Exhibit
C; and
(vi) Interference With Work. Interference with
Landlord's work caused by Tenant or by Tenant's agents, except to the extent
caused by Force Majeure.
h. Calculation of Tenant Delays. Calculations of delays
attributable to Tenant shall be calculated on a Building by Building basis. In
calculation of delays attributable to Tenant, the following shall be
applicable:
(i) Early Delivery of Plans. Tenant shall
receive a credit for the number of days in advance of the appropriate
deadlines set forth in Exhibit C by which Tenant delivers final plans and
Working Drawings;
(ii) Delays Not Cumulative to Extent of Overlap.
To the extent actions, or inactions, of Tenant cause delays which are
concurrent, the time periods for the concurrent delays shall not be added
together, but instead Tenant shall only be charged with the delay attributable
to the longer (or longest) delay; and
(iii) Not Charged With Concurrent Delay or Force
Majeure. Tenant shall not be charged with delays otherwise attributable to
Tenant to the extent the delays are concurrent with, or extended as a result
of, delays attributable to any cause for which Tenant is not responsible.
i. Acceptance.
(i) Condition. The taking of possession of a
Building by Tenant shall be deemed acceptance of the Building in good, clean
and completed condition, excepting the Punch-list Items, subject to all
applicable laws, codes, ordinances and regulations relating to the use,
occupancy and possession of the Building. Notwithstanding the foregoing,
completion of the Punch-list Items for a Building shall not delay the
Commencement Date for the Building. Tenant acknowledges that neither Landlord
nor its partners, subsidiaries, directors, officers, agents or employees have
made any representations or warranties respecting the condition of the Project
or the suitability or fitness of the Project for the conduct of Tenant's
business or for any other purpose other than the suitability of the completed
Project for general office purposes and the PBX Facility, nor has Landlord
agreed to undertake any modification, alteration or improvement to the Project
except as expressly set forth in this Lease.
(ii) Tenant Improvements. Landlord shall give
Tenant five (5) days notice of when a Building, or a portion of a Building,
will be available for preparation of
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a punch-list. Upon receipt of a notice from Landlord, Tenant shall make best
efforts to make a representative available to walk through the Building.
Before the time of the walk-through of a Building, or portion of a Building,
all major work which Landlord is obligated to undertake for the Building, or
portion of the Building, shall be completed and there shall be no work to be
done on behalf of Landlord which would make the Building not ready for
occupancy (determined on the basis of whether tenants of office space in the
Pleasanton-San Ramon area generally commence occupancy of buildings, in the
then condition of the Building) or make it impossible for Tenant to use the
Building, or the portion of the Building subject to the walk through, for
general office purposes. Tenant shall "walk through" the Building, or the
portion of the Building subject to the walk through, with Landlord and the
Architect, and they shall complete a punch-list of items needing additional
work by Landlord. The punch-list shall not include work which makes the
Building not ready for occupancy (determined on the basis of whether tenants of
office space in the Pleasanton-San Ramon area generally commence occupancy of
buildings in the then condition of the Building). The punch-list for a
Building, or a portion of a Building, shall be prepared prior to the
Commencement Date for the Building, or a portion of the Building, unless Tenant
does not make a representative available in a timely manner. Other than the
items specified in the punch-list ("Punch-list Items"), Tenant shall be deemed
to have accepted the Building in good, clean and completed condition and
repair, subject to all applicable laws, codes, ordinances and regulations;
provided, however, that Tenant shall not be deemed to accept latent defects in
the Building of which Tenant is not aware at the time of preparation of the
punch-list if Tenant informs Landlord of the latent defects within thirty (30)
days of the earlier of (1) the date Tenant becomes aware of the latent defects,
or (2) the date Tenant should have become aware of the latent defects, but in
no event later than sixty (60) days prior to expiration of the statute of
limitations for notice to the contractors responsible for remedying the latent
defects. The punch-list shall include a reasonable estimate of the time for
completion of each item on the punch-list. The punch-list shall not include
any damage to the Building caused by Tenant's early entry or move-in, which
damage shall be promptly repaired or corrected by Tenant, at its expense. If
Tenant fails to cooperate with Landlord and Architect to allow completion of a
punch-list within five (5) days after Landlord's notice that the Building, or
portion of the Building, is available for preparation of a punch-list, it shall
be deemed that there are no items within the Building, or portion of the
Building, needing additional work or repair. Landlord's contractor shall
complete the Punch-list Items as soon as reasonably possible. Landlord shall
not release to the general contractor for a Building the portion of the
retention which, under Landlord's contract with the general contractor, is
applicable to, or which otherwise has been withheld by Landlord in connection
with, the Punch-list Items for the Building, or portion of the Building, until
Landlord receives notice from Tenant that Tenant believes all the Punch-list
Items have been completed. Within seven (7) days after notification of
completion of the Punch-list Items, Tenant shall approve, or state its reasons
for
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disapproval of, the completed items in writing to Landlord or the Punch-list
Items shall be deemed approved by Tenant.
5. Adjustment of Term.
a. Adjustment Upon Commencement Date. The term of this
Lease for a Building prior to any adjustment pursuant to this Subsection 5.a.
shall be ten (10) years from the Commencement Date for the Building. Within
thirty (30) days after the Commencement Date for the last of the seven (7)
Buildings, Landlord and Tenant shall adjust the expiration date (and, therefore
the Term) under this Lease of each of the Buildings. The expiration dates
shall be calculated on a Building by Building basis and shall be coordinated
with the expiration date of the Building CC Lease. Except as provided in
Subsections 6.b. and 6.c., the expiration dates shall be calculated such that
the following restrictions are met:
(i) Average Term. The average of the terms of
this Lease as to all the Buildings and the term of the Building CC Lease (i.e.,
the sum of the number of years of the terms of this Lease as to all the
Buildings and the term of the Building CC Lease, divided by eight (8) (the
number of Buildings plus Building CC)) shall be ten (10) years;
(ii) Frequency of Expiration. Except as provided
in Subsection 5.b., dates of expiration shall be calculated such that no two (2)
expiration dates for the Buildings and for Building CC shall occur within three
(3) months of each other;
(iii) Maximum Duration. Subject to the
restrictions in Subsection (i) and (ii), the terms of this Lease as to all the
Buildings and Building CC shall be calculated such that there shall be the
shortest period possible between (A) the term of this Lease as to the Buildings
(or Building CC) with the shortest term and (B) the term of this Lease as to
the Buildings (or Building CC) with the longest term; and
(iv) Minimum Fixed Rent. The Fixed Rent shall not
be less than the Fixed Rent which would have been due if the Term of this Lease
for each of the Buildings (and Building CC), including Special Purpose Building
No. 1 and Special Purpose Building No. 2, were ten (10) years from the
Commencement Date for each of the Buildings (and Building CC).
b. Expiration Date for Special Purposes Buildings. In
determining the expiration dates pursuant to Subsection 5.a., Tenant shall have
the right to provide that the expiration dates for Special Purpose Building No.
1 and Special Purpose Building No. 2 (or either of them) may occur at the same
time as, or within three (3) months of, the expiration date for another
Building or Building CC.
c. Effect of Adjustments Upon Extension. If Tenant
exercises its right under section 35 to extend the Term of this Lease, the
extension for any particular Building shall commence from the expiration of the
initial Term of this Lease for the Building, as calculated pursuant
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to Subsection 5.a. above, as previously adjusted pursuant to Section 6.
d. Expiration Date Memorandum. When the expiration
dates for all the Buildings have been determined, the parties shall execute an
Expiration Date Memorandum, in the form attached hereto as Exhibit G, setting
forth the expiration date for each of the Buildings.
6. Substitution of Expiration Dates of Buildings.
a. Buildings Subject to Substitution. Tenant's right to
substitute expiration dates pursuant to this Section 6 shall be applicable to
all the Buildings and Building CC.
b. Right to Substitute. Subject to the restrictions set
forth in Subsections 6.c. and 6.d., Tenant shall have the right to substitute
the expiration date for any Building (or Building CC) for which the Term has
not expired for the expiration date of another Building (or Building CC) for
which the Term has not expired. For example, if the expiration date for
Building AA is to occur at the end of thirteen (13) months from a particular
date and the expiration date for Building BB is to occur at the end of
twenty-five (25) months from the same date, Tenant shall have the right to
substitute the expiration date for Building BB for the expiration date for
Building AA. If Tenant were to substitute the expiration date of Building BB
for the expiration date of Building AA, the expiration date would occur as to
Building BB at the end of the thirteenth (13th) month and the expiration date
would occur as to Building AA at the end of the twenty-fifth (25th) month.
c. Exercise of Substitution. If Tenant desires to
substitute the expiration date of a Building (or Building CC) for the
expiration date of another Building (or Building CC), Tenant shall give
Landlord notice of the substitution not later than twelve (12) months prior to
the earlier of the expiration dates of either of the Buildings (or Building CC)
which are to be the subject of the substitution.
d. Restrictions on Substitution. Tenant shall not have
the right to substitute the expiration date for any Building (or Building CC)
for another Building (or Building CC) to the extent either of the following
would occur:
(i) Frequency of Expiration Dates. After the
substitution the expiration dates for any two (2) Buildings (or for a Building
and Building CC) would occur within three (3) months of each other; provided,
however, that this restriction is not to apply to Special Purpose Building No.
1 and Special Building No. 2; or
(ii) Minimum Rent. The Fixed Rent would be less
than the Fixed Rent which would have been due if the Term of this Lease for each
of the Buildings (and Building CC), including Special Purpose Building No. 1
and Special Purpose Building No. 2, were ten (10) years from the Commencement
Date for the Buildings (and Building CC).
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e. Substitution Date Memorandum. Upon each substitution
of expiration dates pursuant to this Section 6, Landlord and Tenant shall
complete a Substitution Date Memorandum, in the form attached hereto as Exhibit
G-1.
7. Fixed Rent.
a. General. As to each Building, Tenant shall pay
Landlord fixed rent ("Fixed Rent"), in advance, on the first day of each
calendar month of the Term for the Building, or any renewal thereof. Tenant
shall pay the Fixed Rent at Landlord's Address or at such other place
designated by Landlord within the United States (exclusive of Alaska and
Hawaii), in lawful money of the United States, without prior notice, or demand,
deduction, offset or counterclaim. If the Term for the Building commences on a
day other than the first day of a calendar month, Tenant shall pay on the
Commencement Date for the Building a pro rata portion of the Fixed Rent
prorated on a per diem basis with respect to the portion of the fractional
calendar month included in the Term for the Building. If the Term for a
Building ends on a day other than the last day of a calendar month, Tenant
shall pay on the first day of the last calendar month of the Term for the
Building a pro rata portion of the Fixed Rent prorated on a per diem basis with
respect to the portion of the fractional calendar month included in the Term
for the Building.
b. Amount of Fixed Rent Per Building. The Fixed Rent
for all of any particular Building, prior to any escalation pursuant to
Subsection 7.c., shall be calculated as provided in this Subsection 7.b.
(i) Space Other Than Basement Space. The Fixed
Rent for all of any particular Building, exclusive of basement space, prior to
any escalation pursuant to Subsection 7.c., shall be Fourteen Dollars and
Fifty-One Cents ($14.51) per annum (or one-twelfth [1/12th] of Fourteen Dollars
and Fifty-One Cents [$14.51] per month) per square foot of Square Footage of
the Building, exclusive of basement space.
(ii) Basement Space. As to the portion of a
Building consisting of basement space, the Fixed Rent shall be Seven Dollars
and Eighty Cents ($7.80) per annum (or Sixty-Five Cents ($.65) per month) per
square foot of Square Footage of the basement space.
c. Escalation In Fixed Rent-Other Than Basement Space.
On the first day of the eighth Lease Year for a Building, the Fixed Rent for
that Building, exclusive of the Fixed Rent for the basement space within that
Building, shall increase to Fifteen Dollars and Forty-Eight Cents ($15.48) per
square foot per annum (or One Dollar and Twenty-Nine Cents ($1.29) per square
foot per month).
d. No Escalation in Fixed Rent-Basement Space. The
Fixed Rent for the basement space within a Building shall not increase during
the initial Term (i.e., ten (10) years after the Commencement Date for the
Building in which the basement space is located).
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8. Additional Rent.
a. Obligation of Tenant. All monies required to be paid
by Tenant hereunder exclusive of Fixed Rent, whether or not the provision
requiring payment of the amount specifically so states, including, without
limitation, payments for excess Total Building Shell and Tenant Improvements
Costs (as described in Section 9), payments for Property Taxes (as described in
Section 13), utilities and services, fifty percent (50%) of excess Subrent (as
described in Section 26), a property management fee (as described in Section
15) and insurance, shall be considered additional rent ("Additional Rent").
Upon the failure of Tenant to pay any such costs, charges or expenses, Landlord
shall have all the same rights and remedies available to Landlord under this
Lease or by law as in the case of non-payment of Fixed Rent. In addition,
Landlord shall have the right to require Tenant to promptly deposit with
Landlord funds for the payment of current items of Additional Rent. Landlord
shall pay the amount deposited with Landlord for the items of Additional Rent
to which the sums apply.
b. Payment of Additional Rent. At Landlord's election,
Tenant shall pay any item of Additional Rent either to Landlord (at Landlord's
Address) or directly to persons entitled to the payments. Unless otherwise
specifically provided for in this Lease or directed by Landlord, Tenant shall
pay items of Additional Rent directly to the persons entitled to the payment
prior to the date the payments are due. To the extent payments are to be made
to Landlord by Tenant under this Lease, Tenant shall pay Additional Rent to
Landlord within the time period specified in this Lease, or if no time period
is specified, within thirty (30) days after written notice from Landlord.
Tenant shall not be responsible for payment of an item of Additional Rent, or
penalties resulting from Landlord's failure to pay an item of Additional Rent,
to the extent Tenant makes timely payment of the item to Landlord.
c. General Rule Regarding Proration of Additional Rent.
Except as provided in Subsections 8.d., 8.e., 8.f. and 8.g., Tenant shall be
obligated for all Additional Rent applicable to all the Buildings accruing from
and after the Initial Commencement Date and no component of the Additional Rent
shall be prorated to take into account the Commencement Date of any particular
Building. An example of an item of Additional Rent which is not to be prorated
is the property management fee described in Section 15.
d. Real Property Taxes For Land and Assessments.
(i) Items Subject to Proration. Prior to the
Commencement Date for all the Buildings, the following components of Additional
Rent shall be prorated and Tenant shall be responsible for the following
components with respect to any particular Building only after the Commencement
Date for that Building:
(A) Real Property Taxes. Real Property
Taxes for the Land and any improvements to the Land other than the Buildings;
and
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(B) Assessments. Assessments, including
Assessments imposed by or on Behalf of the Association.
(ii) Basis For Prorations. The components of the
Additional Rent for Real Property Taxes for the Land and any improvements to
the Land other than the Buildings and for Assessments, shall be prorated by
multiplying the following:
(A) Amount To Be Prorated. The amount
of the component of Additional Rent which is to be prorated; times
(B) Fraction. A fraction equal to the
Square Footage of all the Building(s) for which the Commencement Date has
occurred over an amount equal to Architect's latest estimate of the Square
Footage of all the Buildings and Building CC (whether the Buildings and
Building CC are completed or are yet to be completed).
e. Proration of Real Property Taxes Attributable to
Buildings. Real Property Taxes for improvements comprising the Buildings shall
be prorated on the basis of the occurrence of the Commencement Dates for each
Building. Beginning on the Commencement Date for a Building, Tenant shall be
responsible for all Real Property Taxes (as shown on the assessor's bill or as
reasonably determined by Landlord) allocable to the improvements comprising the
Building.
f. Proration of Utilities. The costs of the utilities
supplied to a Building shall be prorated on the basis set forth in this
Subsection 8.f.
(i) Not More Than Twenty-Five Percent (25%)
Occupancy. If not more than twenty-five percent (25%) of the Square Footage of
a Building is occupied by Tenant (and/or any Subtenant(s)), Tenant shall not be
responsible for payment as Additional Rent of any of the costs of the utilities
supplied to that Building.
(ii) More Than Twenty-Five Percent (25%)
Occupancy. Tenant shall be responsible for all costs of utilities to a
Building upon Tenant (and/or Subtenant(s)) occupying more than twenty-five
(25%) of the Square Footage of the Building. The costs of the utilities shall
be paid as Additional Rent.
g. Items and Manner of Proration Based Solely on Usage.
(i) Items Subject to Proration. The only
components of the Additional Rent which shall be prorated based solely on
usage by Tenant for the period prior to the Commencement Date for all the
Buildings and Building CC shall be the following:
(A) Janitorial Services. Fees for
janitorial services provided to the Project;
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(B) Garbage. Fees for garbage
collection services provided to the Project; and
(C) Project Common Area Maintenance.
Fees for maintenance of the Project Common Areas.
(ii) Basis For Prorations. The components of the
Additional Rent which are prorated in accordance with the terms of Subsection
8.g.(i) shall be prorated based on Landlord's reasonable determination of the
portion of each component which is incurred as a result of the occurrence of
the Commencement Date. For example, if garbage collection is provided solely
to the Buildings, or portions of the Buildings, for which the Commencement Date
has occurred, Tenant shall be responsible for one hundred percent (100%) of the
costs of the garbage collection.
9. Additional Rent Upon Excess Cost. As provided in Section 4.3
of Exhibit C, Tenant shall pay Additional Rent in the amount of Sixteen Dollars
and Thirteen Cents ($16.13) per month for each One Thousand Dollars ($1,000.00)
that the Total Building Shell and Tenant Improvements Costs exceeds the Base
Building Shell and Tenant Improvements Allowance until the Total Building Shell
and Tenant Improvements Allowance equals the Maximum Building Shell and Tenant
Improvements Allowance; provided, however, that Tenant shall have the right,
pursuant to Section 4.3 of Exhibit C, to pay all or any portion of the excess
in one (1) lump payment. Each increment of Additional Rent due pursuant to
this Section 9 shall be payable for a period of ten (10) years from the first
date a payment of Additional Rent for the increment is due.
10. Interest Payments.
a. Payment of Interest. Except as otherwise provided in
this Lease, interest payable by Tenant to Landlord shall be payable not later
than thirty (30) days after demand by Landlord. In the event of a default by
Tenant, the interest due on the defaulted amount shall be due, if requested in
the notice of default, at the same time as the defaulted amount.
b. Interest on Delinquent Rent. If Tenant fails to pay,
when due, Fixed Rent or any item of Additional Rent or other sums required to
be paid to Landlord under this Lease, interest shall accrue on the unpaid
amount, at the Prime Rate plus two percent (2%) from the date due until the
date paid, regardless of whether the failure to pay is or becomes an Event of
Default. In addition Tenant shall pay all penalties, interest or other charges
due to parties other than Landlord who are to receive any items of Additional
Rent if Tenant fails to pay, when due, the items of Additional Rent.
11. Absolute Net Nature of Lease.
a. Rent Absolutely Net, Except as provided in Subsection
11.d., this Lease shall be absolutely net to Landlord, it being understood that
Landlord shall receive Fixed Rent free and clear of any and all reasonable
property management fees, taxes, assessments, impositions liens, charges or
expenses of any nature whatsoever in connection
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with the ownership, operation or maintenance of the Project. The performance
and observance by Tenant of all the terms, covenants and conditions of this
Lease including, without limitation, the payment of all reasonable property
management fees, taxes, assessments, impositions, insurance premiums,
utilities, operating charges, maintenance charges and repair costs required to
be paid by Tenant under this Lease shall be performed and observed by Tenant at
Tenant's sole cost and expense. This Lease shall not be terminable for any
reason by Tenant and Tenant shall in no event be entitled to any abatement of
or reduction in Rent payable under this Lease.
b. No Abatement or Termination. This Lease shall
continue in full force and effect and the obligations of Tenant hereunder,
including, without limitation, the payment of Rent, shall not be released,
discharged or otherwise affected, by reason of the following:
(i) Damage or Destruction. Any damage to or
destruction of the Project or any parts thereof, or the taking of the Project
or any parts thereof by condemnation, requisition or otherwise for any reason;
(ii) Restrictions On Use. Any restriction or
prevention of, or interference with, any use of the Project or any part thereof
by any present or future laws, or by priorities, rationing or curtailment of
labor or materials, or by war, civil commotion, strikes or riots, or any other
cause whatsoever; provided, however, that Tenant shall have the right to abate
payment of Rent for a Building to the extent (and during the period) that
Tenant is not permitted by the City to occupy the Building as of the
Commencement Date because of laws on the Commencement Date which will not allow
the Building to be used for general office purposes (or the PBX Facility
[within Building CC]);
(iii) Claims Against Landlord. Any claim which
Tenant has or might have against Landlord;
(iv) Landlord's Failure. Except as provided in
Subsection 4.e., any failure on the part of Landlord to perform or comply with
any of the terms hereof or of any other agreement with Tenant;
(v) Diminution In Space. Any diminution in the
amount of the space used by Tenant caused by legally required changes in the
construction, operation or use of the Project; or
(vi) Any Other Occurrence. Any other occurrence
whatsoever, whether similar or dissimilar to the foregoing, any present or
future law to the contrary notwithstanding; in each case, whether or not Tenant
shall have notice or knowledge of any of the foregoing.
c. Waiver of Tenant. Except as otherwise expressly
provided in this Lease, Tenant waives all rights now or hereafter conferred by
statute or otherwise to quit, terminate or surrender this Lease or the Project
or any part thereof, or to any abatement, suspension, deferment, diminution or
reduction of Rent. It is the intention of Landlord and Tenant that the
obligations of Landlord and Tenant under
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this Lease shall be separate and independent covenants and agreements and that
the Rent and all other charges and sums payable by Tenant hereunder shall
continue to be payable in all events unless the obligations to pay the Rent and
other charges and sums shall be terminated pursuant to the express provisions
of this Lease.
d. Exceptions to Absolute Net Nature. This Lease may
not be absolute net to Landlord as to the following matters:
(i) Amortization of Landlord's Compliance Costs.
Amortization of Landlord's Compliance Costs, as provided in Subsection 17.e.;
(ii) Amortization of Certain Capital Expenditures.
Amortization of certain capital expenditures, as provided in Subsection 19.d.;
and
(iii) Termination Right. Tenant's rights to
terminate this Lease in accordance with the terms of Subsection 4.e.
12. Security Deposit. Tenant shall not be required to deliver a
security deposit to Landlord.
13. Property Taxes.
a. Property Taxes. Subject to the limitation set forth
in Subsections 8.d., 8.e., 13.f., 13.g. and 13.o, Tenant shall pay and
discharge prior to delinquency all Property Taxes relating to the Project
commencing on the Initial Commencement Date.
b. Definition of Property Taxes. The term "Property
Taxes" shall include all real estate taxes ("Real Estate Taxes") and other
taxes relating to the Project, Assessments (as defined in Subsection 13.c.),
fees for such purposes as fire and police protection, public transportation,
street, sidewalk, road and utility construction and maintenance, refuse and
sewage removal and treatment and other governmental services, license fees,
rent taxes, levies, government charges, penalties and other taxes, general and
special, ordinary and extraordinary, foreseen as well as unforeseen, of any
kind and nature, for public improvements, services and benefits, and all other
fees and taxes which may be levied in lieu of any of the above, which may be
imposed, assessed, levied, confirmed or become a lien (including all
extensions). Property Taxes shall not include any documentary transfer taxes
(and related City or county documentary stamp taxes), or other similar taxes,
which may be due upon transfer of the Project. Property Taxes shall include
any imposition by any authority having the direct or indirect power to tax
including, without limitation, any city, county, state or federal government or
any improvement or other district or division thereof. Property Taxes also
shall include any taxes or assessments that are:
(i) Area of Project or Land. Determined by the area of
the Project, or any part thereof, or the Rent and other sums payable hereunder
by Tenant, including, without limitation, any gross income or excise tax levied
by any
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of the foregoing authorities with respect to receipt of the Rent or other sums
due under this Lease;
(ii) Landlord's Equitable Interest. Upon or with
respect to any legal or equitable interest of Landlord in the Project, or any
part thereof;
(iii) In Lieu Taxes. Levied or assessed in lieu
of, in substitution for, or in addition to, existing or additional taxes on the
Project or any part thereof whether or not now customary or within the
contemplation of the parties; or
(iv) Upon Transaction. Upon this transaction.
c. Definition of Assessments. The term "Assessments"
shall include any payment for assessment districts and other funding
mechanisms, including, but not limited to, improvement districts, maintenance
districts, landscaping and lighting districts, public utility districts,
special utility districts, special service zones or districts or any
combination thereof (collectively, "Assessment Districts") for the
construction, alteration, expansion, improvement, completion, repair, operation
and maintenance of on-site and off-site improvements or services, as required
by the City or other governmental entity for construction of certain public
improvements ("Public Improvements") which shall benefit the Project and the
Hacienda Business Park. It is acknowledged by Tenant and Landlord that
Proposition 13 was adopted by the voters of the State of California in the
June, 1978 election and that assessments, taxes, fees, levies and charges may
be imposed by governmental agencies for such purposes as fire protection,
street, sidewalk, road, utility construction and maintenance, refuse removal
and for other governmental services which may formerly have been provided
without charge to property owners or occupants. It is the intention of the
parties that, in addition to the Assessment Districts described in Subsection
13.d., all new and increased assessments, taxes, fees, levies and charges due
to Proposition 13 or any other cause are to be included within the definition
of Real Property Taxes for purposes of this Lease.
d. Assessment Districts. The following Assessment
Districts have been, or will be, formed in connection with the Hacienda
Business Park:
(i) Assessment District No. 1984-1. Assessment
District No. 1984-1, Hopyard Road;
(ii) North Pleasanton Improvement District
(Roadways). Assessment District No. 1982-4, North Pleasanton Improvement
District (Roadways);
(iii) Fire Assessment District. The North
Pleasanton Fire Protection Assessment District No. 1982-6;
(iv) Water System Improvement District. The North
Pleasanton Water System Improvement District No. 1983-3;
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(v) Assessment District No. 1985-1. Assessment
District No. 1985-1, Chabot Drive Extension, East Amador Relief Sewer and Santa
Rita Road;
(vi) Stoneridge Drive Extension(s). An Assessment
District that provides for either the construction of street improvements or
the acquisition of street improvements on Stoneridge Drive from West Las
Positas to the Arroyo Mocho Canal and from the Arroyo Mocho Canal to Santa Rita
Road;
(vii) North Pleasanton Improvement District
(Freeways). A proposed Assessment district that provides for the funding of
the design and construction of interchanges for interstates 580 and 680; and
(viii) Phase II In-Tract Assessments. Assessments
for the Phase II in-tract improvements.
e. Tenant's Consent. Tenant hereby consents to the
formation of the Assessment Districts described in Subsection 13.d. and Tenant
hereby waives any right of notice and protest in connection with formation and
continued existence of the Assessment Districts. Tenant shall execute all
documents, including, but not limited to, petitions and formal waivers of
notice and protest of formation, evidencing such consent and waiver upon
request of Landlord, the City, or any other public entity. Tenant's waiver
pursuant to this Subsection 13.e. shall not include a waiver of Tenant's right
to protest the allocation of costs within the Assessment Districts. Tenant
shall not be in breach of this Subsection 13.e. if employees of Tenant, in
their individual capacities, and without direction, assistance or support of
Tenant, protest formation of the Assessment Districts described in Subsection
13.d.
f. Limitation on Tenant's Obligations For Assessment
District Liens.
(i) Tenant's Maximum Obligation. During the
period extending to ten (10) years after the Initial Commencement Date, Tenant
shall not be responsible for payment of the portion of the increments of
Assessments for the Assessment Districts described in Subsection 13.d.
("Section 13.d. Assessment Districts") which results from the sum of the unpaid
principal balances of the Assessments for the Section 13.d. Assessment
Districts ("Section 13.d. Assessments") which are recorded against the Land and
which are allocable to the Land exceeding Six Dollars ($6.00) per square foot
of the Land. For purposes of this Subsection 13.f., the Land shall be deemed
to be two million six hundred fifty-two thousand six hundred seventy-four
(2,652,674) square feet.
(ii) Calculation of Unpaid Principal Balances
Prior to Refinancing. Prior to any refinancing of the Section 13.d.
Assessment Districts, the sum of the unpaid principal balances of the Section
13.d. Assessments shall be determined as of the date of a calculation by adding
together the unpaid principal balances of the Section 13.d. Assessments as of
the date of the calculation.
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(iii) Calculation of Unpaid Principal Balance of
Assessments in the Event of Refinancing.
(A) Formation of New Assessment
Districts. Tenant acknowledges that Landlord may refinance one (1) or more of
the Section 13.d. Assessment Districts. As a result of lower interest rates or
extended terms of amortization, the annual payments for the refinanced Section
13.d. Assessment Districts may be lower than the annual payments which would
otherwise be due for the Section 13.d. Assessment Districts prior to
refinancing. Underwriting fees, legal fees, call premiums, financing fees and
other costs may be incurred in connection with refinancing of the Section 13.d.
