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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1995
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 0-17157
NOVELLUS SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 77-0024666
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3970 NORTH FIRST STREET, SAN JOSE, CA 95134
(Address of principal executive offices) (Zip Code)
(408) 943-9700
(Registrant's telephone number
including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
------------------- ------------------------
None N/A
Securities registered pursuant to Section 12(g) of the Act:
Common Stock
(Title of Class)
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
--- ---
As of March 7, 1996 the aggregate market value of voting stock held by
non-affiliates of the registrant was approximately $580,386,508.00 based on the
average of the high and low prices of the Common Stock as reported on the Nasdaq
National Market on such date. Shares of Common Stock held by officers,
directors and holders of more than 5% of the outstanding Common Stock have been
excluded from this calculation because such persons may be deemed to be
affiliates. This determination of affiliate status is not necessarily a
conclusive determination for other purposes.
The number of shares of Common Stock outstanding on March 7, 1996 was
15,999,199.
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. [ ]
Documents Incorporated by Reference: Part II of this Report on Form 10-K
incorporates information by reference to Registrant's 1995 Annual Report to
Shareholders. Part III of this Report on Form 10-K incorporates information by
reference from the Registrant's Proxy Statement for its 1996 Annual Meeting of
Shareholders.
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PART I
ITEM 1. BUSINESS
Novellus is a leading supplier of high productivity chemical vapor
deposition (CVD) systems used in the fabrication of integrated circuits. CVD
systems are used to deposit all of the dielectric (insulating) layers and
certain of the conductive metal layers on the surface of a semiconductor
wafer. The overall growth in the semiconductor industry and the increasing
number of layers used in complex integrated circuits have lead to increased
demand for advanced CVD equipment. The Company's products are differentiated
by their simultaneous ability to provide superior film quality while
providing the highest productivity and lowest cost of ownership in the
advanced CVD market. The Company's strategy is to focus on major
semiconductor manufacturers, and the Company has sold one or more of its
systems to each of the 20 largest semiconductor manufacturers in the world.
INDUSTRY BACKGROUND
The semiconductor industry has experienced significant growth in recent
years due to the continued growth of the personal computer market, the expansion
of the telecommunications industry, the emergence of new applications such as
consumer electronics products, wireless communications devices and mobile
computers and the increased semiconductor content in these electronics systems.
Many of these new applications have been made possible by significant advances
in the performance of and lower costs for integrated circuits. In response to
the growth in demand for integrated circuits, the semiconductor industry is
significantly increasing its manufacturing capacity through the expansion of
existing facilities and construction of new facilities.
The fabrication of integrated circuits requires a number of complex and
repetitive processing steps, including deposition, photolithography and etch.
Deposition is a process in which a film of either electrically insulating or
electrically conductive material is deposited on the surface of a wafer. The
two principal methods of thin film deposition are CVD, which can be used to
deposit both insulating and conductive films, and physical vapor deposition
(PVD), which is used primarily for sputtering conductive metals onto the wafer
surface. In the CVD process, wafers are typically placed in a reaction chamber
and a variety of pure and precisely metered gases are introduced while some form
of energy is added to activate a chemical reaction on the wafer surface. The
result of this reaction is the deposition of a film on the wafer. CVD has become
the predominant deposition solution for smaller line width geometry
semiconductor devices because CVD is more effective than PVD in uniformly
filling the narrower spaces and holes in depositing insulating material and
certain metals in advanced devices.
CVD processes are used to deposit all of the dielectric films and certain
conductive, metal films in an integrated circuit. The dielectric layers in an
integrated circuit include the initial interlayer, portions of the interconnect
layers and the final passivation layer. CVD is also used for deposition of
conductive metal layers, particularly those metals that are more difficult to
deposit in smaller line width geometry devices through conventional PVD or other
deposition technology. CVD technology is particularly effective for depositing
blanket tungsten as a "plug" layer that connects one conductive metal layer to
another in a multi-level integrated circuit. For such applications, tungsten is
replacing aluminum, which has certain physical properties that reduce its
efficacy for the smaller interconnect holes of devices with smaller line width
geometries.
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Advanced integrated circuit technology has created increased demand for
more sophisticated semiconductor processing equipment. Today's complex
semiconductor devices, such as 64 megabit DRAM memories and 64-bit
microprocessors, are being designed with .35 micron and below micron line width
geometries, and the microprocessors have up to four layers of interconnect
circuitry. The next generation of semiconductor devices, including 256 megabit
DRAMs and 64-bit microprocessors, are being designed with .25 micron line
geometries, and the microprocessors will incorporate four or more interconnect
layers. Each additional interconnect layer requires three separate layers of
deposition, which include the initial metal layer, a non-conductive dielectric
layer and then a "plug" metal film to fill patterned holes in the dielectric
layer that connects the metal layers on either side of the dielectric. The
Company believes that the greater complexity and number of interconnect layers
in advanced integrated circuits will enable the markets for dielectric and metal
CVD systems to experience significant growth.
Semiconductor manufacturers generally measure the cost performance of their
production equipment in terms of "cost per wafer," which is determined by
factoring in the fixed costs for acquisition and installation of the system, its
variable operating costs and its net throughput rate. A system with higher
throughput allows the semiconductor manufacturer to recover the purchase price
of the system over a greater number of wafers and thereby reduce the cost of
ownership of the system on a per wafer basis. Throughput is most accurately
measured on a net or overall basis, which takes into account the processing
speed of the system and any non-operational downtime for cleaning, maintenance
or other repairs. Yield and film quality are also significant factors to the
semiconductor manufacturer in selecting processing equipment. The increased
costs of larger and more complex semiconductor wafers have made high yields
extremely important to semiconductor manufacturers. To achieve higher yields and
better film quality, deposition systems must be capable of repeating the
original process on a consistent basis without a disqualifying level of defects.
This characteristic, known in the industry as "repeatability," is extremely
important in achieving commercially acceptable yields. Repeatability is more
easily achieved in those systems that can operate at desired throughput rates
without requiring the system to approach its critical tolerance limits.
The continuing evolution of semiconductor devices to smaller line width
geometries and more complex multi-level circuitry has significantly increased
the cost and performance requirements of the capital equipment used to
manufacture these devices. Many of the advanced eight inch fabrication lines
that are currently planned or in construction will cost up to $1 billion each,
representing a substantial increase over the costs of prior generation
fabrication facilities. Increased capital depreciation costs will continue to
become a much larger percentage of the aggregate production costs for
semiconductor manufacturers relative to labor, materials and other variable
manufacturing costs. As a result, there has been an increasing focus by the
semiconductor industry on obtaining increased productivity and higher returns
from its semiconductor manufacturing equipment, thereby reducing the effective
cost of ownership of such systems.
THE NOVELLUS SOLUTION
Novellus focuses on advanced CVD systems that provide superior film quality and
yield while attaining the high levels of productivity required to meet the
semiconductor industry's need for high volume, low cost wafer production. The
Company's multi-station continuous processing architecture enables its systems
to address each of the following critical parameters of CVD system performance:
THROUGHPUT, COST PER WAFER. In contrast to CVD systems which process
only one wafer at a time in a chamber, the Company's multi-station continuous
processing systems can process five, six, or seven wafers at the same time in a
chamber, leading to higher throughput levels. The design
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simplicity and automatic cleaning capabilities of the Company's systems further
increase net throughput by reducing production downtime. The Company believes
that its systems attain the highest levels of productivity and lowest cost per
wafer in the advanced CVD equipment market.
YIELD AND FILM QUALITY. With Novellus' unique sequential,
multi-station chamber design, each wafer receives a fraction of the desired film
thickness at each of five, six, or seven deposition stations in the process
chamber. The "averaging" effect created by this design tends to reduce
anomalies in film thickness and thereby improves film uniformity and quality.
The Company's systems can obtain within-wafer and wafer-to-wafer uniformity
levels of +/- 1% of film thickness as measured at one standard deviation, which
the Company believes is the highest in the industry.
PROCESS REPEATABILITY. Because of the inherently higher throughput
potential of continuous processing, the Company's systems are able to deposit
materials at lower, more controlled rates than single wafer processing systems
which generally deposit at faster rates closer to the process performance limits
to achieve production-level throughputs. Lower deposition rates avoid straining
the system's process tolerance limits and thereby permit increased process
control and repeatability.
STRATEGY
The Company's objective is to increase its market share in the worldwide
CVD market and strengthen its position as a leading supplier of semiconductor
processing equipment. The key elements of the Company's strategy are as
follows:
EMPHASIS ON HIGH PRODUCTIVITY SYSTEMS. Novellus focuses on providing
high productivity CVD systems to leading semiconductor companies. The Company
addresses the needs of semiconductor manufacturers through its unique continuous
processing architecture which enables its systems to attain high levels of wafer
throughput, yield and film quality. The architecture's simple design also
provides the Company's systems with greater up-time and smaller footprints
compared to competitive systems, resulting in additional cost of ownership
advantages. The Company intends to retain its focus on productivity by
leveraging its continuous processing architecture in product enhancements and
new product offerings.
LEADERSHIP IN CVD TECHNOLOGY. The Company's strategy is to provide a
family of deposition systems which utilize advanced CVD technologies to address
leading-edge wafer processing needs. The Company's Concept One-Dielectric offers
a proprietary dual frequency deposition technology to achieve superior results
for a wide variety of films on wafers as large as eight inches and geometries as
small as .35 micron. The Company's Concept One-W is used by manufacturers to
connect multiple metal layers in advanced devices and the Company believes that
it is currently the only system that provides full coverage tungsten deposition.
The Company's Concept Two system is a modular CVD system designed to address the
needs of wafer fabs that demand greater levels of wafer processing integration,
higher volume production and increased factory automation. The Company is
focusing its research and development efforts on additional Concept Two modules
and "gap fill" technology for the next generation of reduced geometry
fabrication lines.
FOCUS ON MAJOR SEMICONDUCTOR MANUFACTURERS. The Company has sold
one or more CVD systems to each of the 20 largest semiconductor manufacturers
in the world. The long-term growth prospects for semiconductors has caused
many of these manufacturers to plan major capacity expansions over the next
several years. The Company's sales objective is to work closely with
customers to secure purchase orders for multiple systems as such customers
expand existing facilities and build next
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generation wafer fabs. The Company seeks to build customer loyalty and achieve
a high level of repeat business by offering high reliability products,
comprehensive field support and a responsive parts replacement and service
program.
EXPANSION OF ASIAN MARKET PRESENCE. An industry source estimates that
Asian manufacturers accounted for over half of the worldwide market for
processing semiconductor equipment in 1995, due to Japan's large semiconductor
industry and the recent rapid growth of manufacturers in Korea, Taiwan and
Singapore. While Novellus derives a significant percentage of its net sales from
the Asian marketplace, the Company believes that substantial additional growth
potential exists. Currently, the Company's local presence in Asia includes
sales and support offices through the Company's wholly owned subsidiary in Japan
and one in each of Korea, Taiwan, Mainland China and Singapore. The Company also
sells its products through a distributor in Japan and manufacturers
representatives in other Asia-Pacific countries. To improve its market presence
in Asia, Novellus in 1994 created and filled the position of President of
Novellus Asia. Novellus feels it is an important part of its current business
strategy to aggressively build its infrastructure in Asia to serve this rapidly
growing region.
LOW MANUFACTURING COST STRUCTURE. Novellus utilizes an outsourcing
strategy for the manufacture of major subassemblies and performs system design,
assembly and testing in-house. Novellus believes that outsourcing enables it to
minimize its fixed costs and capital expenditures while also providing the
flexibility to increase capacity as needed. This strategy also allows the
Company to focus on product differentiation through system design and quality
control. Through the use of third party manufacturing specialists, the Company
ensures that its subsystems incorporate advanced technologies in robotics, gas
panels and microcomputers. The Company works closely with its suppliers to
achieve mutual cost reduction through joint design efforts.
PRODUCTS
Since the introduction of its original Concept One-Dielectric system
in 1987, the Company has developed and now offers a family of processing systems
for the CVD dielectric and metal markets. The Concept One-Dielectric deposits a
variety of insulating or "dielectric" films on wafers including Oxide, Nitride
and TEOS. In 1990, the Company introduced a modified version of the Concept
One-Dielectric, the Concept One-W, which also uses a CVD process to deposit
blanket tungsten metal films on wafers primarily as the metal interconnect
between conductor layers in the integrated circuit layers. In November 1991,
the Company introduced the Concept Two which is a modular, integrated production
system that is capable of depositing both dielectric and conductive metal layers
by combining one or more processing chambers around a common, automated robotic
wafer handler.
CONCEPT ONE-DIELECTRIC
The Concept One-Dielectric is shipped in two versions, the Concept One-150,
which processes 100, 125, and 150 mm (approximately 4, 5, and 6 inches) wafers
and the Concept One-200, which processes 125, 150 and 200 mm (approximately 5, 6
and 8 inches) wafers and is designed for advanced eight inch fabrication lines.
The Concept One consists principally of two attached chambers and associated
hardware and electronics. The first chamber of the system, called the
"loadlock," isolates the process chamber from the outside environment.
Depending on the model of the Concept One-Dielectric, the loadlock accepts up to
75 wafers sized from 100 to 200 mm (approximately 4 to 8 inches) in diameter in
cassette carriers. The operator inserts the cassettes of wafers in batches into
the loadlock, and the pressure inside the
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loadlock is decreased to create a vacuum, which matches the constant pressure
level of the process chamber. A robotic arm, as the wafer transport mechanism,
in the center of the loadlock transfers wafers one at a time from the cassettes
to the process chamber and, upon completion of the deposition process, returns
the finished wafers to the cassettes. The loadlock isolates the process chamber
from the fabrication environment, permitting the process chamber to remain at
constant temperature and pressure while wafers are transferred from the
cleanroom to the loadlock and from the loadlock to the process chamber. These
stable process chamber conditions enhance film quality, process repeatability,
and throughput. The loadlock design also reduces particulate contamination
because the robotic arm is the only moving mechanism in the loadlock and because
the wafer cassettes are isolated from the cleanroom.
The process chamber for the Concept One-Dielectric has six or eight
stations depending on the particular model. One station is used as a
load/unload site and the remaining five or seven stations are used for wafer
deposition. Each deposition station employs a dedicated shower head which
delivers gases and plasma energy to the wafer surface. In a six station process
chamber for example, each wafer moves through the system and stops at each of
the five deposition stations to receive one-fifth of its preprogrammed film
thickness. Some CVD products, called "single wafer" systems, process only one
wafer at a time in a process chamber, while multistation continuous process
systems, like the Concept One, can process numerous wafers at the same time.
The continuous processing capabilities of a multistation system generally enable
such systems to attain higher throughput while using a less critical, more
repeatable process than would be required for a single wafer system at
equivalent throughput levels. This multiple deposition design also results in
greater film uniformity and improved film quality because small variations in
deposition at any single station tend to be offset by deposition of the same
film at other stations.
After the entire batch of up to 75 wafers has been processed and returned
to the cassettes, an automatic cleaning cycle in the process chamber removes
residual deposition materials, which could otherwise cause particulate
contamination in a subsequent deposition process. During this cleaning cycle,
the loadlock automatically returns to atmospheric pressure, enabling the
operator to remove the cassettes of finished wafers without impacting system
throughout.
The Concept One-Dielectric uses electrical, radio frequency (RF) plasma
energy to enhance thermal energy, enabling the system to process wafers at a
relatively low temperature, thereby reducing the risk of heat damage to existing
metal layers during processing. The system also suppresses hillock formation by
limiting the time that the wafer is exposed to elevated temperatures prior to
deposition. The wafer is heated for 10 seconds or less in advance of deposition
in the Concept One-Dielectric, which the Company believes is one of the shortest
preheat times of any CVD system. Stress related defects are addressed through
the system by addition of a proprietary dual frequency, "stress control" option
which the Company offers. The system's vacuum loadlock reduces the level of
particulates, thereby improving film quality by isolating the process chamber of
the Concept One-Dielectric from temperature and pressure fluctuations. In
addition, the automatic cleaning capability and relatively simple mechanical
design of the system reduce particulate contaminants and thereby increase yields
and film quality.
In 1995, the Company introduced an extension to its Concept One-Dielectric
system, the Concept One Maxus. The Maxus extends the Company's leadership in
nitride passivation by enhancing the nitride deposition rate while retaining
superior nitride film performance. It also enhances the gap fill capability of
TEOS films by enabling fluorinated-TEOS (F-TEOS) processing for .35 micron gap
fill. F-TEOS enables the customer to lower the dielectric constant to 3.7, an
important capability in enhancing device performance.
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The Maxus is available on both the Concept One and Concept Two platform.
CONCEPT ONE-W
The Concept One-W was introduced in 1990 to address the tungsten CVD
market. The Concept One-W deposits blanket tungsten metal films, which are
increasingly used in advanced semiconductor devices to connect multiple metal
layers in the integrated circuit. Like the Concept One-Dielectric, the Concept
One-W uses a multistation, sequential deposition design that achieves high
throughput with desirable film properties for the entire range of film
thickness. The Concept One-W also uses an approach patented by the Company to
provide full-coverage frontside tungsten deposition while preventing deposition
of tungsten on the backside of the wafer. This capability helps prevent the
generation of damaging particles on the wafer and eliminates the need for
time-consuming etching on the backside of the wafer to remove the film.
During 1993, the Concept One-W successfully completed a 21 day, 24 hour per
day wafer manufacturing trial at SEMATECH, a U.S. semiconductor industry
consortium. The results of this extended manufacturing trial demonstrated that
the Concept One-W achieved or surpassed all program goals, which included system
availability, film uniformity, particulates and other film properties. SEMATECH
has also announced that the Concept One-W was one group of U.S. manufactured
semiconductor production tools capable of producing devices with 0.35 micron
geometries. The success of the Concept One-W in these SEMATECH trials was a
major milestone for the Company in attaining market acceptance for the Concept
One-W at major U.S. semiconductor manufacturers and in enabling the Company to
penetrate certain of these important accounts.
CONCEPT TWO
The Concept Two, which was introduced in November 1991, is a modular,
integrated production system that is capable of depositing both dielectric and
conductive metal layers by combining one or more processing chambers around a
common, automated robotic wafer handler. The Concept Two enables the
semiconductor manufacturer to increase production throughput and system
capability as needed without equipment replacement by adding additional process
modules through the Concept Two's modular configuration. The Concept Two was
initially available with a tungsten process chamber and a PVD process module for
deposition of certain metal layers. In late 1994, a dielectric process module
became available for Concept Two systems. The Concept Two has been designed to
be compatible with the modular equipment interface standard established by the
Modular Equipment Standards Committee (MESC), which is sponsored by SEMATECH.
The Concept Two in a typical configuration incorporates a central cassette
module and wafer handler that interfaces with the cleanroom and has multiple
interfaces for process or transport modules. The cassette module manages wafer
movement through its robotics between the various processing stations that can
be included in a particular Concept Two configuration. Different cassette
modules are available depending on the customer requirements. An optional
isolation chamber is also available that is connected to the cassette module to
connect high vacuum process chambers and other portions of the system.
In 1993, the Company introduced the Concept Two-ALTUS, which combines the
modular architecture of the Concept Two system with an advanced tungsten CVD
process chamber. The system features a new dual loadlock cassette module with
full factory automation capability to meet the high throughput requirements of
high volume automated eight inch wafer fabs. This dual loadlock cassette
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handler permits continuous operation of the process chamber with one loadlock,
while a second loadlock is simultaneously being loaded or unloaded by the
operator in the cleanroom. Through its modular configuration, the Concept Two
enables the semiconductor manufacturer to combine multistation modules for
slower processes with single wafer modules for faster processes to balance the
throughput of the overall system. A dielectric version of the Concept Two
ALTUS, the Concept Two SEQUEL, was shipped in late 1994. This new system brings
the same level of factory automation and throughput to the dielectric market as
the ALTUS does to the metals market. The Concept Two SEQUEL was initially
shipped in a single chamber version targeted at thin dielectric films used in
volume 200mm IMD production applications.
In 1994, the Company introduced the Concept Two-Dual ALTUS tungsten
deposition system. The Dual ALTUS features the production proven performance of
Novellus' tungsten CVD chamber in a dual chamber configuration that delivers the
throughput power to dramatically lower the cost of tungsten deposition. The
Company feels that the Dual ALTUS is the best solution in the industry for very
high volume 200mm wafer fabs producing state-of-the-art 0.35um semiconductor
devices.
Subsequent to 1994, the Company has continued to expand its Concept Two
product offerings as follows:
CONCEPT TWO DUAL SEQUEL
This dual chamber version of the SEQUEL dielectric family is designed for
high throughput deposition of thick films, such as layers before CMP (chemical-
mechanical planarization), and dual layer passivation films. It utilizes two
process chambers to provide the throughput power of twelve stations, resulting
in dramatic improvements in productivity for these types of films.