Assessment Districts and may increase the outstanding principal balances of the
Section 13.d. Assessments.
(B) Consent of Tenant. Tenant consents
to refinancing of one (1) or more of the Section 13.d. Assessment Districts and
waives any right of notice or protest in connection with the refinancings).
(C) Consent to Specific Refinancing.
Tenant specifically consents, and waives all rights of protest, to refinancing
of the Assessment Districts described in Subsections 13.d.(i), (ii) and (v) by
Assessment District No. 1986-7, North Pleasanton Improvement District No. 2.
(D) Revised Calculation of Limitation on
Obligations For Liens. For purposes of determining, under Subsection 13.f.(i),
whether the sum of the unpaid principal balances of the Section 13.d.
Assessments exceeds Six and No/100 Dollars ($6.00) per square foot of the Land,
the amount of the lien of the refinanced Section 13.d. Assessment Districts
resulting from underwriting fees, legal fees, call premiums, financing fees and
other costs incurred in connection with refinancing of the Section 13.d.
Assessment Districts shall not be included if the amount of each individual
semi-annual payment of Real Estate Taxes is reduced as a result of the
refinancing.
g. Landlord's Taxes. Property Taxes shall not include
any federal, state, municipal or city income tax of Landlord, or any franchise,
capital stock, estate or inheritance tax of Landlord.
h. Payment.
(i) General. Except as otherwise directed by
Landlord, Tenant shall pay directly to the appropriate taxing authority as
Additional Rent, all Property Taxes as provided herein.
(ii) Notice. On or before March 1 and November 1
of each calendar year of the Term (including all extensions) in which any
portion of the Project is included on the Alameda County tax rolls ("Tax
Rolls"), Landlord shall give written notice to Tenant of the amount due for
Property Taxes that can be determined based upon the county assessor's tax
statement for the Project. Prior to delinquency, Tenant shall pay to the
appropriate taxing authority all Property Taxes set forth in Landlord's
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notice. Tenant shall pay any Property Taxes not included within Landlord's
notice within thirty (30) days after receiving a bill for the Property Taxes
or, when due, if later.
(iii) Failure to Pay. If Tenant shall fail to pay the
amount of any Property Taxes prior to delinquency or as provided above, Tenant
shall pay to Landlord any penalty incurred as a result of the delinquency,
provided the delinquency is caused by the fault of Tenant. The dates set forth
herein may be changed, at Landlord's election, if the delinquency dates for
Property Taxes are changed.
i. Removal of Project From Tax Rolls. Applicable law may allow
the Project to be removed from the Tax Rolls during the Term (and any
extension). If the Project is removed from the Tax Rolls, Tenant shall be
solely obligated for, and shall pay directly to the appropriate tax collecting
authority prior to or when due, the following:
(i) In Lieu or Additional Taxes. All amounts due as
taxes imposed on the Project (and any additional improvements made by or on
behalf of Tenant) which are imposed in lieu of, or in addition to, the Property
Taxes; and
(ii) Amount Due Upon Reappraisal. Any amounts due as
taxes as result of reappraisal of the Project during the Term (and any
extension), except to the extent provided in Subsection 13.o.
j. Increases. In addition, Tenant shall pay any
increases in Real Property Taxes resulting from any Tenant Personal Property
and Alterations, as defined in Subsection 27.a., placed on the Project for the
benefit of, at the request of, or by Tenant.
k. Proration.
(i) General. Property Taxes shall be prorated (i) on the
basis of a three hundred sixty-five (365) day year to account for any
fractional portion of a fiscal tax year included at the Initial Commencement
Date or expiration of the Term as to all the Project, and (ii) so that Tenant
shall pay only the portion of any Property Taxes which is applicable to the
period from the Initial Commencement Date to the expiration of the Term as to
all the Project.
(ii) Landlord's Option. If all the Project is not removed
from the Tax Rolls, and if permitted by any applicable regulations Landlord may
elect to pay the full amount of any Property Taxes immediately rather than
allowing the Property Taxes to become a lien against the Land, in which event
the Property Taxes shall be prorated in accordance with this Subsection 13.k.
(iii) Termination of Lease. If this Lease terminates as to
all the Project on a date earlier than the end of a fiscal tax year, Landlord
shall deliver to Tenant a statement setting forth the amount of Property Taxes
to be
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paid by Tenant adjusted to the date of termination which. shall be paid within
thirty (30) days of receipt. If Tenant has prepaid Property Taxes for periods
beyond the termination of this Lease, within thirty (30) days after the
termination Landlord shall pay to Tenant the portion of the Real Property taxes
attributable to the period after the termination.
1. Calculation of Assessments Due From Tenant. For
purposes of determining the amount of Assessments which Tenant shall be
obligated to pay as Property Taxes, the limitations set forth in Subsection
13.f. and this Subsection 13.1. shall apply.
(i) One (1) Time Cash Assessment. If a lien for
an Assessment is recorded against the Project during the Term or Extension Term
pursuant to an Assessment District for capital improvements which requires a
one (1) time cash payment, Tenant shall pay to Landlord, within thirty (30)
days of recordation of the assessment lien, the percentage of the Assessment
equal to the following:
(A) Months Remaining. The number of
months, and any portion thereof, remaining in the Term as of the date of
recordation of the Assessment Lien, divided by
(B) One Hundred Eighty (180). One
hundred eighty (180).
(ii) Assessments of Fewer Than Fifteen (15) Years.
If any lien for an Assessment is recorded against the Project pursuant to an
Assessment District for capital improvements which provides for payment of the
Assessment over a period of fewer than fifteen (15) years, Tenant shall, during
the Term (and Extension Term, if applicable), pay to Landlord, together with
the remainder of the Property Taxes, semi-annual equal payments in an amount
that would be necessary to pay in full the principal amount of the Assessment
together with interest, at the Interest Rate at the time the Assessment lien is
recorded, amortized over fifteen (15) years.
(iii) Assessments Elects to Prepay. If any lien
for an Assessment is recorded against the Project pursuant to an Assessment
District for capital improvements which provides for payment of the Assessment
over a period of longer than one (1) year, and Landlord elects to pay the
Assessment in a lump sum Tenant shall, during the Term (and Extension Term, if
applicable), pay to Landlord, together with the remainder of the Property
Taxes, semi-annual equal payments in an amount that would be necessary to pay
in full the principal amount of the Assessment together with interest at the
rate which would have been payable on the Assessment if the Assessment had been
paid over its term, amortized over the term of the Assessment but in no event
less than fifteen (15) years.
(iv) Payments During Extension Term - Amortization.
If a lien for an Assessment is recorded against the Project during the Term,
and Tenant elects to extend the Term of this Lease, Tenant shall be responsible
for the unamortized portion of the Assessment which shall be
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payable until the lien is fully amortized or this Lease (including any
extensions) expires. The unamortized portion of the Assessment shall be
calculated in accordance with, and paid at the time provided in, Subsections
(ii) and
(v) Payments During Extension Term Lump Payment.
If Tenant was obligated, pursuant to Subsection (i), to pay a portion of a lien
of an Assessment District requiring a one (1) time cash payment, then upon any
extension of the Term, Tenant shall pay to Landlord the amount determined
pursuant to this Subsection (v), together interest at the Interest Rate from
the date of recordation of the assessment lien to the date of the payment. The
payment shall be made within thirty (30) days after commencement of the
extension of the Term. The amount of Tenant's payment (prior to increase for
interest due thereon) shall be an amount equal to the product of the initial
balance of the assessment lien times a fraction equal to the following:
(A) Months of extension. The lesser of
(1) the number of months of the extension, or (2) one hundred eighty (180) less
the number of months which remained in the Term (not counting the extension) as
of the recordation of the assessment lien, divided by
(B) One Hundred Eighty (180). One
hundred eighty (180).
m. Personal Property Taxes. Tenant shall pay prior to
delinquency all taxes assessed against and levied upon Tenant Personal Property
and Alterations ("Personal Property Taxes"). When possible, Tenant shall cause
the Tenant Personal Property to be assessed and billed separately from the real
and personal property of Landlord.
n. Certificates. Within twenty (20) days after the time
provided above for the payment by Tenant of Real Property Taxes and Personal
Property Taxes, Tenant shall produce and deliver to Landlord either of the
following:
(i) Receipted Bills. Receipted bills or
sufficient and adequate copies of the receipted bills as proof of the payment;
or
(ii) Evidence That Taxes Not Due. Evidence
reasonably acceptable to Landlord, which may take the form of a certificate of
Tenant, that Tenant (either on its own behalf or on behalf of Landlord) is not
obligated to pay Real Property Taxes and Personal Property Taxes.
o. Increases in Real Property Taxes as a Result of Sale.
(i) Limitation on Responsibility. During the
period within ten (10) years after the Initial Commencement Date, Landlord
shall be responsible for a portion of the Real Property Taxes if the Project is
sold within ten (10) years after the Initial Commencement Date for a sales
price in excess of a specified price ("Real Property Tax Limitation Price").
The Real Property Tax
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Limitation Price, which shall be calculated as of the date the transfer of the
Project occurs, shall be the sum of (1) the unpaid balance (and accrued but
unpaid interest) on the costs paid by Landlord and which Tenant is to reimburse
Landlord (as such costs are described in Section 20); (2) any Additional Rent
which is due during the balance of initial Term pursuant to Section 9,
discounted, at fifteen percent (15%) per annum, to the present value as of the
date the transfer of the Project occurs; and (3) the product of (A) eleven and
seventy-six hundredths (11.76), times (B) ninety-five percent (95%) of the Fixed
Rent as of the date of the sale. If the Project is sold within ten (10) years
after the Initial Commencement Date for a sales price in excess of the Real
Property Tax Limitation Price, during the period within ten (10) years after
the initial Commencement Date Landlord shall pay as its share of the Real
Property Taxes an amount equal to the product of (A) the tax rate, times (B)
the difference between the sales price and the Real Property Tax Limitation
Price; Tenant shall pay the balance of the Real Property Taxes.
(ii) Calculation of Fixed Rent As of Date of Sale.
For purposes of this Subsection 13.o., the "Fixed Rent as of the date of the
sale" shall mean the Fixed Rent, without any deduction of offset, for the
Buildings and Building CC for the month in which close of escrow for the sale
of the Project occurs, multiplied by twelve (12). If this Lease has terminated
or expired as to a Building or Building CC as of the date of close of escrow
for the sale, the "Fixed Rent as of the date of the sale" for the Building or
Building CC shall be the highest Fixed Rent, without deduction or offset, for
the Building or Building CC which shall have been due for the Building or
Building CC at any time prior to termination or expiration of the Term as to
the Building or Building CC.
(iii) Determination of Sales Price of Project.
Landlord shall reasonably allocate the sales price, the Real Property Tax
Limitation Price and the Real Property Taxes between the Buildings and Building
CC.
14. Utilities & Services.
a. Obligation of Tenant. Commencing on the Commencement
Date for at least twenty-five percent (25%) of a Building, Tenant shall make
all arrangements for and shall pay, prior to delinquency, the cost of all
utilities and services including surcharges, installation fees and other costs
or expenses in connection therewith, furnished to the Building or Tenant,
including, without limitation, all charges for water, sewer, heat, gas, hot
water, electricity, air conditioning and ventilating, light, power, refuse
service and janitorial service. Landlord shall direct the contractor for the
Project not to discontinue power to any particular Building, without Tenant's
consent, after the contractor completes the Building and prior to Tenant
commencing occupancy of the Building. Landlord and Tenant acknowledge that
Tenant's allowance for Tenant Improvements shall exclude the sewer connection
fees for the Tenant Improvements.
b. Intention of Parties. Except as otherwise
specifically set forth in this Lease, it is the inten-
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tion of Landlord and Tenant that Tenant shall pay for all expenses of every
kind or nature whatsoever in connection with the use, operation and maintenance
of the Project and Tenant's activities thereon. Landlord shall not be required
to furnish any services or utilities to the Project or to make any repairs in
connection therewith. If any charges are not paid when due, Landlord may pay
the charges, and any amount so paid by Landlord, together with interest at the
Interest Rate, shall thereupon become due to Landlord from Tenant as Additional
Rent.
15. Management Fee. During the Term (including all extensions)
Tenant shall pay to Landlord a reasonable management fee for management of the
Project by Landlord or Landlord's agent. The management fee shall be in the
amount of Landlord's out of pocket costs of managing the Project and shall not
exceed seventy-five hundredths of one percent (0.75%) of the Fixed Rent for the
Project.
16. Fixtures. Tenant shall, at its own expense, provide, install
and maintain in good condition all trade fixtures and equipment required in the
conduct of its business in the Project. All Tenant's fixtures and
improvements, other than Tenant's trade fixtures and equipment, which are
installed or constructed upon or attached to the Project shall become a part of
the realty and belong to Landlord. If Tenant is not then in default, Tenant
may, at the termination of this Lease, or at any other time, remove from the
Project all Tenant's trade fixtures, equipment and other personal property.
Upon removal, Tenant shall restore the Project to its original condition at the
time of occupancy, normal wear and tear excepted, and subject to the terms of
Section 29.
17. Use of the Project.
a. Tenant's Use. Tenant shall use the Project in
accordance with all applicable governmental restrictions, and the CC&R's.
Tenant shall use the Project solely for general office purposes, the PBX
Facility (in Building CC) and the related uses described in Subsections (i)
through (v) below, which uses shall not require the prior written consent of
Landlord. Tenant shall not use the Project for any other purpose without
obtaining the prior written consent of Landlord, which consent Landlord may
withhold in its sole discretion. The PBX Facility (in Building CC) and the
uses set forth in Subsections (i) through (v) below in no event shall include
use of the Project by the general public and the uses shall be made only by
Tenant, and not by any Subtenant other than those described in Subsection
26.1., and by operators (who may be Subtenants) providing services for the uses
described in Subsections M, (ii), (iv) and (v). Subject to the restrictions
set forth in this Section 17, the following shall be uses of the
Project acceptable to Landlord:
(i) Credit Union. An office for a credit union
such as Patelco;
(ii) Sundries Shop. A sundries shop, consisting
of not greater than three thousand (3,000) square feet, for employees of
Tenant and Subtenants described in Subsection 26.1;
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(iii) Earth Station. Subject to Landlord's
approval on aesthetic grounds, an earth station which shall consist of a
parabolic dish of not greater than ten (10) meters in diameter, together with
necessary support;
(iv) Travel Agency. A travel agency for employees
of Tenant and Subtenants described in Subsection 26.1; and
(v) Cafeteria. A cafeteria for employees of
Tenant and Subtenants described in Subsection 26.1.
b. CC&R's. Tenant agrees that this Lease is subject and
subordinate to the proposed CC&R's for Phase II of the Hacienda Business Park,
and further agrees that the CC&R's are an integral part of this Lease. By
initialing the following spaces, Tenant acknowledges that it has reviewed and
approved the proposed CC&R's (Draft 4; dated 4-28-86). ______ Throughout
the Term and any extension thereof, notwithstanding any other provision
hereof, Tenant shall faithfully and timely assume and perform all obligations
of Landlord and/or Tenant under the CC&R's and any modifications or amendments
thereto, including the payment of any periodic or special dues or common area
assessments against the Project as may be made from time to time by the
Hacienda Business Park Owners Association ("Association"); provided, however,
that no amendment to the CC&R's not initiated by Tenant shall materially
increase Tenant's burdens and/or obligations, or decrease its rights, hereunder
without Tenant's prior written consent. Tenant shall comply with all duly
adopted rules, regulations and restrictions as may be made from time to time by
the Association. Tenant shall indemnify and hold Landlord, its partners,
subsidiaries, directors, officers, agents and employees harmless from and
against any loss, expense and damage, including attorneys' fees and court
costs, arising out of the failure of Tenant to perform or comply with the
CC&R's applicable to Tenant.
c. Conflict Within Applicable Restrictions. If there is
any conflict or inconsistency between the CC&R's and any applicable law,
ordinance or order, the stricter (strictest) requirement shall apply.
d. Uses Prohibited.
(i) Conflict with Law. Tenant shall not use the
Project or suffer or permit anything to be done in, on or about the Project
which will in any way conflict with any law, statute, zoning restriction,
ordinance or governmental law, rule, regulation or requirement of duly
constituted public authorities now in force or which may hereafter be in force,
or board of fire underwriters' requirements or other similar body now or
hereafter constituted relating to or affecting the condition, use or occupancy
of the Project or the Land.
(ii) Nuisance. Tenant shall not commit any public
or private nuisance or any other act or thing which unreasonably disturbs the
quiet enjoyment of other co-tenants of the Project or any occupant of nearby
property.
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Tenant shall place no loads upon the floors, walls or ceilings in excess of the
maximum designed load or loads which endanger the structure; nor place any
harmful liquids in the drainage systems; nor dump or store waste materials or
refuse, or allow such to remain outside the Buildings, except in the enclosed
trash areas designated by Landlord, and Tenant shall not store or permit to be
stored or otherwise place any other such material of any nature whatsoever
outside the Buildings.
e. Compliance.
(i) Tenant's Obligation. Except as provided in
Subsection (ii), Tenant shall, at Tenant's sole cost and expense, promptly
comply with all laws, statutes, ordinances and governmental rules, regulations
or requirements now in force or which may hereafter be in force, and with the
requirements of any board of fire underwriters or other similar body now or
hereafter constituted relating to or affecting the condition, use, or occupancy
of the Project, whether forseen or unforseen, ordinary or extraordinary, and
whether or not the same shall require structural repairs, alterations or
additions, and irrespective of the cost thereof. Tenant's observation and
compliance shall include Tenant's compliance with all the rules, laws,
ordinances and requirements applicable to an alteration, addition or change to
the Project at the time Tenant makes the alteration, addition or change.
Tenant shall indemnify, defend and save Landlord harmless from all costs,
expenses, claims and damages by reason of any notice, order, rule, regulation,
requirement, violation or penalty filed against or imposed upon the Project or
any part thereof or against Landlord as owner thereof arising from the failure
of Tenant to comply with this covenant.
(ii) Landlord's Obligation. Tenant shall not be
responsible for the compliance costs incurred by Landlord for a Building to the
extent the costs are required because the Building failed to comply with the
law as of the Commencement Date for the Building; provided, however, that
Tenant shall, at Tenant's sole cost and expense, promptly pay all costs to
comply with all laws to the extent that the failure to comply is the result of
any change order (described in Exhibit C) requested by Tenant.
(iii) Tenant's General Obligation. Tenant shall,
at Tenant's sole cost and expense, promptly comply with all laws to the extent
the compliance requirement arises from Tenant's use of the Project (i.e.,
Tenant's use of the Project for other than general office use and the PBX
Facility within Building CC) or as a result of any Alteration, addition or
change to the Project made by Tenant.
(iv) Tenant's Obligation.
(A) Requirement for Compliance. Except
as provided in Subsection 17 (e)(ii), Tenant's responsibility for the costs of
compliance to the extent the requirement for compliance arises despite the fact
that Tenant uses the Project solely for general office use and the PBX Facility
within Building CC and not as a result of
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any Alteration, addition or change to the Project made by Tenant, shall be as
set forth in this Subsection (iv).
(B) Tenant's Obligation. Tenant shall
be responsible for any compliance cost, regardless of the basis for the cost,
which during any twelve (12) month period is less than Seventy-Five Thousand
Dollars ($75,000.00). The Seventy-Five Thousand Dollar ($75,000.00) figure
shall increase by Five Thousand Dollars ($5,000.00) per year, commencing on the
first anniversary date of the Initial Commencement Date. To determine whether
the amount of a compliance cost exceeds Seventy-Five Thousand Dollars
($75,000.00), the costs incurred during any twelve (12) month period to make
the same repair, alteration or addition for compliance of more than one
Building shall be aggregated. For example, the cost incurred within any twelve
(12) month period to make the same repair to the air conditioning systems of
more than one Building in order to bring the air condition systems into
compliance with applicable law shall be aggregated.
(C) Action by Landlord. If, pursuant to
Subsections (A) and (B), Tenant is not to be solely responsible for the cost of
compliance, Landlord shall undertake the actions necessary to comply with the
applicable rules, laws, ordinances and requests. All costs incurred by
Landlord in compliance shall be known as "Landlord's Compliance Costs." All
Landlord's Compliance Costs shall bear interest at the Interest Rate from the
date expended by Landlord until the date Landlord's Compliance Costs are paid
in full or expiration of the term of this Lease (including all extensions).
(D) Amortization of Landlord's
Compliance Costs. Landlord's Compliance Costs for a particular matter shall be
fully amortized, in accordance with the procedures set forth in Section 20,
over the following periods:
(1) Five (5) years, if Landlord's
Compliance Costs for the particular matter total less than Five Hundred
Thousand Dollars ($500,000.00) and the particular matter is personal property;
or
(2) Ten (10) years, if the amount
of Landlord's Compliance Costs, or the type of the particular matter (i.e.,
real property), is other than as provided in Subsection (1).
(E) Payment of Amortized Costs. Tenant
shall be responsible for the portion of Landlord's Compliance Costs which are
amortized over the Term (including any extensions). Except as provided in
Subsection (F), Tenant's share of the amortized Landlord's Compliance Costs
shall be paid in monthly increments, with the Fixed Rent, as an item of
Additional Rent. The amount of each monthly increment shall be calculated in
accordance with the terms of Section 20.
(F) Right to Make Initial Lump Payment.
Within forty-five (45) days after Landlord determines Landlord's Compliance
Costs and notifies Tenant of the amount of Landlord's Compliance Costs, Tenant
shall
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have the right to pay to Landlord a lump sum equal to the portion of Landlord's
Compliance Costs for which Tenant would be responsible for the remainder of the
Term (including any extensions). If Tenant elects to pay Landlord a lump sum
for Tenant's share of Landlord's Compliance Costs for a particular matter,
Tenant shall only be responsible for interest at the Interest Rate, on
Landlord's Compliance Costs from the date expended by Landlord to the date paid
by Tenant.
(G) Right to Make Subsequent Lump
Payment. Tenant shall have the right to make a lump payment or all or a
portion of the outstanding portion of Landlord's Compliance Costs in accordance
with the terms of Subsection 20.b.
f. Sewage Capacity.
(i) Capacity. The Project shall have sewage
capacity ("Sewage Capacity") in the amount which Landlord, Tenant and City,
after consultation, reasonably determine sufficient to meet the anticipated
needs of Tenant for use of the Project for general office purposes based on
Tenant's use of the Project during normal business hours and, subject to
overtime and special requirements, on a single shift per day basis. Landlord
shall notify the Tenant of the number of gallons of sewage capacity which
Landlord, Tenant and City determine shall be allocated to the Project and
Tenant shall not intentionally discharge sewage in excess of the Sewage
Capacity. Tenant shall not seek additional Sewage Capacity for the Project
without Landlord's prior written consent. The Sewage Capacity is estimated to
be ninety-one thousand three hundred (91,300) gallons average day dry weather
flow, based on the aggregate Square Footage of the Buildings and Building CC
being approximately one million eighty-six thousand (1,086,000) square feet.
(ii) Excess Usage. If Tenant discharges sewage in
excess of the Sewage Capacity, Tenant shall immediately take steps to correct
the excess discharge until the sewage discharged is no longer in excess of the
Sewage Capacity. The determination of the City, any other public agency having
the necessary authority to do so, or the reasonable determination of Landlord,
as to the amount of sewage discharged by Tenant, shall be binding on Tenant;
provided, however, that Tenant shall have the right to contest a determination
in accordance with appropriate Judicial or administrative procedures provided
the contest does not result in the water to the Project being discontinued.
Tenant shall be liable for any damages, costs and claims arising out of
Tenant's discharge of sewage in excess of the Sewage Capacity.
(iii) Acquisition of Additional Sewage Capacity.
If Tenant discharges sewage in excess of the Sewage Capacity and, as a result,
Landlord acquires additional sewage capacity for the Project, Tenant shall pay,
as Additional Rent, all costs of the additional sewage capacity.
g. Easement to PBX Facility. During the Term of this
Lease (including any extensions), Tenant shall
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have the right to a nonexclusive easement ("PBX Facility, Easement") from the
PBX Facility to the exterior boundary of the easement area, described in the
Easement granted to The Pacific Telephone and Telegraph Company (recorded on
September 25, 1941, at Book 4105, Page 318 of the Official Records of the
County of Alameda), which is in the closest proximity to the PBX Facility;
provided, however, that the PBX Facility Easement shall be subject to
reasonable restrictions, including, but not limited to, the area of the PBX
Facility Easement, the location of the PBX Facility Easement and the uses which
may be made of the property above and around the PBX Facility Easement area.
18. PUD, Design Approval and Development Agreement.
a. PUD. The Land is within the Hacienda Business Park.
Landlord has obtained the approval of the City of Pleasanton for the zoning of
the portion of the Hacienda Business Park which includes the Land as a planned
unit development ("PUD 85-8"). The conditions of PUD-85-8 are set forth in
Exhibit I, attached hereto. Tenant acknowledges that revisions or amendments
to the Conditions of Approval of PUD 85-8 may be made after the date of this
Lease; provided, however, that no revision or amendment to PUD 85-8 shall
increase Tenant's burdens and/or obligations hereunder, or decrease Tenant's
rights, without Tenant's prior written consent.
b. Design Approval. Landlord has obtained design review
approval of the City of Pleasanton for the Project. The design approval is set
forth in PUD 85-8-1D, the conditions of which are set forth in Exhibit I-1,
attached hereto. Tenant acknowledges that revisions or amendments to PUD
85-8-1D may be made after the date of this Lease; provided, however, that no
revision or amendment to PUD 85-8-1D shall increase Tenant's burdens and/or
obligations hereunder, or decrease Tenant's rights, without Tenant's prior
written consent.
c. Subsequent PUD's. PUD 85-8 and PUD 85-8-1D may be
terminated after the date of execution of this Lease. Landlord shall have the
right, but not the obligation, to seek approvals for all or any portion of the
Hacienda Business Park as one (1) or more subsequently approved planned unit
developments ("Subsequent PUD's"). The conditions which may be imposed as part
of the Subsequent PUD's may include some or all of the conditions set forth in
PUD 85-8 and PUD 85-8-1D, as well as additional conditions which the City and
Landlord may desire; provided, however, that no additional conditions shall
materially increase Tenant's burdens and/or obligations hereunder, or decrease
Tenant's rights, without Tenant's prior written consent.
d. Development Agreement. Landlord and the City have
entered the Development Agreement attached hereto as Exhibit J. Tenant
acknowledges that Landlord shall have the right to enforce Tenant's obligations
under the Development Agreement and that the Development Agreement may be
amended, modified or revoked at a later date.
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e. Subsequent Development Agreements. Landlord shall
have the right, but not the obligation, to seek approvals for making the Land
subject to one (1) or more subsequent development agreements ("Subsequent
Development Agreements") regarding the Land. The conditions that may be
imposed as part of the Subsequent Development Agreements may include some or
all of the conditions set forth in the Development Agreement, as well as
additional conditions which the City and Landlord may desire.
f. Consent and Waiver of Tenant. Tenant hereby waives
any and all rights of notice and any and all rights of protest in connection
with revisions, modifications or amendments to the Conditions of Approval of
PUD-85-8 and PUD 85-8-1D and the terms and conditions of the Development
Agreement and any and all rights of notice and any and all rights of protest in
connection with filing and processing of the Subsequent PUD's and negotiating
and implementing of the Subsequent Development Agreements; provided, however,
that Tenant shall have the right to protest any revisions, modifications, or
amendments to PUD 85-8, PUD 85-8-1D or the Development Agreement or any
conditions in the Subsequent PUD's and Subsequent Development Agreements, other
than those set forth in PUD 85-8, PUD 85-8-1D and the Development Agreement,
which substantially and materially interfere with Tenant's proposed use of the
Premises, substantially and materially interfere with Tenant's use or
substantially and materially increase Tenant's obligations; and provided
further that Landlord shall not enforce Tenant's obligations under the
Development Agreement or the Subsequent Development Agreements, other than
those set forth in Exhibit J, which materially increase Tenant's burdens and/or
obligations, or decrease Tenant's rights, without Tenant's prior written
consent.
g. Tenant's Covenants. Except as otherwise specifically
provided in this Lease, Tenant covenants to do the following in connection with
PUD 85-8, PUD 85-8-1D, the Subsequent PUD's, the Development Agreements and the
Subsequent Development Agreements:
(i) Perform Obligations. Perform all obligations
as required by PUD 85-8, PUD 85-8-1D, the Subsequent PUD's, the Development
Agreement and the Subsequent Development Agreements;
(ii) Use Of Premises. Uses the Premises in
accordance with the terms of PUD 85-8, PUD 85-8-1D, the Subsequent PUD's, the
Development Agreement and the Subsequent Development Agreements; and
(iii) Execution of Documents. Upon request of
Landlord or the City, execute all documents which effectuate this Article, PUD
85-8, PUD 85-8-1D, the subsequent PUD's, the Development Agreement and the
Subsequent Development Agreements, including, but not limited to, formal
waivers of notice of protest in connection with filing and processing of the
Subsequent PUD's and negotiating and implementing of the Subsequent Development
Agreements.