CONCEPT TWO SEQUEL-S
This enhanced version of the SEQUEL system offers improved throughput
performance for both thick and thin dielectric films, while occupying 40% less
space than previous versions. It also provides a range of improved
maintainability features and design enhancements that reduce customer facilities
costs. It is available in both single and dual chamber versions.
In addition, in 1995 the Company began accepting orders for its Concept
Two Titanium Nitride (TiN) system. This system will be used to form a high
quality, low cost barrier/adhesion layer prior to depositing tungsten (W).
CONCEPT TWO SPEED
Introduced in February 1996, SPEED is the Company's advanced dielectric
gap fill system, the semiconductor capital equipment industry's first
high-density plasma deposition solution capable of high-volume manufacturing.
Speed is targeted for advanced inter-metal dielectric (IMD) deposition for
0.35 micron devices and below. The IMD market is the largest segment in
dielectric CVD and is also the fastest growing. Speed is offered either as a
stand alone gap fill system or integrated with the Concept Two SEQUEL to
provide a complete high-throughput, low-cost gap fill and chemical mechanical
polishing cap layer solution for logic manufacturing. The system utilizes a
patented hemispherical source design and a proprietary electrostatic chuck to
provide excellent fill, superior reproducibility, low damage and high
throughput. The Company is shipping initial production deliveries in the
first quarter of 1996.
MARKETING, SALES AND SERVICE
Novellus markets its products worldwide to manufacturers of semiconductors,
including both captive fabrication lines, which produce semiconductors primarily
for internal consumption, and merchant semiconductor manufacturers, which
produce semiconductors primarily for sales to third party customers. In North
America, the Company sells products primarily through a direct sales force. It
has one manufacturer's representative. The Company's U.S. sales and support
offices are located in Boston, Austin, Dallas, Phoenix, Hopewell Junction, New
York, Williston, Vermont and Beaverton, Oregon. In Europe, the Company's
products are predominantly sold through a wholly owned subsidiary, Novellus
Systems, Ltd, which has a sales and support facility outside London and in
Scotland. The Company also has a sales and support office in The Netherlands
(Eindhoven). In Asia, the Company sells its products through a wholly owned
subsidiary and a distributor in Japan, through wholly owned subsidiaries in
Korea, Taiwan, Singapore and Mainland China, and manufacturers representatives
in other Asia Pacific countries. The
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Company's Japanese subsidiary maintains four offices in Japan located outside
Tokyo and in Kyoto and Fukuoka. The Company also has one sales and support
office located in Seoul, Korea. In 1994, the Company established a sales and
service office in Taiwan, and in 1995, the Company formed sales and service
offices in Singapore and Mainland China (Shanghai).
The ability to provide prompt and effective field support is critical to
the Company's sales efforts, due to the substantial operational and financial
commitments made by customers that purchase a CVD system. The Company's strategy
of supporting its installed base through both its customer support and research
and development groups has served to encourage use of the Company's systems in
production applications and has accelerated penetration of certain key accounts.
The Company believes that its marketing efforts are enhanced by the technical
expertise of its research and development personnel who provide customer process
support and participate in a number of industry forums such as conferences and
publications.
The Company believes that its ability to service its customers is enhanced
by the design simplicity of its systems. The Company generally warrants its
products against defects in design, materials, and workmanship. In 1992, the
Company became the first semiconductor equipment manufacturer to extend its
warranty to 24 months from shipment and in 1993 also included the cost of all
consumable parts in the system and preventative maintenance parts. The Company
offers maintenance contracts as an additional service to its customers.
For the years ended December 31, 1995 and 1994, respectively, one customer, Seki
Technotron (a distributor in Japan), accounted for 11% and 13% of the Company's
net sales, respectively. For the year ended December 31, 1993, an additional
customer, Advanced Micro Devices, accounted for 12% of net sales.
Export sales for the year ended December 31, 1995 were approximately $137.0
million, or 37% of net sales. For the years ended December 31, 1993, and 1994,
export sales were $36.1 million and $92.9 million, respectively, or 32% and 41%,
respectively. Export sales do not include sales made by the Company's Japanese
subsidiary. Export sales increased due to strong international demand for
semiconductor processing equipment, particularly in the Far East.
Historically, the Company has sold a significant proportion of its systems
in any particular period to a limited number of customers. Sales to the
Company's ten largest customers in 1995 and 1994 accounted for 58% and 65% of
net sales, respectively. The Company expects that sales of its products to
relatively few customers will continue to account for a high percentage of its
net sales in the foreseeable future.
BACKLOG
As of December 31, 1995, the Company's backlog was $151,456,000, as
compared to a backlog of $102,184,000 at December 31, 1994. The Company includes
in its backlog only those customer orders for which it has accepted purchase
orders and assigned shipment dates within twelve months. All orders are subject
to cancellation or rescheduling by customers with limited or no penalties.
Because of orders received in the same quarter in which a system is shipped,
possible changes in system delivery schedules, cancellations of orders and
delays in systems shipments, the Company's backlog at any particular date is not
necessarily a reliable indicator of actual sales for any succeeding period.
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RESEARCH AND DEVELOPMENT
The semiconductor manufacturing industry is subject to rapid technological
change and new product introductions and enhancements. The Company's ability to
remain competitive in this market will depend in part upon its ability to
develop new and enhanced systems and to introduce these systems at competitive
prices and on a timely and cost-effective basis. Accordingly, the Company
devotes a significant portion of its personnel and financial resources to
research and development programs and seeks to maintain close relationships with
its customers to remain responsive to their product needs.
The Company's current research and development efforts are directed at
development of new systems and processes and improving existing system
capabilities. The Company is focusing its research and development efforts on
additional Concept Two modules, gap fill technology, and additional advanced
technologies for the next generation of smaller geometry fabrication lines.
Expenditures for research and development during 1995, 1994 and 1993 were
$41,009,000, $26,012,000, and $16,860,000, respectively. The Company expects in
future years that research and development expenditures will continue to
represent a substantial percentage of net sales.
The success of the Company in developing, introducing and selling new and
enhanced systems depends upon a variety of factors, including product selection,
timely and efficient completion of product design and development, timely and
efficient implementation of manufacturing and assembly processes, product
performance in the field and effective sales and marketing. There can be no
assurance that the Company will be successful in selecting, developing,
manufacturing and marketing new products or in enhancing its existing products.
As is typical in the semiconductor capital equipment market, the Company has
experienced delays from time to time in the introduction of, and certain
technical and manufacturing difficulties with, certain of its systems and
enhancements and may experience delays and technical and manufacturing
difficulties in future introductions or volume production of new systems or
enhancements. The Company's inability to complete the development or meet the
technical specifications of any of its new systems or enhancements or to
manufacture and ship these systems or enhancements in volume in a timely manner
would materially adversely affect the Company's business, financial condition
and results of operations. In addition, the Company may incur substantial
unanticipated costs to ensure the functionality and reliability of its future
product introductions early in the product's life cycle. If new products have
reliability or quality problems, reduced orders or higher manufacturing costs,
delays in collecting accounts receivable and additional service and warranty
expense may result. Any of such events could materially adversely affect the
Company's business, financial condition and results of operations.
MANUFACTURING
The Company's manufacturing activities consist primarily of assembling and
testing components and subassemblies which are acquired from third party vendors
and then integrated into a finished system by the Company. The Company utilizes
an outsourcing strategy for the manufacture of major subassemblies and performs
system design, assembly and testing in-house. Novellus believes that outsourcing
enables it to minimize its fixed costs and capital expenditures while also
providing the flexibility to increase production capacity. This strategy also
allows the Company to focus on product differentiation through system design and
quality control. Through the use of manufacturing specialists, the Company
ensures that its subsystems incorporate advanced technologies in robotics, gas
panels and microcomputers. The Company works closely with its suppliers on
achieving mutual cost reduction through joint design efforts.
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The Company manufactures its system units in clean-room environments which
are similar to the clean rooms used by semiconductor manufacturers for wafer
fabrication. This procedure is intended to reduce the amount of particulates
and other contaminants in the final assembled system, which in turn improves
yield and reduces the level of contaminants at the customer level. Following
assembly, the completed system is packaged in a plastic shrink wrap to maintain
cleanroom standards during shipment.
Certain of the components and subassemblies included in the Concept
One-Dielectric, Concept One-W and Concept Two are obtained from a limited group
of suppliers. Although the Company seeks to reduce its dependence on these
limited source suppliers, disruption or termination of certain of these sources
could occur and such disruptions could have at least a temporary adverse effect
on the Company's operations. Moreover, a prolonged inability to obtain certain
components could have a material adverse effect on the Company's business and
results of operations and could result in damage to customer relationships.
COMPETITION
Significant competitive factors in the semiconductor equipment market
include system performance and flexibility, cost, the size of each
manufacturer's installed customer base, capability for customer support and
breadth of product line. The Company believes that it competes favorably in the
CVD marketplace primarily on the basis of system performance and flexibility,
cost and customer support capability.
The semiconductor equipment industry is highly competitive. The Company
faces substantial competition in the markets in which it competes from both
established competitors and potential new entrants. In the CVD market, the
Company's principal competitor is Applied Materials, Inc., which is a major
supplier of CVD systems and has established a substantial base of CVD and other
equipment in large semiconductor manufacturers. Certain of the Company's
competitors have greater financial, marketing, technical or other resources,
broader product lines, greater customer service capabilities and larger and more
established sales organizations and customer bases than the Company. The Company
may also face future competition from new market entrants from Japan and other
overseas and domestic sources. The Company expects its competitors to continue
to improve the design and performance of their products. There can be no
assurance that the Company's competitors will not develop enhancements to or
future generations of competitive products that will offer superior price or
performance features. In addition, a substantial investment is required by
customers to install and integrate capital equipment into a semiconductor
production line. As a result, once a semiconductor manufacturer has selected a
particular vendor's capital equipment, the Company believes that the
manufacturer will be generally reliant upon that equipment for the specific
production line application. Accordingly, the Company may experience difficulty
in selling a product line to a particular customer for a significant period of
time if that customer selects a competitor's product. Increased competitive
pressure could lead to lower prices for the Company's products, thereby
adversely affecting the Company's operating results. There can be no assurance
that the Company will be able to compete successfully in the future.
PATENTS AND PROPRIETARY RIGHTS
The Company intends to continue to pursue primarily the legal protection of
its technology through patent and trade secret protection. The Company currently
holds nine patents in the United States, some with pending foreign counterparts,
has ten patent applications pending in the United States and intends to file
additional patent applications as appropriate. There can be no assurance that
patents
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will issue from any of these pending applications or that any claims allowed
from existing or pending patents will be sufficiently broad to protect the
Company's technology. While the Company intends to protect its intellectual
property rights vigorously, there can be no assurance that any patents held by
the Company will not be challenged, invalidated or circumvented, or that the
rights granted thereunder will provide competitive advantages to the Company.
The Company also relies on trade secrets and proprietary technology that it
seeks to protect, in part, through confidentiality agreements with employees,
consultants and other parties. There can be no assurance that these agreements
will not be breached, that the Company will have adequate remedies for any
breach, or that the Company's trade secrets will not otherwise become known to
or independently developed by others.
On January 30, 1995, Applied Materials, Inc. (Applied) filed suit against
the Company in the United States District Court, Northern District (the Court),
alleging that the Company's TEOS products infringe one of Applied's patents that
was issued in November 1994. Applied is requesting injunctive relief to enjoin
the Company from allegedly infringing the subject patent, and is seeking
unspecified damages for alleged past infringement, treble damages for alleged
willful infringement and attorneys' fees and costs related to the suit. The
Company filed counterclaims against Applied seeking a declaration that the
subject patent is not infringed and is invalid and unenforceable, and seeking an
injunction and unspecified actual and punitive damages from Applied in
connection with certain conduct by Applied concerning the Company's customers.
On April 12, 1995, the Court severed and stayed discovery on the Company's
counterclaim against Applied in which the Company seeks an injunction against
and damages from Applied in connection with certain conduct by Applied
concerning the Company's customers.
On September 15, 1995, the Company filed suit in the United States District
Court, Northern District of California against Applied alleging that Applied's
Tungsten products infringe U.S. Patent No. 5,238,499 ('449 patent) issued August
24, 1993 and assigned to the Company. The Company is requesting injunctive
relief to enjoin Applied from infringing the '499 patent, and is seeking
unspecified damages for past infringement, treble damages for willful
infringement, and attorney's costs and fees related to the suit.
Also on September 15, 1995 Applied filed suit against the Company in
United States District Court, Northern District of California, alleging that
one of the Company's Tungsten processes infringes on U.S. Patent No.
5,028,565 ('565 patent) issued July 2, 1991 and assigned to Applied. Applied
is requesting injunctive relief to enjoin the Company from infringing the
'565 patent, and is seeking unspecified damages for past infringement, treble
damages for willful infringement, and attorney's costs and fees related to
the suit. Applied is also requesting a finding that Applied has not infringed
on any valid claims of the Company's '499 patent, and that the '499 patent is
invalid and void.
On October 10, 1995, the Company filed a counterclaim in United States
District Court, Northern District of California in response to Applied's suit
for infringement of the '565 patent alleging that Applied's TEOS products
infringe on U.S. Patent No. 5,425,803 issued June 20, 1995 and assigned to the
Company. The Company is requesting injunctive relief to enjoin Applied from
infringing the subject patent, and is seeking unspecified damages for past
infringement, treble damages for willful infringement, and attorney's costs and
fees related to the suit.
On October 26, 1995, the Company filed an amended counterclaim in United
States District Court, Northern District of California in response to Applied's
suit for infringement of the '565 patent, alleging that Applied's Tungsten
products infringe U.S. Patent No. 5,374,594, issued December 20, 1994 and
assigned to the Company. The Company is requesting injunctive relief to enjoin
Applied from
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infringing the subject patent, and is seeking unspecified damages for past
infringement, treble damages for willful infringement, and attorneys' costs and
fees related to the suit.
The Company intends to vigorously pursue its claims and counterclaims, and
defend Applied's claims. Management's expectations are that the ultimate
resolution of these matters will not have a material adverse effect on the
Company's financial position, cash flows, or results of operations, however
based on future developments, management's estimate of the ultimate outcome
could change in the near term.
In addition, in the normal course of business, the Company from time to
time receives inquiries with regard to possible other patent infringements. The
Company believes it is unlikely that the outcome of the patent infringement
inquiries will have a material adverse effect on the Company's financial
position or results of operations.
There has been substantial litigation regarding patent and other
intellectual property rights in semiconductor-related industries. Although the
Company is not aware of any infringement by its products of any patents or
proprietary rights of others except as claimed by Applied, further
commercialization of the Company's products could provoke claims of infringement
from third parties. In the future, litigation may be necessary to enforce
patents issued to the Company, to protect trade secrets or know-how owned by the
Company or to defend the Company against claimed infringement of the rights of
others and to determine the scope and validity of the proprietary rights of
others. Any such litigation could result in substantial cost and diversion of
effort by the Company, which by itself could have a material adverse effect on
the Company's financial condition and operating results. Further, adverse
determinations in such litigation could result in the Company's loss of
proprietary rights, subject the Company to significant liabilities to third
parties, require the Company to seek licenses from third parties or prevent the
Company from manufacturing or selling its products, any of which could have a
material adverse effect on the Company's financial condition and results of
operations.
OTHER CAUTIONARY STATEMENTS
Certain of the statements contained in this Annual Report on Form 10-K are
forward-looking statements that involve a number of risks and uncertainties, in
addition to those risks and uncertainties described above. These additional
risks and uncertainties could cause actual results to differ materially from
those described herein and include the following:
- MARKET RISK. The Company's business depends predominantly on capital
expenditures of semiconductor manufacturers, which, in turn, depend on the
current and anticipated market demand for integrated circuits and products
utilizing integrated circuits. The semiconductor industry has historically been
very cyclical and has experienced periodic downturns, which have had a material
adverse effect on the semiconductor industry's demand for semiconductor
processing equipment, including equipment manufactured and marketed by the
Company. No assurance can be given that the Company's net sales and operating
results will not be adversely affected if downturns or slowdowns in the rate of
capital investment in the semiconductor industry occur in the future. In
addition, the semiconductor equipment industry is highly competitive, and
subject to rapid change and new products and enhancements.
- COMPETITION. The Company faces substantial competition in each of the
markets in which it sells its products. Certain of the Company's competitors
are larger, and have greater resources, financial and otherwise, than the
Company. There can be no assurance that the Company will be
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successful, or as successful as its competitors, in selecting, developing,
manufacturing, and marketing its new products, or enhancing its existing
products. Failure to successfully develop new products could materially
adversely affect the Company's business, financial condition, and results of
operations.
- PATENTS AND PROPRIETARY RIGHTS. There has also been substantial
litigation regarding patent and other intellectual property rights in
semiconductor related industries. The Company is currently involved in such
litigation (see Note 9 to the consolidated financial statements), and, although
it is not aware of any infringement by its products of any patent or proprietary
rights of others, it could become involved in additional litigation in the
future. Although the Company does not believe the outcome of the current
litigation will have a material impact on the Company's financial condition or
results of operations, no assurances can be given that this litigation or future
litigation will not have such an impact.
- INTERNATIONAL OPERATIONS. Export sales accounted for approximately
37%, 41%, and 32% of net sales in 1995, 1994, and 1993, respectively. The
Company anticipates that export sales will account for a significant portion of
net sales in the foreseeable future. As a result, a significant portion of the
Company's sales will be subject to certain risks, including tariffs and other
barriers, difficulties in staffing and managing foreign subsidiary operations,
difficulties in managing distributors, potentially adverse tax consequences, and
the possibility of difficulty in accounts receivable collection. The Company is
also subject to the risks associated with the imposition of legislation and
regulations relating to the import or export of semiconductor products. The
Company cannot predict whether quotas, duties, taxes, or other charges or
restrictions will be implemented by the United States or any other country upon
the importation or exportation of the Company's products in the future. There
can be no assurance that any of these factors or the adoption of restrictive
policies will not have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, sales of systems
shipped by the Company's Japanese subsidiary are denominated in Japanese Yen.
The Company sells the systems to its Japanese subsidiary in U.S. Dollars. It
then enters into forward foreign exchange contracts to hedge against the short-
term impact of foreign currency fluctuations of intercompany accounts payable
denominated in U.S. Dollars recorded by the Japanese subsidiary.
EMPLOYEES
At December 31, 1995, the Company had 790 full time employees.
The success of the Company's future operations depends in large part on the
Company's ability to recruit and retain engineers and technicians, as well as
marketing, sales, service and other key personnel, who in each case are in great
demand. There can be no assurance that the Company will be successful in
retaining or recruiting key personnel.
None of the Company's employees is represented by a labor union and the
Company has never experienced a work stoppage, slowdown, or strike. The Company
considers its employee relations to be good.
ITEM 2. PROPERTIES
The Company's operations are conducted primarily in four buildings located
near each other in San Jose, California. The first serves as corporate
headquarters and consists of 42,048 square feet under a sublease that expires in
1999. The second is used for research and development and customer
demonstrations. It consists of 58,000 square feet under a lease that expires in
2001. The third is used
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primarily for manufacturing and contains 42,624 square feet under a lease that
expires in 1997 (with an option to renew through 2001). The fourth consists of
59,904 square feet under two subleases that expire in 1998 and 1999, and is used
primarily for sales and service office space and warehousing.
The Company also operates facilities in Machida, Tokyo Prefecture and
Sagamihara, Kanagawa Prefecture, Japan. The former serves as corporate
headquarters and sales offices and the latter as a service, technology, and
customer demonstration center for the Company's Japanese subsidiary. The
facility in Machida is operated under a two year lease expiring in 1996. The
facility in Sagamihara is operated under a lease of two years with options to
renew every two years up to a total of ten years. If all the options to renew
are exercised, the lease would end in 2001.
The Company leases various other smaller facilities worldwide which are
used as sales and customer service centers.
In January 1996, the Company entered into certain agreements which, if
consummated, will result in the leasing of five buildings, three of which are
already under lease or sublease.
ITEM 3. LEGAL PROCEEDINGS
See Item 1, Patents and Proprietary Rights.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required by this item is included under "Stock Information"
on page 21 of the Company's 1995 Annual Report to Shareholders and is
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is included under "Selected
Consolidated Financial Data" on page 17 of the Company's 1995 Annual Report to
Shareholders and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item is included under "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 18-20 of the Company's 1995 Annual Report to Shareholders and is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is included on pages 21-33 of the
Company's 1995 Annual Report to Shareholders and is incorporated herein by
reference. Such information is listed under Item 14 of Part IV of this Report on
Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this item is included under "Proposal No. 1:
Election of Directors," "Other Information - Executive Officers" and "Compliance
with Section 16(a) of the Exchange Act" in the Company's Proxy Statement to be
filed in connection with its 1996 Annual Meeting of Shareholders and is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is included under "Other Information
- - Executive Compensation" in the Company's Proxy Statement to be filed in
connection with its 1996 Annual Meeting of Shareholders and is incorporated
herein by reference.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is included under "Other
Information - Security Ownership of Certain Beneficial Owners and Management" in
the Company's Proxy Statement to be filed in connection with its 1996 Annual
Meeting of Shareholders and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is included under "Other
Information - Certain Transactions" in the Company's Proxy Statement to be filed
in connection with its 1996 Annual Meeting of Shareholders and is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS. The following financial statements and
schedules of the Registrant are contained on pages 21-33 of the Company's 1995
Annual Report to Shareholders and are incorporated herein by reference:
Report of Ernst & Young, LLP Independent Auditors.
Consolidated Balance Sheets at December 31, 1995 and 1994.
Consolidated Statements of Income for each of the three years in
the period ended December 31, 1995.
Consolidated Statements of Shareholders' Equity for each of the
three years in the period ended December 31, 1995.
Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 1995.
Notes to Consolidated Financial Statements.
2. FINANCIAL STATEMENT SCHEDULES. The following financial statement
schedules for each of the three years in the period ended December 31, 1995 are
filed as part of this Report on Form 10-K and should be read in conjunction with
the financial statements:
Schedule II - Valuation and Qualifying Accounts.
Schedules not listed above have been omitted because they are
either inapplicable or the required information has been given in the financial
statements or the notes thereto.
(b) REPORTS ON FORM 8-K. None filed during quarter ended
December 31, 1995.
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(c) Exhibits.
3.1 (5) Amended and Restated Articles of Incorporation of Registrant.
3.2 (1) Form of Bylaws of Registrant, as amended to date.
4.1 (1) Registration Rights Agreement dated December 21, 1987 between
Registrant, holders of Series A Preferred Stock, Series B Preferred
Stock, Series D Preferred Stock, Warrants to purchase Series B and
Series C Preferred Stock and Robert F. Graham, and amendment
thereto.
10.1 (8) Credit Agreement dated June 23, 1992 between Registrant and Bank of
America National Trust and Savings Association.
10.2 (9) First Amendment dated May 1, 1993 to Credit Agreement dated June 23,
1992 between Registrant and Bank of America National Trust and
Savings Association.
10.3(10) Second Amendment dated April 30, 1994 to Credit Agreement dated
June 23, 1992 between Registrant and Bank of America National Trust
and Savings Association.
10.4 Third Amendment dated April 28, 1995 to Credit Agreement dated June
23, 1992 between Registrant and Bank of America National Trust and
Savings Association.
10.5 (9) Credit Agreement dated April 30, 1993 between Registrant and Sanwa
Bank of California, as amended August 19, 1993.
10.6 (9) Guaranty dated November 29, 1993 between Registrant and The Sanwa
Bank Ltd.
10.7(10) Line of Credit Agreement dated June 13, 1994 between Registrant and
Sanwa Bank of California.
10.8 Amendment dated May 2, 1995 of Commercial Credit Agreement dated
June 13, 1994 between Registrant and Sanwa Bank of California.
10.9 (5) Business Loan Agreement dated August 2, 1990 between Registrant and
Silicon Valley Bank.
10.10 (7) Change in Terms Agreement dated September 23, 1991 to Business Loan
Agreement dated August 2, 1990 between Registrant and Silicon Valley
Bank.
10.11 (8) Change in Terms Agreement dated July 29, 1992 to Business Loan
Agreement dated August 2, 1990 between Registrant and Silicon Valley
Bank.
10.12(9) Change in Terms Agreement dated May 12, 1993 to Business Loan
Agreement dated August 2, 1990 between Registrant and Silicon Valley
Bank.
10.13(9) Modification dated May 12, 1993 to Business Loan Agreement dated
August 2, 1990 between Registrant and Silicon Valley Bank, as
amended September 23, 1991 and July 29, 1992.
10.14(10) Loan Modification Agreement dated July 15, 1995 between Registrant
and Silicon Valley Bank.
10.15(9) Commercial Guaranty dated May 12, 1993 between the Registrant,
Silicon Valley Bank and Individual Employees of Novellus
Systems, Inc.
10.16(7) Loan and Guaranty Agreement dated November 29, 1991 between
Registrant and The Japan Development Bank.
10.17 Commercial Loan Agreement dated November 15, 1995 between Registrant
and Sumitomo Bank of California.
10.18 Guarantee dated August 31, 1995 between Registrant and The
Mitsubishi Bank, Limited.
10.19(5) Commercial Lease dated October 19, 1990 between Registrant and
Sobrato Development Companies #871, concerning property located at
81 Vista Montana, San Jose, California.
10.20(1) Commercial Lease dated March 11, 1987 between Registrant and
California Second, Ltd., concerning property located at 3950 North
First Street, San Jose, California.
10.21(3) First Amendment dated February 8, 1989 to Commercial Lease dated
March 11, 1987 between Registrant and California Second Ltd.,
concerning property located at 3950 North First Street, San Jose,
California.
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10.22 Lease dated September 26, 1995 between Registrant and W. F. Batton &
Co., Inc. concerning property located at 3590 North First Street,
San Jose, California.
10.23(10) Standard Sublease dated April 28, 1994 between Registrant and
Granada Computer Services, Inc., concerning property located 3940
North First Street, San Jose, California.
10.24 Sublease Agreement dated January 13, 1995 between Registrant and LTX
Corporation concerning property located at 3970 North First Street,
San Jose, California.
10.25 Assignment and Assumption of Lease dated November 22, 1995 among
Registrant, Circadian, Incorporated (Assignor) and California
Second, Ltd. (Landlord) concerning property located at 3942 North
First Street, San Jose, California.
10.26 Lease Agreement dated January 11, 1996 between Registrant and South
Bay/Fortran concerning property located at 4415 Fortran Court, San
Jose, California.
10.27(1) Commercial Lease dated May 2, 1988 between Registrant and Aetna Life
Insurance Company, concerning property located at 12820 Hillcrest
Road, Suite 122, Dallas, Texas.
10.28(6) Amendment dated March 27, 1990 to Commercial Lease dated May 2, 1988
between Registrant and Aetna Life Insurance Company, concerning
property located at 12820 Hillcrest Road, Suite 122, Dallas, Texas.
10.29(9) Amendment dated March 29, 1993 to Lease dated May 2, 1993 between
Registrant and Aetna Life Insurance Company, concerning property
located at 12820 Hillcrest Road, Suite 122, Dallas, Texas.
10.30(10) Standard Office Building Lease Agreement dated August 15, 1994
between Registrant and Aetna Life Insurance Company concerning
property located at 12840 Hillcrest Road, Suite 104, Dallas, Texas.
10.31(6) Lease Agreement dated May 1, 1990 between Registrant and East
Williston Road Associates, concerning property located at One Blair
Park, Blair Park, Williston, Vermont.
10.32(7) Amendment dated May 23, 1991 to Lease Agreement dated May 1, 1990
between Registrant and East Williston Road Associates, concerning
property located at One Blair Park, Blair Park, Williston, Vermont.
10.33(9) Letter Extension dated October 25, 1993 to Lease Agreement dated
May 1, 1990 between Registrant and East Williston Road Associates,
concerning property located at One Blair Park, Blair Park,
Williston, Vermont.
10.34 Addendum dated August 10, 1995 to Lease Agreement dated May 1, 1990
between Registrant and East Williston Road Associates, concerning
property located at One Blair Park, Blair Park, Williston, Vermont.
10.35(7) Office Lease dated July 1, 1991 between Registrant and Ray Prather,
concerning property located at 4090 W. State Street, Boise, Idaho.
10.36(8) Office Lease dated January 29, 1992 between Registrant and Alan
Arkawy, concerning property located at 1123 Route 52, Fishkill, New
York.
10.37 Lease dated August 14, 1995 between Registrant and East Fishkill
Corporate Park Investments concerning property located at 25
Corporate Park Drive, Route 52, East Fishkill, New York.
10.38(7) Commercial Lease dated February 1, 1991 between Registrant (Nippon
Novellus Systems, K.K.) and Tenko, K.K., concerning property located
at 1-12-3 Kamitsuruma, Sagimihara City, Kanagawa Prefecture, Japan.
10.39(8) Commercial Lease dated June 15, 1992 between Registrant (Novellus
Systems, Ltd.) and Exploitatiemaatschappij Dillenberg B.V.,
concerning property located at Dillenburgstraat 5-B Eindhoven, The
Netherlands.
10.40(8) Commercial Lease dated March 26, 1992 between Registrant (Novellus
Systems, Ltd.) and W.B. Properties Ltd., concerning property located
at 1 to 5 Pyrford Road, West End Garage, West Byfleet, Surrey,
United Kingdom.
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10.41(9) Lease dated August 17, 1993 between Registrant and OTR, acting as
the duly authorized nominee of the Board of State Teachers
Retirement System of Ohio, concerning property located at 1701
Directors Boulevard, Austin, Texas.
10.42 Lease Agreement dated May 26, 1995 between Registrant and OTR,
acting as the duly authorized nominee of the Board of State Teachers
Retirement System of Ohio, concerning property located at 1701
Directors Boulevard, Austin, Texas.
10.43(9) Lease dated November 2, 1993 between Registrant and Arnbil
Associates, concerning property located at 5 Mount Royal Avenue,
Marlborough, Massachusetts.
10.44(9) Lease dated November 4, 1993 between Registrant and Canterbury
Associates, concerning property located at 19 Walnut Hill Road,
Poughkeepsie, New York.
10.45(9) Lease dated November 17, 1992 between Registrant and Aetna Casualty
and Surety Company, concerning property located at Two Gateway,
Suite 420, Phoenix, Arizona.
10.46(9) First Amendment dated November 30, 1993 to Lease dated November 17,
1992 between Registrant and Aetna Casualty and Surety Company,
concerning property located at Two Gateway, Suite 420, Phoenix,
Arizona.
10.47(9) Lease dated April 25, 1990 between Registrant and Korea Women's
Missionary Union.
10.48 Office Rental Contract dated November 28, 1994 between Registrant
(Novellus Systems Korea Co., Ltd.) and Suh Won Building Management
Company concerning property located at 57 Garak-Dong Songpa-Gu,
Seoul, Korea.
10.49 Sublease executed February 2, 1995 between Registrant (Novellus
Systems, Ltd.) and Leyland DAF Finance PLC with the consent of
Central Regional Council concerning property located at the Upper
Ground Floor (East Wing), The Forum, Callendar Business Park,
Falkirk, Scotland.
10.50 Commercial Lease Agreement dated February 1, 1996 between Registrant
and Faison & Associates, Inc. d/b/a Southland Management Company,
not individually, but solely as Management and Leasing Broker for
Plaza Central I concerning property located at 6220 S. Orange
Blossom Trail, Suite 186, Orlando, Florida.
10.51 Office Lease dated March 20, 1995 between Registrant and Hartford
Underwriters Insurance Company concerning property located at 15350
North West Greenbrier Parkway, Suite B-340, Beaverton, Oregon.
10.52 Lease dated February 15, 1995 between Registrant (Novellus Systems
Taiwan) and Mr. Woo-Shung Lin and Mr. Wing-Yee Lee concerning
property located at 5F-1, No. 295, Sec. 2, Kwang Fu Road, Hsinchu,
Taiwan R.O.C. (English translation of original exhibit in the
Chinese language).
10.53(2) Equipment Lease dated March 28, 1989 between Registrant and Matsco
Leasing Company.
10.54(7) Distribution Agreement dated April 1, 1991 between Registrant and
Seki Technotron Corporation.
10.55(9) First Amendment dated January 1, 1993 to Distribution Agreement
dated April 1, 1991 between the Registrant and Seki Technotron
Corporation.
10.56 Distribution Agreement dated January 1, 1996 between Registrant and
Seki Technotron Corporation.
*10.57(7) Registrant's Amended and Restated 1984 Stock Option Plan, together
with forms of agreements thereunder.
*10.58(9) Registrant's 1992 Stock Option Plan, together with forms of
agreements thereunder.
*10.59(8) Registrant's 1992 Employee Stock Purchase Plan.
*10.60(1) Form of Agent Indemnification Agreement and amendment thereto.
*10.61(4) Employment Agreement dated June 1, 1989 between Registrant and Evert
van de Ven.
*10.62(8) Employment Agreement dated as of June 15, 1992 between the
Registrant and Peter Hanley.
*10.63(9) Offer Letter Agreement dated November 1, 1993 between Registrant and
Richard S. Hill.
*10.64(8) Promissory Note secured by Deed of Trust between Registrant and
Daniel Queyssac secured by property located at 6051 Reston Road,
Care Creek, Arizona.
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property located at 6051 Reston Road, Care Creek, Arizona.
13.1 Registrant's 1995 Annual Report to Shareholders (only portions of
this document specifically incorporated herein by reference are
included in this exhibit).
22.1 Subsidiaries of Registrant.
23.1 Consent of Ernst & Young, LLP, Independent Auditors.
25.1 Powers of Attorney (see page 22).
___________
(1) Incorporated by reference to the exhibit filed with Registrant's
Registration Statement on Form S-1, File No. 33-23011, which was declared
effective August 11, 1988.
(2) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission on March 31,
1989.
(3) Incorporated by reference to the exhibit filed with Registrant's
Registration Statement on Form S-1, File No. 33-28108, which was declared
effective May 2, 1989.
(4) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission on March 30,
1990.
(5) Incorporated by reference to the exhibit filed with Registrant's
Registration Statement on Form S-1, File No. 33-37607, which was declared
effective November 19, 1990.
(6) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission on March 29,
1991.
(7) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission on March 30,
1992.
(8) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission on
February 26, 1993.
(9) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission on February
18, 1994.
(10) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission on March 16,
1995.
* Management contracts or compensatory plans or arrangements.
21
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
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 the 13th day of March, 1996.
NOVELLUS SYSTEMS, INC.
By: /s/William J. Wall
-------------------------------------
William J. Wall
VICE PRESIDENT, FINANCE AND
ADMINISTRATION,
CHIEF FINANCIAL OFFICER AND SECRETARY
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Richard S. Hill and William J. Wall, and
each of them, his attorneys-in-fact, each with the power of substitution, for
him in any and all capacities, to sign any amendments to this Report on
Form 10-K and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
SIGNATURE CAPACITY DATE
--------- -------- ----
/s/Richard S. Hill President, Chief Executive Officer March 13, 1996
- ---------------------- and Director (Principal Executive
Richard S. Hill Officer)
/s/William J. Wall Vice President, Finance and March 13, 1996
- ---------------------- Administration, Chief Financial
William J. Wall Officer and Secretary (Principal
Financial and Accounting Officer)
/s/Robert F. Graham Chairman of the Board of Directors March 13, 1996
- ----------------------
Robert F. Graham
Director March , 1996
- ----------------------
D. James Guzy
/s/Tom Long Director March 13, 1996
- ----------------------
Tom Long
22
<PAGE>
/s/Glen Possley Director March 13, 1996
- ----------------------
Glen Possley
/s/Robert H. Smith Director March 13, 1996
- ----------------------
Robert H. Smith
/s/Joseph Van Poppelen Director March 13, 1996
- ----------------------
Joseph Van Poppelen
23
<PAGE>
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
Description Balance at Charged Deductions(1) Balance at
- ----------- Beginning to Costs ------------- End of
of Period and Period
--------- Expenses ---------
--------
<S> <C> <C> <C> <C>
Year Ended December 31, 1993
Allowance for Doubtful Accounts $ 740 $ 178 $ 119 $ 799
Year Ended December 31, 1994
Allowance for Doubtful Accounts 799 1,097 135 1,761
Year Ended December 31, 1995
Allowance for Doubtful Accounts 1,761 495 60 2,196
_______________
</TABLE>
(1) Charges for uncollectable accounts
24
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NUMBER DOCUMENT SEQUENTIALLY
- -------------- -------- NUMBERED PAGE
-------------
3.1 (5) Amended and Restated Articles of Incorporation
of Registrant. . . . . . . . . . . . . . . . . . . .
3.2 (1) Form of Bylaws of Registrant, as amended
to date. . . . . . . . . . . . . . . . . . . . . . .
4.1 (1) Registration Rights Agreement dated
December 21, 1987 between Registrant, holders
of Series A Preferred Stock, Series B Preferred
Stock, Series D Preferred Stock, Warrants to
purchase Series B and Series C Preferred Stock
and Robert F. Graham, and amendment thereto. . . . .
10.1 (8) Credit Agreement dated June 23, 1992 between
Registrant and Bank of America National Trust
and Savings Association. . . . . . . . . . . . . . .
10.2 (9) First Amendment dated May 1, 1993 to Credit
Agreement dated June 23, 1992 between Registrant
and Bank of America National Trust and Savings
Association. . . . . . . . . . . . . . . . . . . . .
10.3 (10) Second Amendment dated April 30, 1994 to Credit
Agreement dated June 23, 1992 between Registrant
and Bank of America National Trust and Savings
Association. . . . . . . . . . . . . . . . . . . . .
10.4 Third Amendment dated April 28, 1995 to Credit
Agreement dated June 23, 1992 between Registrant
and Bank of America National Trust and Savings
Association. . . . . . . . . . . . . . . . . . . . .
10.5 (9) Credit Agreement dated April 30, 1993 between
Registrant and Sanwa Bank of California, as
amended August 19, 1993. . . . . . . . . . . . . . .
10.6 (9) Guaranty dated November 29, 1993 between Registrant
and The Sanwa Bank Ltd. . . . . . . . . . . . . . .
10.7 (10) Line of Credit Agreement dated June 13, 1994
between Registrant and Sanwa Bank of California. . .
10.8 Amendment dated May 2, 1995 of Commercial Credit
Agreement dated June 13, 1994 between Registrant
and Sanwa Bank of California.. . . . . . . . . . . .
10.9 (5) Business Loan Agreement dated August 2, 1990
between Registrant and Silicon Valley Bank.. . . . .
10.10(7) Change in Terms Agreement dated
September 23, 1991 to Business Loan Agreement
dated August 2, 1990 between Registrant and
Silicon Valley Bank. . . . . . . . . . . . . . . . .
10.11 (8) Change in Terms Agreement dated July 29, 1992
to Business Loan Agreement dated August 2, 1990
between Registrant and Silicon Valley Bank.. . . . .
10.12(9) Change in Terms Agreement dated May 12, 1993 to
Business Loan Agreement dated August 2, 1990
between Registrant and Silicon Valley Bank.. . . . .
10.13(9) Modification dated May 12, 1993 to Business
Loan Agreement dated August 2, 1990 between
Registrant and Silicon Valley Bank, as amended
September 23, 1991 and July 29, 1992.. . . . . . . .
10.14(10) Loan Modification Agreement dated July 15, 1995
between Registrant and Silicon Valley Bank.. . . . .
25
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NUMBER DOCUMENT SEQUENTIALLY
- -------------- -------- NUMBERED PAGE
-------------
10.15(9) Commercial Guaranty dated May 12, 1993 between
the Registrant, Silicon Valley Bank and Individual
Employees of Novellus Systems, Inc.. . . . . . . . .
10.16(7) Loan and Guaranty Agreement dated November 29, 1991
between Registrant and The Japan Development Bank. .
10.17 Commercial Loan Agreement dated November 15, 1995
between Registrant and Sumitomo Bank of California .
10.18 Guarantee dated August 31, 1995 between Registrant
and The Mitsubishi Bank, Limited . . . . . . . . . .
10.19(5) Commercial Lease dated October 19, 1990 between
Registrant and Sobrato Development Companies #871,
concerning property located at 81 Vista Montana,
San Jose, California.. . . . . . . . . . . . . . . .
10.20(1) Commercial Lease dated March 11, 1987 between
Registrant and California Second, Ltd., concerning
property located at 3950 North First Street,
San Jose, California.. . . . . . . . . . . . . . . .
10.21(3) First Amendment dated February 8, 1989 to
Commercial Lease dated March 11, 1987 between
Registrant and California Second Ltd., concerning
property located at 3950 North First Street,
San Jose, California.. . . . . . . . . . . . . . . .
10.22 Lease dated September 26, 1995 between Registrant
and W. F. Batton & Co., Inc. concerning property
located at 3590 North First Street, San Jose,
California.. . . . . . . . . . . . . . . . . . . . .
10.23(10) Standard Sublease dated April 28, 1994 between
Registrant and Granada Computer Services, Inc.,
concerning property located 3940 North First
Street, San Jose, California.. . . . . . . . . . . .
10.24 Sublease Agreement dated January 13, 1995
between Registrant and LTX Corporation
concerning property located at 3970 North
First Street, San Jose, California.. . . . . . . . .
10.25 Assignment and Assumption of Lease dated
November 22, 1995 among Registrant,
Circadian, Incorporated (Assignor) and
California Second, Ltd. (Landlord) concerning
property located at 3942 North First Street,
San Jose, California . . . . . . . . . . . . . . . .
10.26 Lease Agreement dated January 11, 1996 between
Registrant and South Bay/Fortran concerning
property located at 4415 Fortran Court, San
Jose, California.. . . . . . . . . . . . . . . . . .