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19. Repair and Maintenance.
a. Tenant's Obligations. Except as provided in
Subsection 19.d., Tenant, at Tenant's sole cost and expense, shall keep,
maintain, and preserve the Project and every part thereof in good condition and
repair, and shall, when and if needed, make all repairs to the Project
including, without limitation, the interior, exterior and all structural
portions of the Buildings, the foundations, roofs, subfloorings, elevators, the
sidewalks, driveways, parking areas, landscaping and grounds which are part of
the Project, the elevators, any heating, ventilating and air conditioning
("HVAC") systems, all plumbing and sewerage facilities within the Project,
fixtures, interior walls, floors, ceilings, windows, glass, store fronts,
doors, entrances, plateglass, showcases, skylights, roof drains, all electrical
facilities and equipment, including lighting fixtures, lamps, fans and any
exhaust equipment and systems, any automatic fire extinguisher equipment within
the Buildings, electrical motors and all other appliances and equipment of
every kind and nature located within the Project. Tenant shall, at Tenant's
option, either institute and maintain elevator and HVAC systems preventive
maintenance programs, or obtain elevator and HVAC systems preventive
maintenance contracts. The elevator and HVAC systems maintenance programs or
contracts shall be subject to the reasonable approval of Landlord, shall be
paid for by Tenant, and shall provide for and include, without limitation,
replacement of filters, oiling and lubricating of machinery, parts replacement,
adjustment of drive belts, oil changes and other preventive maintenance. If
Tenant fails to maintain the elevator or the HVAC systems in the manner
described above, Landlord shall have the option, after reasonable notice to
Tenant, to maintain and repair the elevator or HVAC systems, in which event
Tenant shall reimburse Landlord upon demand for all costs thereby incurred by
Landlord.
b. Right of Landlord To Make Repairs.
(i) Applicability. Landlord's rights under this
Subsection 19.b. shall apply in the event of the following during the Term
(including all extensions) or after its expiration:
(A) Failure to Maintain. Tenant's
failure or neglect to maintain the Project in good order, condition and repair
within thirty (30) days after notice from Landlord (or such shorter period of
time as Landlord reasonably determines necessary in the event of an emergency
in order to avoid damage to the Project);
(B) Failure After Notice. Tenant's
failure to make repairs or alterations within thirty (30) days after notice by
Landlord (or such shorter period of time as Landlord reasonably determines
necessary in the event of an emergency or to avoid damage to the Project); or
(C) Failure to Pursue. Tenant's failure
to diligently pursue repairs or alterations.
(ii) Right of Landlord. Upon the occurrence of an
event described in Subsection (i), Landlord
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shall have the right, but not the obligation, to make such repairs or
alterations as may be necessary for the safety and preservation of the Project,
or to discharge Tenant's obligations hereunder and all costs and expenses
incurred by Landlord in so doing, with interest thereon at the Interest Rate
from the date the costs and expenses are paid by Landlord until repaid in full
by Tenant, shall be repaid by Tenant to Landlord as an item of Additional Rent.
c. Limitation on Obligation of Landlord. Except as
otherwise specifically provided in this Lease, Landlord shall not under any
circumstances be required to build any improvements in connection with the
Project except those set forth in Exhibit C, or to make any repairs,
replacements, alterations or renewals of any nature or description to the
Project, whether interior or exterior, ordinary or extraordinary, structural or
non-structural, foreseen or unforeseen, or to make any expenditure whatsoever
in connection with this Lease, or to inspect or maintain the Project in any
way.
d. Amortization of Certain Capital Expenditures.
(i) Applicability. Except as provided in
Subsection 19.d.(i)(B), nothing in this Subsection 19.d. shall reduce Tenant's
obligation, pursuant to Section 24, to repair damage or destruction of all or
any portion of the Project. This Subsection 19.d. shall be applicable only to
the following items:
(A) Major Capital Expenditures.
Expenditures which (1) under generally accepted accounting principles, are
capital expenditures, rather than expenses; (2) are not collectible by
warranty; (3) exceed Seventy-Five Thousand Dollars ($75,000.00) per item; and
(4) are made to a Building later than three years after the Commencement Date
for the Building; and
(B) Uninsurable Loss. Any loss which
under the terms of this Lease is not the obligation of Tenant to insure against
(including the option to self-insure against), which shall include losses for
which insurance is not available at the time of the loss from a recognized
insurer in the commercial insurance industry that meets the standards set out
in Subsection 21.i. below, at a cost which is economically feasible under the
circumstances.
(ii) increase in Dollar Figure. The Seventy-Five
Thousand Dollar ($75,000.00) figure set forth in Subsection d.(i)(A) shall
increase by Five Thousand Dollars ($5,000.00) on an annual basis commencing on
the fourth anniversary of the Initial Commencement Date.
(iii) Aggregation of Expenditures. To determine
whether a capital expenditure exceeds Seventy-Five Thousand Dollars
($75,000.00), capital expenditures incurred within any twelve (12) month period
for the same repair made to more than one Building shall be aggregated. For
example, capital expenditures incurred within a twelve (12) month period to
make the same repair to the air conditioning systems of more than one Building
shall be aggregated.
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(iv) Amortization or Lump Sum Payment. Any costs
of the work described in Subsection d.(i) initially shall be borne by Landlord.
Tenant shall reimburse or repay Landlord all or the appropriate portion of the
cost incurred for the work described in Section d.(i). At Tenant's option,
Tenant's obligation to reimburse or repay Landlord shall take the form of
either:
(A) Amortization. Amortization of the
costs, in accordance with the schedule set forth in Subsection (vi), over the
remainder of the Term; or
(B) Lump Sum Payment. Payment of a lump
sum, equal to the amount which would be amortized over the remainder of the
Term of this Lease, with interest at the Interest Rate from the date the
expenditures are made by Landlord to the date that the expenditures are paid in
full by Tenant to Landlord.
(v) Election of Tenant. Tenant shall elect
either of the alternatives set forth in Subsection (iii) within thirty (30)
days after Landlord notifies Tenant of the amount of the cost to be reimbursed
or repaid.
(vi) Amortization of Landlord's Costs. Landlord's
costs of work undertaken pursuant to Subsection d. (i), shall be amortized in
accordance with the terms of Section 20, over the following periods:
(A) Limited Amount and Personal
Property. Five (5) years if the costs for the particular matter total less
than Five Hundred Thousand Dollars ($500,000.00) and the particular matter is
personal property; or
(B) Other. Ten (10) years, if the
amount of Landlord's costs, or the type of the particular matter (i.e., real
property), is other than as provided in Subsection (A).
(vii) Delivery of Invoices. Landlord shall deliver
to Tenant in a timely manner invoices for the costs which Landlord has incurred
for which Landlord will seek reimbursement from Tenant.
(viii) Payment of Amortized Costs. Tenant shall be
responsible for the portion of Landlord's costs for a particular matter of work
undertaken pursuant to Subsection d.(i) which are amortized over the Term
(including any extensions). Except as provided in Subsection (ix), Tenant's
share of Landlord's amortized costs shall be paid in accordance with Section
20.
(ix) Right to Make Lump Payment. Within
forty-five (45) days after Landlord determines Landlord's costs and notifies
Tenant of the amount of the costs, Tenant shall have the right to pay to
Landlord a lump sum equal to the portion of Landlord's costs for which Tenant
would be responsible for the remainder of the Term. If Tenant elects to pay
Landlord a lump sum for Landlord's costs for a particular matter, Tenant shall
only be responsible for interest, at the Interest Rate, on Landlord's costs
from the
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date expended by Landlord to the date paid in full by Tenant.
(x) Payments upon Extension. If Tenant elected,
pursuant to Subsection (ix), to pay to Landlord a lump sum equal to a portion
of Landlord's costs, upon extension of the Term, Tenant shall pay to Landlord
the balance of the unamortized costs together with interest, at the Interest
Rate, on Landlord's costs from the date expended by Landlord to the date paid
in full by Tenant.
e. Standard of Repairs and Maintenance. All repairs and
replacements made by or on behalf of Tenant or any person claiming through or
under Tenant shall be made and performed in a good and workmanlike manner in
accordance with all applicable laws and regulations and shall be made and
performed so that the repairs and replacements shall be at least equal in
quality, value, and utility to the original work or installation. Tenant
waives the right to make repairs at Landlord's expense under any law, statute
or ordinance now or hereafter in effect.
f. Warranties. Landlord shall use Landlord's best
efforts to assign to Tenant any warranties or other causes of action or claims,
whether contractual or in tort, that Landlord has with respect to the Project,
to the extent the warranties or other causes of action or claims may be
assigned. To the extent warranties or other causes of action or claims are not
assignable, Landlord shall attempt, at no expense to Landlord, to enforce the
warranties or claims at Tenant's direction and shall provide for timely
delivery of the proceeds to Tenant.
g. Inspection of Premises. Subject to Tenant's
reasonable security requirements, Landlord and Landlord's agents and other
representatives shall have the right upon reasonable notice, except in the case
of an emergency (in which event no notice shall be necessary), to enter into
and upon the Project or any part thereof at all reasonable hours to inspect the
Project and to inspect the performance by Tenant of the terms and conditions of
this Lease.
20. Amortization of Costs With Interest.
a. Applicability. This Lease provides for amortization
of certain costs, with interest at the Interest Rate, over a specified number
of years. Examples of costs which are amortized with interest are Landlord's
Compliance Costs pursuant to Subsection 17.e. and certain major capital
expenditures described in Subsection 19.d.
(i) Manner of Amortization. The amount of a
particular increment of costs which is to be amortized (which, for purposes of
this Section 20 shall be considered the principal portion of the payment) shall
be amortized over the appropriate number of years for the type of cost (e.g.,
ten (10) years for costs incurred for capital expenditures for real property).
The amortization schedule for each increment shall be based on equal monthly
payments of principal over the period of amortization; the interest due on each
increment shall fluctuate over the period of amortization to reflect both
revisions in the Interest Rate
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during the period of the amortization and the outstanding balance of the
principal.
(ii) Payment Schedule. A payment schedule shall
be established for each increment of costs which is to be amortized. The
payment schedule shall provide that each month, together with the Fixed Rent,
Tenant shall make a payment of a portion of the increment, as Additional Rent.
Each payment shall be an amount equal to the sum of (A) the principal payment
due for the month, plus (B) the amount of interest, at the Interest Rate, on
the unpaid portion of the increment of cost (i.e., the principal) which has
accrued but is unpaid as of the date of payment.
(iii) Determination of Interest Due. Within thirty
(30) days prior to the date upon which the first increment of principal and
interest is to be due for a particular item to be amortized, Landlord shall
establish a payment schedule for the next twelve (12) months. The payment
schedule shall be based on Landlord's reasonable estimate of the Interest Rate
over the twelve (12) month period.
(iv) Annual Review. Within sixty (60) days after
the end of each twelve (12) month period for each increment of cost which is to
be amortized, Landlord shall provide Tenant with a statement comparing (A) the
actual interest which should have been due during the prior twelve (12) month
period for the particular increment (based on the actual Interest Rate during
the twelve (12) month period) to (B) the interest paid by Tenant during the
twelve (12) month period (based on Landlord's reasonable estimate of the
Interest Rate over the twelve (12) month period). If the interest which should
have been due is more than the interest paid, Tenant shall pay the difference
to Landlord within thirty (30) days of receipt of a bill therefore. If the
interest which should have been due is less than the interest paid, Tenant
shall receive a credit against future interest payments equal to the amount of
the difference; provided that, in the case of overpayment of interest for the
final twelve (12) months of the Term (including all extensions), Landlord shall
credit Tenant with the difference against the sums due from Tenant to Landlord
in accordance with the terms of this Lease; and if no sums are due or unpaid,
Landlord shall refund the amount to Tenant.
b. Prepayment of Unamortized Costs. Tenant shall have
the right to pay Landlord all or any portion of the unamortized portion of any
increment of cost (i.e., the outstanding principal amount) upon thirty (30)
days advance notice. Within sixty (60) days after Landlord's receipt of
Tenant's payment of an unamortized portion of an increment of cost, Landlord
shall provide Tenant with a statement comparing (A) the interest paid for the
item (updated from the latest statement given pursuant to Subsection a.(iv)) to
(B) the interest due on the item (updated from the latest statement given
pursuant to Subsection a.(iv)). Any difference shall be treated in the same
manner as a difference under Subsection a.(iv).
c. Survival. Upon early termination of this Lease not
caused by Tenant's default, all unamortized costs
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and all interest thereon which would have been due if early termination had not
occurred shall be immediately due and payable. Upon termination of this Lease
caused by Tenant's default, Landlord shall have the same rights to all
amortized and unamortized costs (and all interest thereon) as Landlord has for
all other Rent due under this Lease. All obligations pursuant to this Section
20 shall survive the expiration or early termination of this Lease.
21. Insurance.
a. Right of Tenant to Self Insure.
(i) Right of Tenant. It is anticipated that
Tenant shall self insure so long as Tenant has a net worth of at least Five
Hundred Million Dollars ($500,000,000.00). So long as Tenant is self insured,
Tenant shall be responsible for payment of all amounts which would otherwise be
payable as proceeds from insurance in accordance with the insurance Tenant is
otherwise obligated to maintain pursuant to this Lease. Based on Tenant's
obligation to pay all amounts which would otherwise be payable by third-party
liability, worker's compensation, personal property, and other insurers,
Landlord waives the obligation of Tenant to obtain the insurance described in
this Lease to the extent it is legally permissible for Tenant to self insure
and so long as Tenant has a net worth of at least Five Hundred Million Dollars
($500,000,000.00). If Tenant assigns this Lease, the right of Tenant to self
insure immediately shall terminate, and Tenant immediately shall meet the
insurance requirements set forth in this Lease, unless Tenant assigns this
Lease to Tenant's parent corporation or to a subsidiary of Tenant or Tenant's
parent corporation in which Tenant or Tenant's parent corporation owns not less
than fifty percent (50%) of all outstanding stock, and the permissible
subsidiary maintains a net worth of at least Five Hundred Million Dollars
($500,000,000.00) or this Lease is guaranteed by American Telephone & Telegraph
Company ("AT&T").
(ii) Tenant Deemed Self Insured. Tenant shall be
deemed "self insured" for all purposes under this Lease with regard to any
insurance coverage required by this Lease, regardless of whether Tenant has
applicable insurance coverage, if Tenant is responsible for a substantial
deductible or retainage under such coverage. As long as Tenant is deemed self
insured, Tenant shall have no duty to obligate its insurers (if any) beyond the
obligations Tenant would have under this Lease if Tenant were self insured with
no additional insurance whatsoever. For purposes of this Subsection,
"substantial deductible or retainage" shall mean a deductible or retainage
amount exceeding Four Hundred Ninety-Nine Thousand Dollars ($499,000.00).
b. Premises Insurance. During the Term (and all
extensions), Tenant, at Tenant's sole cost and expense, shall procure and
maintain in full force and effect "All-Risk" property coverage insurance
including, at Landlord's option, earthquake and flood coverage, plateglass
coverage, vandalism and malicious mischief coverage inflation endorsement,
agreed amount endorsement, hazardous materials endorsement, sprinkler leakage
endorsement, and boiler, air conditioning and ventilation systems and machinery
coverage
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on the Buildings, including coverage of all interior improvements, equipment,
trade fixtures, inventory, fixtures and personal property of Tenant located on
or in the Project, in an amount equal to one hundred percent (100%) of the
replacement value (replacement cost new, including debris removal, and
demolition) thereof, as reasonably determined by Landlord. The insurance shall
also include insurance against loss of rents on an "All-Risk" basis including,
at Landlord's option, the perils of earthquake and flood, in an amount equal to
the Rent and any other sums payable under this Lease, for a period of at least
twelve (12) months commencing with the date of loss. The insurance shall name
Landlord and Landlord's partners, subsidiaries, directors and officers as named
insured and include a lender's loss payable endorsement (Form 438 BFU
Endorsement) in favor of Landlord's lender, if any. Until Landlord gives
Tenant notice to the contrary, Landlord shall be deemed to require all the
insurance described in the two (2) preceding sentences. The proceeds from the
coverage shall be used for the repair or replacement of the items insured.
c. Liability Insurance. Tenant shall maintain in full
force and effect at all times during the Term (and all extensions), at its own
expense, for the protection of Tenant and Landlord, as their interests may
appear, policies of insurance issued by a responsible carrier or carriers
acceptable to Landlord which afford the following coverages:
(i) Worker's Compensation. Worker's Compensation
for Tenant's employees - Statutory.
(ii) General Liability, Comprehensive general
liability insurance including blanket contractual liability, broad form
property damage, personal injury, completed operations, products liability,
fire and water damage and legal liability, in an amount not less than Fifty
Million and No/100 Dollars ($50,000,000.00), combined single limit for both
bodily injury and property damage, naming Landlord and its partners,
subsidiaries, directors, agents, officers and employees as additional insureds
and shall provide that it shall be primary insurance and any insurance of
Landlord shall be secondary. Notwithstanding any provision in this Lease,
Tenant's self insurance shall not be required to extend to, nor shall any
insurance obtained by Tenant be required to contain, coverage against
negligence or wilful misconduct of Landlord or its partners, subsidiaries,
directors, agents, officers or employees.
d. Personal Property. If Tenant is no longer AT&T, or a
Subtenant of AT&T described in Subsection 26.1., Tenant shall, at Tenant's
expense, procure and maintain in full force and effect any insurance ("Personal
Property Insurance") on Tenant's personal property. Landlord shall have no
interest in the Personal Property insurance and no obligation to insure any of
Tenant's personal property.
e. Certificates. Tenant shall deliver to Landlord at
least thirty (30) days prior to the time the insurance is first required to be
carried by Tenant, and thereafter at least thirty (30) days prior to expiration
of each such policy, Certificates of Insurance or other docu-
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mentation reasonably acceptable to Landlord evidencing the coverage specified
in this Section 21 with limits not less than those specified above. To the
extent reasonably commercially available, the certificates shall expressly
provide that the interest of Landlord therein shall not be affected by any
breach of Tenant of any policy provision for which the certificates evidence
coverage. Further, all certificates shall expressly provide that not less than
thirty (30) days' prior written notice shall be given Landlord in the event of
a lowering or cancellation of the coverages evidenced by the certificates.
f. Increased Coverage. Upon demand, Tenant shall
provide Landlord, at Tenant's expense, with such increased amount of existing
insurance, and such other insurance as Landlord or Landlord's lender may
reasonably require, to afford Landlord and Landlord's lender adequate
protection.
g. Co-Insurer. If, because of the failure of Tenant to
comply with the foregoing provisions, Landlord is adjudged a co-insurer by its
insurance carrier, then any loss or damage Landlord shall sustain by reason
thereof, including attorneys' fees and costs, shall be borne by Tenant and
immediately shall be paid by Tenant upon receipt of a bill therefor and
evidence of the loss.
h. No Limitation of Liability. Landlord makes no
representation that the limits of liability specified to be carried by Tenant
under the terms of this Lease are adequate to protect Tenant or Landlord, and
the limits of insurance shall not limit the liability of Tenant hereunder.
i. Insurance Requirements. All insurance required to be
obtained by Tenant hereunder shall be in a form satisfactory to Landlord; shall
be carried with companies admitted to do business in the State of California
that have a general policy holder's rating of not less than "A" and a financial
rating of not less than Class "X" in the most current edition of Best's
Insurance Reports; shall provide that such policies shall not be subject to
material alteration or cancellation except after at least thirty (30) days'
prior written notice to Landlord; shall be primary as to Landlord; and the
policy or policies, or duly executed certificates for them, together with
satisfactory evidence of payment of the premium thereon, shall be deposited
with Landlord prior to the Initial Commencement Dater and upon renewal of such
policies, not less than thirty (30) days prior to the expiration of the term of
such coverage. The policies shall contain a cross liability endorsement which
shall provide that any loss otherwise payable under the policy shall be payable
notwithstanding the fact that Landlord and Tenant are named as additional
insureds and not withstanding any act or negligence of Landlord or Tenant which
might, absent such an endorsement, result in forfeiture of all or part of the
payment of such loss.
j. Tenant's Failure. If Tenant fails to meet the
requirements to self insure (to the extent permitted under this Lease) or to
procure and maintain the insurance required of Tenant hereunder, Landlord may,
but shall not be required to, procure the insurance after thirty
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(30) days notice to Tenant; provided, however, that Landlord shall not be
obligated to give Tenant thirty (30) days notice if the result is that there
will be an absence of the insurance during any portion of the Term (or any
extension). Tenant shall pay the costs and expenses of the insurance procured
by Landlord pursuant to this Subsection 21.j. upon demand. Notwithstanding the
foregoing if Tenant fails to comply with any of the provisions set forth in
this Section 21, Tenant shall be liable for all losses and damages, including
attorneys' fees and court costs, resulting from the failure.
k. Landlord's Disclaimer. Except to the extent caused
by the negligence or wilful misconduct of Landlord or Landlord's partners,
subsidiaries, directors or officers, agents, contractors or employees,
Landlord, its partners, subsidiaries, directors, officers, agents and employees
shall not be liable for (i) any loss or damage to persons or property in or
about the Project from any cause whatsoever and, without limiting the
generality of the foregoing, whether resulting from fire, explosion, falling
plaster, glass, tile or sheetrock, steam, gas, electricity, water or rain which
may leak from any part of the Project, or from the pipes, appliances or
plumbing works therein or from the roofs, streets or subsurface, (ii)
interference with light or air, or (iii) subject to Tenant's obligation, set
forth in Subsection 4.i.(ii), to notify Landlord of latent defects, any latent
defect in the Project.
l. Additional insurance. If Tenant is not self insured
in accordance with the terms of this Lease, Tenant shall not take out separate
insurance concurrent in form or contributing in the event of a loss with that
required to be furnished by Tenant under this Section 21, unless Landlord and
the trustee(s) under any deed(s) of trust covering the Project are included
therein as named insureds, with loss payable as provided for above, and Tenant
shall immediately notify Landlord whenever any separate insurance is taken out
and shall deliver to Landlord duplicate original(s) thereof, or original
certificates) evidencing the insurance with true copies thereof, as provided
for in this Lease.
m. Insurance Unavailable.
(i) Notices and Agreement. Pursuant to
Subsection 19.d.(i)(B), a loss shall be deemed uninsurable to the extent
insurance for the loss is not available at the time of the loss from an insurer
satisfying the requirements of Subsection 21.i. at a cost which is economically
feasible under the circumstances. Not later than sixty (60) days after
Landlord's request (which request shall not be made more frequently than once a
year) Tenant shall deliver to Landlord a notice of those insurance coverages
which Tenant believes are not economically feasible. If Landlord and Tenant
disagree whether a particular coverage set forth in Tenant's notice is not
economically feasible, the matter shall be submitted to arbitration in
accordance with the provisions of Section 49.
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(ii) Rights of Landlord. Landlord shall have the
right to obtain the insurance which Landlord and Tenant agree, or the
arbitrator determines, would not be economically feasible for Tenant to obtain.
To the extent that Landlord can obtain the coverages on an economically
feasible basis, Tenant shall pay the costs (including premiums) of the
coverages as Additional Rent.
22. Indemnification. Tenant shall indemnify and hold Landlord,
its partners, subsidiaries, directors, officers, agents and/or employees
harmless from and against any and all damage, loss, liability or expense,
including, but not limited to, attorneys' fees, legal costs and court costs,
suffered directly or by reason of any claim, suit or judgment brought by or in
favor of any person or persons for damage, loss or expense due to, but not
limited to, bodily injury, including death resulting anytime therefrom, and
property damage sustained by such person or persons which arises out of, is
occasioned by or in any way attributable to (i) the use, maintenance, repair,
alteration or occupancy of the Project or any portion thereof by Tenant, or
Tenant's officers, employees, agents, servants, subtenants, licensees,
contractors or invitees, (ii) the acts or omissions of Tenant which are
Tenant's obligation under the Lease, (iii) the breach by Tenant of any of the
covenants, agreements, terms or conditions of this Lease, or (iv) the conduct
or management of any work or thing whatsoever done by Tenant in or about, or
from transactions of Tenant occurring, on the Project; provided, however, that,
notwithstanding anything to the contrary set forth in this Lease, Tenant shall
not indemnify and not hold Landlord harmless from and against any and all
damage, loss, liability or expense to the extent the damage, loss, liability or
expense is the result of Landlord's wilful misconduct or negligence. The loss
or damage shall include, but not be limited to, any injury or damage to
Landlord's personnel (including death resulting anytime therefrom) or to the
Project. It is the intention and agreement of the parties that, except to the
extent caused by the negligence or wilful misconduct of Landlord, its partners,
subsidiaries, directors, officers, agents, contractors and/or employees,
Landlord shall not be liable for any personal injuries or damage to Tenant,
Tenant's agents or employees or to any other persons or for any injury or
damage to any goods, wares, merchandise, equipment or property of Tenant or
third parties. The parties hereby expressly agree to this allocation of risk,
and represent that this allocation of risk is a material inducement for
Landlord entering this Lease. Tenant shall, upon demand by Landlord, defend
any actions or proceedings brought against Landlord for which Tenant is
responsible to indemnify and hold Landlord harmless, through counsel reasonably
satisfactory to Landlord; provided however, that Landlord shall have the right
to conduct any such defenses at Landlord's cost and expense, if Landlord so
chooses. Tenant agrees that the obligations assumed herein shall survive this
Lease.
23. Waiver of Subrogation. Anything in this Lease to the contrary
notwithstanding Landlord and Tenant each hereby waives and releases the other
of and from any and all
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rights of recovery, claim, action or cause of action against each other, their
subsidiaries, directors, agents, officers and employees, for any loss or damage
that may occur on, in or to the Project, Buildings, improvements to the
Buildings, personal property within the Buildings, any furniture, equipment,
machinery, goods and supplies not covered by this Lease which Tenant may bring
or obtain upon the Project or any additional improvements which Tenant may
construct on the Project, by reason of casualty, the elements or any other
cause which is required to be insured against under this Lease, regardless of
cause or origin, including negligence of Landlord or Tenant and their agents,
subsidiaries, directors, officers and employees, to the extent insured against
under the terms of any insurance policies carried by Landlord or Tenant
pursuant to this Lease and in force at the time of any such damage; provided,
however, that if Tenant is self insured, Tenant shall neither indemnify nor
hold harmless Landlord, its subsidiaries, directors, agents, contractors,
officers and/or employees from or against any damage, loss, liability or
expense to the extent the same is the result of the negligence or
wilful misconduct of Landlord, its subsidiaries, directors, agents,
contractors, officers and/or employees. Because this Section will preclude the
assignment of claims by Tenant, if Tenant is not self insured, and by Landlord
by way of subrogation or otherwise to an insurance company or any other person,
each party to this Lease which is not self insured agrees immediately to give
to each insurance company written notice of the terms of the mutual waivers
contained in this Section and to have the insurance policies properly endorsed,
if necessary, to prevent the invalidation of the insurance coverages by reason
of the mutual waivers contained in this Section. If either party fails to
obtain the endorsement, the party shall indemnify, defend and save the other
party harmless from and against any and all claims, demands, actions, suits,
losses, damages, costs, expenses and liabilities attributable to the failure.
24. Damage or Destruction.
a. Tenant's obligation to Repair. If during the Term
the Project, or any part thereof, is damaged by whatever cause, this Lease and
the obligations of Tenant shall continue in full force and effect. Tenant
shall give Landlord immediate notice of the damage or destruction and shall
promptly file a proof of loss with the relevant insurance company(ies) (except
to the extent Landlord is responsible for repairs or restorations pursuant to
the terms of this Lease); and Tenant, at Tenant's sole cost and expense,
whether or not insurance proceeds are sufficient to cover the actual cost of
repair or restoration, shall promptly repairs replace, restore and rebuild the
Project to substantially the same character, condition and quality as existed
immediately prior to the occurrence, including buildings having a value and
total square footage of floor area not less than the Buildings and Building CC
as they existed immediately prior to the occurrence. In no event shall
Landlord be called upon to repair, replace or rebuild any buildings,
improvements or equipment, or to pay any of the cost or expenses thereof,
except to the extent the
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repair, replacement or rebuilding is required as a result of Landlord's wilful
misconduct or negligence.
b. Insurance Trustee. If Tenant is not self insured in
accordance with the terms of this Lease, a special trust account for proceeds
of insurance shall be established in accordance with the terms of this
Subsection.