10.27(1) Commercial Lease dated May 2, 1988 between
Registrant and Aetna Life Insurance Company,
concerning property located at 12820 Hillcrest
Road, Suite 122, Dallas, Texas.. . . . . . . . . . .
10.28(6) Amendment dated March 27, 1990 to Commercial
Lease dated May 2, 1988 between Registrant
and Aetna Life Insurance Company, concerning
property located at 12820 Hillcrest Road,
Suite 122, Dallas, Texas.. . . . . . . . . . . . . .
10.29(9) Amendment dated March 29, 1993 to Lease dated
May 2, 1993 between Registrant and Aetna Life
Insurance Company, concerning property located
at 12820 Hillcrest Road, Suite 122, Dallas, Texas. .
10.30(10) Standard Office Building Lease Agreement dated
August 15, 1994 between Registrant and Aetna
Life Insurance Company concerning
26
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NUMBER DOCUMENT SEQUENTIALLY
- -------------- -------- NUMBERED PAGE
-------------
property located at 12840 Hillcrest Road, Suite 104,
Dallas, Texas. . . . . . . . . . . . . . . . . . . .
10.31(6) Lease Agreement dated May 1, 1990 between
Registrant and East Williston Road Associates,
concerning property located at One Blair Park,
Blair Park, Williston, Vermont.. . . . . . . . . . .
10.32(7) Amendment dated May 23, 1991 to Lease Agreement
dated May 1, 1990 between Registrant and East
Williston Road Associates, concerning property
located at One Blair Park, Blair Park,
Williston, Vermont.. . . . . . . . . . . . . . . . .
10.33(9) Letter Extension dated October 25, 1993 to Lease
Agreement dated May 1, 1990 between Registrant
and East Williston Road Associates, concerning
property located at One Blair Park, Blair Park,
Williston, Vermont.. . . . . . . . . . . . . . . . .
10.34 Addendum dated August 10, 1995 to Lease Agreement
dated May 1, 1990 between Registrant and East
Williston Road Associates, concerning property
located at One Blair Park, Blair Park,
Williston, Vermont.. . . . . . . . . . . . . . . . .
10.35(7) Office Lease dated July 1, 1991 between Registrant
and Ray Prather, concerning property located at
4090 W. State Street, Boise, Idaho.. . . . . . . . .
10.36(8) Office Lease dated January 29, 1992 between
Registrant and Alan Arkawy, concerning property
located at 1123 Route 52, Fishkill, New York.. . . .
10.37 Lease dated August 14, 1995 between Registrant
and East Fishkill Corporate Park Investments
concerning property located at 25 Corporate
Park Drive, Route 52, East Fishkill, New York. . . .
10.38(7) Commercial Lease dated February 1, 1991 between
Registrant (Nippon Novellus Systems, K.K.)
and Tenko, K.K., concerning property located
at 1-12-3 Kamitsuruma, Sagimihara City,
Kanagawa Prefecture, Japan.. . . . . . . . . . . . .
10.39(8) Commercial Lease dated June 15, 1992 between
Registrant (Novellus Systems, Ltd.) and
Exploitatiemaatschappij Dillenberg B.V.,
concerning property located at Dillenburgstraat
5-B Eindhoven, The Netherlands.. . . . . . . . . . .
10.40(8) Commercial Lease dated March 26, 1992 between
Registrant (Novellus Systems, Ltd.) and W.B.
Properties Ltd., concerning property located
at 1 to 5 Pyrford Road, West End Garage,
West Byfleet, Surrey, United Kingdom.. . . . . . . .
10.41(9) Lease dated August 17, 1993 between Registrant
and OTR, acting as the duly authorized nominee
of the Board of State Teachers Retirement
System of Ohio, concerning property located at
1701 Directors Boulevard, Austin, Texas. . . . . . .
10.42 Lease Agreement dated May 26, 1995 between
Registrant and OTR, acting as the duly authorized
nominee of the Board of State Teachers Retirement
System of Ohio, concerning property located at
1701 Directors Boulevard, Austin, Texas. . . . . . .
10.43(9) Lease dated November 2, 1993 between Registrant
and Arnbil Associates, concerning property located
at 5 Mount Royal Avenue,
27
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NUMBER DOCUMENT SEQUENTIALLY
- -------------- -------- NUMBERED PAGE
-------------
Marlborough, Massachusetts.. . . . . . . . . . . . .
10.44(9) Lease dated November 4, 1993 between Registrant
and Canterbury Associates, concerning property
located at 19 Walnut Hill Road, Poughkeepsie,
New York.. . . . . . . . . . . . . . . . . . . . . .
10.45(9) Lease dated November 17, 1992 between Registrant
and Aetna Casualty and Surety Company, concerning
property located at Two Gateway, Suite 420,
Phoenix, Arizona.. . . . . . . . . . . . . . . . . .
10.46(9) First Amendment dated November 30, 1993 to Lease
dated November 17, 1992 between Registrant and
Aetna Casualty and Surety Company, concerning
property located at Two Gateway, Suite 420,
Phoenix, Arizona.. . . . . . . . . . . . . . . . . .
10.47(9) Lease dated April 25, 1990 between Registrant
and Korea Women's Missionary Union.. . . . . . . . .
10.48 Office Rental Contract dated November 28, 1994
between Registrant (Novellus Systems Korea Co., Ltd.)
and Suh Won Building Management Company concerning
property located at 57 Garak-Dong Songpa-Gu,
Seoul, Korea.. . . . . . . . . . . . . . . . . . . .
10.49 Sublease executed February 2, 1995 between
Registrant (Novellus Systems, Ltd.) and Leyland DAF
Finance PLC with the consent of Central Regional
Council concerning property located at the Upper
Ground Floor (East Wing), The Forum, Callendar
Business Park, Falkirk, Scotland.. . . . . . . . . .
10.50 Commercial Lease Agreement dated
February 1, 1996 between Registrant and
Faison & Associates, Inc. d/b/a Southland
Management Company, not individually, but
solely as Management and Leasing Broker for
Plaza Central I concerning property located at
6220 S. Orange Blossom Trail, Suite 186,
Orlando, Florida.. . . . . . . . . . . . . . . . . .
10.51 Office Lease dated March 20, 1995 between
Registrant and Hartford Underwriters Insurance
Company concerning property located at 15350
North West Greenbrier Parkway, Suite B-340,
Beaverton, Oregon. . . . . . . . . . . . . . . . . .
10.52 Lease dated February 15, 1995 between Registrant
(Novellus Systems Taiwan) and Mr. Woo-Shung Lin
and Mr. Wing-Yee Lee concerning property located
at 5F-1, No. 295, Sec. 2, Kwang Fu Road,
Hsinchu, Taiwan R.O.C. (English translation
of original exhibit in the Chinese language).. . . .
10.53(2) Equipment Lease dated March 28, 1989 between
Registrant and Matsco Leasing Company. . . . . . . .
10.54(7) Distribution Agreement dated April 1, 1991
between Registrant and Seki Technotron Corporation..
10.55(9) First Amendment dated January 1, 1993 to Distribution
Agreement dated April 1, 1991 between the Registrant
and Seki Technotron Corporation. . . . . . . . . . .
10.56 Distribution Agreement dated January 1, 1996 between
Registrant and Seki Technotron Corporation.. . . . .
*10.57(7) Registrant's Amended and Restated 1984 Stock Option
Plan, together with forms of agreements thereunder..
*10.58(9) Registrant's 1992 Stock Option Plan, together with
forms of agreements thereunder.. . . . . . . . . . .
28
<PAGE>
INDEX TO EXHIBITS
EXHIBIT NUMBER DOCUMENT SEQUENTIALLY
- -------------- -------- NUMBERED PAGE
-------------
*10.59(8) Registrant's 1992 Employee Stock Purchase Plan.. . .
*10.60(1) Form of Agent Indemnification Agreement and amendment
thereto. . . . . . . . . . . . . . . . . . . . . . .
*10.61(4) Employment Agreement dated June 1, 1989 between
Registrant and Evert van de Ven. . . . . . . . . . .
*10.62(8) Employment Agreement dated as of June 15, 1992
between the Registrant and Peter Hanley. . . . . . .
*10.63(9) Offer Letter Agreement dated November 1, 1993
between Registrant and Richard S. Hill.. . . . . . .
*10.64(8) Promissory Note secured by Deed of Trust between
Registrant and Daniel Queyssac secured by property
located at 6051 Reston Road, Care Creek, Arizona.. .
13.1 Registrant's 1995 Annual Report to Shareholders
(only portions of this document specifically
incorporated herein by reference are included in
this exhibit). . . . . . . . . . . . . . . . . . . .
22.1 Subsidiaries of Registrant.. . . . . . . . . . . . .
23.1 Consent of Ernst & Young, LLP, Independent Auditors.
25.1 Powers of Attorney (see page 22).. . . . . . . . . .
___________
(1) Incorporated by reference to the exhibit filed with Registrant's
Registration Statement on Form S-1, File No. 33-23011, which was declared
effective August 11, 1988.
(2) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission on
March 31, 1989.
(3) Incorporated by reference to the exhibit filed with Registrant's
Registration Statement on Form S-1, File No. 33-28108, which was declared
effective May 2, 1989.
(4) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission
on March 30, 1990.
(5) Incorporated by reference to the exhibit filed with Registrant's
Registration Statement on Form S-1, File No. 33-37607, which was declared
effective November 19, 1990.
(6) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission
on March 29, 1991.
(7) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission
on March 30, 1992.
(8) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission
on February 26, 1993.
29
<PAGE>
(9) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission
on February 18, 1994.
(10) Incorporated by reference to the exhibit filed with Registrant's Report on
Form 10-K filed with the Securities and Exchange Commission
on March 16, 1995.
* Management contracts or compensatory plans or arrangements.
30
<PAGE>
THIRD AMENDMENT TO CREDIT AGREEMENT
This THIRD AMENDMENT TO CREDIT AGREEMENT ("Third Amendment"), dated as
of April 28, 1995, is entered into by and between NOVELLUS SYSTEMS, INC.
("Borrower") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
("Bank").
RECITALS
A. The Bank and the Borrower are parties to a Credit Agreement dated
as of June 23, 1992, as amended by a First Amendment to Credit Agreement
dated May 1, 1993, and as amended by a Second Amendment to Credit Agreement
dated April 30, 1994 (the "Credit Agreement"), pursuant to which the Bank has
extended certain credit facilities to the Borrower and its subsidiaries.
B. The Borrower has requested that the Bank agree to certain amendments
to the Credit Agreement.
C. The Bank is willing to amend the Credit Agreement, subject to the
terms and conditions of this Third Amendment.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Bank and Borrower mutually
agree to amend said Credit Agreement as follows:
1. DEFINED TERMS. Unless other wise defined herein,
capitalized terms used herein shall have meanings, if any, assigned to them
in the Credit Agreement.
2. AMENDMENTS TO CREDIT AGREEMENT.
(a) Paragraph 1.1 of the Credit Agreement is hereby
amended by replacing the phrase "April 30, 1995" with the phrase "April 30,
1996".
(b) Paragraph 1.2 (a) of the Credit Agreement is hereby
amended by replacing the phrase "April 30, 1995" with the phrase "April 30,
1996".
(c) Paragraph 1.3 (f) of the Credit Agreement is hereby
amended by replacing the phrase "April 30, 1995" with the phrase "April 30,
1996".
1
<PAGE>
(d) Paragraph 1.4 (f) of the Credit Agreement is hereby
amended by replacing the phrase "April 30, 1995" with the phrase "April 30,
1996".
(e) Paragraph 1.5 (c)(i) of the Credit Agreement is hereby
amended by replacing the phrase "April 30, 1995" with the phrase "April 30,
1996".
(f) Paragraph 1.6 (b)(i) of the Credit Agreement is hereby
amended by replacing the phrase "October 31, 1995" with the phrase "October 31,
1996".
(g) Paragraph 1.7 (b)(i) of the Credit Agreement is hereby
amended by replacing the phrase "April 30, 1996" with the phrase "April 30,
1997".
(h) Paragraph 1.10 of the Credit Agreement is hereby
amended by replacing the phrase "April 30, 1995" with the phrase "April 30,
1996" in all three places.
3. REPRESENTATIONS AND WARRANTIES. The Borrower hereby
represents and warrants to the Bank as follows:
(a) No Event of Default or event which with the giving
of notice, the lapse of time, or both, would be an Event of Default, has
occurred and is continuing.
(b) The execution, delivery, and performance by the
Borrower of this Third Amendment have been duly authorized by all necessary
corporate and other action and do not and will not require any registration
with, consent or approval of, notice to or action by, any person (including
any governmental agency) in order to be effective and enforceable. The
Credit Agreement as amended by this Third Amendment constitutes the legal,
valid, and binding obligations of the Borrower, enforceable against the
Borrower in accordance with its terms, without defense, counterclaim or
offset.
(c) All representations and warranties of the Borrower
contained in the Credit Agreement are true and correct.
(d) The Borrower is entering into this Third Amendment
on the basis of its own investigation and for its own reasons, without
reliance upon the Bank or any other person.
4. EFFECTIVE DATE. This Third Amendment will become effective
on April 28, 1995 (the "EFFECTIVE DATE") PROVIDED that each of the following
conditions precedent has been satisfied:
(a) The Bank has received from the Borrower a duly executed
original of this Third Amendment.
2
<PAGE>
(b) The Bank has received from the Borrower a copy of a
resolution passed by the board of directors of the Borrower, certified by the
Secretary or Assistant Secretary of the Borrower as being in full force and
effect on the date hereof, authorizing the execution, delivery and performance
of this Amendment.
(c) Borrower has paid Bank a non-refundable facility fee of
Five Thousand U.S. Dollars (U.S.$5,000), calculated at the rate of one quarter
of one percent (.25%) on Two Million U.S. Dollars (U.S.$2,000,000).
5. RESERVATION OF RIGHTS. The Borrower acknowledges and agrees
that the execution and delivery by the Bank of this Third Amendment shall not be
deemed to create a course of dealing or otherwise obligate the Bank to execute
similar amendments under the same or similar circumstances in the future.
6. MISCELLANEOUS.
(a) Except as herein expressly amended, all terms,
covenants, and provisions of the Credit Agreement are and shall remain in full
force and effect and all references therein to such Credit Agreement shall
henceforth refer to the Credit Agreement as amended by this Third Amendment.
This Third Amendment shall be deemed incorporated into, and a part of, the
Credit Agreement.
(b) This Third Amendment shall be binding upon and inure to
the benefit of the parties hereto and thereto and their respective successors
and assigns. No third party beneficiaries are intended in connection with this
Third Amendment.
(c) This Third Amendment shall be governed by and construed
in accordance with the law of the State of California (without regard to
principles of conflicts of laws).
(d) This Third Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument.
(e) This Amendment may not be amended except in writing
executed by the Borrower and the Bank.
(f) If any term or provision of this Third Amendment shall
be deemed prohibited by or invalid under any applicable law, such provision
shall be invalidated without affecting the remaining provisions of this Third
Amendment or the Credit Agreement, respectively.
(g) Borrower covenants to pay to or reimburse the Bank,
upon demand, all cost and expenses (including allocated cost of in-house
counsel) incurred in
3
<PAGE>
connection with the development, preparation, negotiation, execution and
delivery of this Third Amendment.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this Third
Amendment as of the date first above written.
Bank of America National Trust Novellus Systems, Inc.
and Savings Association
By: /s/ Stephen L. Parry By: /s/ W. J. Wall
-------------------------------- ---------------------------------
Stephen L. Parry
Vice President Title: Vice President and Chief
Financial Officer
--------------------------------
By: /s/ John P. Root
-----------------------------------
Title: Product Line Financial Manager
--------------------------------
4
<PAGE>
[Logo]
AMENDMENT OF COMMERCIAL CREDIT AGREEMENT
This Amendment of Commercial Credit Agreement ("Amendment") is made and
entered into this 2nd day of May 1995 by and between SANWA BANK CALIFORNIA
(the "Bank") and NOVELLUS SYSTEMS, INC. (the "Borrower") with respect to the
following:
This Amendment shall be deemed to be a part of and subject to that certain
commercial credit agreement between the parties hereto and dated as of June 13,
1994, as it may have been or be amended from time to time, and any and all
addenda, riders, exhibits and schedules therto (collectively, the "Agreement").
Unless otherwise defined herein, all terms used in this Amendment shall have the
same meanings as in the Agreement. To the extent that any of the terms or
provisions of this Amendment conflict with those contained in the Agreement, the
terms and provisions contained herein shall control.
WHEREAS, the Borrower and the Bank mutually desire to extend, amend and/or
modify the Agreement.
NOW THEREFORE, for value received and hereby acknowledged, the Borrower and the
Bank agree as follows:
1. EXTENSION OF EXPIRATION DATE OF THE LINE OF CREDIT FACILITY. The
Expiration Date of the Line of Credit Facility contained in the Agreement,
which is currently April 30, 1995, shall be modified and extended to be April
30, 1997.
2. REVISED REPAYMENT OF PRINCIPAL. The first sentence contained in Section
2.02.D of the Agreement is modified and amended to read as follow: Unless
sooner due in accordance with the terms of this Agreement, on April 30, 1997 the
Borrower hereby promises and agrees to pay to the Bank in full the aggregate
unpaid principal balance of all Advances then outstanding, together with all
accrued and unpaid interest thereon.
3. EXTENSION OF EXPIRATION OF THE LETTER OF CREDIT FACILITY. The Expiration
of the Letter of Credit Facility contained in the Agreement which is currently
April 30, 1995, shall be modified and extended to be April 30, 1997 and no
Letter of Credit shall expire on a date which is 90 days after such date.
4. REVISED DEBT TO NET WORTH RATIO. Section 5.11 (ii) of the Agreement is
modified and amended to read as follows: A debt to effective tangible net worth
ratio of not more than .50 to 1.00.
5. REVISED EFFECTIVE TANGIBLE NET WORTH. Section 5.11 (iii) of the Agreement
is modified and amended to read as follows: A minimum effective tangible net
worth of not less then $175,000,000.00.
6. INCORPORATION INTO AGREEMENT. On and after the effective date of this
Amendment, each reference in the Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import referring to the Agreement shall
mean and be referenced to the Agreement as amended by this Amendment.
7. NO WAIVER. The execution, delivery and performance of this Amendment shall
not, except as expressly provided herein, constitute a waiver of any provision
of, or operate as a waiver of any right, power or remedy of the Bank under, the
Agreement.
8. CONFIRMATION OF OTHER TERMS AND CONDITIONS. Except as specifically
provided in this Amendment, all other terms, conditions and covenants of the
Agreement which are unaffected by this Amendment shall remain unchanged and
shall continue in full force and effect and the Borrower hereby covenants and
agrees to perform and observe all terms, covenants and agreements provided for
in the Agreement, as hereby amended.
IN WITNESS WHEREOF, this Amendment has been executed by the parties hereto as of
the date first hereinabove written.
BANK: BORROWER:
SANWA BANK CALIFORNIA NOVELLUS SYSTEMS, INC.
BY: /s/ Jullian Matthew BY: /s/ William J. Wall
-------------------------------- -------------------------------------
NAME/TITLE WILLIAM J. WALL, VICE PRESIDENT
BY: /s/ John P. Root
-------------------------------------
JOHN P. ROOT, TREASURER
(1)
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COMMERCIAL LOAN AGREEMENT
This Commercial Loan Agreement dated as of November 15, 1995 ("Agreement") is
between Sumitomo Bank of California ("Bank") and Novellus Systems,
Inc. ("Borrower").
1. LINE OF CREDIT, AMOUNT AND TERMS
Bank agrees to make available to Borrower a line of credit on the following
terms, covenants and conditions:
1.1 LINE OF CREDIT AMOUNT.
Unsecured Line of Credit. During the Availability Period, Bank will
provide an Unsecured Line of Credit to Borrower. The maximum amount of this
Line of Credit (the "Commitment") is One Million Dollars ($1,000,000).
Borrower's obligation to repay this Unsecured Line of Credit is evidenced by a
promissory note substantially in the form of Exhibit A attached hereto (the
"Unsecured Line Note").
(a) MAXIMUM LOAN BALANCE. Borrower agrees not to permit the
outstanding principal balance of the Unsecured Line of Credit plus the
outstanding amounts of any letters of credit, including amounts drawn on letters
of credit and not yet reimbursed, and any amounts outstanding under obligations
to Bank of third parties which are guaranteed by Borrower (such sum is the "Loan
Balance") to exceed the Commitment.
1.2 AVAILABILITY PERIOD.
The period under which Borrower may draw on the Unsecured Line of Credit
("Availability Period") is between the date of this Agreement and June 30, 1996
(the "Maturity Date") unless Borrower is in default, in which event Bank need
not make any advances.