(i) Trust Account. For the purpose of paying
amounts owing for the cost of the repairs, replacement or rebuilding, in the
event of a loss in excess of one Hundred Thousand Dollars ($100,000.00),
Landlord and Tenant shall deposit the proceeds of insurance in a special trust
account in a bank mutually acceptable to Landlord and Tenant; or, in the event
that the Project is encumbered by one (1) or more deed(s) of trust and, if so
required by the deed(s) of trust, with the trustee(s) under the deed(s) of
trust (the bank(s) or trustee(s) shall hereinafter be referred to as the
"Trustee"). The Trustee shall pay to Tenant from time to time, but in no event
more frequently than once each month, in reimbursement for work and materials
actually incorporated in the Project, all net sums received under insurance
policies covering such loss.
(ii) Progress Payments by Trustee, Payment shall
be made by the Trustee upon appropriate requisition certificates of the
architect ("Trustee Architect") which has been retained by the Trustee, with
Landlord's and Tenant's concurrence, to supervise the work. The reasonable
expenses and charges of the Trustee Architect shall be paid out of the trust
fund. Tenant's request for release of insurance proceeds shall be accompanied
by the following:
(A) Written certification by the Trustee
Architect that (1) all of the work for which reimbursement is being requested
has been completed in compliance with the plans and specifications therefore,
and all applicable laws and ordinances, (2) the sum requested is justly
required to reimburse Tenant for payments by Tenant to the contractor,
subcontractors, materialmen, laborers, engineers, architects or other persons
rendering services or materials for the work (giving a brief description of the
services and materials), (3) when added to all sums previously paid out by the
Trustee, the sum requested does not exceed ninety percent (90%) of the value of
the work done to the date of the certificate, and (4) the amount of the
proceeds remaining in the hands of the Trustee will be sufficient on completion
of the work to pay for the work in full (which shall include, in such
reasonable detail as Landlord may require, an estimate of the cost of the
completion);
(B) Lien waivers reasonably satisfactory
to Landlord covering that part of the work for which payment or reimbursement
is being requested; and
(C) A search prepared by a title company
or licensed abstractor or by other evidence, reasonably satisfactory to
Landlord, that no mechanics' or other lien has not been filed with respect to
any part of the Project.
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(iii) Final Payment. Final payment of the balance
of the cost of the work shall be made by the Trustee to Tenant upon (A)
completion of restoration and certification by the Trustee Architect that all
work has been completed in accordance with the approved plans and
specifications therefore and all applicable laws and ordinances, (B)
satisfactory evidence of payment of all costs, and (C) expiration of all
applicable lien periods and proof that the Project is free of all mechanics'
liens and lien claims.
(iv) Right to Withhold. If, in the course of the
work, any mechanic's or other lien shall be filed against the Project or
against Landlord or Tenant or any contractor of Tenant, or if Tenant shall be
in default in the payment of any Rent or other sums then due and payable, or if
there is any existing and unremedied default on the part of Tenant under this
Lease, the Trustee shall not be obligated to make any payment of the insurance
proceeds until and unless the lien shall have been fully bonded, satisfied, or
discharged of record and/or until such default shall have been cured.
(v) Damage Less Than One Hundred Thousand and
No/100 Dollars ($100,000.00). In the event of a loss less than One Hundred
Thousand Dollars ($100,000.00), the proceeds of insurance shall be assigned or
paid directly to Tenant to be applied by it in accordance with the provisions
of this Section 24.
(vi) Uninsured Loss. If the net amount of the
insurance proceeds shall be insufficient for the proper and effective repair,
replacement or rebuilding of the Project, improvements and equipment, or in the
event of an uninsured loss, Tenant shall deposit the amount of any deficiency
with the Trustee within twenty (20) days after request by the Trustee
indicating the amount of the deficiency.
(vii) Excess Proceeds. Any insurance proceeds not
disbursed by the Trustee after restoration has been completed and final payment
has been made to Tenant's contractor shall be delivered within ten (10) days
after demand by Tenant to Tenant. All actual costs and charges of the Trustee
shall be paid by Tenant. Both parties shall promptly execute all documents and
perform all acts reasonably required by the Trustee to perform its obligations
under this Section.
c. No Abatement. There shall be no abatement or
diminution of Rent or release from any of Tenant's obligations hereunder by
reason of the damage or destruction, regardless of the period of time, if any,
during which the Project or any part thereof remain untenantable.
d. Waiver. Tenant hereby waives the provisions of
Section 1932, Subdivision 2 and Section 1933 Subdivision 4, of the Civil Code
of California, and the provisions of any similar law hereinafter enacted.
e. Restoration of Premises.
(i) Plans. Within thirty (30) days after the
date of the damage or destruction, Tenant, at its
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cost, shall prepare final plans and specifications and working drawings
(collectively, "Plans") complying with applicable laws as will be necessary for
restoration of the Project. The Plans must be approved in writing by Landlord
and the Trustee Architect. Landlord and the Trustee Architect shall have
thirty (30) days after receipt of the Plans to either approve or disapprove the
Plans and return them to Tenant. If Landlord or the Trustee Architect
disapproves the Plans, Landlord or the Trustee Architect shall notify Tenant of
its objections and Landlord's or the Trustee Architect's proposed solution to
each objection. Tenant shall thereafter cause the plans to be revised in
accordance with Landlord's or the Trustee Architect's proposals and resubmit
the Plans for Landlord's and the Trustee Architect's approval. Tenant
acknowledges that the Plans shall be subject to approval of the appropriate
governmental bodies and that they will be prepared in such a manner as to
obtain that approval.
(ii) Procedure. The restoration shall be
accomplished as follows:
(A) Tenant shall commence restoration
within thirty (30) days after the Plans have been approved by the appropriate
government bodies and all required permits have been obtained and shall
diligently and continuously pursue the restoration until completion.
(B) Tenant shall retain a licensed,
bondable contractor approved in writing by Landlord. The contractor shall be
required to carry public liability and property damage insurance, standard fire
and extended coverage insurance, with vandalism and malicious mischief
endorsements, during the period of construction. The insurance shall contain
waiver of subrogation clauses in favor of Landlord and Tenant.
(C) Tenant shall notify Landlord of the
date of commencement of the restoration not later than twenty (20) days before
commencement of the restoration to enable Landlord to post and record notices
of nonresponsibility. The contractor retained by Tenant shall not commence
construction until a completion and a labor and materials bond executed by a
company reasonably satisfactory to Landlord have been delivered to Landlord to
insure completion of the construction.
(D) Tenant shall accomplish the
restoration in a manner that will reasonably minimize the inconvenience,
annoyance and disruption to tenants of neighboring buildings.
(E) On completion of the restoration,
Tenant shall immediately record a notice of completion in Alameda County.
(iii) If No Trustee Architect. The provisions in
this Subsection 24.e. regarding the Trustee Architect shall not be applicable
to the extent that Tenant is self insured in accordance with the terms of this
Lease.
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25. Eminent Domain.
a. Rights and Obligations Governed by Lease. If the
Project, or any part thereof, shall be taken or appropriated under the power of
eminent domain, inversely condemned or conveyed in lieu thereof
("Condemnation"), the rights and obligations of Landlord and Tenant shall be
determined in accordance with this Section 25. Tenant hereby waives and
releases any right to terminate this Lease under Sections 1265.120 and 1265.130
of the California Code of Civil Procedure, or any similar law, statute or
ordinance now or hereafter in effect.
b. Total Condemnation. If the entire Project or so much
thereof shall be taken by Condemnation such that the reconstruction of the
Project will not, as reasonably determined by Landlord and Tenant, result in
the Project being reasonably suitable to Tenant's occupancy, this Lease shall
terminate as of the date that possession of the Project is taken and Rent shall
be adjusted as of the date of termination. All Condemnation awards shall be
paid to Landlord's lender until Landlord's lender is paid in full. The portion
of the remainder of the award which is designated as award for the value of
Tenant's leasehold interest shall be paid to Tenant for loss of Tenant's
leasehold interest. Tenant shall pay and/or assign to Landlord its interest in
any other award or payment made by reason of the Condemnation and Landlord
shall be entitled to the entire award; provided, however, that nothing
contained herein shall be deemed to give Landlord any interest in or require
Tenant to assign to Landlord any separate award made to Tenant in connection
with costs in removing Tenant's personal property to a new location and the
costs to Tenant of performing an obligation required of Tenant by this Lease
with respect to surrender of the Project.
c. Partial Condemnation. If (i) a portion of the
Project shall be taken by Condemnation, and this Lease shall not be terminated
in accordance with the provisions of Subsection 25.b., or (ii) the use or
occupancy of the Project or part thereof shall be temporarily requisitioned by
any governmental authority, then this Lease shall continue in full force and
effect, without any abatement of Rent, and Tenant shall, at its own cost and
expense, regardless of the sufficiency of any Condemnation award, promptly and
diligently commence and complete the restoration of the Project, provided that
in the case of a temporary requisition, Tenant shall not be required to effect
restoration until the requisition is terminated. In case of any such taking,
Tenant shall apply the net award actually received by Tenant to the cost of
restoration and, if the net award shall have been paid to Landlord, it shall be
paid to Tenant. In the event of a temporary requisition, the entire net award
received by Landlord shall be paid over currently to Tenant provided that any
portion of the award allocable to a period after the termination of the term of
this Lease shall be paid to Landlord, including any award for the restoration
of the Project if the temporary requisition shall continue after the expiration
of this Lease.
d. Award. For the purposes of this Lease, all amounts
paid pursuant to any agreement with any condemning authority which has been
made in settlement of any
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Condemnation proceeding affecting the Project shall be deemed to constitute an
award made in such proceeding. If the cost of restoration required to be made
by Tenant pursuant to this Section 25 shall exceed the amount of the net award,
the deficiency shall be paid by Tenant. If the amount of the net award shall
exceed the cost of restoration, the excess first shall be paid to Landlord's
lender until Landlord's lender is paid in full; the balance shall be paid fifty
percent (50%) to Landlord and fifty percent (50%) to Tenant; provided, however,
no payment of any portion of the net award shall be made to Tenant so long as
Tenant shall be in default under this Lease.
e. Delivery of Documents. Tenant and Landlord each
shall execute and deliver to the other party, within a reasonable period of
time, all instruments reasonably required to effectuate the provisions of this
Section 25.
f. Sale. A sale by Landlord to any authority having the
power to condemn, either under threat of condemnation or while condemnation
proceedings are pending, shall be deemed Condemnation for purposes of this
Section 25 and the proceeds shall be treated as Condemnation awards.
26. Assignment and Subletting.
a. Landlord's Consent. Except as provided in Subsection
26.1. Tenant shall not transfer, sublet, assign, enter any license or
concession agreement, change ownership, mortgage, or hypothecate this Lease or
Tenant's interest in this Lease or in and to all or any portion of the Project
(hereinafter collectively referred to as "Sublet", with the term "Subtenant"
similarly construed) without Landlord's prior written consent. Landlord's
consent shall not be unreasonably withheld but Landlord may nevertheless
condition its consent upon compliance with all terms of this Section 26 and
upon such factors as the identity, reputation, proposed use, financial worth
and stability, intensity of use, comparability with other tenants, and
operating ability of any proposed Subtenant. My attempted or purported
Subletting without Landlord's prior written consent shall be void and confer no
rights upon any third person and, at Landlord's election, shall terminate this
Lease. This Lease may not be Sublet by operation of law.
b. Sublet Form. Each Sublet to which Landlord has
consented shall be by an instrument in writing in a form satisfactory to
Landlord, as evidenced by Landlord's written approval. Each sublease or
assignment shall contain provisions to the effect that in the event this Lease
shall terminate before the expiration of a sublease, the Subtenant thereunder
shall, at Landlord's option, attorn to Landlord and waive any rights the
Subtenant may have to terminate the sublease or to surrender possession
thereunder as a result of the termination of this Lease.
c. No Waiver. Consent by Landlord to one (1) such
Subletting shall not be deemed to be a consent to any subsequent Subletting.
No Sublet by Tenant shall relieve Tenant of any of Tenant's obligations under
this Lease; provided however, that Tenant shall be relieved of liability under
this Lease upon a Sublet described in
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Subsection 26.1. if the Subtenant has a net worth of not less than Five Hundred
Million Dollars ($500,000,000.00) at the time of the Sublet and AT&T guarantees
all the obligations of the Subtenant under this Lease during any period the
Subtenant has a net worth of less than Five Hundred Million Dollars
($500,000,000.00).
d. Information to be Furnished. If Tenant desires at
any time to Sublet all or any portion of the Buildings, it shall first notify
Landlord of its desire to do so and shall submit in writing to Landlord:
(i) Name. The name of the proposed Subtenant;
(ii) Nature of Business. The nature of the
proposed Subtenant's business to be carried on in the Project;
(iii) Terms of Sublease. The terms and provisions
of the proposed sublease or assignment and a copy of the proposed sublease or
assignment form; and
(iv) Financial Information. Such financial
information, including financial statements, as Landlord may reasonably request
concerning the proposed Subtenant.
e. Landlord's Options -- Sublet Not After Nine (9)_or
Eighteen (18) Years.
(i) Applicability. The provisions of this
Subsection 26.e. shall be applicable to any proposed Sublet, not described in
Subsection 26.1., which is to occur at any time during either of the following
periods:
(A) Within Nine (9) Years After Initial
Commencement Date. The period ending nine (9) years after the Initial
Commencement Date unless Tenant has given notice, pursuant to Subsection 35.b.,
to extend the Term of this Lease for the Building(s) which is (are) to be
Sublet; or
(B) Within Eighteen (18) Years After
Initial Commencement Date. The period ending eighteen (18) years after the
Initial Commencement Date, if the option to extend the Term of this Lease
(pursuant to Section 35) for the Building(s) which is (are) to be Sublet has
previously been exercised.
(ii) Options of Landlord. At any time within
fifteen (15) days after Landlord's receipt of all the information specified in
Subsection 26.d., Landlord may, by written notice to Tenant, elect either:
(A) Consent. To consent to the Sublet
by Tenant; or
(B) Refuse Consent. To refuse its
consent to the Sublet; provided that Landlord's consent shall not be
unreasonably withheld.
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f. Landlord's Options - Sublet After Nine (9) or Eighteen
(18) Years.
(i) Applicability. The provisions of this
Subsection f. shall be applicable to any proposed Sublet, not described in
Subsection 26.1., which is to occur at any time during either of the following
periods:
(A) Commencing Nine (9) Years After
Initial Commencement Date. The period commencing nine (9) years after the
Initial Commencement Date unless Tenant has given notice, pursuant to
Subsection 35.b., to extend the Term of this Lease for the Building(s) which is
(are) to be Sublet; or
(B) Commencing Eighteen (18) Years After
Initial Commencement Date. The period commencing eighteen (18) years after the
Initial Commencement Date, if the option to extend the Term of this Lease
(pursuant to Section 35) for the Building(s) which is (are) to be Sublet has
previously been exercised.
(ii) Landlord's Options. At any time within
fifteen (15) days after Landlord's receipt of all the information specified in
Subsection 26.d., Landlord may, by written notice to Tenant, elect one (1) of
the following:
(A) Lease For Own Account. To lease for
its own account the Building(s) or the portion thereof so proposed to be Sublet
by Tenant as shall be specified in the notice, upon the same terms as those
offered to the proposed Subtenant but on a form acceptable to Landlord with a
proportionate abatement of Rent payable hereunder;
(B) Lease to Other Parties. To lease
the Building(s) or the portion thereof proposed to be Sublet by Tenant to any
person upon any terms desired by Landlord with a proportionate abatement in
Rent payable hereunder;
(C) Cancel Portion of Lease. In the
event of a proposed Sublet fewer than all the Buildings, to cancel this Lease
as to all or any portion of the space specified in the notice, with a
proportionate abatement in Rent payable hereunder;
(D) Consent. To consent to the Sublet
by Tenant; or
(E) Refuse Consent. To refuse its
consent to the Sublet; provided that Landlord's consent shall not be
unreasonably withheld.
g. Landlord's Right to Cancel. In addition to
Landlord's rights under subsections 26.e. and 26.f., Landlord shall have the
right, within fifteen (15) days after Landlord's receipt of all the information
specified in Subsection 26.d., to cancel this Lease in the event of a proposed
Sublet of all the Buildings to any person or entity other than a Subtenant
described in Subsection 26.1.
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h. Failure of Landlord to Elect. If Landlord fails to
elect any of the alternatives set forth in subsection 26.f.(ii)(A), Subsection
26.f.(ii)(B) or Subsection 26.f.(ii)(C) within the fifteen (15) day period, it
shall be deemed that Landlord has consented to the Sublet.
i. Revisions to Lease. If Landlord proceeds with
Subsection 26.f.(ii)(A), 26.f.(ii)(B) or 26.f.(ii)(C) and cancels this Lease as
to a portion or all of one or more of the Buildings, Landlord shall have the
right to make reasonable revisions to this Lease, with Tenant's consent, to
reflect the fact that the Buildings will be leased on a multi-tenant basis.
j. No Consent of Landlord; Provisions of Sublet.
(i) Landlord Not Entitled to Excess Subrent. If
Tenant Sublets a portion or all of one or more Buildings pursuant to a Sublet
described in Subsection 26.1., consent of Landlord shall not be required and
Landlord shall not be entitled, as a result of the Sublet, to any of the excess
of the Subrent over the Rent to be paid by Tenant hereunder.
(ii) Terms of Sublet. Each Subtenant shall agree
in writing, for the benefit of Landlord, to assume, to be bound by this Lease,
and to perform the terms, conditions and covenants of this Lease to be
performed by Tenant. Each sublease or assignment shall contain provisions to
the effect that (A) such sublease is subject and subordinate to all of the
terms, covenants and conditions of this Lease and to all of the rights of
Landlord hereunder and (B) no Subtenant shall have the right to further Sublet,
except as provided in this Lease.
k. After Landlord's Consent. If Landlord proceeds with
Subsection 26.e.(ii)(A) or Subsection 26.f.(ii)(D) and consents to the Sublet,
Tenant may within thirty (30) days thereafter enter a valid Sublet of the
Buildings or portion(s) thereof, upon the terms and conditions set forth in the
information furnished by Tenant to Landlord pursuant to Subsection 26.d.,
subject to the condition that fifty percent (50%) of the excess of the Subrent
over the Rent required to be paid by Tenant hereunder shall be paid to
Landlord. Any such Subrent to be paid to Landlord pursuant hereto shall be
Additional Rent and shall be payable to Landlord as and with the Fixed Rent
payable to Landlord hereunder.
l. Subletting to Parent or Subsidiaries. Tenant shall
have the right to Sublet all or any portion of one or more of the Buildings to
any parent corporation of AT&T, or to a subsidiary of AT&T or AT&T's parent
corporation in which AT&T or AT&T's parent corporation owns not less than
fifty percent (50%) of all the outstanding stock, without Landlord's consent.
AT&T shall have the right to Sublet one or more of the Buildings to a
subsidiary of AT&T or AT&T's parent corporation in which AT&T or AT&T's parent
corporation does not own greater than fifty percent (50%) of all outstanding
stock with Landlord's consent. Tenant shall notify Landlord each time Tenant
Sublets a Building to an entity described in this Subsection 26.1. In the event
of a
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Sublet pursuant to this Subsection 26.1., the terms of Subsections 26.a and
26.b., Subsections 26.e. through 26.i. and Subsections 26.k., 26.m. and 26.p.
shall not apply. In the event of a Sublet, pursuant to this Subsection 26.1.,
of all the Project, Tenant shall deliver an executed counterpart of the
sublease or assignment to Landlord.
m. Subrent. The term "Subrent" as used herein shall
include any consideration of any kind received, or to be received, by Tenant
from the Subtenant, if such sums are related to Tenant's interest in this Lease
or in the Project, including, but not limited to, bonus money and payments (in
excess of book value thereof) for Tenant's assets, fixtures, inventory,
accounts, goodwill, equipment, furniture, general intangibles, and any capital
stock or other equity ownership of Tenant. If less than all of Buildings and
Building CC are Sublet, the pro rata share of the Rent attributable to the
partial area of all the Buildings and Building CC shall be determined by
Landlord by dividing the Rent payable by Tenant hereunder by the total Square
Footage of the Buildings and Building CC and multiplying the resulting quotient
(the per square foot Rent) by the Square Footage of the Buildings which are
being Sublet. Landlord shall have the right to make reasonable revisions to
the calculations to reflect the portion of the Buildings which is Sublet and
which consists of basement space.
n. Scope. If Tenant is no longer AT&T or a Subtenant of
AT&T, described in Subsection 26.1., and (i) this Lease is Sublet, (ii) the
underlying beneficial interest of Tenant is transferred, or (iii) the Project
or any part thereof is Sublet or occupied by anyone other than Tenant, Landlord
may collect rent from the Subtenant or occupant and apply the net amount
collected to the Rent herein reserved and apportion any excess rent so
collected in accordance with the terms of Subsection 26.k.; provided that no
such Subletting, occupancy or collection, or the acceptance of the Subtenant or
occupant as tenant, shall be deemed a waiver of Tenant's covenants under this
Lease.
o. Waiver. Except as provided in Subsection 26.c.,
Landlord may proceed against Tenant without having taken action against or
joined any Subtenant, provided that Landlord shall use reasonable efforts to
notify Tenant of any default by the Subtenant, and provided further that Tenant
shall have the benefit of any indulgences, waivers and extensions of time
granted to the Subtenant.
p. Executed Counterparts. No Sublet shall be valid nor
shall any Subtenant take possession of any portion of the Project until an
executed counterpart of the sublease or assignment has been delivered to
Landlord and approved in writing.
q. Transfer to Purchaser. If Tenant is no longer AT&T
or any parent corporation of AT&T, or a subsidiary of AT&T or AT&T's parent
corporation in which AT&T or AT&T's parent corporation owns not less than fifty
percent (50%) of all the outstanding stock, any sale or other transfer,
including by consolidation, merger or
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reorganization, of a majority interest in Tenant shall be deemed a Sublet.
27. Alterations, Additions and Improvements.
a. Permitted Alterations. Tenant shall not make or
permit any alterations, additions or improvements (collectively, "Alterations")
in, on or about the Project without the prior written consent of Landlord;
provided, however, that as long as Tenant is not in default under this Lease,
Tenant shall have the right without Landlord's prior consent to make
Alterations to the Buildings the cost of which does not exceed Fifty Thousand
Dollars ($50,000.00); provided the Alterations do not (i) affect the structure
of the Buildings or building systems except for minor systems changes (e.g.,
the relocation, within reconfigured offices, of HVAC ducts or power outlets),
(ii) substantially decrease the square foot floor area of the Buildings, (iii)
add or attach to or penetrate the roof of a Building, (iv) affect the exterior
of a Building or the Project, (v) make changes which are visible from the
outside of a Building, including antennae and landscaped areas, to which
Landlord may withhold Landlord's consent on wholly aesthetic grounds, or (vi)
reduce the value of the Buildings or Project. The Fifty Thousand Dollars
($50,000.00) figure set forth in the prior sentence shall increase by Five
Thousand Dollars ($5,000.00) on each anniversary date of the Initial
Commencement Date. All Alterations shall be made in accordance with plans and
specifications prepared by a licensed architect and engineer and submitted to
Landlord at least thirty (30) days prior to the date Tenant intends to commence
the Alterations. To the extent Landlord's consent is required for an
alteration, Landlord shall have fifteen (15) days from receipt of complete
plans and specifications for the Alterations to approve or disapprove the
Alterations. Any Alterations shall be installed at Tenant's sole expense, in
compliance with all applicable laws, by a licensed, bonded contractor with
insurance satisfactory to Landlord, and shall be performed in a good and
workmanlike manner conforming in quality and design with the Project and the
Buildings. Tenant shall deliver to Landlord plans for all Alterations not
requiring Landlord's consent. Any Alterations including, but not limited to,
heating, lighting, electrical, air conditioning, partitioning, drapery and
carpentry installations made by Tenant which become an integral part of the
Project or a Building or are affixed to a Building so that they cannot be
removed without material damage to the Building shall be and become the
property of Landlord upon installation and shall not be deemed trade fixtures;
provided, however, that prior to or upon expiration of the Term, Landlord may,
at its sole option and subject to the provisions of Section 29, require that
Tenant, at Tenant's sole expense, remove any or all nonstructural Alterations
installed by Tenant and restore the Buildings and Project to their condition as
of the Commencement Date, normal wear and tear excepted and subject to the
provisions of this Lease. Not later than sixty (60) days after expiration of
the Term as to a particular Building, Landlord shall notify Tenant whether
Landlord will require Tenant, at Tenant's sole expense, to remove any or all of
the nonstructural Alterations installed by Tenant in the Building and restore
the Building to its condition as of the Commencement Date. If Tenant fails to
repair the
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Project, Landlord may do so at Tenant's expense and Tenant shall reimburse
Landlord for the reasonable expense of repair within thirty (30) days after
demand, and receipt of an itemized bill therefor. Tenant shall be solely
responsible for the maintenance and repair of any and all Alterations made by
it to the Project.
b. Notice. Any Tenant (or Subtenant) other than AT&T
(or a Subtenant described in Subsection 26.1.) shall give Landlord written
notice of Tenant's intention to perform work on the Project which might result
in any claim of lien at least ten (10) days prior to the commencement of the
work to enable Landlord to post and record a Notice of Nonresponsibility or
other notice Landlord deems proper before the commencement of any such work.
c. Indemnification By Tenant. Tenant agrees that at all
times during construction Tenant shall indemnify, defend and hold Landlord
harmless against loss on account of injuries to person or property and against
loss by way of penalties or otherwise on account of the failure of Tenant to
perform or fulfill any duty in, or arising out of, or in any way connected
with, the intended construction, either by appropriate endorsement on the
policy or policies of general liability insurance referred to in this Lease,
self insurance which complies with the terms of this Lease or by obtaining
policies of insurance with the same limitations of coverage to cover Landlord
and Tenant during construction; provided, however, that Tenant shall not
indemnify, defend and hold Landlord harmless against loss resulting from the
negligence or wilful misconduct of Landlord, its partners, subsidiaries,
directors, officers, agents, contractors and/or employees.
d. Survival. Tenant's obligations under this Section
shall survive for not more than one (1) year after termination of this Lease.
28. Liens.
a. Payment By Tenant. Tenant shall promptly pay and
discharge all claims for work performed, and supplies and services rendered,
for which Tenant is responsible under this Lease and shall keep the Project
free from any liens arising out of any work performed, materials furnished or
obligations incurred by or on behalf of Tenant. Tenant shall indemnify, defend
and hold Landlord harmless from all liability and cost, including attorneys'
fees and costs, in connection with or arising out of any such lien or claim of
lien.
b. Removal. If any liens shall at any time be filed
against the Project for work performed, supplies or services rendered for which
Tenant is responsible under this Lease, Tenant shall either cause the liens to
be discharged of record within sixty (60) days after the date of filing of the
liens or, if Tenant, in good faith, determines that the liens should be
contested, Tenant shall furnish such security and documentation as Landlord
shall determine to (i) prevent any foreclosure proceedings against the Project
during the pendency of the contest, and (ii) cause a title company selected by
Landlord to remove the liens as a matter affecting title to the Project.
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c. Failure to Remove. If Tenant shall fail to discharge
a lien within the sixty (60) day period or fail to furnish the security, then,
in addition to any other right or remedy of Landlord resulting from Tenant's
default and after five (5) days notice from Landlord, Landlord may, but shall
not be obligated to, discharge the lien either by paying the amount claimed to
be due or by procuring the discharge of the lien by giving security or in such
other manner as is, or may be, prescribed by law. Tenant shall repay to
Landlord on demand all sums disbursed, incurred or deposited by Landlord
pursuant to the foregoing provisions of this Subsection, including Landlord's
costs, expenses and reasonable attorneys' fees with interest thereon at the
Interest Rate. Nothing contained herein shall imply any consent or agreement
on the part of Landlord to subject Landlord's estate to liability under
regulations governing liens.
29. Surrender of the Premises.
a. Condition. Upon the expiration or earlier
termination of the Term of this Lease as to each Building, Tenant shall
surrender the Building and, without limitation, all sidewalks, parking areas,
grounds, and all fixtures and Building equipment, pipes, plumbing, electric
wires, elevators and heating and ventilating systems, to Landlord in its
condition existing as of the Commencement Date for the Building, normal wear
and tear excepted; provided, however, that Tenant shall not be obligated to
reconfigure the Building to its condition as of the Commencement Date to the
extent of (1) changes to the original configuration as a result of typical
office improvements made by Tenant and (2) Alterations made by Tenant if, at
the time Tenant requested Landlord's consent to the Alterations, Landlord
agreed that Tenant would not be obligated to restore the Building to its
condition prior to the Alterations upon the expiration or termination of this
Lease. In addition, Tenant shall remove from the Building (and applicable
Project Common Areas) all signs containing Tenant's name or logo and all of
Tenant's personal property and trade fixtures and any fixtures and improvements
required by Landlord to be removed pursuant to Section 27 and repair any damage
caused by or perform any restoration necessitated by the removal. Upon
surrender of a Building, the interior walls shall be cleaned, any carpets shall
be cleaned, all floors shall be cleaned and waxed and the elevator and HVAC
equipment shall be serviced by a reputable service person.
b. Tenant's Failure to Remove. If Tenant fails to
remove any trade fixtures, equipment, personal property, or any fixtures or
improvements the removal of which is required by Landlord pursuant to Section
27, and the failure continues after the expiration or termination of this Lease
as to the Building, Landlord may retain the property and all rights of Tenant
with respect to it shall cease, or Landlord, upon three (3) days notice to
Tenant, may place the property in public storage for Tenant's account. Tenant
shall be liable to Landlord for costs of removal of any trade fixtures,
equipment, personal property, fixtures or improvements, the cost of repairing
and restoring the Buildings, and the transportation and storage costs
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of same, together with interest at the Interest Rate on all such expenses from
the date of expenditure by Landlord.
c. Indemnity For Failure. If a Building is not so
surrendered at the termination of this Lease, Tenant shall indemnify Landlord
against all loss or liability resulting from delay by Tenant in so surrendering
the Building, including, without limitation, any claims made by any succeeding
tenant, losses to Landlord due to lost opportunities to lease to succeeding
tenants, and attorneys' fees and costs, except to the extent Tenant's failure
to surrender the Building in accordance with this Lease is the result of Force
Majeure.
30. Holding Over. If Tenant remains in possession of all or any
part of a Building after the expiration of the Term as to the Building, as it
may be extended pursuant to Section 35, with the express or implied consent of
Landlord, the tenancy for the Building shall be month-to-month only and shall
not constitute a renewal or extension for any further term. In such event,
Fixed Rent shall be increased to an amount equal to one hundred twenty-five
percent (125%) of the Fixed Rent for the Building due during the last month of
the Term (or any extension). In addition Tenant shall pay any other sums due
under this Lease (including amortized Assessment Costs and Landlord's
Compliance Costs) in the amount and at the time specified in this Lease, and
the month-to-month tenancy shall be subject to every other term, condition,
covenant and agreement contained in this Lease.
31. Landlord's Right to Enter the Project. Subject to Tenant's
reasonable security requirements, Tenant shall permit Landlord and its agents
to enter the Project at all reasonable times and upon reasonable notice, except
in the case of an emergency (in which event no notice shall be necessary), to
do the following: to inspect the Project; to post Notices of Nonresponsibility
and similar notices; to show the Project to interested parties such as
prospective mortgagors; to the extent otherwise permitted or required under
this Lease, to make necessary alterations, additions, improvements or repairs;
to discharge Tenant's obligations hereunder when Tenant has failed to do so
within a reasonable time after written notice from Landlord; and, at any
reasonable time within one (1) year prior to the expiration of this Lease (or
any extension) thereof as to any Building, to show any Buildings for which no
notice of extension has been given.
32. Landlord's Reserved Rights. Subject to Tenant's consent,
which shall not be unreasonably withheld, Landlord reserves the right at any
time to grant easements across, under or above the Project. This Lease shall
not be affected by the granting of any easements, provided that no easements
hereafter granted shall materially interfere with Tenant's use and enjoyment of
the Project.
33. Signs.
a. General Restriction. In addition to all other
restrictions set forth in this Section 33, any sign which is installed by
Tenant must be in compliance with the CC&R's and all statutes and governmental
rules and regulations.
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b. Signs Visible Outside of Building. Tenant shall have
no right to maintain any sign, display or advertising material within any
Building that is visible from the exterior of any of the Buildings without the
prior written consent of Landlord. The size, design, color and other physical
aspects of any permitted sign in a Building which is visible from outside any
of the Buildings shall be subject to the Landlord's approval.
c. Costs of Signs. The costs of any signs provided to
Tenant by Landlord, and the costs of installation of the signs, shall be
included in the costs of Tenant's Tenant Improvements (as described in Exhibit
C). Tenant, at Tenant's own expense, shall be responsible for the costs of
maintenance and removal of any permitted sign.
34. Default.
a. Tenant's Default. At the option of Landlord, a
material breach of this Lease by Tenant shall exist if any of the following
events (individually, "Event of Default"; collectively, "Events of Default")
shall occur:
(i) Payment. Failure by Tenant to pay Fixed
Rent, or any items of Additional Rent or any other sums required to be paid to
Landlord under this Lease, when due, provided that Tenant shall have an
additional three (3) business days after Landlord's notice to Tenant that the
sum(s) is (are) past due; or
(ii) Performance. Failure by Tenant to comply
with any term, covenant or condition of this Lease, other than payments due to
Landlord described in Subsection (i), within thirty (30) days from billing or
the due date (whichever is later), or, if no billing is appropriate, within ten
(10) business days after notice to Tenant; provided, however, that if the
breach is one which cannot be cured within ten (10) business days, Tenant shall
not be in default if Tenant commences to cure the breach within the ten (10)
day period and diligently and continuously pursues the cure until the breach is
cured; or
(iii) Assignment. A general assignment by Tenant
of its assets for the benefit of its creditors; or
(iv) Petition. The filing of a voluntary petition
by Tenant, or the filing of an involuntary petition by any of Tenant's
creditors, seeking the rehabilitation, liquidation or reorganization of Tenant
under any law relating to bankruptcy, insolvency or other relief of debtors,
other than pursuant to Federal Bankruptcy Law, if such involuntary petition is
not withdrawn within sixty (60) days of filing; or
(v) Receivership. The appointment of a receiver
or other custodian to take possession of substantially all of Tenant's assets
or of this leasehold; or
(vi) Insolvency. Tenant shall become insolvent or
unable to pay its debts, or shall fail generally to pay its debts as they
become due; or any court shall enter a decree or order directing the winding up
or liquidation of Tenant or of substantially all of its assets;
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or Tenant shall take any action toward the dissolution or winding up of its
affairs or the cessation or suspension of its use of the Project; or
(vii) Attachment. The sequestration of, attachment
of, or execution on, any material part of the property of Tenant located in the
Project or on any property essential to the conduct of Tenant's business
located in the Project, and Tenant shall have failed to obtain a return or
release of the property prior to sale pursuant to the sequestration, attachment
or levy, whichever is earlier; or
(viii) Abandonment. Abandonment or vacation of the
Buildings for a period of ten (10) days and, if AT&T, or a Subtenant described
in Subsection 26.1., is Tenant, five (5) days after notice is given that
Landlord will deem abandonment to have occurred; or
(ix) Fraudulent Transfer. Any transfer made or
suffered to be made by Tenant which constitutes a fraudulent or otherwise
avoidable transfer under any provision of the federal Bankruptcy Laws or any
applicable state law; or
(x) Event of Default Under Building CC Lease. An
Event of Default under the Building CC Lease.
b. Remedies. Upon an Event of Default, Landlord shall
have the following remedies, in addition to all other rights and remedies
provided by law or otherwise provided in this Lease, to which Landlord may
resort cumulatively or in the alternative.
(i) Abandonment. If Tenant abandons the Project,
this Lease shall continue in effect. Landlord shall not be deemed to terminate
this Lease other than by written notice of termination from Landlord, and
Landlord shall have all of the remedies of a Landlord provided by Section
1951.4 of the Civil Code of the State of California. After abandonment of the
Buildings by Tenant, Landlord may give notice of termination.
(ii) Continue Lease. Landlord may continue this
Lease in full force and effect, and this Lease shall continue in full force and
effect as long as Landlord does not terminate Tenant's right to possession, and
Landlord shall have the right to collect Rent when due. During the period
Tenant is in default, Landlord may enter the Project (upon voluntary surrender
by Tenant or removal of Tenant, pursuant to legal processes) and relet it, or
any part of it, to third parties for Tenant's account, provided that any rent
in excess of the Fixed Rent due hereunder shall be payable to Landlord to be
applied against the amounts due to Landlord from Tenant in accordance with the
terms of this Lease. Tenant shall be liable immediately to Landlord for all
costs Landlord incurs in reletting the Project, including, without limitation,
legal fees, brokers' commissions, expenses of removing Tenant's personal
property, cleaning, redecorating and repairing the Project required by the
reletting and like costs. Reletting shall be on terms commercially reasonable
under the circumstances. Tenant shall pay to Landlord the Rent and other sums
due under this Lease on the dates the Rent is
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due, less the rent and other sums Landlord receives from any reletting. No act
by Landlord allowed by this Subsection shall terminate this Lease unless
Landlord notifies Tenant in writing that Landlord elects to terminate this
Lease.
(iii) Termination Right to Possession. Landlord
may terminate Tenant's right to possession of the Project at any time by giving
written notice to that effect. No act by Landlord other than giving written
notice of termination to Tenant shall terminate this Lease. Acts of
maintenance, efforts to relet the Project or the appointment of a receiver on
Landlord's initiative to protect Landlord's interest under this Lease shall not
constitute a termination of Tenant's right to possession. On termination,
Landlord shall have the right to remove all personal property of Tenant and
store it at Tenant's cost. In addition, Landlord shall have all the rights and
remedies of a landlord under Section 1951.2 of the Civil Code of the State of
California, which provides that Landlord may receive:
(A) The worth at the time of award of
unpaid Rent and other sums due and payable which had been earned at the time of
termination; plus
(B) The worth at the time of award of
the amount by which the unpaid Rent and other sums due and payable which would
have been payable after termination until the time of award exceeds the amount
of the Rent loss that Tenant proves could have been reasonably avoided; plus
(C) The worth at the time of award of
the amount by which the unpaid Rent and other sums due and payable for the
balance of the Term after the time of award exceeds the amount of such rent
loss that Tenant proves could be reasonably avoided; plus
(D) Any other amount necessary to
compensate Landlord for all the detriment proximately caused by Tenant's
failure to perform Tenant's obligations under this Lease, or which, in the
ordinary course of things, would be likely to result therefrom, including but
not limited to, any costs or expenses incurred by Landlord:
(1) In retaking possession of the
Project, including reasonable attorneys' fees and costs therefor;
(2) Maintaining or preserving the
Project for reletting to a new tenant, including repairs or alterations to the
Project for such reletting;
(3) Leasing commissions, and
(4) Any other costs necessary or
appropriate to relet the Project; plus
(E) At Landlord's election, such other
amounts in addition to or in lieu of the foregoing as may be permitted from
time to time by the laws of the State of California.
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The "worth at the time of award" of the amounts referred to in
Subsections 34.b.(iii)(A) and 34.b.(iii)(B) is computed by allowing interest at
the Interest Rate, however, in no event to exceed the maximum rate permitted by
law. The "worth at the time of award" of the amount referred to in Subsection
34.b.(iii)(C) is computed by discounting the amount at the rate of interest
allowed on the amounts referred to in Subsections 34.b.(iii)(A) and
34.b.(iii)(B) (which shall be the Interest Rate or such lesser amount as
permitted by law).
c. Assignment of Rights and Monies. In the event of a
termination of this Lease by reason of the occurrence of an Event of Default,
(i) all unexpired insurance premiums, all deposits made by Tenant with utility
companies, all rights of Tenant under all insurance policies required to be
maintained by Tenant under this Lease, any claims for refunds of any items of
Additional Rent, any pending claims for insurance proceeds or condemnation
awards relating to the Project, all monies and securities of Tenant then held
by Landlord under the terms of this Lease, and all fuel and supplies on the
Project shall be deemed to be and are hereby assigned to and transferred to
Landlord, and (ii) Tenant shall deliver to Landlord all leases of subtenants
and all security deposits and advance rentals then held by Tenant with respect
to any and all subleases not previously turned over to Landlord as required
herein. All funds received by the Landlord which would otherwise be payable to
Tenant shall be applied against amounts Landlord is entitled to receive from
Tenant, with any excess paid to Tenant.
d. Additional Remedies. In addition to the foregoing
remedies and so long as this Lease is not terminated, Landlord shall have the
right to remedy any default of Tenant, to maintain or improve the Project
without terminating this Lease, to incur expenses on behalf of Tenant in
seeking a Subtenant, to cause a receiver to be appointed to administer the
Project and new or existing subleases and to add to the Rent payable hereunder
all of Landlord's reasonable costs in so doing, with interest at the Interest
Rate from the date of such expenditure until the date of repayment.
e. Other. If Tenant or Landlord causes or threatens to
cause a reach of any of the covenants, terms or conditions contained in this
Lease, Landlord or Tenant, as appropriate, shall be entitled, except as
otherwise provided in this Lease, to enjoin the breach or threatened breach and
to invoke any remedy allowed at law, in equity, by statute or otherwise (unless
otherwise expressly prohibited by this Lease) as though re-entry, summary
proceedings and other remedies were not provided for in this Lease. Nothing in
this Subsection shall permit any abatement of, or reduction in, Rent payable
under this Lease.
f. Rights Cumulative. Except as otherwise provided in
this Lease, each right and remedy of Landlord or Tenant provided for in this
Lease shall be cumulative and shall be in addition to every other right or
remedy provided for in this Lease or now or hereafter existing at law or in
equity or by statute or otherwise, and the exercise or
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beginning of the exercise by Landlord or Tenant of any one or more of the
rights or remedies provided for in this Lease or now or hereafter existing at
law or in equity or by statute or otherwise, shall not preclude the
simultaneous or later exercise by Landlord or Tenant of any or all other rights
or remedies. Nothing in this Subsection shall give Tenant any right to
abatement of, or reduction in, the Rent payable under this Lease.
g. Indemnification. Nothing in this Section 34 affects
the right of Landlord to indemnification by Tenant in accordance with Section
22 for liability arising from personal injuries, property damage or any other
cause prior to the termination of this Lease.
h. After Default. Landlord shall be under no obligation
to observe or perform any covenant of this Lease on its part to be observed or
performed which accrues after the date of any Event of Default by Tenant
hereunder until the Event of Default is cured.
i. Waiver. Tenant hereby waives any right of redemption
or relief from forfeiture under California Code of Civil Procedure Section 1174
or 1179, or under any other present or future law, in the event Tenant is
evicted or Landlord takes possession of the Project by reason of any Event of
Default by Tenant hereunder.
35. Option to Extend.
a. Conditions to Exercise of Right. Tenant shall have
the option to extend the Term as to one (1) or more Buildings (but not as to a
portion of a Building) for one (1) period of ten (10) years ("Extension Term")
if Tenant is not in default under this Lease or the Building CC Lease at the
time of notice of extension or at commencement of the Extension Term.
b. Exercise of Option to Extend. Tenant shall exercise
the option to extend by giving written notice ("Option Notice") of Tenant's
exercise to Landlord at least six (6) months, but not more than one (1) year,
prior to the expiration of the initial Term as to any Building or Building CC.
The Option Notice shall state the Buildings ("Extension Premises") for which
Tenant desires to extend the Term. Tenant's failure to give the option Notice
in a timely manner shall be deemed a waiver of Tenant's right to extend. Upon
exercise of the option by Tenant, the Term for the Extension Premises shall
automatically be extended for an additional ten (10) years upon the same terms,
covenants and conditions of this Lease except that Tenant shall not be entitled
to any further option to extend and the Fixed Rent for each of the Extension
Premises shall be adjusted as provided in this Section 35.
c. Initial Fixed Rent. The initial Fixed Rent during
the Extension Term for each Extension Premises shall be the greater of (i)
ninety percent (90%) of the fair market rental value for the Extension
Premises, or (ii) the Fixed Rent for that Extension Premises in effect during
the last year of the initial Term for that Extension Premises.
(i) Determination of Fixed Rent. The Fixed Rent
of an Extension Premises during the last year of the Term shall be the Fixed
Rent for the Extension Premises
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determined pursuant to Subsection 7.b., as adjusted pursuant to Subsection 7.c.
(ii) Determination of Fair Market Rental Value.
In determining the "fair market rental value" of an Extension Premises during
the Extension Term, factors which shall be considered shall include, but not be
limited to, the use of the Project permitted under this Lease, the quality,
size, design and location of the Project, the basic absolute net nature of this
Lease, the method of calculating Square Footage of the Buildings under this
Lease, and the rental value of comparable improved property in southern Contra
Costa County and in Alameda County. Considerations shall not be given to any
Tenant Improvements which are installed at Tenant's sole cost.
d. Methods of Determining Fixed Rent During Extension
Term.
(i) Agreed Upon Fixed Rent. Landlord and Tenant
shall have until six (6) months prior to the commencement of the Extension Term
for any Extension Premises to agree on the Fixed Rent for each Extension
Premises for the Extension Term. If the parties agree on the Fixed Rent
earlier than six (6) months prior to the commencement, they shall immediately
execute an amendment to this Lease setting forth the Fixed Rent.
(ii) Inability to Agree. If Landlord and Tenant
cannot agree on the Fixed Rent for each of the Extension Premises for the
Extension Term earlier than six (6) months prior to the commencement of the
Extension Term for any Extension Premises, the fair market rental value of the
Extension Premises shall be determined in accordance with Subsection (iii).
(iii) Appraisal Procedure.
(A) If Landlord and Tenant cannot agree
on the Fixed Rent for each of the Extension Premises for the Extension Term
earlier than six (6) months prior to the commencement of the Extension Term for
any Extension Premises, Landlord and Tenant each shall have thirty (30) days
after the commencement of the six (6) month period to select a M.A.I. appraiser
to determine the fair market rental value of the Extension Premises during the
Extension Term. Any appraiser selected pursuant to this Subsection d.(iii)(A),
shall have at least five (5) years full-time commercial appraisal experience in
the Pleasanton - San Ramon area. If a party does not appoint an appraiser
within the thirty (30) day period, the single appraiser appointed shall be the
sole appraiser and shall set the fair market rental value of the Extension
Premises during the Extension Term.
(B) If two (2) appraisers are appointed
by the parties in accordance with Subsection d.(iii)(A), the two (2) appraisers
shall promptly meet and attempt to agree on the fair market rental value of the
Extension Premises during the Extension Term. Each appraiser shall prepare a
written narrative appraisal of the fair market rental value of the Extension
Premises during the Extension Term with the appraiser setting forth his data,
analysis, reasoning and conclusions. If the two (2) appraisers cannot agree on
the fair market rental value
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within thirty (30) days after the second appraiser has been appointed, the two
(2) appraisers shall select a third appraiser, meeting the qualifications
stated in Subsection d.(iii)(A), within forty (40) days after the second
appraiser was selected. If the two (2) appraisers cannot select a third
appraiser, either of the parties, by giving ten (10) days notice to the other
party, can apply to the then President of the Northern California Chapter of
the American Institute of Real Estate Appraiser County Real Estate Board, or
the then Presiding Judge of the Alameda County Superior Court, for the
selection of a third appraiser who meets the qualifications stated in
Subsection d.(iii)(A). The third appraiser, however selected, shall be a person
who is not acting in any capacity for either party, an affiliate of either
party, The Prudential Insurance Company of America or Callahan, Sweeney,
O'Brien, and has not done so for a period of two (2) years prior to selection.
The third appraiser shall review the reports prepared by the first two (2)
appraisers and arrive at his own opinion of the fair market rental value of the
Extension Premises during the Extension Term, which he will set forth in his
own report.
(C) Within thirty (30) days after the
selection of the third appraiser pursuant to Subsection d.(iii)(B), a majority
of the appraisers shall set the fair market rental value of the Extension
Premises during the Extension Term. If a majority of the appraisers are
unable, within the thirty (30) day period, to set the fair market rental value
of the Extension Premises during the Extension Term, the appraisals submitted
by each appraiser shall be separated into appraisals for each Extension
Premises. The appraisals for each Extension Premises then shall be added
together and the total divided by three (3); the resulting quotient shall be
the fair market rental value of the respective Extension Premises during the
Extension Term. If, however, an appraisal for an Extension Premises is more
than ten percent (10%) lower or higher then the middle appraisal, the appraisal
shall be disregarded. If only one (1) appraisal for an Extension Premises is
disregarded, the remaining two (2) appraisals shall be added together and the
total divided by two (2); the resulting quotient shall be the fair market
rental value of the Extension Premises during the Extension Term. If two (2)
appraisals are disregarded, the middle appraisal shall be the fair market
rental value of the Extension Premises during the Extension Term.
(D) After the fair market rental values
of all the Extension Premises during the Extension Term have been determined,
the appraisers shall immediately notify the parties of the values.
(E) Except as provided in Subsection
35.g., costs of a party appointing an appraiser and the fees of each appraiser
shall be borne by the party appointing the appraiser, and the cost of
appointing the third appraiser, and the fees of the third appraiser, shall be
borne fifty percent (50%) by each of the parties.
e. Fixed Rent If Appraisal Not Completed.
(i) Fixed Rent Pending Appraisal. If the
determination of Fixed Rent during the Extension Term
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for an Extension Premises is not completed prior to commencement of the
Extension Term for the Extension Premises, upon the commencement of the
Extension Term for the Extension Premises Tenant shall pay Fixed Rent in the
amount of one hundred fifteen percent (115%) of the Fixed Rent for that
Extension Premises due during the last month of the initial Term. Tenant shall
make the payment until the determination of the Fixed Rent for that Extension
Premises is made.
(ii) Fixed Rent and Adjustment Upon Appraisal.
Upon determination of the Fixed Rent for an Extension Premises for the
Extension Term, the Fixed Rent shall be applicable for the Extension Premises
until the Fixed Rent is increased pursuant to Subsection 35.f.
(A) Underpayment of Fixed Rent. Within
thirty (30) days after the Fixed Rent is determined for an Extension Premises,
Tenant shall pay Landlord the positive difference, if any, between the
following:
(1) Fixed Rent Determined. The
Fixed Rent, based on the determination, due from the commencement date of the
Extension Term for the Extension Premises to the date Tenant commences to pay
the Fixed Rent which has been determined for the Extension Premises; less
(2) Fixed Rent Paid. The Fixed
Rent paid by Tenant, pursuant to Subsection (i) for the Extension Premises,
from the commencement date of the Extension Term for the Extension Premises to
the date Tenant commences to pay the Fixed Rent which has been determined for
the Extension Premises.
(B) Overpayment of Fixed Rent. Tenant
shall receive a credit toward the next installment(s) of Fixed Rent in the
amount of the negative difference, if any, between item (1) less item (2),
above.
f. Increases In Fixed Rent. Fixed Rent for an Extension
Premises shall be increased on the first (1st) day of the thirty-first (31st)
month of the Extension Term for the Extension Premises and every thirty (30)
months thereafter. The Fixed Rent shall be increased by the lesser of (1)
fifteen percent (15%) of the Fixed Rent for the Extension Premises in effect
immediately prior to the increase or (2) the percentage increase in the
Consumer Price Index (as calculated below). As to each Extension Premises,
each date during the Extension Term upon which the Fixed Rent for the Extension
Premises shall be adjusted shall be called an "Adjustment Date".
(i) Calculation of Increases in Consumer Price
Index. To determine the percentage increase in the Consumer Price Index as of
each Adjustment Date for an Extension Premises during the Extension Term, the
following shall be applicable: (a) the "Base Index" shall be the Consumer
Price Index published for the month nearest preceding (1) the month in which
the Extension Term commences for the first Adjustment Date, (2) the month in
which the first Adjustment Date occurs for the second Adjustment Date, and (3)
the month in which the preceding Adjustment Date occurs for all subsequent
Adjustment Dates; and (b) the Fixed Rent shall be increased as of the
Adjustment Date by an amount determined by multiplying the
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Fixed Rent then in effect by a fraction, the numerator of which shall be the
difference between (1) the Consumer Price Index for the month nearest preceding
the Adjustment Date and (2) the Base Index, and the denominator of which shall
be the Base Index.
(ii) Changes In CPI. If there is a change in the
method of calculation of the Consumer Price Index, Landlord shall, at
Landlord's option, be permitted to make such adjustments as may be necessary in
order to approximate the result that would have occurred had there been no
change in the method of calculating the Consumer Price Index. If it becomes
impossible to make the adjustment provided in the preceding sentence, or if the
Consumer Price Index fails to exist, then the Consumer Price Index shall be
replaced by such other index selected by Landlord as may be generally
recognized as a successor index or, if none, then any other reasonable index
which Landlord may select.
g. Tenant's Right to Terminate.
(i) Tenant's Right. Tenant shall have the right
to give notice; within thirty (30) days after the first time the Fixed Rent for
the Extension Term is determined as to any one (1) of the Extension Premises
(but not after the determination for any additional Extension Premises)
pursuant to the appraisal procedure set forth in Subsection 35.d., to give
notice of revocation ("Notice of Revocation") of Tenant's Option Notice.
(ii) Effects of Revocation. If Tenant gives a
Notice of Revocation, the following shall be applicable:
(A) Costs of Appraisal. All costs of
the appraisal procedure (including all appraisers' fees) shall be borne by
Tenant;
(B) Term. The Term of this Lease shall
expire in accordance with the provisions of Sections 5 and 6; provided,
however, that the Term of this Lease as to each Building shall be extended by a
period equal to the greater of (1) the period of time between the option Notice
and the Revocation Notice, or (2) twelve months; and
(iii) Fixed Rent. Tenant shall pay Fixed Rent for
the Building or Buildings in the amounts determined pursuant to the appraisal
procedure set forth in Subsection 35.d., for the period the Term is extended
pursuant to (B), above.
36. Option to Extend As to Portion of Project.
a. Right to Exercise. Tenant shall have the option, in
accordance with the terms of this Section 36, to extend this Lease as to (i) a
portion of the basement within Building CC, (ii) parking spaces within the
Project Common Areas, and (iii) the portion of the Land upon which Tenant's
"earth station" is located. Any extension pursuant to this Section 36 shall be
for two (2) consecutive periods of ten (10) years each commencing on the
expiration of the Term of the Building CC Lease (or Extension Term, if the
option to extend, described in Section 35, is exercised). The first extension
pursuant to this Section 36 shall be known as the
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"Initial Section 36 Extension"; the second extension shall be known as the
"Second Section 36 Extension." During the Initial Section 36 Extension and the
Second Section 36 Extension, Tenant shall have no right under this Section 36
to lease any portion of the Project other than the property described in
Subsection 36.b.
b. Areas Subject to Extension.
(i) Basement Space. The portion of the basement
within Building CC for which Tenant shall have the right to extend this Lease
pursuant to this Section 36 ("Basement Space") shall be a portion of Building
CC which includes the PBX Facility and which contains a maximum Square Footage
of twenty thousand (20,000) square feet. If the portion of Building CC for
which Tenant desires to extend this Lease pursuant to this Section 36 is not
segregated from the remainder of the basement of Building CC (i.e., segregated
by a wall which meets all reasonable safety and security requirements for the
remainder of the basement of Building CC), Tenant shall pay all costs of
partitioning the area to segregate it from the remainder of the basement of
Building CC. Tenant shall complete the segregation of the Basement Area prior
to commencement of the Initial Section 36 Extension.
(ii) Parking Spaces. Upon extension of this Lease
pursuant to this Section 36, Tenant shall have the right to use up to four (4)
parking spaces ("Parking Spaces") per thousand (1,000) square feet of the
Basement Space which Tenant leases pursuant to this Section 36; provided,
however, that the number of Parking Spaces Tenant shall have the right to use
shall not exceed ten (10).
(iii) Earth Station. If Tenant elects, pursuant to
this Section 36, to extend this Lease as to the Basement Space, Tenant shall
have the right to extend this Lease, pursuant to this Section 36, for the
portion of the Land ("Earth Station Area") within the Project upon which one
earth station then owned and operated by Tenant is located. The Earth Station
Area shall not include any portion of any Building. Tenant's right to lease
the Earth Station Area shall be subject to all restrictions (including
governmental restrictions, set backs, restrictions set forth in the CC&R's, and
security requirements) on the use of the earth station.
(iv) Restrictions on Extensions. Tenant shall
have the right to extend this Lease as to the Earth Station Area only during
the period that Tenant extends this Lease as to the Basement Space.
(v) Section 36 Extension Property. The term
"Section 36 Extension Property" shall mean the Basement Space, Parking Spaces
and Earth Station Area for which Tenant exercises the right to extend this
Lease pursuant to this Section 36.
c. Condition to Exercise. Tenant's option to extend for
the Initial Section 36 Extension shall be conditional upon Tenant not being in
default under this Lease at the time of notice or at the time of commencement
of the Initial Section 36 Extension. Tenant's option to extend for the Second
Section 36 Extension shall be conditional upon Tenant not being in default
under this
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Lease at the time of notice or at the time of commencement of the Second
Section 36 Extension.
d. Exercise of Option.
(i) Initial Extension. Tenant shall exercise the
option ("Initial Option") to extend the term of this Lease for the Section 36
Extension Property pursuant to the Initial Section 36 Extension by giving
notice ("Initial Section 36 Option Notice") of Tenant's exercise to Landlord at
least one (1) year, but not more than fifteen (15) months, prior to the
expiration of the Term (including any extension) as to any of the Buildings or
Building CC.