1.3 INTEREST RATE.
(a) Unless Borrower elects an Offshore Rate based Interest Rate as
described below, the interest rate is Bank's Prime Rate in effect from time to
time.
(b) The "Prime Rate" equals the rate of interest set from time to
time by Bank as its head office in San Francisco, California as its Prime Rate.
The Prime Rate is determined by
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Bank as a means of pricing credit extensions to some customers and is neither
tied to any external rate of interest or index nor is it necessarily the lowest
rate of interest charged by Bank at any given time for any particular class of
customers or credit extensions. Any changes in the interest rate resulting from
a change in the Prime Rate shall take effect without notice on the date
specified at the time the Prime Rate is set.
(c) OFFSHORE RATE/RATE PLUS DISCLOSED SPREAD.
Borrower may elect to have all or portions of the principal balance of the
Unsecured Line of Credit bear interest at the Offshore Rate plus One and Three
Fourths percent (1.75%).
Designation of an Offshore Rate portion is subject to the following
requirements:
(i) The interest period during which the Offshore Rate will be
in effect will be no shorter than 30 days and no longer than 180 days as
selected by Borrower with consent of Bank. The last day of the interest
period will be determined by Bank using the practices of the offshore
dollar inter-bank market.
(ii) Each Offshore Rate portion will be for an amount not less
than One Million dollars ($1,000,000).
(iii) The "Offshore Rate" means the interest rate determined by
the following formula, rounded upward to the nearest 1/100 of one percent.
All amounts in the calculation will be determined by Bank as of the first
day of interest period.
Offshore Rate = Eurodollar Rate
---------------
(1.00 - Reserve Percentage)
Where,
(A) "Eurodollar Rate" means the interest rate (rounded upward to
the nearest 1/16th of one percent) at which bank's Grand Cayman Branch
would offer U.S. dollar deposits for the applicable interest period to
other major banks in the offshore dollar inter-bank market.
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(B) "Reserve Percentage" means the total of the maximum reserve
percentages for determining the reserves to be maintained by member
banks of the Federal Reserve System for Eurocurrency Liabilities, as
defined in the Federal Reserve Board Regulation D, rounded upward to
the nearest 1/100 of one percent. The percentage will be expressed
as a decimal, and will include, but not be limited to, marginal,
emergency, supplemental, special, and other reserve percentages.
(iv) Borrower may not elect an Offshore Rate with respect to any
portion of the principal balance of the Unsecured Line of Credit which is
scheduled to be repaid before the last day of the applicable interest
period.
(v) No portion of the principal balance of the line of credit
already bearing interest at the Offshore Rate may be converted to a
different rate during its interest period.
(vi) Each prepayment of an Offshore Rate option, whether
voluntary, by reason of acceleration or otherwise, will be accompanied by
the amount of accrued interest on the amount prepaid, and a prepayment fee
equal to the amount (if any) by which
(A) the additional interest which would have been payable on the
amount prepaid had it not been paid until the last day of the interest
period, exceeds
(B) the interest which would have been recoverable by Bank by
placing the amount prepaid on the deposit in the offshore dollar
market for a period starting on the date on which it was prepaid and
ending on the last day of the interest period for such portion.
(vii) Bank will have no obligation to accept an election of an
Offshore Rate portion if any of the following described events has occurred
and is continuing:
(x) Dollar deposits in the principal amount, and for periods
equal to the interest
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period, of an Offshore Rate portion are not available in the
offshore Dollar interbank market; or
(y) the Offshore Rate does not accurately reflect the cost of an
Offshore Rate portion.
1.4 REPAYMENT TERMS/UNSECURED LINE OF CREDIT.
(a) Borrower will pay interest in arrears commencing on December 1,
1995, and then on each first day of each month thereafter until payment in full
of all amounts outstanding under the Unsecured Line of Credit.
(b) Borrower will repay in full, all principal, interest and other
charges outstanding under the Unsecured Line of Credit no later than the
Maturity Date.
(c) Subject to provisions contained elsewhere herein, Borrower may
prepay the Unsecured Line of Credit in full or in part at any time. The
prepayment will be applied first to interest and charges and then to the most
remote installment of principal due under this Agreement.
1.5 LETTER OF CREDIT LINE. This Line of Credit may be used for
financing:
(i) commercial letters of credit with a maximum maturity of 360
days but not to extend beyond the Maturity Date. Each commercial letter of
credit will require drafts payable at sight or up to 180 days after sight.
(ii) standby letters of credit with a maximum maturity of 360
days but not to extend beyond the Maturity Date.
(a) The amount of outstanding letters of credit, including amounts
drawn on letters of credit and not yet reimbursed, may not exceed at any one
time the Commitment.
(b) Any sum drawn under a letter of credit may, at the option of
Bank, be added to the principal amount outstanding under this Agreement. The
amount will bear interest and be due as described elsewhere in this Agreement.
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(c) In the event any letters of credit are outstanding on the Maturity
Date, or in the event an Event of Default shall have occurred, Borrower shall
immediately prepay such letters of credit and deposit with Bank, as cash
collateral for the obligations of Borrower under such letters of credit (and
Borrower hereby grants to Bank a security interest in such cash collateral), an
amount equal to the face amount of all outstanding letters of credit, to be
applied to repay draws under letters of credit as and when made.
(d) The issuance of any letter of credit or any amendment to a letter
of credit is subject to Bank's written approval and must be in form and content
satisfactory to Bank and in favor of a beneficiary acceptable to Bank.
(e) Borrower will sign Bank's form Application and Security Agreement
for Commercial Letter of Credit or Application and Agreement for Standby Letter
of Credit.
(f) Borrower agrees that Bank may automatically charge its checking
account for applicable fees, discounts, and other charges relating to any
letters of credit.
(g) Borrower will pay Bank a non-refundable fee equal to 1.0% per
annum of the outstanding undrawn amount of each standby letter of credit,
payable in advance, calculated on the basis of the face amount outstanding on
the day the fee is calculated. Standby letters of credit issued for the purpose
of allowing Borrower to borrow local currencies from Sumitomo Bank Limited will
carry an issuance fee equal to .5% per annum.
(h) Borrower will pay any issuance and/or other fees that Bank
notifies Borrower will be charged for issuing and processing letters of credit
for Borrower.
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2. FEES AND EXPENSES
2.1 FEES.
(a) LOAN FEE. Borrower agrees to pay a Two Thousand Five Hundred
Dollar ($2,500) loan fee due on Closing.
2.2 EXPENSES.
(a) Borrower agrees to immediately repay Bank for expenses that
include, without limitation, filing, recording and search fees, appraisal
fees, title report fees, and documentation fees.
(b) Borrower agrees to reimburse Bank for any expenses it incurs
in the negotiation and preparation of this Agreement and any agreement or
instrument required by this Agreement. Expenses include, but are not
limited to, reasonable attorneys' fees, including any allocated costs of
Bank's in-house counsel.
3. DISBURSEMENTS, PAYMENTS AND COSTS
3.1 REQUEST FOR CREDIT. Each request for an extension of credit will be
made in writing in a manner acceptable to Bank, or by another means acceptable
to Bank.
3.2 DISBURSEMENTS AND PAYMENTS. Each disbursement by Bank and each
payment by Borrower will be:
(a) made at Bank's branch (or other location) selected by Bank
from time to time.
(b) made for the account of Bank's branch selected by Bank from
time to time.
(c) made in immediately available funds, or such other type of
funds selected by Bank.
(d) evidenced by records kept by Bank. In addition, Bank may,
at its discretion, require Borrower to sign one or more promissory notes.
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3.3 TELEPHONE AUTHORIZATION.
(a) Bank may honor telephone instructions for advances or
repayments or for the designation of optional interest rates given by any
officer of Borrower or a person or persons so authorized by any officer of
Borrower.
(b) Advances will be deposited in, and repayments will be
withdrawn from, Borrower's account number 019-001809-70, or such other
accounts with Bank as designated in writing by Borrower.
(c) Borrower indemnities and holds harmless Bank (including its
officers, employees, and agents) from all liability, loss, and costs in
connection with any act resulting from telephone instructions it reasonably
believes are made by an officer of Borrower or a person authorized by an
officer of Borrower. This indemnity and agreement to hold harmless
will survive this Agreement's termination.
3.4 DIRECT DEBIT
(a) Borrower agrees that interest, principal payments and any
fees will be deducted automatically on the due date from Borrower's
checking account number 019-001809-70.
(b) Bank will debit Borrower's account on the dates the payments
become due. If a due date does not fall on a banking day, Bank will debit
the account on the first Banking Day following the due date.
(c) Borrower will maintain sufficient funds in the account on
the dates Bank enters debits authorized by this Agreement. If there are
insufficient funds in the account on the date Bank enters any debit
authorized by this Agreement Borrower shall immediately pay such shortfall
to Bank.
3.5 BANKING DAYS. Unless otherwise provided in this Agreement, a
"Banking Day" is a day other than a Saturday or a Sunday, on which Bank is open
for business in California. For amounts bearing interest at an Offshore Rate
(if any), a Banking Day is a day other than a Saturday or a Sunday on which Bank
is open for business in California and dealing in offshore dollars.
7
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All payments and disbursements which would be due on a day which is not a
Banking Day will be due on the next Banking Day. All payments received on
a day which is not a Banking Day will be applied to the applicable Line of
Credit on the next Banking Day.
3.6 TAXES. Borrower will not deduct any taxes from any payments made to
Bank. If any government authority imposes any taxes or charges on any
payments to Borrower, Borrower will pay the taxes or charges. Upon request
by Bank, Borrower will confirm that it has paid the taxes by giving Bank
official tax receipts (or notarized copies) within 30 days after the due date.
3.7 ADDITIONAL COSTS. Borrower will pay Bank, on demand, for Bank's costs
or losses arising from any statute or regulation, or any request or requirement
of a regulatory agency which is applicable to Bank. The costs and losses
will be allocated to the loans in a manner determined by Bank, using any
reasonable method. The costs include the following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to Bank's assets and
commitments for credit.
3.8 INTEREST CALCULATION. Except as otherwise stated in this
Agreement, all interest and fees, if any, will be computed on the basis of a
360-day year and the actual number of days elapsed. This results in more
interest or a higher fee than if a 365-day year is used.
3.9 INTEREST ON LATE PAYMENTS. At Bank's sole option in each
instance, any amount not paid when due under this Agreement (including interest)
shall bear interest from the due date at Bank's Prime Rate plus Two percent
(2.0%). This may result in compounding of interest.
3.10 DEFAULT RATE. If any amount under this Agreement is not paid in
full when due at maturity or when due because of the exercise of an option by
Bank, Borrower agrees to pay interest on the outstanding principal and interest
at the rate of interest otherwise provided under this Agreement plus Two percent
(2.0%).
8
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3.11 OVERDRAFTS. At Bank's sole option in each instance, Bank may make
advances under this Agreement to prevent or cover an overdraft on any account of
Borrower with Bank. Each such advance will accrue interest from the date of
the advance or the date on which the account is overdrawn, whichever occurs
first, at the interest rate described in this Agreement.
4. CONDITIONS
4.1 INITIAL ADVANCE. Bank must have received the following items, in
form and content acceptable to Bank, before it is required to extend any credit
to Borrower under this Agreement:
(a) AUTHORIZATIONS. Evidence that the execution, delivery and
performance by Borrower of this Agreement and any instrument or agreement
required under this Agreement have been duly authorized.
(b) NOTES. The fully executed Unsecured Note.
(c) GOOD STANDING. Certificates of good standing for Borrower from its
state of incorporation and from any other state in which Borrower is
required to qualify to conduct its business.
4.2 CONDITIONS TO EACH ADVANCE. Before each extension of credit,
including the first:
(a) The Representations and Warranties hereunder must be true and
correct.
5. REPRESENTATIONS AND WARRANTIES
When Borrower signs this Agreement, and until Bank is repaid in full,
Borrower makes the following representations and warranties. Each request for
an extension of credit constitutes a renewed representation.
5.1 ORGANIZATION OF BORROWER. Borrower is a corporation duly formed and
existing under the laws of the state where organized.
5.2 AUTHORIZATION. This Agreement, and any instrument or agreement
required hereunder, are within Borrower's powers,
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have been duly authorized, and do not conflict with any of its organizational
papers.
5.3 ENFORCEABLE AGREEMENT. This Agreement and any related loan documents,
are legal, valid and binding agreements of Borrower, enforceable against
Borrower in accordance with their terms, and any instrument or agreement
required hereunder or thereunder, when executed and delivered, will be similarly
legal, valid, binding and enforceable.
5.4 GOOD STANDING. In each state in which Borrower does business, it is
properly licensed, in good standing, and, where required, in compliance with
fictitious name statutes.
5.5 NO CONFLICTS. This Agreement does not conflict with any law,
agreement, or obligation by which Borrower is bound.
5.6 FINANCIAL INFORMATION. All financial and other information that has
been or will be supplied to Bank, including Borrower's financial statement dated
as of March 31, 1995, is:
(a) sufficiently complete to give Bank accurate knowledge of
Borrower's financial condition.
(b) in form and content required by Bank.
(c) in compliance with all government regulations that apply.
Since the dates of the financial statements specified above, there
has been no material adverse change in the assets or the financial condition of
Borrower.
5.7 LAWSUITS. There is no lawsuit, tax claim or other dispute pending
or threatened against Borrower except as has been disclosed in writing to Bank
prior to the date hereof.
5.8 PERMITS, FRANCHISES. Borrower possesses all permits, memberships,
franchises, contracts and licenses required and all trademark rights, trade name
rights, patent rights and fictitious name rights necessary to enable it to
conduct the business in which it is now engaged without conflict with the rights
of others.
5.9 OTHER OBLIGATIONS. Borrower is not in default on any obligation for
borrowed money, any purchase money obligation or
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any other material lease, commitment, contract, instrument or obligation.
5.10 INCOME TAX RETURNS. Borrower has filed all required tax returns and
has no knowledge of any pending assessments or adjustments of its income tax for
any year.
5.11 NO EVENT OF DEFAULT. No event has occurred which is, or with notice
or lapse of time or both would be, an Event of Default under this Agreement.
5.12 ERISA PLANS.
(a) Borrower has fulfilled its obligations, if any, under the
minimum funding standards of ERISA and the Code with respect to each Plan and is
in compliance in all material respects with the presently applicable provisions
of ERISA and the Code, and has not incurred any liability with respect to any
Plan under Title IV of ERISA.
(b) No reportable event has occurred under Section 4043(b) of
ERISA for which the PBGC requires 30 day notice.
(c) No action by Borrower to terminate or withdraw from any Plan
has been taken and no notice of intent to terminate a Plan has been filed under
Section 4041 of ERISA.
(d) No proceeding has been commenced with respect to a Plan
under Section 4042 of ERISA, and no event has occurred or condition exists which
might constitute grounds for the commencement of such a proceeding.
(e) The following terms have the meanings indicated for purposes
of this Agreement:
(i) "Code" means the Internal Revenue
Code of 1986, as amended from time to time.
(ii) "ERISA means the Employee
Retirement Income Act of 1974, as amended from time to time.
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(iii) "PBGC means the Pension Benefit
Guaranty Corporation established pursuant to Subtitle A of Title IV of
ERISA.
(iv) "Plan" means any employee
pension benefit plan maintained or contributed to by Borrower and
insured by the Pension Benefit Guaranty Corporation under Title IV of
ERISA.
6. COVENANTS
Borrower agrees, so long as credit is available under this Agreement
and until Bank is repaid in full:
6.1 USE OF PROCEEDS. To use the proceeds of the Unsecured Line of Credit
only for corporate purposes, including the guaranty of employee loans at the
Bank.
6.2 FINANCIAL INFORMATION. To provide the following financial information
and statements and such additional information as requested by Bank from time to
time:
(a) Within 90 days of Borrower's fiscal year end, Borrower's
annual financial statements. These financial statements must be audited by a
Certified Public Accountant ("CPA") acceptable to Bank. The statements shall be
prepared on a consolidated basis.
(b) Within 45 days of the period's end, Borrower's quarterly
financial statements. These financial statements may be Borrower prepared.
The statements shall be prepared on a consolidated basis.
(c) Copies of Borrower's Form 10-K Annual Report, Form 10-Q
Quarterly Report and Form 8-K Current Report within 15 days after the date
of filing with the Securities and Exchange Commission.
6.3 OUICK RATIO. To maintain on a consolidated basis as of the last day
of each fiscal quarter, a ratio of quick assets to current liabilities of at
least 1.5:1.0.
"Quick assets" means cash, short-term cash investments, net trade
receivables and marketable securities not classified as long-term investments.
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6.4 TANGIBLE NET WORTH. To maintain on a consolidated basis, as of the
last day of each fiscal quarter, Tangible Net Worth equal to at least
$220,000,000.
"Tangible Net Worth" means the gross book value of Borrower's assets
(excluding goodwill, patents, trademarks, trade names, organization expense,
treasury stock, unamortized debt discount and expense, deferred research and
development costs, deferred marketing expenses, and other like intangibles and
monies due from affiliates, officers, directors or shareholders of Borrower)
plus debt subordinated to Bank in a manner acceptable to Bank less total
liabilities, including, without limitation, accrued and deferred income taxes,
and any reserves against assets.
6.5 TOTAL LIABILITIES TO TANGIBLE NET WORTH. To maintain on a
consolidated basis, as of the last of each fiscal quarter, a ratio of Total
Liabilities not subordinated to Tangible Net Worth not exceeding .5:1.0.
"Total Liabilities not subordinated" means the sum of current
liabilities plus long term liabilities, excluding debt subordinated to
Borrower's obligations to Bank in a manner acceptable to Bank.
6.6 PROFITABILITY. To maintain on a consolidated basis, a positive net
income before taxes and extraordinary items and a positive net income after
taxes and extraordinary items for each fiscal year
6.7 OTHER DEBTS. Not to have outstanding or incur any direct or
contingent debts or lease obligations (other than those to Bank), or become
liable for the debts of others without Bank's written consent. This does not
prohibit:
(a) Acquiring goods, supplies, or merchandise on normal
trade credit.
(b) Endorsing negotiable instruments received in the usual
course of business.
(c) Obtaining surety bonds in the usual course of business.
(d) Unsecured debts and lines of credit in existence on the
date of this Agreement disclosed in
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writing to Bank prior to the date of this Agreement in Borrower's
financial statement dated March 31, 1995.
(e) Additional unsecured lines of credit with other banks and
financial institutions not exceeding, in the aggregate, $20,000,000.
6.8 OTHER LIENS. Not to create, assume, or allow any security
interest or lien (including judicial liens) on property Borrower now or later
owns, except:
(a) Liens or security interests in favor of Bank.
(b) Liens for taxes not yet due.
6.9 NOTICES TO BANK. To promptly notify Bank in writing of:
(a) any lawsuit over One Million dollars ($1,000,000) against
Borrower;
(b) any substantial dispute between Borrower and any government
authority;
(c) any failure to comply with this Agreement;
(d) any material adverse change in Borrower's financial
condition or operations;
(e) any change in Borrower's name, address, or legal structure;
and
(f) the occurrence of any Event of Default.
6.10 BOOKS AND RECORDS. To maintain adequate books and records.
6.11 COMPLIANCE WITH LAWS. To comply with the laws, regulations, and
orders of any government body with authority over Borrower's business
(including any fictitious name statute and all statutes regarding the
processing, manufacture, storage, transportation, sale or use of hazardous or
toxic materials).
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6.12 PRESERVATION OF RIGHTS. To maintain and preserve all rights,
privileges, and franchises Borrower now has necessary to carry on Borrower's
business.
6.13 COOPERATION. To take any action requested by Bank to carry out the
intent of this Agreement.
6.14 INSURANCE.
(a) General Business Insurance. To maintain insurance as is
usual for the business it is in.
6.15 ADDITIONAL NEGATIVE COVENANTS. Not to, without Bank's prior written
consent:
(a) engage in any business activities substantially different
from Borrower's present business.
(b) liquidate or dissolve Borrower's business.
(c) enter into any consolidation, merger, pool, joint venture,
syndicate, or other combination.
(d) lease, or dispose of all or a substantial part of
Borrower's business or Borrower's assets except in the ordinary course of
Borrower's business.
6.l6 ERISA PLANS. To give prompt written notice to Bank of:
(a) The occurrence of any reportable event under Section
4043(b) of ERISA for which the PBGC requires 30 day notice.
(b) Any action by Borrower to terminate or withdraw from a
Plan or the filing of any notice of intent to terminate under Section 4041
of ERISA.
(c) Any notice of noncompliance made with respect to a Plan
under Section 4041(b) of ERISA.
(d) The commencement of any proceeding with respect to a Plan
under Section 4042 of ERISA.
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7. DEFAULT
7.1 EVENTS OF DEFAULT. The occurrence of any one or more of the following
events shall constitute an "Event of Default":
(a) FAILURE TO PAY. Borrower fails to make a payment under this
Agreement when due.