(ii) Second Extension. Tenant shall exercise the
option ("Second Option") to extend the term of this Lease for the Section 36
Extension Property by the Second Section 36 Extension by giving notice ("Second
Section 36 Option Notice") of Tenant's exercise to Landlord at least one (1)
year, but not more than fifteen (15) months, prior to expiration of the Initial
Section 36 Extension.
(iii) Failure to Give Notice. Tenant's failure to
give the Initial Section 36 Option Notice or the Second Section 36 Option
Notice in a timely manner shall be deemed a waiver of Tenant's right to extend
pursuant to this Section 36.
e. Effect of Exercise. Upon exercise by Tenant of the
Initial Section 36 Option, Tenant shall have the right to lease the Section 36
Extension Property for an additional ten (10) years upon the same terms,
covenants and conditions as this Lease (including the multi-tenant provisions
set forth in Section 37) except that the Fixed Rent for the Section 36
Extension Property shall be as determined in this Section 36 and Tenant shall
have only one (1) additional option to extend (i.e., the Second Section 36
Option) as to the Section 36 Extension Property. Upon exercise by Tenant of
the Second Section 36 Option, Tenant shall have the right to extend this Lease
for the Section 36 Extension Property for an additional ten (10) years beyond
the Initial Section 36 Option upon the same terms, covenants and conditions as
this Lease (including the multi-tenant provisions set forth in Section 37)
except that Tenant shall have no further option to extend as to the Section 36
Extension Property and the Fixed Rent for the Section 36 Extension Property
shall be determined in accordance with this Section 36.
f. Fixed Rent. The initial Fixed Rent during the
Initial Section 36 Extension Term shall be the fair market rental value of the
Section 36 Extension Property during the Initial Section 36 Extension. The
initial Fixed Rent during the Second Section 36 Extension shall be the fair
market rental value of the Section 36 Extension Property during the Second
Section 36 Extension. The fair market rental value of the Section 36 Extension
Property shall be determined in accordance with the procedures set forth in
Section 35.
g. Incidental Right. If Tenant elects to extend the
Lease as to the Section 36 Extension Property pursuant to this Section 36,
Tenant also shall have the right during the extensions) to utilize an easement
from
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the Section 36 Extension Property to the exterior boundary of the easement area
described in the Easement referred to in Subsection 17.g.
37. Multi-Tenant Occupancy.
a. Applicability. The provisions of this Section 37
shall apply commencing on the earlier of (1) the expiration or earlier
termination of this Lease with respect to any Building or (2) the expiration or
earlier termination of the Building CC Lease.
b. Landlord's Rights. Landlord shall have the right, in
Landlord's absolute discretion and during the period the provisions of this
Section 37 are applicable, to undertake to provide any or all of the
obligations of Tenant under this Lease with respect to the maintenance, repair
and operation of all or any portion of the Project Common Areas, and to require
Tenant to pay Tenant's proportionate share of the expenses incurred by Landlord
as a result of such undertaking. If Landlord undertakes to maintain, repair
and operate the Project Common Areas, Landlord shall maintain, repair and
operate the Project Common Areas in a manner consistent with the standards of
first-class office buildings in the Pleasanton-San Ramon area. Tenant shall
pay to Landlord, as Additional Rent, on a monthly basis, Tenant's Percentage
Share (as defined below) of Project Common Area Operating Expenses (as defined
below).
c. Tenant's Percentage Share. Tenant's percentage share
("Tenant's Percentage Share") of Project Common Area Operating Expenses shall
mean the percentage figure obtained by dividing the rentable area of the
Building or Buildings leased by Tenant as of the date of the calculation by the
rentable area of the Buildings and Building CC. The rentable area for each of
the Buildings and Building CC, which is calculated in accordance with BOMA
specifications, is set forth in Exhibit D-1. If Landlord reasonably determines
that any costs resulting from Tenant's use of any Building or Buildings or the
Project Common Areas are not in proportion to Tenant's Percentage Share
disproportionate costs incurred for the Buildings occupied by Tenant during
periods that the remainder of the Buildings are not occupied) Landlord shall
make adjustments in Tenant's Percentage Share of Common Area Operating Expenses
to reflect the disproportionate costs resulting from Tenant's use. In
addition, Landlord shall make reasonable adjustments in calculating Tenant's
Percentage share to reflect the portions of the buildings which consist of
basement space.
d. Tenant's Rights. If during the period described in
Subsection a., Landlord fails to undertake Tenant's obligation under Subsection
37.b. with respect to the maintenance, repair or operation of all or any
portion of the Project Common Areas, Tenant shall have the right, but not the
obligation, after thirty (30) days notice to Landlord, to continue to
maintain, repair and operate the Project Common Areas and to require Landlord
to pay Landlord's proportionate share of expenses incurred by Tenant as a
result of Tenant's actions.
e. Landlord's Percentage Share. If, pursuant to
Subsection 37.d., Tenant maintains, repairs and operates the Project Common
Areas during the period
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described in Subsection 37.a., Landlord's Percentage Share ("Landlord's
Percentage Share") of the Project Common Area Operating Expenses shall mean the
percentage figure obtained by dividing the BOMA Square Footage of the Building
or Buildings no longer leased by Tenant as of the date the calculations by the
BOMA Square Footage of all the Buildings and Building CC. Landlord shall make
reasonable adjustments in calculating Landlord's Percentage Share to reflect
the portions of the Buildings and Building CC which consist of basement space.
f. Project Common Area Operating Expenses. The term
"Project Common Area Operating Expenses" shall mean all reasonable expenses,
costs and disbursements of every reasonable kind and nature which Landlord
shall pay or become obligated to pay because of or in connection with the
ownership, maintenance, repair and operation of the Project Common Areas.
Project Common Area Operating Expenses shall include, but not be limited to,
reasonable expenditures for the following:
(i) Wages and salaries of all employees engaged
in the operation, maintenance and security of the Project Common Areas,
including taxes, insurance and benefits relating thereto; and the rental cost
and overhead of any office and storage space used to provide such services;
(ii) All supplies and materials used in
maintenance, repair and operation of the Project Common Areas;
(iii) Cost of all utilities, including surcharges,
for the Project Common Areas, including the cost of water, power and lighting,
which are not separately billed to and paid for by tenants;
(iv) Cost of all maintenance and service
agreements for the Project Common Areas and the equipment thereon, including,
but not limited to, security services, janitorial service, gardeners, refuse
collection and trash removal services;
(v) The cost of all insurance which Landlord or
Landlord's lenders deem(s) necessary for the Project Common Areas, including
the insurance specified in Section 21;
(vi) Maintenance repair and replacement of all
parking lot surfaces service areas, sidewalks, curbs, guard rails, fences,
flagpoles, bike racks, landscaping and planting, courts, including cleaning,
sweeping, painting, striping and repaving within the Project Common Areas, with
such costs to be amortized, to the extent appropriate, over the applicable
period determined pursuant to Subsection 19.d.;
(vii) Maintenance, repair and replacement of storm
and sanitary drainage systems, irrigation systems, electrical, gas, water and
telephone systems, lighting systems, sprinkler systems and other utility
systems within the Project Common Areas, with such costs to be amortized, to
the extent appropriate, over the applicable period determined pursuant to
Subsection 19.d.;
(viii) Costs for planting, replanting and
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replacing of flowers, shrubbery, plants, trees and other landscaping within the
Project Common Areas;
(ix) Maintenance, repair and acquisition costs of
all security devices, machinery and equipment used in the operation or
maintenance of the Project Common Areas and all personal property taxes and
other charges incurred in connection with such security devices, machinery and
equipment, with such costs to be amortized, to the extent appropriate, over
the applicable period determined pursuant to Subsection 19.d.;
(x) A reasonable management fee for the manager
of the Project Common Areas;
(xi) The costs of any capital improvements made to
the Project Common Areas that reduce other operating expenses or are required
under any governmental law or regulation, with such costs to be amortized over
the applicable period determined pursuant to Subsection 19.d.; and
(xii) Legal and accounting expenses, including
costs of audits by certified public accountants, incurred in connection with
the Project Common Areas.
g. Payment by Tenant. Commencing on the later of (i)
thirty (30) days after early termination of this Lease with respect to any
Building or early termination of the Building CC Lease or (ii) fifteen (15)
days prior to the expiration of this Lease with respect to any Building or
expiration of the Building CC Lease, if Landlord elects to provide services
pursuant to this Section 37, Landlord shall estimate the Project Common Area
Operating Expenses payable by Tenant pursuant to this Section for the next
twelve (12) month period, and any period prior to commencement of the twelve
(12) month period. Within fifteen (15) days after Tenant's receipt of
Landlord's estimate of Project Common Area Operating Expenses, Tenant shall pay
to Landlord the estimated amount for Project Common Area Operating Expenses
applicable to any period prior to commencement of the twelve (12) month period
and Tenant shall commence paying to Landlord on the first day of each month, in
advance, one-twelfth (1/12th) of the amount of Project Common Area Operating
Expenses estimated by Landlord for the next twelve (12) month period.
h. Annual Revision. Within thirty (30) days prior to
the end of each twelve (12) month period, Landlord shall prepare an estimate of
the Project Common Area Operating Expenses for the next twelve (12) month
period.
i. Comparison of Actual and Estimated Project Common
Area Expenses. Within ninety (90) days (or as soon thereafter as possible)
after the close of each twelve (12) month period, Landlord shall provide Tenant
with a statement of the actual Project Common Area Operating Expenses incurred
during the twelve (12) month period compared to the estimated Project Common
Area Operating Expenses. If the actual Project Common Area Operating Expenses
are more than the estimated Project Common Area Operating Expenses, then Tenant
shall pay Landlord, within thirty (30) days of receipt of a bill therefore,
Tenant's Percentage Share of the difference. If the actual Project Common Area
operating Expenses are less than the estimated
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Project Common Area Operating Expenses, then Tenant shall receive a credit
against future Project Common Area Operating Expense payments equal to Tenant's
Percentage Share of the difference; provided, that in the case of an
overpayment for the final twelve (12) months of the Term (including all
extensions), Landlord shall credit Tenant's Percentage Share of the difference
against any sums due from Tenant to Landlord in accordance with the terms of
this Lease; and if no sums are due and unpaid, shall refund the amount to
Tenant.
j. Proration. Tenant's liability to pay Tenant's
Percentage Share of Project Common Area Operating Expenses shall be prorated on
the basis of a three hundred sixty-five (365) day year to account for any
fractional portion of a year included at the commencement of Tenant's
obligation to pay Project Common Area Operating Expenses or expiration of the
Term of this Lease. Landlord's and Tenant's obligations to pay for or credit
any increase or decrease in payments pursuant to this Section shall survive
this Lease.
k. Failure to Pay. Failure of Tenant to pay any of the
charges required to be paid under this Section shall constitute a material
default and breach of this Lease and Landlord's remedies shall be as specified
in Section 34.
l. Landlord's Notice. Landlord shall give Tenant thirty
(30) days written notice of its intention to undertake to provide any
obligations of Tenant under this Lease and to commence charging Tenant for
Project Common Area Operating Expenses. Following Landlord's notice, Landlord
and Tenant shall enter an amendment to this Lease setting forth Tenant's
Percentage Share and identifying those obligations of Tenant which Landlord
shall undertake.
m. Allocation of Parking. During the period described
in Subsection 37.a., Landlord shall allocate among the Buildings the parking
portion of the Project Common Areas. The parking shall be allocated among the
Buildings in proportion to the rentable areas of the Buildings (with the
rentable areas calculated in accordance with BOMA specifications).
n. Rules and Regulations. Landlord shall have the right
to establish rules and regulations for the Project and Tenant shall comply with
all such reasonable rules and regulations and any amendments as Landlord may
reasonably adopt. The rules and regulations may include the rules and
regulations set forth in Exhibit H; provided, however, that Landlord shall not
have the right, without Tenant's consent, to enforce upon Tenant rules and
regulations which are more strict than those set forth in Exhibit H.
38. Toxic Materials.
a. Compliance with Laws. Tenant, and all agents and
contractors of Tenant, shall comply with all laws relating to the storage, use
and disposal of hazardous, toxic or radioactive matter including, without
limitation, those materials identified in Sections 66680 and 66685 of Title 22
of the California Administrative Code, Division 4, Chapter 30 ("Title 22") as
amended from time to time and those substances defined as "hazardous
substances" or "toxic
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substances" in the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq., the Resource
Conservation and Recovery Act, 42 U.S.C. 6901 et seq., and the Hazardous
Materials Transportation Act, 42. U.S.C. Section 1802 (collectively, "Toxic
Materials").
b. Tenant's Indemnity. Tenant shall not cause any Toxic
Materials to be used, generated stored or disposed of on or about the Project
without the prior written consent of Landlord, which consent Landlord may
withhold in its sole discretion. Landlord agrees that storage or use within
the Project of levels of the following items which are normal for office
complexes comparable to the Project shall not be a breach of this Lease: (i)
fuel for emergency generators, (ii) paint and related solvents, and (iii)
emergency power batteries. Tenant shall be solely responsible for and shall
indemnify, defend and hold Landlord and its subsidiaries, directors, officers,
employees, servants and agents (collectively, "Agents"), harmless from any and
all claims, judgments, losses, demands, causes of action, proceedings or
hearings (collectively, "Claims") relating to the storage, placement or use of
Toxic materials, including those described in (i), (ii) and (iii) above, by
Tenant, its Agents or invitees on or about the Project including, without
limitation, Claims resulting from the contamination of subterranean water
beneath, adjoining or in the vicinity of the Project. Tenant shall reimburse
Landlord for: (i) losses in or reductions to rental income resulting from
Tenant's use, storage and disposal of Toxic Materials; (ii) all costs of
refitting or other alterations to the Project necessitated by Tenant's use,
storage, or disposal of Toxic Materials including, without limitation,
alterations required to accommodate an alternate use of the Project; (iii) any
diminution in the fair market value of the Project caused by Tenant's use,
storage or disposal of Toxic Materials; and (iv) any liability arising out of
Tenant's use, generation, storage, or disposal of Toxic Materials. Tenant
agrees to defend all such Claims on behalf of Landlord with counsel reasonably
acceptable to Landlord, and to pay all fees, costs, damages or expenses
relating to or arising out of any such Claim, including attorneys' fees and
costs.
c. Inspection Rights; Costs of Monitoring. Subject to
Tenant's reasonable security precautions, Landlord shall have the right at all
reasonable times and upon reasonable notice, except in the case of an emergency
(in which event no notice shall be necessary), to inspect the Project to
confirm Tenant's compliance with this Section. If Toxic Materials are found on
the Project, Tenant shall pay all costs of monitoring the Toxic Materials to
the extent Landlord reasonably believes any monitoring by the Association is
insufficient.
d. Further Indemnity. Tenant shall further be solely
responsible for and shall indemnify, defend and hold Landlord and its Agents
harmless from and against all Claims, including reasonable attorneys' fees and
costs, arising out of or in connection with any removal, clean-up or
restoration work which is required by any government agency having jurisdiction
and which arises from Tenant's storage, use or disposal of Toxic Materials on
the Project during its tenancy. Neither the written consent of Landlord to the
use, generation, storage, or disposal of Toxic
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Materials, nor the strict compliance by Tenant with all statutes, laws,
ordinances, rules, regulations or precautions pertaining to Toxic Materials,
shall excuse Tenant from its obligation of indemnification pursuant to this
Subsection.
e. Survival. All obligations of Tenant under this
Section 38 shall survive the expiration or termination of this Lease.
39. Subordination.
a. Subordinate Nature. This Lease is subject and
subordinate to all ground and underlying leases, mortgages and deeds of trust
which affect the Land or all or any other part of the Project as of the date of
this Lease, to the CC&R's and to all renewals, modifications, consolidations,
replacements and extensions thereof; provided, however, that if the lessor
under any such lease ("Lessor") or the holder or holders of any such mortgage
or deed of trust ("Holder") shall advise Landlord that it desires or requires
this Lease to be prior and superior thereto, upon written request of Landlord
to Tenant, Tenant shall within fifteen (15) days of the request, and Tenant's
receipt of the documents for execution, execute, have acknowledged and deliver
any and all documents or instruments, in the form reasonably acceptable to
Tenant and presented to Tenant which Landlord, Lessor or Holder deems necessary
or desirable for purposes thereof. Landlord shall have the right to cause this
Lease to be and become and remain subject and subordinate to any and all ground
or underlying leases, mortgages or deeds of trust which are now or may
hereafter be executed covering the Land or the Project or any renewals,
modifications, consolidations, replacements or extensions thereof, for the full
amount of all advances made or to be made thereunder and without regard to the
time or character of the advances, together with interest thereon and subject
to all the terms and provisions thereof; provided that in the event of
termination of any such lease or upon the foreclosure of any such mortgage or
deed of trust, so long as Tenant is not in default, Lessor or Holder shall
agree to either enter a nondisturbance agreement with Tenant, or enter a new
lease with Tenant upon the same terms and conditions as this Lease, so long as
Tenant shall pay the Rent and observe and perform all the provisions of this
Lease to be observed and performed by Tenant. Within fifteen (15) days after
Landlord's written request therefor, and Tenant's receipt of the documents for
execution, Tenant shall execute any and all documents required by Landlord or
the Lessor under such lease or the Holder of the mortgage or deed of trust
required to effectuate the subordination to make this Lease subordinate to any
lien of the lease, mortgage, or deed of trust, as the case may be.
b. Attornment. Subject to Tenant's rights under
Subsection 39.a., Tenant hereby attorns and agrees to attorn to any entity
purchasing or otherwise acquiring the Project at any sale or other proceeding
or pursuant to the exercise of any rights, powers or remedies under such leases
or mortgages or deeds of trust.
40. Estoppel Certificates.
a. Delivery by Tenant. Within fifteen (15) days
following written request by Landlord, Tenant shall
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deliver to Landlord an executed and acknowledged certificate, in the form
attached hereto as Exhibit K, or in the form required by any proposed
mortgagee, purchaser or Landlord. The estoppel certificate shall be for the
benefit of proposed mortgagees, purchasers or Landlord.
b. Failure of Tenant to Deliver. Tenant's failure to
deliver the estoppel certificate within fifteen (15) days after delivery of
Landlord's written request therefor shall be conclusive upon Tenant:
(i) The commencement date under this Lease of
each of the Buildings is as represented by Landlord in the estoppel certificate
Landlord delivered to Tenant, and the expiration date of each of the Buildings
is as therein represented by Landlord;
(ii) There are no modifications, amendments,
supplements, arrangements, side letters or understandings, oral or written, of
any sort, modifying, amending, altering, supplementing or changing the terms of
this Lease except as represented by Landlord in the estoppel certificate
Landlord delivered to Tenant;
(iii) This Lease is in full force and effect, and
this Lease has been duly executed and delivered by, and is a binding obligation
of, Tenant as set forth herein;
(iv) Tenant acknowledges that (A) Rent under the
Lease has been paid up to and including the date represented by Landlord in the
estoppel certificate Landlord delivered to Tenant, (B) monthly Fixed Rent for
each Building during the Initial Term of this Lease is the amount represented
by Landlord in the estoppel certificate Landlord delivered to Tenant, (C) Rent
has not been paid for any period after the date represented by Landlord in the
estoppel certificate Landlord delivered to Tenant, and (D) Rent shall not be
paid for a period in excess of one (1) month in advance;
(v) This Lease is not in default, and Landlord
has performed all the obligations required to be performed by Landlord under
the terms hereof through the date of the representation; and
(vi) Landlord and Tenant agree not to modify,
amend, terminate or otherwise change the Lease without the prior written
consent of the party(ies) for whose benefit the certificate was sought, which
consent shall not be unreasonably withheld, provided the change does not impair
the security of the party(ies) for whose benefit the certificate was sought.
c. Revised Estoppel Certificate. Landlord reserves the
right to substitute a different form of estoppel certificate in place of the
estoppel certificate attached hereto as Exhibit M, provided that the substitute
form does not expand the scope of the estoppel certificate.
d. Financial Statements of Tenant. Within seven (7)
days following written request by Landlord, Tenant shall deliver to Landlord
the current financial statements of Tenant and financial statements of the two
(2) years prior to the current financial statement's year, with an
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opinion of a certified public accountant, all prepared in accordance with
generally accepted accounting principles consistently applied. Tenant shall
have the right to deliver to Landlord, in satisfaction of its obligations under
this Subsection, shareholders' annual reports for AT&T covering the applicable
periods for AT&T if Tenant is AT&T or Tenant is (i) a Subtenant described in
Subsection 26.1., and (ii) Tenant either maintains not less than Five Hundred
Million Dollars ($500,000,000.00) of net worth or this Lease is guaranteed by
AT&T.
41. Landlord Conveyance.
a. Assignment to Joint Venture. Landlord shall have
the right to assign this Lease to a joint venture comprised of Landlord and The
Prudential Insurance Company of America. At the time of the assignment, Tenant
shall deliver an estoppel certificate to Landlord in the form attached hereto
as Exhibit K. Upon the assignment, all obligations of Landlord under this Lease
shall be assumed by the joint venture and Landlord shall be released of all
obligation (other than in its capacity as partner in the Joint Venture).
b. Further Assignment. Whenever Landlord conveys or
assigns Landlord's interest in the Project, Landlord shall be automatically
released from further performance of the covenants of this Lease, and from all
further liabilities, obligations, costs, expenses, demands, causes of action,
claims and judgments connected with this Lease, arising after the conveyance or
assignment, unless Landlord is a general partner of the party to which
Landlord's interest in the Project is conveyed or assigned. Whenever Landlord
conveys or assigns its interest, Tenant shall look solely to the new owner for
performance of Landlord's obligations under this Lease which arise after the
conveyance or assignment. The effective date of Landlord's release from all
subsequently arising obligations shall be the date of the conveyance or
assignment. If requested, Tenant shall execute a form of release, in the form
attached hereto as Exhibit L, and such other documentation as may be required
to further effect the provisions of this Section.
42. Right of First Offer.
a. Offer.
(i) Contents of Sales Notice. If Landlord
desires to offer any or all of the Project for sale to one (1) or more
unaffiliated third parties, and Tenant is AT&T or a Subtenant of AT&T described
in Subsection 26.1., Landlord shall deliver a notice of intent to sell ("Sales
Notice") to Tenant setting forth the terms and conditions upon which Landlord
proposes to sell the portion or all of the Project, including a statement of
the offering price ("Offering Price").
(ii) Effect of Sales Notice. Delivery of the
Sales Notice to Tenant shall be deemed to be an offer ("Offer") by Landlord to
sell the portion or all of the Project to Tenant on all the terms set forth in
the Sales Notice.
b. Acceptance of Offer; Agreement of Purchase and Sale.
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(i) Acceptance or Rejection--Other Than Board.
The Offer set forth in the Sales Notice may be accepted by Tenant obtaining the
approvals of all necessary parties other than the Board of Directors ("Board")
of AT&T within thirty (30) days after the date of delivery of the Sales Notice.
Tenant shall deliver notice ("Tenant's Notice") to Landlord within the thirty
(30) day period stating that the approvals of all appropriate parties other
than the Board have been obtained.
(ii) Acceptance or Rejection-Board. Within sixty
(60) days of Tenant's Notice stating that all approvals other than approval by
the Board have been obtained, Tenant shall deliver notice ("Tenant's Board
Notice") to Landlord stating whether the Board approved acceptance of the
Offer. If the Board approves acceptance of the Offer, Tenant shall deliver
into escrow a written notice of acceptance, together with Tenant's certified or
bank cashier's check in the amount of the deposit ("Deposit") specified in the
Sales Notice, within the sixty (60) day period.
(iii) Agreement of Purchase and Sale. Landlord and
Tenant shall have ten (10) days after delivery of the notice of the Board's
acceptance (accompanied by the Deposit) to execute an agreement of purchase and
sale for the portion or all of the Project based on the terms set forth in the
Sales Notice. The agreement of purchase and sale shall provide that all
closing costs, transfer taxes, recording and escrow fees and brokers'
commissions due and payable at closing shall be assumed and paid by Tenant.
c. Deemed Rejection. The Offer shall be deemed rejected
if any one (1) of the following occurs:
(i) No Tenant's Notice. Tenant fails, within
thirty (30) days after the delivery of the Sales Notice, to deliver the
Tenant's Notice stating that all approvals other than approval of the Board
have been obtained;
(ii) No Tenant's Board Notice (with Deposit).
Tenant fails to deliver the Tenant's Board Notice stating that the Board
approves acceptance of the Offer (together with the Deposit) within sixty (60)
days of delivery of the Tenant's Notice; or
(iii) No Agreement of Purchase and Sale. The
Tenant's Board Notice stating that the Board approves acceptance of the Offer
is given but Landlord and Tenant do not execute an agreement of purchase and
sale within ten (10) days after delivery of the Tenant's Board Notice.
d. Release of Project. If the Offer contained in the
Sales Notice is not accepted in accordance with Subsection 42.b., or is deemed
rejected in accordance with Subsection 42.c., then the portion or all of the
Project shall be released from the restrictions contained in this Section 42
and Landlord shall have the right to sell the portion or all of the Project on
such terms as Landlord deems reasonable.
43. Landlord's Right to Perform Tenant's Covenants. If Tenant
shall at any time fail to make any payment
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or perform any other act on its part to be made or performed under this Lease
within the time period, and after the notice, set forth in this Lease, Landlord
may, but shall not be obligated to, and without waiving or releasing Tenant,
from any obligation of Tenant under this Lease, make the payment or perform the
other act to the extent Landlord may deem desirable, and in connection
therewith, pay expenses and employ counsel. If no notice period is otherwise
set forth in this Lease, Landlord shall give Tenant thirty (30) days notice
prior to Landlord taking actions or performing acts on behalf of Tenant if
Landlord reasonably determines that the Project would not be jeopardized by
delays in taking actions or performing acts. All sums so paid by Landlord and
all penalties, interest and costs in connection therewith shall be due and
payable by Tenant, as Additional Rent, together with interest thereon at the
Interest Rate, from the dates paid by Landlord to the date of payment thereof
by Tenant to Landlord, together with collection costs and attorneys' fees if
necessary to collect the amounts from Tenant. Nothing herein contained shall
be deemed to waive the right of Landlord to recover by action at law any sums
of money which it may have paid out or any indebtedness which it may have
incurred on account of the failure of Tenant to comply with or perform any
term, condition, covenant or agreement of this Lease.
44. Escrow Deposits.
a. Establishment of Escrow. In the event of the
occurrence of an Event of Default as defined under Section 34 of this Lease,
whether or not the default shall have been waived by Landlord, and for so long
as the Event of Default has not been cured, Landlord shall have the option
during the Term to require Tenant to pay to Landlord, together with and in
addition to the Fixed Rent reserved herein, the current installment of the
Property Taxes levied or to be levied against the Project and of any insurance
premiums required pursuant to the provisions of Section 21 of the Lease.
Landlord shall hold the payments, in escrow, and apply them against the taxes
and assessments and insurance premiums when due.
b. Excess or Insufficient Payments. If the total of the
payments made by Tenant for Property Taxes shall exceed the amount of the
payments actually made by Landlord for Property Taxes, the excess shall be
credited by Landlord on subsequent payments of the same nature made by Tenant.
If, however, the monthly payments made by Tenant shall not be sufficient to pay
the Property Taxes when they shall become due and payable, then Tenant shall
pay to Landlord any amount necessary to make up the deficiency, on or before
the date when payment of the Property Taxes shall be due.
45. Mortgagee Protection. In the event of any default on the part
of Landlord, Tenant shall give notice by registered or certified mail to any
beneficiary ("Beneficiary") of a deed of trust or mortgagee ("Mortgagee") of a
mortgage covering all or any portion of the Project. If Landlord fails to cure
the default in a timely manner, Tenant shall send an additional notice to any
Beneficiary or Mortgagee. After receipt of the additional notice, the
Beneficiary or Mortgagee shall have a reasonable period of time (which shall
not be less than sixty (60) days) to commence to cure the default.
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46. Brokerage Commission. Landlord and Tenant each warrants for
the benefit of the other that its sole contact in connection with this Lease
and the Building CC Lease has been directly with the other and Joseph W.
Callahan, Jr. ("Callahan") (who was a principal of CPS, A Commercial Real
Estate Company ("CPS"), and who is now a principal of Callahan, Sweeney &
O'Brien, Inc. ("CSO")). Tenant further warrants for the benefit of Landlord
that no broker or finder other than Callahan (which shall include CPS and CSO)
can successfully claim from Landlord a right to a commission or a finder's fee
based solely upon contacts between the claimant and Tenant with respect to
Landlord or the Lease and the Building CC Lease. Landlord further warrants for
the benefit of Tenant that no broker or finder other than Callahan (which shall
include CPS and CSO) can successfully claim a right to a commission or finder's
fee based solely upon contacts between the claimant and Landlord with respect
to the Lease and the Building CC Lease. Landlord or Tenant each shall
indemnify, defend and hold the other harmless from and against any attorneys'
fees and court costs, resulting from any breach of its warranties in this
Section. For purposes of this Section 46, the term "Landlord" shall include
Rosewood Associates and The Prudential Insurance Company of America.
47. Recording. Neither Landlord nor Tenant shall record this
Lease or a short form memorandum of this Lease without the prior written
consent of the other.
48. Substantiation of Costs. To the extent costs are incurred by
Landlord for which Tenant shall be obligated, pursuant to this Lease, to
reimburse Landlord, Landlord shall provide Tenant with reasonable
substantiation of the amounts of the costs incurred. In addition, Tenant shall
have the right, upon reasonable notice to Landlord, to inspect invoices and
related contracts and other relevant documents in Landlord's custody or
reasonable control to confirm the costs which Tenant is obligated to reimburse
Landlord and, if applicable, to confirm the allocation of costs among the
Buildings and Building CC.
49. Arbitration.
a. Matters Subject to Arbitration. Landlord or Tenant
may submit to arbitration any matter which, in accordance with the terms of
this Lease, is subject to arbitration. Any matter which is submitted to
arbitration by Landlord or Tenant shall be settled in accordance with the
provisions of this Section 49.
b. Establishing Method of Arbitration. Landlord and
Tenant may establish any method of arbitration by agreement, whether the method
is the same as, or different from, the method set forth in this Section 49. If
the parties do not agree on any alternate method, then either Landlord or
Tenant may require that any matter which is subject to arbitration hereunder be
arbitrated according to the procedures set forth in this Section 49.
c. Instituting Arbitration. If Landlord or Tenant
desires to submit a matter to arbitration, the party first shall deliver to the
other party a written statement of the matter and a statement of a demand as to
what is desired from the other party to resolve the matter. If within ten (10)
days after giving the notice the matter has
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not been resolved, the arbitration procedure shall be commenced and shall
proceed as set forth in Subsections 49.d., 49.e., and 49.f.
d. Arbitration Procedures.
(i) Place of Arbitration. The arbitration
hearing shall be held in Alameda County.
(ii) Selecting the Arbitrator.
(A) Qualifications of Arbitrator. There
shall be a single arbitrator to be selected by agreement of Landlord and
Tenant. A qualified arbitrator must meet the following standards: (i) he must
not be, nor ever have been, an employee of either Landlord or Tenant (or an
attorney, accountant, agent or consultant for either party), and (ii) the
arbitrator must have substantial professional experience and arbitration
experience relating to the business or legal aspects of the subject of the
arbitration, provided the arbitrator may be a retired judge without such
professional experience. Within ten (10) days of request by either party,
Landlord and Tenant each shall submit to the other a list containing the names
of four (4) persons so qualified in the opinion of the party submitting the
list. Either Landlord or Tenant may request that the American Arbitration
Association provide the list. Within ten (10) days of receipt of a list, the
other party shall strike three (3) of the four (4) names from the list and send
it back to the submitting party. Within ten (10) days thereafter, Landlord and
Tenant thereupon shall mutually agree upon an arbitrator from the remaining two
(2) names, or they shall seek, from the presiding judge of the Superior Court
of Alameda County, an order appointing an arbitrator.
(B) Failure to Cooperate. If either
Landlord or Tenant fails to cooperate in the mechanics of selecting an
arbitrator, the presiding judge of the Superior Court of Alameda County shall,
upon request of the other party, appoint an arbitrator who shall serve as the
arbitrator under this provision.
(C) Rules. Except as otherwise provided
in this Section 49, the arbitration shall be conducted in accordance with the
rules and procedures of the American Arbitration Association. If requested by
either Landlord or Tenant, the arbitration shall actually be administered by
the office of the American Arbitration Association which is located nearest the
place in which the arbitration is to be held.
(iii) Discovery, Landlord and Tenant agree that all
the provisions of the California Code of Civil Procedure Section 1283.05 shall
be incorporated herein. Notwithstanding the foregoing, and not by way of
limitation, Landlord and Tenant also agree that after selection of an
arbitrator they shall cooperate fully with all other parties to the arbitration
by furnishing within ten (10) days of written request, if at all possible,
subject only to mechanical limitations of availability and reproduction
facilities, any business records, statistics, bookkeeping records and
correspondence reasonably related to the subject matter of the arbitration.
The duplication costs shall be borne by the party requesting the documents.
The information so provided shall be treated as
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confidential and shall not be released or used in any other proceeding by the
recipient.
(iv) Timing of Arbitration. The arbitration shall
commence as soon as possible after the arbitrator has been selected. Specific
timing, including setting dates for hearings, shall be subject to agreement by
all parties to the arbitration, including the arbitrator. If agreement cannot
be reached as to timing of hearings, the arbitrator shall have authority to
establish times for hearings at such times as he deems appropriate, considering
the needs for preparation, the need for resolution of the dispute and the goal
of disposing of the matter as soon as is practical.
e. Basis of Decision. The arbitrator shall base his
decision upon his best interpretation of this Agreement.
f. Cost. Unless otherwise determined by the arbitrator,
the cost of the arbitration, including any administrative fee and arbitrator
fee, and costs for use of a facility during the hearings, shall be borne
equally by Landlord and Tenant. Landlord and Tenant shall pay its own
attorneys' fees.
50. General.
a. Executive Approval. This Lease and all rights and
obligations of the parties hereto shall not be effective unless and until this
Lease and the Building CC Lease have been approved by each of Landlord's (which
shall include The Prudential Insurance Company of America's) and Tenant's legal
counsel, corporate officers and board of directors (or authorized subcommittee
thereof). Conclusive evidence that all necessary approvals have been obtained
by the parties shall be the execution by Landlord and Tenant of the Approval
Acknowledgement attached hereto as Exhibit M. Landlord and Tenant each
acknowledges that the approval process contemplated by this Section 50 requires
the approval of the other party's board of directors, and that if the other
party's corporate officers do not accept the terms and conditions of this Lease
(which acceptance may be withheld by such officers for any reason, or for no
reason, in their discretion), then no review will be made by such other party's
board of directors. If either party notifies the other party on or before
December 15, 1986, that it has not obtained the approvals and acceptance
required hereunder, this Lease shall be deemed terminated and of no further
force or effect as of the date of the notification.
b. Waiver By Landlord. No waiver by Landlord of any
Event of Default or breach of any covenant by Tenant hereunder shall be implied
from any omission by Landlord to take action on account of the Event of Default
if the Event of Default persists or is repeated, and no express waiver shall
affect any Event of Default other than the Event of Default specified in the
waiver. Any waiver shall be operative only for the time and to the extent
therein slated. Waivers by Landlord of any covenant, term or condition
contained herein shall not be construed as a waiver of any subsequent breach of
the same covenant, term or condition. The consent or approval by Landlord to
any act of Tenant requiring further consent or approval by Landlord shall not
be deemed to waive or render unnecessary
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Landlord's consent or approval to any subsequent similar acts. No waiver by
Landlord of any provision under this Lease shall be effective unless in writing
and signed by Landlord. Landlord's acceptance of full or partial payment of
Rent during the continuance of any breach of this Lease shall not constitute a
waiver of any such breach of this Lease. Efforts by Landlord to mitigate
damages caused by Tenant's breach of this Lease shall not be construed as a
waiver of Landlord's right to recover damages under Section 34.
c. No Waiver by Tenant. No waiver by Tenant of any
default or breach of any covenant by Landlord hereunder shall be implied from
any omission by Tenant to take action on account of the default or breach if
the default or breach persists or is repeated, and no express waiver shall
affect any default or breach other than the default or breach specified in the
waiver. Any waiver shall be operative only for the time and to the extent
herein stated. Waivers by Tenant of any covenant, term or condition contained
herein shall not be construed as a waiver of any subsequent breach of the same
covenant, term or condition. The consent or approval by Tenant to any act of
Landlord requiring further consent or approval by Tenant shall not be deemed to
be a waiver or render unnecessary Tenant's consent or approval to any
subsequent or similar acts. No waiver by Tenant of any provision under this
Lease shall be effective unless in writing and signed by Tenant. Efforts by
Tenant to mitigate damages caused by Landlord's breach of this Lease shall not
be construed as waivers of Tenant's rights under this Lease.
d. Accord and Satisfaction. No payment by Tenant of a
lesser amount than the Rent nor any endorsement on any check or letter
accompanying any check or payment as Rent shall be deemed an accord and
satisfaction of full payment of Rent, and Landlord may accept such payment
without prejudice to Landlord's right to recover the balance of the Rent or to
pursue other remedies.
e. Limitation of Landlord's Liability. The obligations
of Landlord under this Lease are its obligations and not personal obligations
of the partners, directors, officers and shareholders of Landlord, and Tenant
shall look solely to the Project and Landlord for satisfaction of any liability
and shall not seek recourse against the assets of the individual partners,
directors, officers and shareholders of Landlord so long as Landlord has a net
worth of at least Five Million Dollars ($5,000,000.00) and maintains a
reasonable amount of insurance coverage.
f. Consent. Except where otherwise specified in this
Lease, if consent of a party is required under this Lease, the consent shall
not be unreasonably withheld.
g. Entire Agreement. This Lease sets forth all the
covenants, agreements, conditions and understandings between Landlord and Tenant
concerning the Buildings and Tenant's right to use the Project Common Areas in
common with the tenants of Building CC, and there are no covenants, agreements,
conditions or understandings, either oral or written, between Landlord and
Tenant other than as set forth herein. No alteration, amendment, change or
addition to this Lease shall be binding upon Landlord and Tenant unless in
writing and signed by both Landlord and Tenant.
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h. Portion and Whole. Any reference to the portion of
any term used in this Lease shall be deemed to include a reference to the whole
of such term, when appropriate, and any reference to the whole of any term
shall be deemed to include a reference to the portion of any such term, when
appropriate.
i. Singular and Plural. Any reference to the singular
of any term used in this Lease shall be deemed to include a reference to the
plural of such term, when appropriate, and any reference to the plural of any
term used in this Lease shall be deemed to include a reference to the singular
of such term, when appropriate.
j. Time. Time is of the essence of this Lease.
k. Successors and Assigns. This Lease shall be binding
upon and inure to the benefit of the successors and assigns of each of the
parties to this Lease, subject to Section 26.
l. Attorneys' Fees. In any action which Landlord or
Tenant brings to enforce its respective rights under this Lease, the prevailing
party shall be entitled to recover costs incurred by the prevailing party,
including reasonable attorneys' fees and court costs.
m. Captions and Article Letters. The captions, article
and section numbers and letters and table of contents appearing in this Lease
are inserted as a matter of convenience and in no way define or limit the
provisions of this Lease.
n. Severability. If any provision of this Lease or the
application of any such provision shall be held by a court of competent
jurisdiction to be invalid, void or unenforceable to any extent, the remaining
provisions of this Lease and the application thereof shall remain in full force
and effect and shall not be affected, impaired or invalidated.
o. Applicable Laws. This Lease shall be construed and
enforced in accordance with the laws of the State of California.
p. Examination of Lease. Submission of this Lease to
Tenant does not constitute an option to lease, and this Lease is not effective
until execution and delivery by both Landlord and Tenant.
q. Notices. All notices to be given hereunder shall be
in writing and mailed postage prepaid by certified or registered mail, return
receipt requested, or delivered by personal delivery, to Landlord's Address and
Tenant's Address, as set forth below, or to such other place within the United
States (exclusive of Alaska and Hawaii) as Landlord or Tenant may designate in
a written notice given to the other party. Notices given by personal delivery
shall be deemed served upon delivery. Notices given by mail shall be deemed
served upon receipt, which may be evidenced by the signed certified receipt for
the notice.
Landlord's Address: The Prudential Insurance
Company of America
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Four Embarcadero Center
Suite 2700
San Francisco, CA 94111
Attn: Regional Counsel
Copy to: The Prudential Insurance
Company of America
4309 Hacienda Drive
Suite 500
Pleasanton, CA 94566
Attn: Vice President,
Real Estate
AT&T Resource Management Corporation
222 Mount Airy Road
Basking Ridge, NJ 07920
Attn: General Counsel
Tenant's Address: American Telephone & Telegraph Company
c/o AT&T Communications, Inc.
5925 West Las Positas
Building G, Room 1040
Pleasanton, CA 94561
Attn: District Manager, Buildings
and Real Estate
r. Corporate Authority. If Tenant is a corporation,
each individual initialing or executing this Lease on behalf of Tenant
represents and warrants that he is duly authorized to execute and deliver this
Lease on behalf of Tenant, in accordance with a duly adopted resolution of the
board of directors of Tenant and in accordance with the by-laws of Tenant, and
that the Lease is binding upon Tenant in accordance with its terms.
s. Relationship of Parties. It is the intention of the
parties hereto to create the relationship of landlord and tenant, and no other
relationship whatsoever, and nothing herein shall be construed to make the
parties hereto liable for any of the debts, liabilities or obligations of the
other party.
t. No Merger. There shall be no merger of this Lease,
or the leasehold estate created by this Lease, with any other estate or
interest in the Project, or any part thereof, by reason of the fact that the
same person, firm, corporation or other entity may acquire or own or hold,
directly or indirectly, (i) this Lease or the leasehold estate created by this
Lease, or any interest in this Lease or in any such leasehold estate, and (ii)
any such other estate or interest in the Project or any part thereof; and no
such merger shall occur unless and until all persons, corporations, firms and
other entities having an interest (including a security interest) in (i) this
Lease or the leasehold estate created by this Lease; and (ii) any such other
estate or interest In the Project, or any part thereof, shall join in a written
instrument effecting such merger and shall duly record the same.
u. No Surrender. No surrender to Landlord of this Lease
or of the Project, or any part thereof, or of any interest therein, shall be
valid or effective unless
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agreed to and accepted in writing by Landlord, and no act or omission by
Landlord or any representative or agent of Landlord, other than such a written
acceptance by Landlord, consented to as aforesaid, shall constitute an
acceptance of any such surrender.
v. Exhibits. Exhibits A through N are attached hereto
and incorporated herein by reference thereto.
w. Confidentiality. Landlord and Tenant, their agents,
employees, and assigns, shall exercise the utmost care and due diligence to
restrict disclosure and release of Landlord's and Tenant's confidential or
proprietary information obtained pursuant to this Lease or in connection with
its performance. The obligation to protect the confidentiality of the
information shall survive the termination of this Lease.
x. Counterparts. This Lease may be executed in
counterparts, each of which shall be an original, but all counterparts shall
constitute one instrument.
y. Compliance. Landlord and Tenant shall comply with
the contract attachments attached hereto as
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Exhibit N. For purposes of the documents set forth in Exhibit N, the terms
"AT&T Communications, Inc." and "AT&T Communications" shall include Tenant and
any Subtenants described in Subsection 26.1., and the term "this contract"
shall include this Lease.
z. Reasonableness. Except as otherwise specifically provided in
this Lease, any consent or approval required of either party under this Lease
shall not be unreasonably withheld or delayed.
IN WITNESS WHEREOF, the parties have executed this Lease, on the
date(s) set forth below, effective as of the date first above written.
"LANDLORD"
AT&T RESOURCE MANAGEMENT CORPORATION,
a New York corporation
By /s/ ?
-----------------------------------
Its Vice President
-------------------------------
Date September 23, 1986
---------------------------------
"TENANT"
AMERICAN TELEPHONE & TELEGRAPH
COMPANY, a New York corporation
By /s/ R.L. GEISE
-----------------------------------
Its Dist. Mgr.-Bldgs. & Real Estate
-------------------------------
Date Sep 8 1986
---------------------------------
Approved as to Form By
-----------------------------------
Its
-------------------------------
/s/ ? 9/3/86 Date
- ------------------- ---------------------------------
Attorney
84.
<PAGE> 140
EXHIBIT A
DESCRIPTION OF PHASE II
All that REAL PROPERTY situated in the City of Pleasanton, County of
Alameda, State of California, more particularly described as follows:
LOT 59, AS SHOWN ON PARCEL MAP 3863, FILED MAY 22, 1986, BOOK 161 OF PARCEL
MAPS, AT PAGES 15 THROUGH 30, INCLUSIVE, OFFICIAL RECORDS OF ALAMEDA COUNTY.
EXCEPTING THEREFROM THAT PORTION LYING BELOW A DEPTH OF 500 FEET, MEASURED
VERTICALLY, FROM THE CONTOUR OF THE SURFACE OF SAID PROPERTY, WITHOUT THE RIGHT
OF SURFACE ENTRY, AS RESERVED IN THE DEED FROM SOUTHERN PACIFIC INDUSTRIAL
DEVELOPMENT COMPANY, A TEXAS CORPORATION, RECORDED AUGUST 14, 1981, AS SERIES
NO. 81-138446, OFFICIAL RECORDS OF ALAMEDA COUNTY, AND ALSO RECORDED JUNE 4,
1984, SERIES NO. 84-108001, OFFICIAL RECORDS OF ALAMEDA COUNTY.
EXHIBIT A
<PAGE> 141
EXHIBIT B
Existing Leases of Tenant Within Phase I
5925 West Las Positas Boulevard
Pleasanton, California 94566
Building G
45,525 square feet
4480 Willow Road
Pleasanton, California 94566
Building H
63,934 square feet
5850 West Las Positas Boulevard
Pleasanton, California 94566
Building D
82,944 square feet
One Lease for the two premises:
5794 West Las Positas Boulevard
Pleasanton, California 94566
Building E
53,288 square feet
5758 West Las Positas Boulevard
Pleasanton, California 94566
Building F
51,405 square feet
5964 West Las Positas Boulevard
Pleasanton, California 94566
Building J1
48,501 square feet
5956 West Las Positas Boulevard
Pleasanton, California 94566
Building J2
40,585 square feet
<PAGE> 1
IMP, Inc. 1995
Annual Report
<PAGE> 2
PROFILE
IMP, Inc. is a supplier of high-integration analog and mixed-signal integrated
circuits to the communications, computer and industrial markets. IMP is the
inventor of the EPAC(TM) (Electrically Programmable Analog Circuit) device, the
analog counterpart to the digital field programmable gate array (FPGA). It is
also a technology leader in the field of programmable filters and read channel
devices for mass storage applications.
FINANCIAL SUMMARY
<TABLE>
<CAPTION>
(In thousands except per share data) 1995 1994 Change
<S> <C> <C> <C>
Net revenue $59,750 $48,195 24%
Research and development 8,590 8,560 -
Net income 790 390 103%
Net income per share $ .03 $ .01 200%
Total assets 41,301 36,397 13%
Long-term obligations 4,799 1,648 191%
Stockholders' equity 18,463 17,183 7%
</TABLE>
1
<PAGE> 3
IMP HAS EVOLVED INTO A SUPPLIER OF HIGH-INTEGRATION ANALOG AND MIXED-SIGNAL
SOLUTIONS FOR COMPUTER, COMMUNICATIONS AND INDUSTRIAL SYSTEMS.
DEAR SHAREHOLDER
1995 WAS A YEAR OF TRANSITION, improvement and progress for IMP. In fiscal year
1995 (ended March 26, 1995), revenues increased by 24%, and we were modestly
profitable. Revenues in FY1995 were $59.8 million compared with $48.2 million
in FY1994. We continued our conservative financial control of spending and
costs. Net income was $790,000, or $0.03 per share, compared to $390,000, or
$0.01 per share in FY1994.
THE REAL STORY for IMP, however, goes beyond financial results. We
continued our transition from that of a custom semiconductor manufacturer to
that of a more entrepreneurial standard products company. IMP has evolved into
a supplier of high-integration analog and mixed-signal solutions for computer,
communications and industrial systems. We have reinvested the earnings from our
business into this new vision that will permit higher growth and higher
earnings potential.
WE MADE PROGRESS in our standard product offerings with the introduction in
October of the EPAC(TM) (Electrically Programmable Analog Circuit) device. EPAC
is an IMP innovation, for which we have developed a complex analog and memory
circuit design, and a combined electrically erasable memory and analog
manufacturing process. We also developed Analog Magic(TM) software and
hardware, the user design tools for the EPAC device.
THE EPAC PRODUCT, the analog counterpart to a digital field programmable
gate array (FPGA), has been well received in the marketplace. It has been
featured in over 20 articles published in at least eight languages, received a
Product of the Year Award from Electronic Products magazine, and generated over
1,500 potential customer inquiries in the first four months following its
introduction. We shipped the first EPAC development systems in January. While
we do not anticipate high revenues from this product in the short term, long
term prospects look promising.
2
<PAGE> 4
WE EXPANDED OUR product offerings in the mass storage market. In January we
introduced a new mixed-signal read channel for the tape drive market that
further integrates tape read channel functions. This product reduces tape drive
costs while increasing quality and reliability. It will be attractive to new
customers, as well as create a migration path to higher integration and
improved cost effectiveness for our existing customers.
OUR TECHNICAL SUCCESS has been stronger than our commercial success in the
hard disk drive arena. Nevertheless, we are equipped to continue our support of
this market, and currently have design-in status with a disk drive manufacturer
that is forecast to go to production in FY1996.
OUR TRANSITION TO a standard products-oriented organization requires a
different set of talents and skills, and in 1995 we strengthened our management
team. We added industry veterans David Laws and Russ Almand to the senior
management ranks. Laws, our senior vice president of marketing, was president
and CEO of FPGA start-up QuickLogic, vice president of marketing at Altera, and
spent over ten years at Advanced Micro Devices. Almand, our vice president of
worldwide sales, joined IMP from Pacific Monolithics, and also served as vice
president of sales for AMD. The managerial experience these gentlemen bring to
IMP is key to achieving our corporate goals.
OUR R&D SPENDING is consistent with the high end of the industry norm for
semiconductors. In 1995 we invested 14% of revenues in our future, including
process and product development, and the maintenance of our leadership in
mixed-signal technology.
WITH NEARLY 15 years experience, our core competence is our analog and
mixed-signal design and manufacturing capability. While many of our linear
competitors are still manufacturing in the 2.0 to 5.0 micron range, more than
50% of IMP's production is a 1.0-micron mixed-signal process technology.
OUR TRANSITION TO A STANDARD PRODUCTS-ORIENTED ORGANIZATION REQUIRES A
DIFFERENT SET OF TALENTS AND SKILLS, AND IN 1995 WE STRENGTHENED OUR MANAGEMENT
TEAM.
3
<PAGE> 5
WE WILL CONTINUE OUR FOCUS ON THE TRANSITION TO STANDARD PRODUCTS, WHICH WILL
PROVIDE HIGHER MARGINS AND HIGHER EARNINGS.
WHAT LIES AHEAD for FY1996? We are conservative but also optimistic about
the future. We will continue our cost containment program to gain maximum
earnings leverage from any increase in revenues. We will continue our focus on
the transition to standard products, which will provide higher margins and
higher earnings. We have a strengthened management team in place to guide the
company toward higher growth and improved profits. We anticipate continued
strong revenues from our foundry as a result of our unique manufacturing
expertise, and we believe this will be augmented by a continuing worldwide
fabrication facility shortage. And last, but not least, our loyal and dedicated
employees provide the human resources we need to maximize our performance in
1996.
To our shareholders, a special thanks for your continued support.
Sincerely,
/s/ Barry M. Carrington
- -----------------------
Barry Carrington
President and Chief Executive Officer
4
<PAGE> 6
IMP PRODUCTS AND SERVICES
EPAC(TM) (ELECTRICALLY PROGRAMMABLE ANALOG CIRCUIT) DEVICE
The introduction of the first EPAC product in October continued our transition
to standard products. EPAC devices represent the industry's first programmable
analog solution. They offer significantly reduced total system cost through
reduced time-to-market, higher levels of integration and increased design
flexibility over alternative products such as printed circuit boards with
multiple standard IC and discrete components, custom ICs or analog arrays.
Customers configure the functionality of each EPAC device design with
easy-to-use, PC-based software and hardware development tools.
Analog Magic(TM) software, the Windows-based design tools created by IMP,
reduces the development time of an analog circuit to hours, instead of weeks.
It features pop-up menus, context-sensitive help, design checking and a
correct-by-construction methodology.
The EPAC device is designed to appeal to a broad market of customers,
including a strong international base. In addition to sales representatives, we
will also utilize the distribution channel to sell this product, a first for
IMP in the U.S. The EPAC device is being sold worldwide through distributors
that were commissioned this year including Wyle in the U.S., Tekelec in Europe,
and Macnica in Japan. Because the EPAC market is so broad, we anticipate an
increase in our customer base, thus reducing our dependence on a small number
of customers. The first EPAC development systems shipped through the
distribution channel in January.
The initial device, the IMP50E10, is aimed at signal conditioning, data
acquisition, data conversion and interface applications. IMP plans to introduce
multiple EPAC product families over the next few years.
The EPAC introduction has contributed to the increase in the number of
patents filed by IMP, reinforcing our technology leadership in analog
programmable devices, as well as improving our ability to attract top design
engineering talent to the company.
THE EPAC DEVICE IS DESIGNED TO APPEAL TO A BROAD MARKET OF CUSTOMERS, INCLUDING
A STRONG INTERNATIONAL BASE.
5
<PAGE> 7
IMP, AS THE INVENTOR OF EPAC, CURRENTLY MAINTAINS A UNIQUE POSITION AS THE
FIRST AND ONLY COMPANY TO OFFER ELECTRICALLY PROGRAMMABLE ANALOG DEVICES.
IMP, as the inventor of EPAC, currently maintains a unique position as the
first and only company to offer electrically programmable analog devices. We
believe digital field programmable products have done the "missionary work" for
EPAC products, and that the market for analog programmable devices will develop
much faster as a result of the widespread acceptance of field programmability.
The market for digital field programmable devices has recently exploded due to
growing awareness in the marketplace. We are excited about the future prospects
for the EPAC product line.
MASS STORAGE DEVICES
IMP designs and manufactures a family of programmable filters and single-chip
read channel integrated circuits (ICs) for mass storage tape drive and disk
drive applications. The company also offers the ZIA(TM) chipset for small form
factor disk drives, which was jointly developed with Zilog and Allegro
MicroSystems.
IMP is the largest supplier of read channel-related ICs to the tape drive
market. Our IMP42C451 CMOS integrated filter is very successful, and enjoys
design-in status at the major worldwide tape drive suppliers. This year we
introduced a new single-chip tape read channel, the IMP55T500, which features
further integration including a preamplifier, read channel and write driver, as
typically used in floppy-interface tape drive backup systems. With robust
opportunities in the growing tape drive market, we believe we are strategically
prepared for growth in this area.
We shipped our first read channel to the disk drive market in FY1995.
Though the disk drive market has not been as rewarding as originally
anticipated, IMP has gained significant design, system and manufacturing
expertise. This technical competence has enabled us to be recognized as a
technology leader in disk drive products. By porting this competence to the
tape drive products, IMP is positioned to provide state-of-the-art ICs in
volume to the tape drive market.
6
<PAGE> 8
PROGRAMMABLE DEVICE CONVERSION
IMP offers conversion services from digital field programmable designs, such as
PLD (programmable logic device) and FPGA devices, to masked versions for high
volume, low cost production applications. In addition to the digital conversion
program, we plan to add an analog conversion program for EPAC devices to
convert them to low cost, high volume solutions when customer production
volumes warrant this service.
IMP's NONSTOP(TM) Conversion Program to produce gate arrays from PLD
netlists offers customers fast turnaround of prototypes and expedited
netlist-to-high-volume-production silicon options. This flexible program offers
conversion for as few as 1,000 units, in gate counts from 500 to 65,000, to
meet the needs of a diverse customer base. With the growth of FPGAs and PLDs we
anticipate an expanding market for netlist conversions to gate arrays.
WAFER FABRICATION AND MANUFACTURING SERVICES
With nearly 15 years of high quality semiconductor manufacturing experience,
IMP's wafer foundry and manufacturing services provide the continuity,
strength, and solid foundation for the company to build upon. Over 1,000
customer designs have been successfully manufactured as IC products in the
company's manufacturing facility in San Jose, California. IMP's wafer customers
include some of the world's most demanding semiconductor companies, as well as
technology-leading systems manufacturers in the computer, communications,
consumer and industrial markets.
IMP's processes include 3 to 15 volt CMOS, EEPROM and BiCMOS technologies.
IMP's 16,000 square foot wafer fabrication (fab) facility with Class 10 clean
rooms is currently equipped to produce 0.8- to 3.0-micron geometries. Customers
may purchase their products in wafer form, or as packaged and tested units.
WITH THE GROWTH OF FPGAS AND PLDS WE ANTICIPATE AN EXPANDING MARKET FOR NETLIST
CONVERSIONS TO GATE ARRAYS.
7
<PAGE> 9
WE HAVE IMPROVED OUR CYCLE TIMES, AND OUR YIELDS ARE NOW THE HIGHEST IN THE
HISTORY OF THE COMPANY.