(b) NON-COMPLIANCE. Borrower fails to meet the conditions of, or
fails to perform any obligation under:
(i) this Agreement, or
(ii) any other agreement made in connection with
this Agreement.
(c) OTHER DEFAULTS. Any default occurs under any agreement in
connection with any credit Borrower has obtained from any other creditor if the
default consists of failing to make a payment when due or gives the other
creditor the right to accelerate the obligation.
(d) FALSE INFORMATION. Any representation or warranty under this
Agreement or any agreement, instrument or certificate executed pursuant to this
Agreement or in connection with any transaction contemplated hereby shall prove
to have been false or misleading in any material respect when made or when
deemed to have been made.
(e) BANKRUPTCY. Borrower files a bankruptcy petition, a bankruptcy
petition is filed against Borrower or Borrower makes a general assignment for
the benefit of creditors. The default will be deemed cured if any bankruptcy
petition filed AGAINST Borrower is dismissed within a period of sixty (60) days
after the filing; provided, however, that Bank will not be obligated to extend
any additional credit to Borrower during any bankruptcy period.
(f) RECEIVERS. A receiver or similar official is appointed for
Borrower's business, or the business is terminated.
(g) LAWSUITS. Any lawsuit or lawsuits are filed on behalf of one
or more trade creditors against Borrower in an aggregate amount of Ten Million
dollars ($10,000,000) and such
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lawsuits or lawsuits are not dismissed or fully bonded within ten (10) calendar
days after service of process upon Borrower.
(h) JUDGMENTS. Any judgments or arbitration awards are entered
against Borrower and, absent procurement of a stay of execution, such judgment
or award remains unbonded or unsatisfied for ten (10) calendar days after the
date of entry; or Borrower enters into any settlement agreement with respect to
any litigation or arbitration, in an aggregate amount of Ten Million dollars
($10,000,000) or more in excess of any insurance coverage.
(i) GOVERNMENT ACTION. Any government authority takes action that
Bank believes adversely affects Borrower's financial condition or ability to
repay.
(j) MATERIAL ADVERSE CHANGE. A material adverse change occurs in
Borrower's financial condition, properties or prospects, or ability to repay the
obligations hereunder.
(k) ERISA PLANS. The occurrence of a reportable event with respect
to Plan which is, in the reasonable judgment of Bank, likely to result in the
termination of such Plan for purposes of Title IV of ERISA, or could reasonably
be expected, in the judgment of Bank, to subject Borrower to any tax, penalty or
liability (or any combination of the foregoing) which, in the aggregate, would
have an adverse effect on the financial condition of Borrower with respect to a
Plan.
7.2 REMEDIES. Upon and after the occurrence of an Event of Default, Bank
shall have all of the following rights and remedies:
(a) All obligations and indebtedness hereunder may, at the
option of Bank and without demand, notice, or legal process of any kind, be
declared, and immediately shall become, due and payable;
(b) The Loans shall bear interest at the Default Rate;
7.3 COSTS AND EXPENSES. Upon the occurrence of any Event of Default,
Bank shall be entitled to recover all costs, expenses, and attorneys' fees
(including any allocated costs of in-house counsel) in connection with the
administering or enforcing of this Agreement, whether or not an action is
filed.
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8. MISCELLANEOUS
8.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to Bank and all financial covenants will be made under
generally accepted accounting principles consistently applied.
8.2 CALIFORNIA LAW. This Agreement is governed by California law.
8.3 SUCCESSORS AND ASSIGNS. This Agreement is binding on Borrower's
and Bank's successors and assignees. Borrower agrees that it may not assign
this Agreement without Bank's prior written consent. Bank may sell
participations in or assign these loans, or any portion thereof, and may
exchange financial information about Borrower with actual or potential
participants or assignees. If a participation is sold or any portion of the
loans is assigned, the purchaser will have the right of set-off against
Borrower.
8.4 SEVERABILITY; WAIVERS. If any part of this Agreement is not
enforceable, the rest of the Agreement may be enforced. No failure on the
part of Bank to exercise, and no delay in exercising, any right, power, or
remedy under this Agreement shall operate as a waiver thereof; nor shall any
single or partial exercise of any right under this Agreement preclude any
other or further exercise thereof or the exercise of any other right. Any
consent or waiver under this Agreement must be in writing. If Bank waives a
default, it may enforce a later default.
8.5 COSTS AND EXPENSES. In addition to the recovery of costs and
expenses upon an occurrence of an Event of Default, if Bank incurs expenses
in connection with the preparation, administering or enforcing of this
Agreement, Borrower shall pay Bank all such costs and reasonable attorneys'
fees, including any allocated costs of in-house counsel.
8.6 ENTIRE AGREEMENT. This Agreement and any related security or other
agreements required by this Agreement, collectively:
(a) represent the sum of the understandings and agreements
between Bank and Borrower concerning this credit; and
18
<PAGE>
(b) replace any prior oral or written agreements between Bank
and Borrower concerning this credit; and
(c) are intended by Bank and Borrower as the final, complete
and exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any other
agreements required by this Agreement, this Agreement will prevail.
8.7 NOTICES. Except as otherwise provided herein, all notices required
under this Agreement shall be personally delivered or sent by first class
mail, postage prepaid, to the addresses on the signature page of this
Agreement, or to such other addresses as Bank and Borrower may specify from
time to time in writing.
8.8 HEADINGS. Article and paragraph headings are for reference only
and shall not affect the interpretation or meaning of any provisions of this
Agreement.
8.9 COUNTERPARTS. This Agreement may be executed in as many
counterparts as necessary or convenient, and by the different parties on
separate counterparts each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the same
agreement.
8.10 FURTHER ASSURANCES. Borrower shall, at its expense and without
expense to Bank, do, execute and deliver such further acts and documents as
Bank from time to time reasonably requires for the assuring to Bank the
rights created or intended to be created by this Agreement and for carrying
out the intention or facilitating the performance of the terms of this
Agreement or any document executed in connection with this Agreement.
8.11 HAZARDOUS WASTE INDEMNIFICATION. Borrower will indemnify and hold
harmless Bank from loss or liability directly or indirectly arising out of
the use, generation, manufacture, production, storage, release, threatened
release, discharge, disposal or presence of a hazardous substance. This
indemnity will apply whether the hazardous substance is on, under or about
Borrower's property or operations or property
19
<PAGE>
leased to Borrower. The indemnity includes but is not limited to attorneys'
fees (including the reasonable estimate of the allocated cost of in-house
counsel and staff). The indemnity extends to Bank, its parent, subsidiaries
and all of their directors, officers, employees, agents, successors,
attorneys and assigns. For these purposes, the term "hazardous substances"
means any substance which is or becomes designated as "hazardous" or "toxic"
under any federal, state or local law. This indemnity will survive repayment
of Borrower's obligations to Bank.
Upon demand by Bank, Borrower will defend any investigation, action
or proceeding alleging the presence of any hazardous substance in any such
location, which affects any of Borrower's property or operations or property
leased to Borrower or which is brought or commenced against Bank, whether
alone or together with Borrower or any other person, all at Borrower's own
cost and by counsel to be approved by Bank in the exercise of its reasonable
judgment. In the alternative, Bank may elect to conduct its own defense at
the expense of Borrower.
8.12 WAIVER OF JURY TRIAL. The parties to this Agreement acknowledge
that jury trials often entail additional expenses and delays not occasioned
by nonjury trials. The parties to this Agreement further agree and stipulate
that a fair trial may be had before a state or federal judge by means of a
bench trial without a jury. In view of the foregoing, and as a specifically
negotiated provision of this Agreement, each party to this Agreement hereby
expressly waives any right to trial by jury of any claim, demand, action or
cause of action (1) arising under this Agreement or any other instrument,
document or agreement executed or delivered in connection herewith, or (2) in
any way connected with or related or incidental to the dealings of the
parties hereto or any of them with respect to this Agreement or any other
instrument, document or agreement executed or delivered in connection
herewith, or the transactions related hereto or thereto, in each case whether
now existing or hereafter arising, and whether sounding in contract or tort
or otherwise; and each party hereby agrees and consents that any such claim,
demand, action or cause of action shall be decided by court trial without a
jury, and that any party to this Agreement may file an original counterpart
or a copy of this section with any court as written evidence of the consent
of the parties hereto to the waiver of their right to trial by jury.
20
<PAGE>
This Agreement is executed as of the date stated at the top of the first page.
NOVELLUS SYSTEMS, INC.
By /s/
---------------------------
Its CFO
--------------------------
By /s/ John P. Root
-----------------------------
Its Product Line Controller
--------------------------
Address where notices to Borrower are to be sent:
Novellus Systems, Inc.
81 Vista Montana
San Jose, CA 95134
Attn: John P. Root
SUMITOMO BANK OF CALIFORNIA
By /s/ William G. Nelle, Jr.
--------------------------------
Its Vice President & Manager
----------------------------
Address where notices to Bank are to be sent:
Sumitomo Bank of California
84 West Santa Clara Street, Suite 700
San Jose, California 95113
Attn: W.G. Nelle, Jr.
21
<PAGE>
UNSECURED LINE NOTE
$1,000,000.00 November 1, 1995
San Jose, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order of The
Sumitomo Bank of California (the "BANK"), the principal amount of ONE MILLION
AND N0/100 DOLLARS ($1,000,000.00) or such lesser aggregate amount of
advances under the Revolving Line of Credit as may be made by the Bank
pursuant to the Loan Agreement referred to below, together with interest on
the principal amount of each advance under the Revolving Line of Credit
remaining unpaid from time to time from the date of each such advance under
the Revolving Line of Credit until the date of payment in full, payable as
hereinafter set forth.
Reference is made to the Commercial Loan Agreement dated as of even date
herewith, by and between the undersigned, as Borrower, and the Bank (the
"Loan Agreement"). Terms defined in the Loan Agreement and not otherwise
defined herein are used herein with the meanings defined for those terms in
the Loan Agreement. This is the Unsecured Line Note referred to in the Loan
Agreement, and any holder hereof is entitled to all of the rights, remedies,
benefits and privileges provided for in the Loan Agreement as originally
executed or as it may from time to time be supplemented, modified or amended.
The Loan Agreement,among other things, contains provisions for acceleration
of the maturity hereof upon the happening of certain stated events upon the
terms and conditions therein specified.
The principal indebtedness evidenced by this Unsecured Line Note shall be
payable as provided in the Loan Agreement and in any event on June 30,1996.
Interest shall be payable on the outstanding daily unpaid principal
amount of advances under the Revolving Line of Credit from the date first
written above until payment in full and shall accrue and be payable at the
rates and on the dates set forth in the Loan Agreement both before and after
default and before and after maturity and judgment, with interest on overdue
principal and interest to bear interest at the rate set forth in Section 3.10
of the Loan Agreement, to the fullest extent permitted by applicable law.
Each payment hereunder shall be made to the Bank in immediately available
funds not later than 4:00 p.m. (Los Angeles time) on the day of payment
(which must be a Banking Day). All payments received after 4:00 p.m. (Los
Angeles time) on any particular Banking Day shall be deemed received on the
next succeeding Banking Day. All payments shall be made in lawful money of
the United States of America.
<PAGE>
The Bank shall use its best efforts to keep a record of advances under
the Revolving Line of Credit made by it and payments received by it with
respect to this Unsecured Line Note, and, absent manifest error, such record
shall be presumptive evidence of the amounts owing under this Unsecured Line
Note.
The undersigned hereby promises to pay all costs and expenses of any
rightful holder hereof incurred in collecting the undersigned's obligations
hereunder or in enforcing or attempting to enforce any of such holder's
rights hereunder, including reasonable attorneys' fees and disbursements
(including the allocated costs of in-house counsel), whether or not an action
is filed in connection therewith.
Subject to the provisions of the Loan Agreement, the undersigned hereby
waives presentment, demand for payment, dishonor, notice of dishonor, protest,
notice of protest and any other notice or formality, to the fullest extent
permitted by applicable laws.
This Unsecured Line Note shall be delivered to and accepted by the Bank
in the State of California, and shall be governed by, and construed and
enforced in accordance with, the local laws thereof.
NOVELLUS SYSTEMS, INC., a
California corporation
By /s/ William J. Wall
------------------------------------------
William J. Wall, CFO
(Printed Name & Title)
By /s/ John P. Root
-----------------------------------------
John P. Root, Product Line Controller
(Printed Name & Title)
<PAGE>
EXHIBIT A
UNSECURED LINE NOTE
$1,000,000.00 November 1, 1995
San Jose, California
FOR VALUE RECEIVED, the undersigned promises to pay to the order of The
Sumitomo Bank of California (the "BANK"), the principal amount of ONE MILLION
AND N0/100 DOLLARS ($1,000,000.00) or such lesser aggregate amount of
advances under the Revolving Line of Credit as may be made by the Bank
pursuant to the Loan Agreement referred to below, together with interest on
the principal amount of each advance under the Revolving Line of Credit
remaining unpaid from time to time from the date of each such advance under
the Revolving Line of Credit until the date of payment in full, payable as
hereinafter set forth.
Reference is made to the Commercial Loan Agreement dated as of even date
herewith, by and between the undersigned, as Borrower, and the Bank (the
"Loan Agreement"). Terms defined in the Loan Agreement and not otherwise
defined herein are used herein with the meanings defined for those terms in
the Loan Agreement. This is the Unsecured Line Note referred to in the Loan
Agreement, and any holder hereof is entitled to all of the rights, remedies,
benefits and privileges provided for in the Loan Agreement as originally
executed or as it may from time to time be supplemented, modified or amended.
The Loan Agreement, among other things, contains provisions for acceleration
of the maturity hereof upon the happening of certain stated events upon the
terms and conditions therein specified.
The principal indebtedness evidenced by this Unsecured Line Note shall be
payable as provided in the Loan Agreement and in any event on June 30,1996.
Interest shall be payable on the outstanding daily unpaid principal
amount of advances under the Revolving Line of Credit from the date first
written above until payment in full and shall accrue and be payable at the
rates and on the dates set forth in the Loan Agreement both before and after
default and before and after maturity and judgment, with interest on overdue
principal and interest to bear interest at the rate set forth in SECTION 3.10
of the Loan Agreement, to the fullest extent permitted by applicable law.
Each payment hereunder shall be made to the Bank in immediately available
funds not later than 4:00 p.m. (Los Angeles time) on the day of payment (which
must be a Banking Day). All payments received after 4:00 p.m. (Los Angeles
time) on any particular Banking Day shall be deemed received on the next
succeeding Banking Day. All payments shall be made in lawful money of the
United States of America.
<PAGE>
The Bank shall use its best efforts to keep a record of advances under
the Revolving Line of Credit made by it and payments received by it with
respect to this Unsecured Line Note, and, absent manifest error, such record
shall be presumptive evidence of the amounts owing under this Unsecured Line
Note.
The undersigned hereby promises to pay all costs and expenses of any
rightful holder hereof incurred in collecting the undersigned's obligations
hereunder or in enforcing or attempting to enforce any of such holder's
rights hereunder, including reasonable attorneys' fees and disbursements
(including the allocated costs of in-house counsel), whether or not an action
is filed in connection therewith.
Subject to the provisions of the Loan Agreement, the undersigned hereby
waives presentment, demand for payment, dishonor, notice of dishonor,
protest, notice of protest and any other notice or formality, to the fullest
extent permitted by applicable laws.
This Unsecured Line Note shall be delivered to and accepted by the Bank
in the State of California, and shall be governed by, and construed and
enforced in accordance with, the local laws thereof.
NOVELLUS SYSTEMS, INC., a
California corporation
By-----------------------------------
-----------------------------------
(Printed Name & Title)
By-----------------------------------
-----------------------------------
(Printed Name & Title)
<PAGE>
MASTER FOREIGN EXCHANGE AGREEMENT
Master Foreign Exchange Agreement (the "Agreement") dated as of November
15, 1995, between Novellus Systems, Inc. (the "Customer") and the Sumitomo
Bank of California (the "Bank").
1. Subject to the terms and conditions of this Agreement, the Bank, in
its discretion, may enter into spot and forward foreign exchange transactions
with Customer requiring the exchange of a specified amount of one currency
for a specified amount of a second currency on a specified date, referred to
as the settlement date (each, a "foreign exchange transaction"), each foreign
exchange transaction to be evidenced by a confirmation sent by Bank and
acknowledged by Customer. Customer agrees to pay Bank, on demand, Bank's then
standard foreign exchange transaction contract fees for each foreign exchange
transaction.
2. The Bank shall enter into transactions with Customer within a Foreign
Exchange Line established by the Bank, the aggregate amount payable by one
party in any currency not to exceed $5,000,000, although this amount may be
increased if both Bank and Customer agree in writing.
3. The maximum amount at any time of the U.S. Dollar equivalent of the
sum of Customer's obligation to Bank hereunder shall not exceed $5,000,000 in
the aggregate and $2,500,000 for any one settlement date.
4. Neither Customer nor Bank shall be under any obligation to enter
into any particular foreign exchange transaction with each other.
<PAGE>
5. It shall constitute a "default" hereunder in the event that:
(a) Bank or Customer fails to pay any sum due under any transaction
or pursuant to this Agreement within two business days of notice of such
non-payment;
(b) Customer fails to perform or observe any other term, obligation,
covenant or undertaking contained hereunder, under any transaction entered
into pursuant hereto, or under any other transaction entered into between
Customer and Bank, within seven days of notice of such failure to perform or
observe;
(c) any representations or warranties made or deemed, pursuant to
Section 7, to be made by Customer proves to be untrue in any material respect
when made or deemed made;
(d) Customer files or has filed against it a proceeding seeking a
judgment of insolvency or bankruptcy or any other relief under any bankruptcy
or insolvency law or other similar law affecting creditors' rights or has a
receiver, administrator, custodian, or similar official appointed for it or
substantially all of its assets is the subject of any event that, under
applicable law, has an analogous effect to any of the foregoing; or
(e) the authority of any investment manager to transact on
Customer's behalf hereunder is terminated or limited for any reason or such
investment manager is removed or resigns and Customer fails to provide Bank
with reasonably contemporaneous notice thereof;
2
<PAGE>
then the other of us (referred to as the non-defaulting party) may then, at
its option, treat such event or circumstances as an anticipatory breach by
the defaulting party of its obligations to the non-defaulting party under the
outstanding transactions in compliance with the next paragraph.
6. Upon the closing of Bank and Customer's outstanding transactions
hereunder the defaulting party or the non-defaulting party, as the cause may
be, shall be obligated to pay to the other with respect to closed-out
transactions an amount determined as follows:
i) All determinations shall be made in good faith by the
non-defaulting party, shall be conclusive absent manifest error as soon as
practicable, and the date of determination shall be the "Close-Out Day";
ii) With respect to each outstanding transaction there shall be
calculated the "Closing Gain or Loss" which shall be a sum of money equal to
the difference between: (x) the amount of the currency which the
non-defaulting party contracted to sell under such transaction (the "Sold
Currency"); and (y) the amount of the sold currency which is required to
purchase the amount of the currency which the non-defaulting party contracted
to buy under such transaction (the "Bought Currency"), at the rate of
exchange (determined in good faith by the non-defaulting party) at which, on
the Close-Out Day, the non-defaulting party could enter into a contract in
the foreign exchange market to buy that amount of the Bought Currency in
exchange for the Sold Currency for delivery on the relevant value date or the
second business day after the Close-Out Day, whichever is later;
3
<PAGE>
iii) Each difference calculated in accordance with clause (i) above
in currency (other than in U.S. Dollars) shall be notionally converted into
U.S. Dollars at the rate of exchange (determined in good faith by
non-defaulting party) at which, on the Close-Out Day, the non-defaulting
party could enter into a contract in the foreign exchange market to buy such
currency in exchange for U.S. Dollars for delivery on such value date or the
second business day after the Close-Out Day, whichever is later;
iv) The Closing Gain or Loss for each transaction converted into
U.S. Dollars as aforesaid as appropriate shall be adjusted to present value
by discounting or, if the value date precedes the Close-Out Day, at a
then prevailing market rate (as determined in good faith by the non-defaulting
party, and calculated on the basis of the actual number of days elapsed and a
year of 360 days); and
v) The following amounts shall be netted against each other, as
appropriate, in the following order: (x) all adjusted Closing Gains or Losses
owed by one of us to the other; and (y) at the election of the non-defaulting
party, any or all other amounts owing and then due by one of us to the other
under this Agreement.
The amount due and owing after effecting close out between Bank and Customer
as aforesaid shall be immediately due and payable on the Close-Out Day. In
addition, the defaulting party will pay the costs and disbursements
(including all legal fees and costs) incurred by the non-defaulting party in
connection with such close-out or in the enforcement and preservation
generally by the non-defaulting party's rights hereunder and under any
transaction. Upon notification by
4
<PAGE>
the non-defaulting party to the defaulting party of such costs and
disbursements, the same will be immediately due and payable. All amounts
payable under this Agreement, until paid, shall bear interest from the date
they are due at then prevailing market rates (as determined in good faith by
the non-defaulting party). All rights and remedies provided in this Agreement
are cumulative and are not exclusive of any other rights or remedies which
either Bank or Customer may have at common law, by statute or otherwise. Bank
reserves all rights of offset available under applicable law. In the event of
any inconsistency between the terms of a foreign exchange transaction
contract and this Agreement, the terms of the foreign exchange transaction
contract shall prevail for the purpose of the foreign exchange transaction
therein described.
7. Customer represents and warrants to Bank throughout the term hereof
that:
(a) it has power to enter into and perform its obligations under
this Agreement and the foreign exchange transactions contemplated hereunder;
and
(b) this Agreement has been duly authorized, executed and delivered
by it, does not conflict with or contravene any provision of its
constitutional documents or any contractual restriction binding on it or any
of its assets and constitutes its valid, binding and enforceable obligation.
Customer further represents that it acknowledges that any advice or market
commentary given by Bank in connection with this Agreement is
5
<PAGE>
incidental to the provision of its services hereunder and will not serve as
the primary basis of any investment decision made by Customer. Customer
further acknowledges that market commentary made by Bank at any time does not
constitute investment or trading advice and may be different from market
commentary made to other customers due to individual analysis of fundamental
and technical factors by different personnel associated with the Bank and
further that such market commentary may not be consistent with our
investments or any of our affiliates, officers, directors, employees, agents
or independent contractors.
8. Prior to entering into the initial foreign exchange transaction with
any investment advisor on Customer's behalf, Customer shall have delivered to
Bank evidence satisfactory to Bank of the authority of such investment
manager to enter into such transactions on Customer's behalf. Customer agrees
that Bank will incur no liability from operating pursuant to the terms hereof
and on the basis of the evidence of authority previously furnished to Bank
unless and until Bank has received written notice of any changes in authority
of the investment manager to act on Customer's behalf.
9. The receipt or recovery by either Bank or Customer of any amount in
respect of an obligation of the other in a currency (other than U.S.
Dollars), whether pursuant to a judgment of any court or pursuant to Section
7, shall discharge such obligation only to the extent that on the business
day immediately following such receipt the recipient shall be able, in
accordance with normal banking procedures, to purchase U.S. Dollars with the
currency received. If the amount of U.S. Dollars so purchasable shall be less
than the original U.S. Dollar amount of such obligation, the obligor shall,
6
<PAGE>
as a separate obligation and notwithstanding any judgment of any court,
indemnify the recipient against any costs incurred by it in making any such
purchase of U.S. Dollars.
10. Customer agrees that Bank may, in its sole discretion, electronically
record any telephonic conversation between Customer and Bank and that any
such recording may be submitted in evidence to any court or in any legal or
arbitration proceeding for the purpose of establishing any matters pertinent
to any foreign exchange transaction.
11. All notices, requests, confirmations and other communications not
permitted to be given orally hereunder shall be deemed to be effective:
i) when received (if acknowledged by appropriate answerback or
confirmation of receipt), if given by hand delivery, telex, or facsimile; and
ii) on the third day after the day sent, if given by first class
mail, postage prepaid.
All such communications shall be sent to the receiving party at its address,
telex or facsimile number, each as set forth on the signature page hereof.
12. In the event any one or more of the provisions contained in this
Agreement should be held invalid, illegal or unenforceable in any respect,
the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected or impaired thereby. Bank
and Customer shall endeavor in
7
<PAGE>
good faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close
as possible to that of the invalid, illegal or unenforceable provisions.
13. No indulgence or concession is granted by Bank hereunder and no
omission or delay on Bank's part in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or privilege preclude any other or further
exercise thereof or the exercise of any right, power or privilege.
14. This Agreement represents Bank's and Customer's entire agreement,
supersedes all prior oral or written agreements having the same subject
matter, can be modified only by a signed writing, and may not be assigned by
Customer without the written consent of Bank.
15. This Agreement will be governed by and construed in accordance with
the laws of the State of California without regard to principles on conflicts
of law. The parties agree that all actions and proceedings arising in
connection with this Agreement shall be tried and litigated only in the State
of California. Each party submits to the jurisdiction of the State and
Federal courts in California with respect to any such action or proceeding.
16. EACH PARTY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LITIGATION
BETWEEN THEM ARISING OUT OF OR RELATED TO THIS AGREEMENT.
8
<PAGE>
AGREED AND ACCEPTED:
NOVELLUS SYSTEMS, INC.
By: /s/ William J. Wall
---------------------------------------
William J. Wall CFO
Print Name and Title
Date: November 15, 1995
Address: 81 Vista Montana
San Jose, CA 95134
Phone: 408-943-3463
Facsimile: 408-943-0202
SUMITOMO BANK OF CALIFORNIA
By: /s/ William G. Nelle, Jr.
--------------------------------------
William G. Nelle, Jr.
Vice President & Manager
Print Name and Title
Date: November 15, 1995
Address: 84 West Santa Clara Street
Suite 700
Santa Jose, CA 95113
Phone: 415-445-8015 (San Francisco)
408-288-6265 (San Jose)
Facsimile: 415-445-3909 (San Francisco)
408-288-6292 (San Jose)
9
<PAGE>
CORPORATE RESOLUTION TO BORROW
Resolved, that this corporation Novellus Systems, Inc. borrow from
Sumitomo Bank of California hereinafter called the "Bank," from time to time,
such sums of money as, in the judgment of the officer or officers hereinafter
authorized, this corporation may require; provided that the aggregate amount of
such borrowing, pursuant to this resolution, shall not at any one time exceed
the principle sum of One million dollars ($1,000,000.00).
In addition to such amount as may be otherwise authorized;
Resolved Further, that any 2 of the following named officers
----------------
Specify Number
William J. Wall the CFO
- ---------------------------------------- -------------------------------------
John P. Root the Product Line Controller
- ---------------------------------------- -------------------------------------
the
- ---------------------------------------- -------------------------------------
the
- ---------------------------------------- -------------------------------------
of this corporation (the officer or officers or officers acting in combination,
authorized to act pursuant hereto being hereinafter designated as "authorized
officers"), be and they are hereby authorized and empowered, for and on behalf
and in the name of this corporation (1) to execute and deliver to the Bank such
notes or other evidences of indebtedness of this corporation for the monies so
borrowed, with interest thereon, as the Bank may require, and to execute and
deliver, from time to time, renewals or extensions of such notes or other
evidences of indebtedness; (2) to grant a security interest in: transfer, or
otherwise hypothecate or deed in trust for Bank's benefit and deliver by such
instruments in writing or otherwise as may be demanded by the Bank, any of the
property of this corporation as may be required by the Bank to secure the
payment of any notes or other indebtedness of this corporation to the Bank,
whether arising pursuant to this resolution or otherwise; and (3) to perform all
acts and execute and deliver all instruments which the Bank may deem necessary
to carry out the purposes of this resolution;
Resolved Further, that said authorized officers be and they are hereby
authorized and empowered, and that any one of said authorized officers be and he
is hereby authorized and empowered (1) to discount with or sell to the Bank,
conditional sales contracts, notes, acceptances, drafts, bailment agreements,
leases, receivables and evidences of indebtedness payable to this corporation,
upon such terms as may be agreed upon by them and the Bank, and to endorse in
the name of this corporation said notes, acceptances, drafts, bailment
agreements, leases, receivables and evidences of indebtedness so discounted, and
to guarantee the payment of the same to the Bank, and (2) to apply for and
obtain from the Bank letters of credit and in connection therewith to execute
such agreements, applications, guarantees, indemnities and other financial
undertakings as Bank may require;
Resolved Further, that this resolution will continue in full force and
effect until the Bank shall receive official notice in writing from this
corporation of the revocation thereof by a resolution duly adopted by the Board
of Directors of this corporation, and that the certification of the Secretary of
this corporation as to the signatures of the above named persons shall be
binding on this corporation.
I, William J. Wall Secretary of the above named corporation, duly organized
and existing under the laws of the State of California, do hereby certify that
the foregoing is a full, true and correct copy of a resolution of the Board of
Directors of said corporation, duly and regularly passed and adopted at a
meeting of the Board of Directors of said corporation which was duly and
regularly called and held on the________________day of_________________________
at which meeting a quorum of the Board of Directors of said corporation was
at all times present and acting.
I further certify that said resolution is still in full force and effect
and has not been amended or revoked, and that the specimen signatures appearing
below are the signatures of the officers authorized to sign for this corporation
by virtue of said resolution.
IN WITNESS WHEREOF, I have hereunto set my hand as such Secretary, and
affixed the corporate seal of said corporation this 7 day of December, 1995.
AUTHORIZED SIGNATURES:
/s/ William J. Wall
- ---------------------------------
(Signature)
/s/ John P. Root SEAL
- ---------------------------------- (If none,
(Signature) no state)
- ---------------------------------
(Signature)
/s/ William J. Wall
- ---------------------------------- ----------------------------------------
(Signature) (Signature) (Secretary)
<PAGE>
Date: August 31, 1995
---------------------
To: The Mitsubishi Bank, Limited
GUARANTEE
The maximum amount guaranteed Three Hundred Million Japanese Yen
The term of this guarantee Valid Until August 21, 1996
In regard to any and all obligations the Principal presently owes and/or
may owe your Bank as a result of transactions at any time until the date set
forth above provided for in Article 1 of the Agreement of Bank Transactions as
well as the terms set forth below with regard to the performance of any such
obligations:
1. Even if you Bank changes or releases the security or other guarantees at
your Bank's convenience, the Guarantor shall not claim exemption from the
obligations.
2. The Guarantor shall not effect a setoff by any of the Principal's
deposits or credits with your Bank.
3.If and when the Guarantor performs any obligations of this guarantee, the
Guarantor shall not exercise any rights obtained from your Bank by subrogation
without the prior approval of your bank so long as transactions between the
Principal and your Bank continue. Upon your Bank's demand, the Guarantor shall
assign such rights and priority to your Bank without compensation.
4. In cases in which the Guarantor has given or gives in the future any
other guarantee in regard to any of the Principal's obligations to your Bank,
the total amount of the obligations guaranteed shall, unless otherwise agreed,
be the aggregate of such guarantees, and this guarantee shall not affect any
such other guarantees.
The Principal: Signature:
---------
Full Name:
Revenue
Stamp Address:
---------- The Guarantor: Signature: /s/
Full Name: William T. Wall
Address: Novellus Systems, Inc.
81 Vista Montana
San Jose, CA 95134
(All questions that may arise within or without courts of law in regard to the
meaning of the words, provisions and stipulations of the Agreement shall be
decided in accordance with the Japanese text.)
[GRAPHIC]
<PAGE>
- ------
COPY
- ------
Date ,19
--------------------
TO: THE MITSUBISHI BANK, LIMITED
AGREEMENT ON BANK TRANSACTIONS
I/We do hereby agree to the terms and conditions set forth in the following
Articles in regard to my/our transactions with your Bank:
Article 1 (Scope of Application)
(1) I/We shall abide by this Agreement pertaining to the performance of
my/our obligations arising from loans against Bills of Exchange
(hereinafter referred to as "Bills"), discounts of Bills and Notes,
loans by deed, overdrafts, acceptances and guarantees, foreign
exchanges, and any and all other transactions.
(2) Even in cases in which your Bank has, through your Bank's transactions
with any third party, acquired Bills and Notes drawn, endorsed,
accepted, accepted by intervention, or guaranteed by me/us, I/we shall
also abide by this Agreement pertaining to the performance of my/our
obligations evidenced by such Bills and Notes.
Article 2 (Obligations in Bills and Notes and Money Borrowed)
In cases in which your Bank has granted me/us loans accompanied by Bills
and Notes, your Bank may demand from me/us the payment of my/our
obligations arising from the loans by exercising your Bank's rights either
on the Bills and Notes or on the loans.
Article 3 (Interest, Damages, etc.)
(1) In regard to the stipulations concerning the rates of interest,
discount charges, guarantee fees, handling commissions and rebates of
any thereof, and also concerning the time and method of payment
thereof, I/we shall agree, in the event of changes in the financial
situation or any other reasonable and probable causes arising, to the
revision of the stipulations to those in the range prevailing
generally
(2) In case I/we fail to perform any obligations which I/we owe your Bank,
I/we shall pay your Bank damages at the rate of 14% annum for the
amount payable. In this case the calculation will be made the actual
number of days on a 365-day basis.
Article 4 (Security)
(1) In cases in which a reasonable and probable cause necessitates the
preservation of your Bank's rights, I/we shall upon demand forthwith
furnish to your Bank such security or additional security, or such
guarantors or additional guarantors as may be approved by your Bank.
(2) Any and all security which has been furnished and that to be furnished
in the future to your Bank for specific obligations shall constitute
security that covers and secures not only such obligations, but also
any and all other obligations which I/we at present or in the future
may owe your Bank.
(3) Your Bank may collect or dispose of security in the manner, at the
time, and for the price, etc. generally deemed proper, not necessarily
following the procedures prescribed by law, and deduct expenses from
the proceeds and appropriate the remainder to the payment of my/our
obligations regardless of the priority prescribed by law; and in the
event any obligations still remain, I/we shall pay them forthwith.
(4) In cases in which I/we fail to perform any obligations which I/we owe
your Bank. Your Bank may collect or dispose of my/our movables, Bills
and Notes, and other instruments and securities in your Bank's
possession' and in such cases, I/we shall agree to your Bank's
handling the matter mutatis mutandis in the manner set forth in the
preceding Paragraph.
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Article 5 (Acceleration of Payment)
(1) In case any one of the following events occurs to me/us, any and all
obligations I/we owe your Bank shall immediately become due and
payable without any notice or demand, etc. from your Bank: and I/we
shall pay such obligations forthwith;
1. When I/we have become unable to pay debts or application or
petition is submitted for bankruptcy, commencement of composition
of creditors, commencement of corporate reorganization
proceedings, commencement of company arrangement, or commencement
of special liquidation.
2. When the Clearing House in observance of its rules takes
procedures for suspension of my/our transactions with banks and
similar institutions.
3. When order or notice of provisional attachment. preservative
attachment or attachment is dispatched in respect of my/our or
the guarantor's deposits and/or any other credits with your Bank.
4. When my/our whereabouts become unknown to your Bank due to my/our
failure to notify your Bank of change of my/our address or any
other causes attributable to me/us.
(2) In any of the following cases, upon your Bank's demand, any and all
obligations I/we owe your Bank shall immediately become due and
payable; and I/we shall pay them forthwith:
1. When I/we fail to pay any of my/our obligations to your Bank when
it is due.
2. When property offered to your Bank as security is attached or
public auction procedure is commenced in respect of such
property.
3. When I/we violate the stipulation of any transactions with your
Bank.
4. When the guarantor fails under any one of the items of the
preceding items, when a reasonable and probable cause
necessitates the preservation of your Bank's rights.
5. In addition to each of the preceding items, when a reasonable and
probable cause necessitates the preservation of your Bank's
rights.
Article 6 (Repurchase of Discounted Bills and Notes)
(1) In cases in which I/we have has Bills and Notes discounted by your
Bank and any one of the items in Paragraph (1) of the preceding
Article occurs to me/us, then pertaining to all such Bills and Notes,
or in cases in which the principal obligators of my/our discounted
Bills and Notes fail to pay them on due dates or any one of the items
in Paragraph (1) of the preceding Article occurs to the principal
obligators, them pertaining to the Bills and Notes wherein such
persons are the principal obligates. I/we shall assume as a matter of
course the repurchasing obligations for the face value of my/our
discounted Bills and Notes without any notice or demand, etc. form
your Bank; and I/we shall pay them forthwith.
(2) In cases other than those provided for in the preceding Paragraph, in
which a reasonable and probable cause necessitates the preservation of
your Bank's rights pertaining to the Bills and Notes which your Bank
has discounted, I/we shall assume, upon your Bank's demand, the
repurchasing obligations for the face value of my/our discounted Bills
and Notes; and I/we shall pay them forthwith.
(3) As long as I/we do not perform the obligations set forth in the
preceding two paragraphs, your Bank may exercise any and all rights
as holder of the Bills and Notes.
Article 7 (Deductions in Accounts)
(1) In cases in which I/we must perform any obligations owed to your
Bank because they become due or because they become due or because of
acceleration of payment or because I/we have assumed the
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<PAGE>
repurchasing obligations or because your Bank has acquired the right
of claiming compensation from me/us or for any other causes, your Bank
may set off against any such obligations at any time any of my/our
deposits and/or any other credits with your Bank irrespective of the
due dates of such deposits and/or other credits.
(2) In cases in which your Bank is able to effect a setoff as mentioned in
the preceding paragraph, your Bank may also obtain withdrawals from
my/our deposits in lieu of my/our doing so, and may appropriate any
such withdrawals to payments of my/our obligations, omitting any
advance notice and also not adhering to established procedures.
(3) In cases in which your Bank makes any deductions in accounts according
to the provisions of the preceding two Paragraphs, interest on my/our
credits and obligations, discount charges and damages, etc. shall be
calculated up to the date on which the actual calculation is made by
your Bank for the purpose of deductions and the rate of interest and
tariffs shall be in accordance with those fixed by your Bank: and with
regard to the foreign exchange rate, the rate quoted at your Bank at
the time when the actual calculation is made by your Bank shall apply.
Article 7-2 (Ditto)
(1) I/we may set off any obligations I/we owe your Bank against my/our
deposits and/or any other credits with your Bank which have become
due, even when such obligations have not yet become due.
(2) When I/we effect a setoff under the provision of the preceding
Paragraph with regard to the Bills and Notes which your Bank has
discounted and assigned to a third party.
(3) With regard to my/our credits or obligations in foreign currency or in
free yen, I/we may not, notwithstanding the provisions of the
preceding two paragraphs, effect a setoff until and unless they have
become due and procedures required under foreign exchange laws and
regulations have been completed for them.
(4) In cases in which I/we effect a setoff under the provisions of the
preceding three Paragraphs, a notice of the setoff shall be made in
writing and I/we shall affix my/our seal impression (or signature)
which has previously been filed with our Bank to the certificate or
passbook representing my/our obligations and submit the same to your
Bank Forthwith.
(5) In cases in which I/we effect a setoff, interest on my/our credits and
obligations, discount charges and damages, etc. shall be calculated up
to the date on which my/our notice charges and damages, etc. shall be
calculated up to the date on which my.our notice of the setoff arrives
at your Bank, and the rate of interest and tariffs shall be in
accordance with those fixed by your Bank; and with regard to the
foreign exchange rate, the rate quoted at your Bank at the time when
the actual calculation is made by your Bank for the purpose of setoffs
shall allow. If there is an agreement providing for special charges
payable when obligations are paid prior to their due dates, I/we shall
abide by such agreement.
Article 8 (Presentment and Delivery of Bills and Notes)
(1) In cases in which there exist Bills and Notes pertaining to my/our
obligations, and your Bank makes deductions in accounts as set forth
in Article 7 without exercising your Bank's rights on the Bills and
Notes, your Bank need not simultaneously return to me/us any such
Bills and Notes.
(2) In cases in which there exist Bills and Notes which your Bank returns
to me/us as a result
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<PAGE>
of deductions in accounts made by your Bank or me/us under the
preceding two Articles. I/we shall appear at your Bank to receive
such Bills and Notes without delay: provided. however, that if such
Bills and Notes have not yet become due, your Bank may collect them
without returning them to me/us.
(3) In cases in which your Bank makes deductions in accounts as set froth
in Article 7 by exercising their rights on the Bills and Notes, your
Bank need not present nor deliver any such Bills and Notes to me.us in
the cases enumerated below; and as for my/our receiving such Bills and
Notes, the provisions of the preceding paragraph shall alloy mutatis
mutandis:
1. When your Bank does not know my/our whereabouts.
2. When I/we have designated your Bank as the place at which Bills
and Notes are made payable.
3. When it is deemed difficult to dispatch the Bills and Notes.
4. When it is deemed that presentment or delivery of the Bills and
Notes can not be made for unavoidable reasons as use for
collections, etc.
(4) In cases in which any of my/our obligations which require immediate
performance still exist after a deduction in accounts has been
effected as provided for in the preceding two Articles, and there also
exist obligators on the Bills and Notes besides me/us, your Bank may
appropriate the proceeds to the payment of my/our obligations.
Article 9 (Designation of Appropriation)
(1) In the event I/we made payments of your Bank made deductions in
accounts as provided for in Article 7, and if in such cases the amount
of such payments made by me/us or my/our deposits and any other
credits with your Bank are insufficient to liquidate all of my/our
obligations, your bank may appropriate the amount of such payments or
such deposits and other credits to satisfy my/our obligations in such
order and in such manner as your Bank deems proper and I/we shall
raise no objection to such appropriation.
Article 9-2 (Ditto)
(1) In the event I/we effect a setoff in accordance with Article 7-2, and
if in such case my/our deposits and any other credits with your Bank
are insufficient to liquidate all of my/our obligations, I/we may
appropriate such deposits and other credits to satisfy my/our
obligations in such order and in such manner as I/we designate.