Wafer fabrication continues to contribute the most significant share to our
total revenues, and foundry revenues grew by 30% in 1995. Our experienced
manufacturing team has established a highly flexible fab facility that allows
us to offer more services to customers, respond quickly to customer requests,
shorten development spans for products, and combine design and process
technology in developing products.
We continue to look for ways to improve the quality of our fab. We
emphasize statistical process controls (SPC), have invested in new stepper
equipment for the 0.8-micron line, and increased product capacity. Our quality
ISO 9001 certification is in process, with completion anticipated next fiscal
year. We have improved our cycle times, and our yields are now the highest in
the history of the company.
Demand for IMP wafers continues to be substantial. We continue our alliance
with South African Microelectronic Systems (SAMES) in South Africa, which
provides fab capacity to supplement our San Jose operations. We are considering
other similar agreements.
Another reason for the sturdy demand for IMP wafer fabrication services is
the value we add to the manufacturing process. Mixed-signal, high- and
low-voltage options, and EEPROM are examples of this value-added expertise. Our
mixed-signal technology, the combination of analog and digital technology on a
single chip, presents a greater manufacturing challenge than pure analog or
digital. Many semiconductor manufacturers are unwilling to master this
challenge. At IMP, however, we have become experts at manufacturing
mixed-signal products, and our customers have a high level of confidence in our
ability.
8
<PAGE> 10
BALANCE SHEETS
<TABLE>
<CAPTION>
(In thousands, except per share amounts) March 26, 1995 March 27, 1994
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents including restricted
cash of $2,000 and $3,625 $ 8,484 $ 7,625
Accounts receivable, net of allowance for
doubtful accounts of $795 and $556 11,799 8,458
Inventories 9,148 8,642
Other current assets 739 446
-------- ---------
Total current assets 30,170 25,171
Leasehold improvements and machinery and equipment:
Leasehold improvements 7,883 7,879
Machinery and equipment 61,676 56,378
-------- ---------
69,559 64,257
Less accumulated depreciation and amortization (58,583) (53,325)
-------- ---------
Net leasehold improvements and machinery and equipment 10,976 10,932
Other assets 155 294
-------- ---------
$ 41,301 $ 36,397
-------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable $ 6,500 $ 6,500
Trade accounts payable 6,003 6,030
Accrued payroll and related expenses 1,588 1,247
Other current liabilities 459 418
Current portion of long-term obligations 3,489 3,371
-------- ---------
Total current liabilities 18,039 17,566
Long-term obligations 4,799 1,648
Commitments
Stockholders' equity:
Convertible preferred stock, $0.001 par value;
5,000 shares authorized; no shares issued and outstanding - -
Common stock, $0.001 par value: 50,000 shares authorized;
28,044 and 27,688 issued and outstanding 28 28
Additional paid in capital 67,540 67,050
Accumulated deficit (45,208) (45,998)
Treasury stock; at cost 2,029 shares (3,897) (3,897)
Total stockholders' equity 18,463 17,183
-------- ---------
$ 41,301 $ 36,397
-------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE> 11
STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Fiscal Year, ended March 26, 1995 March 27, 1994 March 28, 1993
<S> <C> <C> <C>
Net revenues $59,750 $48,195 $55,935
Cost of revenues 42,340 33,025 38,947
------- ------- -------
Gross profit 17,410 15,170 16,988
------- ------- -------
Operating expenses:
Research and development 8,590 8,560 9,659
Selling, general and administrative 6,796 4,765 5,475
Restructuring and other related charges - - 3,000
------- ------- -------
Total operating expenses 15,386 13,325 18,134
------- ------- -------
Income (loss) from operations 2,024 1,845 (1,146)
Interest expense (1,234) (1,455) (1,176)
Net income (loss) $ 790 $ 390 $(2,322)
------- ------- -------
Net income (loss) per share $ .03 $ .01 $ (.09)
Shares used in computing net income (loss) per share 26,462 26,324 25,125
------- ------- -------
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE> 12
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Receivable Total
Fiscal Years ended March 26, 1995 Common Stock Paid-in Accumulated Treasury from Stockholders'
March 27, 1994, and March 28, 1993 Shares Amount Capital Deficit Stock Stockholders Equity
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, MARCH 29, 1992 26,831 $27 $ 66,178 $(44,066) $(3,897) $(44) $18,198
Issuance of common
stock under incentive
stock option plan and
employee stock
purchase plan 514 - 452 - - - 452
Net loss - - - (2,322) - - (2,322)
------ --- -------- -------- -------- ---- -------
BALANCE, MARCH 28, 1993 27,345 27 66,630 (46,388) (3,897) (44) 16,328
Issuance of common
stock under incentive
stock option plan and
employee stock
purchase plan 343 1 420 - - - 421
Repayment of notes
receivable issued under
stock purchase agreements - - - - - 44 44
Net income - - - 390 - - 390
------ --- -------- -------- -------- ---- -------
BALANCE, MARCH 27, 1994 27,688 28 67,050 (45,998) (3,897) 0 17,183
Issuance of common
stock under incentive
stock option plan and
employee stock
purchase plan 356 - 490 - - - 490
Net income - - - 790 - - 790
------ --- -------- -------- ------- ---- -------
BALANCE, MARCH 26, 1995 28,044 $28 $67,540 $(45,208) $(3,897) $ 0 $18,463
------ --- ------- -------- ------- ---- -------
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE> 13
STATEMENT OF CASH FLOWS
Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash
<TABLE>
<CAPTION>
Fiscal Year, ended
(In thousands) March 26, 1995 March 27, 1994 March 28, 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 790 $ 390 $(2,322)
Adjustments to reconcile net income
(loss) to net cash provided by operating activities:
Depreciation and amortization 5,258 4,301 5,096
Restructuring and related charges - - 3,000
Increase (decrease) from changes in:
Accounts receivable (3,341) 164 1,970
Inventories (506) (220) 719
Other assets (154) (427) 79
Trade accounts payable (27) 416 (893)
Accrued payroll and related expenses 341 (327) 16
Other current liabilities 41 (463) (1,152)
------- ------ -------
Net cash provided by operating activities 2,402 3,834 6,513
Cash used in investing activities for the acquisition of
Capital equipment (922) (733) (1,317)
------- ------ -------
Cash flows from financing activities:
Net increase (decrease) under line of credit - 500 (2,000)
Principal payments under capital lease obligations (4,111) (4,685) (4,636)
Proceeds from long term financing agreement 3,000 - -
Proceeds from exercise of options to
purchase common stock 490 465 452
------- ------ -------
Net cash (used for) financing activities (621) (3,720) (6,184)
------- ------ -------
Net increase (decrease) in cash and cash equivalents 859 (619) (988)
Cash and cash equivalents at beginning of period 7,625 8,244 9,232
Cash and cash equivalents at end of period,
including restricted cash of $2,000,
$3,625 and $3,125 8,484 7,625 8,244
------- ------ -------
Supplemental disclosures:
Interest $ 1,329 $1,475 $ 1,331
Acquisition of equipment under capital lease obligations $ 4,380 $3,952 $ 581
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
Years ended March 26, 1995, March 27, 1994 and March 28, 1993
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Fiscal Year: The Company's fiscal year ends on the Sunday nearest March 31.
Fiscal years 1995, 1994, 1993 each included 52 weeks.
Cash and cash equivalents: For purposes of the statement of cash flows, the
Company considers all highly liquid financial instruments purchased with an
original maturity of three months or less to be cash equivalents. The fair
market value of these highly liquid instruments approximates cost. At March 26,
1995 and March 27, 1994, $2,000,000 and $3,500,000 respectively, in cash and
cash equivalents was restricted as collateral under the Company's line of
credit agreement (See Note 2). In addition, at March 27, 1994, $125,000 was
restricted under a capital lease agreement.
Inventories: Inventories are stated at the lower of standard cost (which
approximates actual cost on a first-in first-out basis) or market.
Inventories consist of the following:
<TABLE>
<CAPTION>
(In thousands) March 26, 1995 March 27, 1994
<S> <C> <C>
Raw materials $ 854 $ 922
Work-in-process 7,285 6,352
Finished goods 1,009 1,368
------ ------
$9,148 $8,642
------ ------
</TABLE>
Leasehold improvements and machinery and equipment: Leasehold improvements and
machinery and equipment are stated at cost. Machinery and equipment under
capital lease obligations, which have a capitalized value and net book value of
$44,499,614 and $6,269,777 at March 26, 1995 and $40,492,000 and $5,619,000 at
March 27, 1994, respectively, are amortized using the straight-line method over
the period of the leases. Leasehold improvements consists of improvements to
the facility and are amortized over the remaining term of the lease.
Net revenues: Component revenues are recognized as products are shipped. Design
revenues are recognized under design and engineering contracts as defined
development phases are completed by the Company and accepted by the customers.
Design engineering and technology license revenues aggregated $2,283,000,
$3,893,670 and $3,722,600 for fiscal years ended 1995, 1994 and 1993,
respectively. Costs related to design and engineering aggregating $1,403,100,
$1,673,278 and $2,185,000 for fiscal 1995, 1994 and 1993 respec-
13
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
Years ended March 26, 1995, March 27, 1994 and March 28, 1993
tively are included in research and development as incurred. Technology
license revenues are recognized after signing of the license and delivery of
technical data packages. Technology license revenues were $800,000 and $550,000
for fiscal 1994 and 1993, respectively and are included in amounts above.
Related costs, which are minimal, are included in research and development as
incurred.
In fiscal 1994, the Company derived $750,000 of technology license
revenues from SAMES, one of the Company's strategic foundry partners. During
FY95, the Company purchased $2,700,000 of inventory from SAMES and at March 26,
1995, IMP had an accounts payable balance to SAMES of $602,000.
Accounting for Income Taxes: In April 1993, the Company adopted Statement of
Financial Accounting Standards No. 109 (SFAS 109), Accounting for Income Taxes.
The adoption of SFAS 109 changes the Company's method of accounting for income
taxes to an asset and liability approach. The asset and liability approach
requires the recognition of deferred tax liabilities and assets for the
expected future tax consequences of temporary differences between the carrying
amounts and the tax bases of assets and liabilities. The cumulative effect of
the change in accounting for income taxes was not material.
Net Income (loss) Per Share: Net loss per share is based upon weighted average
common shares outstanding during the period plus incremental common stock
equivalents. Common equivalent shares are excluded in fiscal 1993 as they are
anti-dilutive. Common stock equivalents consist of stock options (using the
treasury stock method).
Concentration of credit risk: The Company performs credit evaluations of its
customers and maintains reserves for losses. At March 26, 1995 one customer
individually representing more than 10% of the Company's 1995 net revenues also
accounted for 25% and 37% for accounts receivable and inventory. At March 27,
1994, customers individually representing more than 10% of the Company's 1994
net revenues also accounted for 45% and 28% for accounts receivable and
inventory. The Company's products are primarily sold to resellers.
NOTE 2
LINE OF CREDIT
At March 26, 1995 the Company had a financing agreement in place with a bank
under which the Company may borrow up to 75 percent of eligible accounts
receivable in an amount not to exceed $5,000,000 and may borrow up to an
additional $3,000,000 based on cash deposits with the bank. Total borrowings
under the line cannot exceed $8,000,000 and bear interest at the bank's
reference rate plus 1.75 percent (a total of 10.75 percent at March 26, 1995).
At March 26, 1995, $6,500,000 was outstanding under the line. Under the
agreement the Company is restricted from paying dividends and is required to
maintain certain financial ratios among other restrictive covenants. In
addition, the line is secured by inventories and other unencum-
14
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
Years ended March 26, 1995, March 27, 1994 and March 28, 1993
bered assets of the Company. The line of credit expires on October 1,
1995 at which time the Company will have to negotiate an extension. In 1991,
the Company issued warrants to purchase 50,000 shares of common stock in
connection with a new credit line from a bank. The warrants are exercisable at
a price of $1.00 per share and expire in September 1996. In fiscal 1995, the
Company financed its own equipment with an asset based lender for $3,000,000.
NOTE 3
RESTRUCTURING
During the fourth quarter of fiscal 1993, the Company recorded a restructuring
charge of $3.0 million, representing the write off of historical inventories
related to discontinued custom ASIC, ROM and PC-related product lines.
NOTE 4
LONG TERM OBLIGATIONS
Capital lease obligations represent the present value of future payments under
various equipment lease agreements. The following schedule sets forth, by
years, future minimum lease payments under the capital lease obligations
together with present value of net minimum lease payments:
<TABLE>
<CAPTION>
Fiscal Year (in thousands) March 26, 1995
<S> <C>
1996 $4,095
1997 3,013
1998 1,981
1999 682
------
Total minimum lease payments 9,771
Less interest 1,483
------
Present value of minimum lease payments 8,288
Less current portion 3,489
------
Long-term obligations 4,799
------
</TABLE>
15
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
Years ended March 26, 1995, March 27, 1994 and March 28, 1993
NOTE 5
COMMITMENTS
The Company leases its facilities under lease agreements which expire in
December 1999. Rent expense charged to operations was $1,545,000, $1,749,000,
$1,725,000 in 1995, 1994 and 1993, respectively.
The aggregate minimum annual rent commitments under all operating
leases as of March 27, 1994 are as follows:
<TABLE>
<CAPTION>
Fiscal Year (In thousands)
<S> <C>
1996 1,448
1997 1,448
1998 1,448
1999 and thereafter 2,279
------
$6,623
------
</TABLE>
NOTE 6
CONTINGENCIES
From time to time, the Company is made aware of various patent-related and
other claims arising in the normal course of business. The Company evaluates
such claims and negotiates license agreements with claimants as necessary. In
the opinion of management, these proceedings will not have a material adverse
effect on the results of operations of the Company.
NOTE 7
STOCKHOLDERS' EQUITY
Employee stock purchase plan: In December 1986, the Company adopted a qualified
"employee stock purchase plan" under Section 423 of the Internal Revenue Code,
with the plan becoming effective on June 10, 1987 upon the completion of the
Company's initial public offering of its common stock. In fiscal 1995, the
Company's Board of Directors authorized an additional 500,000 shares to be
reserved for issuance under the plan. During fiscal year 1995, approximately
301,000 shares at an aggregate price of approximately $440,000 were issued
under the plan (291,000 shares at an aggregate price of $377,000 in fiscal
1994, and 324,000 shares at an aggregate price of approximately $269,000 in
fiscal 1993). As of March 26, 1995, 424,000 shares were available for issuance
under the plan.
Shares are purchased by participants at 85% of the lower fair market
value on certain marking dates through payroll deductions (up to 15% of
participants base compensation).
16
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
Years ended March 26, 1995, March 27, 1994 and March 28, 1993
1992 Stock option plan: The Company has an option plan which provides for the
issuance of incentive stock options and non-statutory stock options to
employees, officers and directors to purchase common stock at a price not less
than 85% (100% for incentive stock options) of the fair market value of the
stock on the grant date. To date all options have been granted at 100% of fair
market value. The plan was amended and renamed the 1992 Stock Option Plan which
terminates in 2002. In fiscal 1993, the Company's Board of Directors authorized
an additional 500,000 shares to be reserved for issuance under the plan and now
provides for a total of 4,177,000 shares of the stock to be issued. Options
granted under the plan primarily vest ratably over four years and expire five
to ten years from the date of grant. The Board of Directors has the right to
determine the terms of each option including allowing optionees to exercise
their options early, subject to a right to repurchase unvested shares.
The Board of Directors may grant the right to surrender unexercised
options for an amount equal to the difference between the fair market value of
the number of shares vested at the surrender date and the aggregate option
price vested for such shares. The Company has not granted any such stock
appreciation rights.
Activity under the plan is as follows (in thousands, expect per share
amounts):
<TABLE>
<CAPTION>
Shares
available Number of Aggregate
(In thousands, except per share amounts) for grant Shares Price per Share Price
<S> <C> <C> <C> <C>
BALANCES 3/29/92 812 1,686 $ .81 - $ 3.75 $1,935
Additional shares available 500 - - - - -
Options granted (616) 616 1.25 - 2.94 930
Options exercised - (190) .81 - 1.625 (183)
Options canceled 23 (23) .81 - 2.625 (35)
---- ----- -------------------- ------
BALANCES 3/28/93 719 2,089 .81 - 2.94 2,647
Options granted (29) 29 1.625 - 2.75 63
Options exercised - (52) .81 - 1.625 (50)
Options canceled 32 (252) .81 - 2.75 (42)
---- ----- -------------------- -----
BALANCES 3/27/94 722 1,814 .81 - 2.94 2,618
Options granted (615) 615 1.50 - 1.88 987
Options exercised - (55) .81 - 1.62 (51)
Options canceled 55 (55) .81 - 2.75 (92)
---- ----- -------------------- ------
162 2,319 $ .81 - $ 2.75 $3,462
---- ----- -------------------- ------
</TABLE>
At March 26, 1995 and March 27, 1994, stock options aggregating 1,545,495 and
1,423,797 shares of common stock respectively, were exercisable.
17
<PAGE> 19
NOTES TO FINANCIAL STATEMENTS
Years ended March 26, 1995, March 27, 1994 and March 28, 1993
NOTE 8
INCOME TAXES
In April 1993, the Company adopted Statement of Financial Accounting Standard
No 109 (SFAS109), Accounting for Income Taxes. The adoption of SFAS109 requires
an asset and liability approach for financial accounting and income tax
reporting purposes. No provision for Federal and State income taxes has been
recorded. The Company has utilized net operating losses generated in prior
years to offset current year taxable income. The remaining net operating loss
carry-forwards of approximately $35,700,000 and $11,000,000, respectively, may
be utilized to reduce future taxable income. These amounts expire beginning in
1996 through 2008. Deferred tax assets (liabilities) under SFAS 109 are
comprised of the following:
<TABLE>
<CAPTION>
Federal March 26, 1995 March 27, 1994
<S> <C> <C>
Net operating loss, tax-effected $ 15,231,640 $ 13,395,326
Non-deductible expenses 66,357 1,952,718
Investment and R&D tax credit 2,976,000 2,976,000
Other 565,115 911,660
------------ ------------
18,839,112 19,235,704
Valuation allowance (18,839,112) (19,235,704)
------------ ------------
Net deferred tax asset - -
============ ============
</TABLE>
The Company has recorded a full valuation allowance against the gross deferred
tax asset, because their realization is uncertain given the Company's history
of operating losses.
NOTE 9
SEGMENT INFORMATION
The Company operates in one industry segment and is engaged in the design
development, manufacture and marketing of integrated circuits. Export sales to
Western Europe were $3,796,000, $7,155,000 and $3,762,000 and to Asia were
$8,842,000, $2,947,000 and $1,013,000 in fiscal 1995, 1994 and 1993,
respectively.
18
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
Years ended March 26, 1995, March 27, 1994 and March 28, 1993
During the fiscal years ended 1995, 1994, 1993 sales to certain customers
individually represented more than 10% of the Company's net revenues as
follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
<S> <C> <C> <C>
Rockwell 34% 15% *
Dialog * 15% *
QLogic * 10% *
Adaptec, Inc. * * 25%
IC Solutions * * 24%
Lewis Galoob * * 10%
*less than 10% of net revenues.
</TABLE>
19
<PAGE> 21
REPORT OF PRICE WATERHOUSE INDEPENDENT ACCOUNTANTS LLP
THE BOARD OF DIRECTORS AND STOCKHOLDERS, IMP, INC.
In our opinion, the accompanying balance sheets and the related statements of
operations, stockholders' equity and cash flows present fairly, in all material
respects, the financial position of IMP, Inc. at March 26, 1995, and March 27,
1994, and the results of operations and cash flows for the year then ended in
conformity with generally accepted accounting principles. 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 audit. We conducted our audits of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
PRICE WATERHOUSE
San Jose, California
May 10, 1995
20
<PAGE> 22
REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND STOCKHOLDERS, IMP, INC.
We have audited the accompanying consolidated balance sheet of IMP, Inc., as of
March 28, 1993 and the related consolidated statements of operations,
stockholders' equity, and cash flows for the year then ended. 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of IMP, Inc. at
March 28, 1993 and the consolidated results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
ERNST & YOUNG
San Jose, California
May 5, 1993
21
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The Company resumed revenue growth in fiscal 1995 driven mainly by strength in
the foundry products. Revenues rose 24% in fiscal 1995 to $59.8 million,
compared to $48.2 million in fiscal 1994. Sales in fiscal 1994 declined 14%
from fiscal 1993 level of $55.9 due to the discontinuation of certain of the
Company's product lines in fiscal 1993, and a decline in sales of certain of
the Company's mature products. Foundry sales accounted for 88% of revenues in
fiscal 1995, compared to 80% in fiscal 1994 and 93% in fiscal 1993. The Company
anticipates that both foundry and ASSP revenues will increase in fiscal 1996
due to new product introductions and existing products. There were no
technology revenues in fiscal 1995 compared to $.8 million in fiscal 1994 and
$.6 million in fiscal 1993.
Cost of revenues as a percent of sales was 70.9% in fiscal 1995 compared to 68%
in fiscal 1994 and 69.9% in fiscal 1993. The increase in fiscal 1995 was due to
a higher mix of low margin products later in the year.
Research and development expenses (R&D) in fiscal 1995 were $8.6 million,
compared to $8.6 million in fiscal 1994 and $9.7 million in fiscal 1993. The
decreases from fiscal 1993 levels were due primarily to lower wafer prototype
activity in the fiscal 1994 and fiscal 1995 periods. The Company believes that
R&D expenditures will grow in fiscal 1996, primarily in ASSP, particularly in
support of the Company's recently announced EPAC(TM) product line.
Selling, general, and administrative expenses (SG&A) increased in fiscal 1995
to $6.8 million from $4.8 million in fiscal 1994, and $5.5 million in fiscal
1993. The increase in fiscal 1995 over the two previous years was due primarily
to sales commissions which resulted from certain house accounts being assigned
to the Company's sales representative firms. The Company expects SG&A expenses
to increase in fiscal 1996 over fiscal 1995 due to higher commissions, and
higher ASSP marketing expenses.
Interest expense in fiscal 1995 was $1.2 million, compared to $1.5 million in
fiscal 1994, and $1.3 million in fiscal 1993. The reduction in interest was due
to lower interest on capitalized leases. The Company had a net profit of
$790,000 in fiscal 1995 or $.03 per share compared to $390,000 or $.02 per
share in fiscal 1994, and a net loss of $2.3 million or $.09 per share in
fiscal 1993. Net income for the year ended March 26, 1995 included a $440,000
reduction of inventory reserve requirement to reflect the sale of products
which had previously been specifically reserved.
22
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents increased to $8.5 million at March 26, 1995 from $7.6
million at March 27, 1994, and $8.2 million at March 28, 1993.
To date, the Company has financed its operations primarily through public and
private sales of its equity securities and lease and bank financing. As of
March 26, 1995 the Company had borrowed $6.5 million under an existing line of
credit. The credit facility imposes certain financial covenants and ratios on
the Company. The existing credit facility expires on October 1, 1995. Although
the Company believes that it will be able to either negotiate an extension of
the credit facility or replace the facility with one or more new facilities,
there can be no assurances that the Company will be successful in doing so.
Failure to extend or replace the credit facility could have an adverse effect
on the Company's short term liquidity and cash flow requirements.
The Company expects to fund future operations and current maturities of long
term debt with existing cash, its available line of credit, lease financings,
and cash from operations. The Company believes that existing cash, its bank
line, and cash from operations will be sufficient for the Company's needs
through at least fiscal 1996.
23
<PAGE> 25
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Fiscal Year Ended
March 26 March 27 March 28 March 29 March 31
In thousands, except per share amounts 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
State of Income Data:
Net revenues $59,750 $48,195 $55,935 $45,846 $51,277
Net income (loss) 790 390 (2,322) (6,069) (19,357)
Net income (loss) per share .03 .01 (.09) (.25) (.80)
Balance Sheet Data:
Total assets $41,301 $36,397 $36,149 $46,103 $54,210
Long term obligations
excluding current portion 4,799 1,648 2,240 5,131 9,975
Stockholders' equity 18,463 17,183 16,328 18,198 23,944
</TABLE>
COMMON STOCK INFORMATION
IMP's common stock has been traded in the over-the-counter market since the
Company's initial public offering on June 10, 1987 and is quoted on NASDAQ
under the symbol IMPX. The following table sets forth the range of high and low
closing for the quarters indicated. No dividends have been paid on common
stock. For a description of restrictions on the Company's ability to pay
dividends see Note 2 to the consolidated financial statements.
The Company had 740 shareholders of record as of March 26, 1995. The
Company has not paid cash dividends on its common stock and presently intends
to continue this policy in order to retain earnings for the development of the
Company's business.
<TABLE>
<CAPTION>
Fiscal 1995 Fiscal 1994
High Low High Low
<S> <C> <C> <C> <C>
First Quarter 2.000 1.437 2.812 2.000
Second Quarter 2.000 1.562 2.000 1.437
Third Quarter 2.000 1.437 2.312 1.125
Fourth Quarter 1.812 1.406 2.312 1.312
</TABLE>
24
<PAGE> 26
CORPORATE INFORMATION
BOARD OF DIRECTORS, IMP
Barry M. Carrington
President and CEO
Zvi Grinfas
Consultant
Heinz Fellinger
Managing Director
SAMES
Peter D. Olson
Executive Vice President
Octel Communications
Bernard V. Vonderschmitt
President
Xilinx, Inc.
OFFICERS
Barry M. Carrington
President and Chief Executive Officer
Charles S. Isherwood
Senior Vice President, Corporate Services
Chief Financial Officer and Secretary
David Laws
Senior Vice President, Marketing
Robert J. Crossley
Vice President, Administration
Moiz B. Khambaty
Vice President, Technology
Jerry L. DaBell
Vice President,
Product Development and Applications
Russ Almand
Vice President, Worldwide Sales
Eugene J. Vaatveit
Vice President, Manufacturing
Jerry Block
Vice President, Materials
George Rassam
Controller
TRANSFER AGENT & REGISTRAR
Bank of Boston
Boston, MA
COUNSEL
Brobeck, Phleger & Harrison
Palo Alto, CA
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
San Jose, CA
CORPORATE OFFICES
2830 North First Street
TEL: 408.432.9100
FAX: 408.434.0335
COMMON STOCK
NASDAQ Symbol: IMPX
ANNUAL MEETING
The Annual Meeting of Shareholders will be held at 2:00 p.m. local time on
Wednesday, August 16, 1995 at:
Hyatt Hotel
1740 North First Street
San Jose, CA 95112
FORM 10-K
A copy of the Company's Form 10-K Annual Report as filed with the Securities
and Exchange Commission, is available without charge upon written request to:
Investor Relations
IMP, Inc.
2830 North First Street
San Jose, CA 95134-2071
Designed by Barbara Oertli Design. (C) 1995, IMP, Inc.
<PAGE> 27
[IMP LOGO]
IMP, INC.
2830 N. FIRST STREET, SAN JOSE, CA 95134-2071
TEL: 408.432.9100 FAX: 408.434.0335
<PAGE> 1
EXHIBIT 23.1
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders, IMP, Inc.
In our opinion, the accompanying balance sheets and the related statements of
operations, stockholders' equity and cash flows present fairly, in all material
respects, the financial position of IMP, Inc. at March 26, 1995, and March 27,
1994, and the results of operations and of cash flows for the year then ended in
conformity with generally accepted accounting principles. 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 of those statements in accordance with
generally accepted auditing standards which 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,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
San Jose, California
May 10, 1995
<PAGE> 1
EXHIBIT 23.2
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders, IMP, Inc.
We have audited the consolidated balance sheet of IMP, Inc., as of March 28,
1993 (not presented separately herein), and the accompanying related
consolidated statements of operations, stockholders' equity, and cash flows for
the year then ended. 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. These standards require that we plan and perform the audits 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of IMP, Inc. at March
28, 1993 and the consolidated results of its operations and its cash flows for
the year then ended inconformity with generally accepted accounting principles.
Ernest & Young LLP
San Jose, California
May 5, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000812927
<NAME> BOWNE
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-26-1995
<PERIOD-START> APR-28-1994
<PERIOD-END> MAR-26-1995
<EXCHANGE-RATE> 1
<CASH> 8,484
<SECURITIES> 0
<RECEIVABLES> 11,799
<ALLOWANCES> 795
<INVENTORY> 9,148
<CURRENT-ASSETS> 30,170
<PP&E> 69,559
<DEPRECIATION> (58,583)
<TOTAL-ASSETS> 41,301
<CURRENT-LIABILITIES> 18,039
<BONDS> 0
<COMMON> 28
0
0
<OTHER-SE> 67,540
<TOTAL-LIABILITY-AND-EQUITY> 41,301
<SALES> 59,750
<TOTAL-REVENUES> 59,750
<CGS> 42,340
<TOTAL-COSTS> 42,340
<OTHER-EXPENSES> 15,386
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,234
<INCOME-PRETAX> 790
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 790
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