(2) In the event I/we fail to designate the order and manner of
appropriation under the preceding Paragraph, your bank may appropriate
my/our deposits and other credits with your Bank to satisfy my/our
obligations in such order and in such manner as your Bank deems proper
and I/we shall raise no objection to such appropriation.
(3) In the event my/our designation under Paragraph (1) is likely to
interfere with the preservation of your Bank's rights, your Bank may,
upon lodging an objection thereto without delay, appropriate my/our
deposits and other credits with your Bank to satisfy my/our
obligations in such order and in such manner as your Bank designates
taking into consideration whether or not the obligations are secured
or guaranteed and if secured or guaranteed, the extent of coverage of
such security or guarantee, the degree of difficulty or disposition of
such security their due dates prospects for settlement of discounted
Bills and Notes, etc.
(4) In case of appropriation by your Bank under the preceding two
Paragraphs, your Bank may designate the order and manner or
appropriation on the assumption that my/our obligations which are in
fact not due have become due or that I/we have assumed the
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<PAGE>
repurchasing obligations with regard to the Bills and Notes which your Bank
has discounted and which have not yet become due or that I/we have assumed
in advance the obligations to compensate your Bank with regard to the
acceptances and guarantees.
Article 10 (Assumption of Risks, Hold Harmless Clause, etc.)
(1) in cases in which Bills and Notes which I/we have furnished to your
Bank are lost, destroyed, damaged or delayed in arrival due to
unavoidable circumstances such as incidents, calamities, accidents
during transit, etc., I /we shall pay my/our obligations as recorded
on your Bank's nooks, vouchers, etc. and further, upon your Banks's
demand, I/we shall forthwith furnish your Bank with substitute Bills
and Notes or instruments. I/we shall make no claim whatsoever against
your Bank with regard to losses and damages arising in such cases.
(2) In cases in which security which I/we have furnished to your Bank is
lost or damaged due to unavoidable circumstances as set forth in the
preceding Paragraph. I/we shall make no claim whatsoever against your
Bank.
(3) Even if your Bank's rights on Bills and Notes are ineffective due to
lack of legal requirements in the Bills and Notes, or due to
invalidating entries thereon, or if your Bank's rights on the Bills
and Notes lapse die to inadequacy in the procedures for preservation
of your Bank's rights, I/we shall be liable for the face value of such
Bills and Notes.
(4) In transactions in which your Bank has deemed my/our seal impression
(or signature) genuine after checking with reasonable care the seal
impression (or signature) on Bills and Notes or instruments against
my/our seal impression (or specimen signature) filed with your Bank,
I/we shall bear any losses and damages arising from forgery,
alteration, wrongful use of Bills and Notes, instruments or seals (or
signatures) and shall be liable in accordance with the terms of any
such Bills and Notes or instruments.
(5) I/We shall bear the expenses incurred in exercising or preserving your
Bank's rights against me/us, or in collecting or disposing of any
security: and I/we shall also bear any expenses required in the event
I/we request your Bank to cooperate with me/us for the preservation of
my/our rights.
Article II (Changes in Matters Filed)
(1) In cases of a change in the matters filed with your Bank such as
my/seal (or signature), name, trade name, representative, address,
etc., I/we shall forthwith notify your Bank thereof in writing.
(2) In any case any notice given by your Bank or any documents, etc.
dispatched by your Bank are delayed or fail to reach me/us because of
my/our failure to notify your Bank in accordance with the preceding
Paragraph, the notice or documents, etc. shall be deemed to have
arrived at the time they normally should have arrived.
Article 12 (Report and Investigation)
(1) Upon your Bank's demand, I/we shall forthwith submit to your Bank
reports pertaining to my/our assets and liabilities, management or the
state of business; and I/we shall forthwith submit to your bank
reports thereof even in the absence of your Bank's demand.
(2) In cases in which material change has occurred or is likely to
occur pertaining to my/our assets and liabilities, management or
the state of business, I/we shall forthwith submit to your Bank
reports thereof even in the absence of your Bank's demand.
Article 13 (Applicable Offices)
(1) I/we agree that all of the terms and conditions of this Agreement
shall apply equally to all of our transactions with your Bank's head
office and branch offices.
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Article 14 (Jurisdiction by Agreement)
In the event the institution of a lawsuit in connection with a transaction
covered by this Agreement becomes necessary, I/we shall agree that the
Court having the jurisdiction in the locale in which the head office
or _________________ branch office of your Bank is situated shall be the
competent Court.
---------- Signature :
Revenue Full Name :
Stamp
Address :
----------
(All questions that may arise within or without courts of law in regard to
the meaning of the words, provisions and stipulations of this Agreement
shall be decided in accordance with the Japanese text.)
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<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGEMENT
STATE OF CALIFORNIA }
} s.s.
COUNTY OF SANTA CLARA }
ON THIS 31ST DAY OF AUGUST, 1995 BEFORE ME, R.E. STANDISH, NOTARY PUBLIC,
PERSONALLY APPEARED WILLIAM J. WALL --------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
/ / PERSONALLY KNOWN TO ME-OR -/ /PROVED TO ME ON THE BASIS OF SATISFACTORY
EVIDENCE TO BE THE PERSON /S WHOSE
NAME /S IS/ARE SUBSCRIBED TO THE WITHIN
INSTRUMENT AND ACKNOWLEDGED TO ME THAT
HE/SHE/THEY EXECUTED THE SAME IN
HIS/HER/THEIR AUTHORIZED CAPACITIES, AND
THAT HIS/ HER/ THEIR SIGNATURE /S ON THE
[SEAL] INSTRUMENT THE PERSON /S OR THE ENTITY
UPON BEHALF OF WHICH THE PERSON /S ACTED
EXECUTED THE INSTRUMENT.
WITNESS MY HAND AND OFFICIAL SEAL.
/S/ R.E STANDISH
----------------------------------------
(SEAL) R.E. STANDISH NOTARY PUBLIC
THIS CERTIFICATE MUST BE ATTACHED TO THE DOCUMENT DESCRIBED BELOW:
TITLE OR TYPE OF DOCUMENT GUARANTEE
----------------------------------------------------
NUMBER OF PAGES SIX (6) DATE OF DOCUMENT AUGUST 31, 1995
-------------- --------------------------------
SIGNERS OTHER THAN NAMED ABOVE
-----------------------------------------------
/X/ INDIVIDUAL /X/ CORPORATE OFFICER(S) TITLES(S) C.F.O
----------------------
/ / PARTNERS / / LIMITED
/ / GENERAL
/ / ATTORNEY - IN - FACT
/ / TRUSTEE(S) / / TRUSTOR(S) / /BENEFICIARY/S/
/ / GUARDIAN/CONSERVATOR
/ / OTHER:
------------------------------------------------------
[LOGO]
SIGNER IS REPRESENTING: NOVELLUS
-------------------------------------------
<PAGE>
RESOLVED, that this Corporation, Novellus Systems, Inc. is hereby authorized to
give a letter of guarantee for a loan extended to its subsidiary, Nippon
Novellus Systems, KK by the Mitsubishi Bank, LTD. Naruse Branch 2-2
Minaminaruse, 1-chome Machida, Tokyo 194 Japan.
CORPORATE SECRETARY'S CERTIFICATE
I, WILLIAM J. WALL, Secretary of NOVELLUS SUSTEMS, INC., a corporation
organized and existing under the laws of the State of CALIFORNIA (the
"Corporation"), hereby certify that the foregoing is a full, true and correct
copy of resolutions of the Board of Director of the Corporation, duly and
regularly adopted by the Board of Directors of the Corporations in all respects
as required by law and the by-laws of the Corporation on JULY 21, 1995, at a
meeting at which a quorum of the Board of Directors of the Corporation was
present and the requisite number of such directors voted in favor of said
resolutions, or by the unanimous consent in writing of all members of the Board
of Directors of the Corporation to the adoption of said resolutions.
I further certify that said resolutions are still in full force and effect
and have not been amended or revoked, and that the specimen signatures appearing
below are the signatures of the officers authorized to sign for the Corporation
by virtue of such resolutions.
IN WITNESS WHEREOF, I have hereunto set my hand as Secretary of the
Corporation, and affixed the corporate seal of the Corporation, on JULY 21,
1995.
/s/William J. Wall
----------------------------
SIGNATURE SECRETARY OF
Novellus Systems, Inc.
----------------------------
AFFIX
CORPORATE
SEAL HERE A California CORPORATION
----------------------------
<PAGE>
LEASE
BY AND BETWEEN
W. F. BATTON & CO., INC., LESSOR
AND
NOVELLUS SYSTEMS, INC., LESSEE
Northpointe Business Center
3590 North First Street
San Jose, California
September 26, 1995
<PAGE>
TABLE OF CONTENTS
PARAGRAPH PAGE
1 Hiring . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2 Initial Term . . . . . . . . . . . . . . . . . . . . . . . . . 2
3 Option to Extend . . . . . . . . . . . . . . . . . . . . . . . 3
4 Security Deposit . . . . . . . . . . . . . . . . . . . . . . . 3
5 Monthly Base Rent. . . . . . . . . . . . . . . . . . . . . . . 4
6 Additional Rent; Increases in Operating Expenses and Taxes . . 7
7 Payment of Rent. . . . . . . . . . . . . . . . . . . . . . . .12
8 Use. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
9 Hazardous Materials. . . . . . . . . . . . . . . . . . . . . .13
10 Taxes on Lessee's Property . . . . . . . . . . . . . . . . . .14
11 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . .15
12 Indemnification. . . . . . . . . . . . . . . . . . . . . . . .16
13 Construction of Leasehold Improvements . . . . . . . . . . . .16
14 Maintenance and Repairs; Alterations . . . . . . . . . . . . .17
15 Utilities. . . . . . . . . . . . . . . . . . . . . . . . . . .19
16 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
17 Assignment and Subletting. . . . . . . . . . . . . . . . . . .20
18 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
<PAGE>
19 Holding Over . . . . . . . . . . . . . . . . . . . . . . . . .23
20 Damage or Destruction. . . . . . . . . . . . . . . . . . . . .24
21 Eminent Domain . . . . . . . . . . . . . . . . . . . . . . . .26
22 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . .27
23 Lessee's Personal Property . . . . . . . . . . . . . . . . . .28
24 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . .28
25 Estoppel Certificate . . . . . . . . . . . . . . . . . . . . .29
26 Parking . . . . . . . . . . . . . . . . . . . . . . . . . . 29
27 Real Estate Brokers. . . . . . . . . . . . . . . . . . . . . .29
28 Expansion Space. . . . . . . . . . . . . . . . . . . . . . . .29
29 Subordination. . . . . . . . . . . . . . . . . . . . . . . . .30
30 No Termination Right . . . . . . . . . . . . . . . . . . . . .30
31 Approvals. . . . . . . . . . . . . . . . . . . . . . . . . . .30
32 Lessor's Entry . . . . . . . . . . . . . . . . . . . . . . . .31
33 Reasonable Expenditures. . . . . . . . . . . . . . . . . . . .31
34 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . .31
35 General Provisions . . . . . . . . . . . . . . . . . . . . . .31
SCHEDULE OF EXHIBITS
Exhibit "A" - Legal Description
Exhibit "B" - the Premises
Exhibit "C" - Leasehold Improvements
<PAGE>
L E A S E
THIS LEASE is made and entered into as of September 26, 1995 by and between
W. F. BATTON & CO., INC., a California corporation, hereafter referred to as
"Lessor," and NOVELLUS SYSTEMS, INC., a California corporation, hereafter
referred to as "Lessee."
The parties agree as follows:
1. HIRING.
(a) Lessor hereby leases to Lessee, and Lessee leases and hires from
Lessor, those certain premises consisting of approximately Six Thousand Two
Hundred Sixty-eight (6,268) rentable square feet (the "premises") located on the
third floor of that certain building commonly known as Northpointe Business
Center, 3590 North First Street, San Jose, California (the "Building"). This
Lease shall be for the term, at the rental, and upon the covenants and
conditions contained herein. The building is located on Parcel One of the real
property described on EXHIBIT "A" attached hereto and incorporated by reference
herein. The premises are shown as the shaded area on EXHIBIT "B" attached
hereto and incorporated by reference herein.
(b) The Building contains Eighty-six Thousand Seven Hundred Thirteen
(86,713) rentable square feet.
(c) The real property referred to above, including the Hetch Hetchy
Lease area used for additional parking area for the tenants of the Building,
together with the Building and all other improvements now or hereafter located
on said real property, are hereafter called the "Complex."
(d) The portion of the real property referred to above not covered by
the Building is hereafter called the "Outside Areas."
(e) "Lessee's Share" as used in this Lease shall mean the percentage
calculated by dividing the total number of rentable square feet of the premises
by the total number of rentable square feet in the Building. The parties agree
that Lessee's Share shall be 7.23% based upon the premises consisting of
approximately Six Thousand Two Hundred Sixty-eight (6,268) rentable square feet
(6,268/86,713).
<PAGE>
2. INITIAL TERM,
(a) The initial term of this Lease (the "initial term") shall
commence (the "Commencement Date") five (5) days after written notice from
Lessor to Lessee of the first to occur of (1) the date a notice of completion
for the Lessee Interior Improvements constructed by Lessor is filed by Lessor;
or (2) the date the City of San Jose completes a final inspection and approves
the Lessee Interior Improvements so completed in accordance with the building
permit; or (3) the date Lessor's architect and general contractor have both
certified in writing to Lessee that the Lessee Interior Improvements have been
substantially completed in accordance with the plans; or (4) the date on which
the Lessee occupies the premises. The parties shall cooperate in attempting to
cause the Lessee Interior Improvements to be completed on or about October 15,
1995. Lessee agrees to accept possession of the premises and to occupy the
premises when possession is delivered by Lessor, provided that the Lessee
Interior Improvements have been substantially completed by Lessor. The initial
term of this Lease shall expire, unless sooner terminated, on the last day of
the sixtieth (60th) full calendar month after the Commencement Date.
(b) If Lessor is unable to deliver possession of the premises to
Lessee pursuant to Paragraph 2(a) by October 15, 1995 for any reason, Lessor
shall not be liable for any damage to Lessee caused by the delay in delivering
possession, and this Lease shall not be void or voidable nor shall Lessee be
relieved of any obligation hereunder; provided, that, unless Lessee agrees in
writing, in no event shall Lessor deliver possession of the premises after
November 30, 1995 plus the period equal to any delays in completing the Lessee
Interior Improvements caused by Lessee or caused by strikes, labor disputes or
work stoppages, unavailability or delay in delivery of materials, inclement
weather, acts of God, or other causes beyond Lessor's control (collectively,
"excusable delays"). In the event that Lessor has not delivered possession of
the premises to Lessee by November 30, 1995, plus the period of excusable
delays, Lessee may terminate this Lease by giving written notice to Lessor
within thirty (30) days thereafter. Upon such termination, Lessor and Lessee
shall be discharged from all obligations hereunder, and Lessor shall return
within ten (10) days of receipt of such notice of termination any and all money
previously deposited by Lessee in connection herewith. In the event that
delivery of possession of the premises is delayed beyond November 30, 1995 by
excusable delays, Lessor, in addition to all other rights and remedies, may in
its discretion extend the Commencement Date of this Lease by the period of such
delay (including beyond November 30, 1995).
(c) Lessee's acceptance of the premises shall not be deemed a waiver
of Lessee's right to have defects in the Lessee Interior Improvements or the
premises repaired at Lessor's sole expense during the first twelve (12) months
of the initial term. Lessee shall give written notice to Lessor whenever any
such defect becomes reasonably apparent, and
2
<PAGE>
provided that such written notice is given to Lessor within twelve (12) months
after the Commencement Date, Lessor shall repair such defect as soon as
practicable. Lessor also hereby assigns to Lessee all warranties with respect to
the premises which would reduce Lessee's maintenance obligations hereunder and
Lessor shall cooperate with Lessee to enforce all such warranties.
3. OPTION TO EXTEND. Lessor hereby grants to Lessee one (1) option to
extend the lease term for one (1) period of thirty-six (36) calendar months
immediately following the expiration of the initial lease term. Lessee may
exercise the foregoing option to extend by giving written notice of exercise to
Lessor at least six (6) months, but not more than twelve (12) months prior to
the expiration of the initial term; provided that if Lessee is currently in
default under this Lease at the time of exercise of the option, such notice
shall be void and of no force or effect. The option extension period, if
exercised, shall be upon the same terms and conditions as the initial term,
except that the Monthly Base Rent during the option period shall be determined
as set forth in Paragraphs 5(d) and 5(e) below, and there shall be no additional
option to extend. The option to extend granted to Lessee by this Paragraph 3 is
granted for Lessee's personal benefit only, and shall be exercisable only by
Novellus Systems, Inc. Said option may not be assigned or transferred by
Novellus Systems, Inc. to any assignee or sublessee. Notwithstanding anything
to the contrary contained above, Lessee shall be entitled to transfer the option
to extend granted by this Paragraph 3 pursuant to a permitted transfer without
Lessor's prior written consent as set forth in Paragraph 17(i) hereof.
4. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution
hereof the sum of Fifteen Thousand Dollars ($15,000) as a security deposit as
security for Lessee's faithful performance of Lessee's obligations under this
Lease. If Lessee fails to pay Monthly Base Rent, Additional Rent, or other
charges due hereunder, or otherwise defaults under this Lease (as default is
defined in Paragraph 22), Lessor may use, apply or retain all or any portion of
the security deposit for the payment of any amount due Lessor or to reimburse or
compensate Lessor for any liability, cost, expense, loss or damage (including
reasonable attorneys' fees) which Lessor may suffer or incur by reason thereof.
If Lessor uses or applies all or any portion of the security deposit, Lessee
shall within ten (10) days after written request therefor deposit moneys with
Lessor sufficient to restore the security deposit to the full amount required by
this Lease. Lessor shall not be required to keep all or any part, of the
security deposit separate from its general accounts. Lessor shall, at the
expiration or earlier termination of the term hereof and after Lessee has
vacated the premises, return to Lessee (or, at Lessee's option, to the last
assignee, if any, of Lessee's interest herein), that portion of the security
deposit not used or applied by Lessor. Unless otherwise expressly agreed in
writing by Lessor, no part of the security deposit shall be considered to be
held in trust, to
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bear interest or other increment of its use, or to be prepayment for any moneys
to be paid by lessee under this lease.
5. MONTHLY BASE RENT.
(a) Lessee shall pay to lessor for each full calendar month during
the initial thirty (30) calendar months of the lease term, plus the partial
month if any at the commencement of the lease term, Monthly Base Rent of Ten
Thousand Six Hundred Fifty-Five and Sixty Hundredths Dollars ($10,655.60) per
month. Upon the execution and delivery of this lease by Lessor and Lessee,
Lessee shall pay to Lessor the sum of Ten Thousand Six Hundred Fifty-five and
Sixty Hundredths Dollars ($10,655.60) representing the Monthly Base Rent for the
first month of the lease term. Monthly Base Rent for any partial calendar month
at the commencement of the lease term shall be payable at the rate of Three
Hundred Fifty-five and Sixty Hundredths Dollars ($355.18) per day.
(b) Lessee shall pay to Lessor for each calendar month during the
period beginning with the thirty-first (31st) full calendar month of the lease
term and continuing through the Sixtieth (60th) full calendar month of the lease
term, Monthly Base Rent of Eleven Thousand Five Hundred Thirty-three and Twelve
Hundredths Dollars ($11,533.12) per month.
(c) Monthly Base Rent is determined on a full service basis and
includes the Base Operating Expenses (including standard electrical service) and
Base Taxes referred to in Paragraph 6(b) hereof.
(d) The Monthly Base Rent for the premises during the option
extension period shall be an amount equal to the then existing fair market rent
of the premises as of the commencement date of the option extension period ("The
Option Monthly Base Rent"), but in no event shall the Option Monthly Base Rent
be less than the Monthly Base Rent in effect for the last month of the initial
lease term. The fair market rent for the premises for the option extension
period shall be determined by comparison with comparables (including typical
market concessions) for similar class "A" buildings in the Santa Clara area.
Said Option Monthly Base Rent for the option extension period shall be
established by agreement between the Lessor and Lessee, if possible, and by the
process of appraisal if the parties cannot reach agreement.
At least six (6) months, but not more than twelve (12) months, prior
to the expiration of the initial lease term, Lessee shall deliver notice to
Lessor of Lessee's determination of the ammount of the fair market Monthly Base
Rent of the premises as of the commencement of the option term, which shall in
no event be less than the Monthly Base
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Rent in effect at the expiration of the initial term; provided that, in the
event Lessee has no intention of exercising the option to extend the lease term,
then Lessee shall have no obligation to deliver notice to Lessor of Lessee's
determination. If Lessor disagrees with Lessee's determination of the amount of
the fair market Monthly Base Rent of the premises, Lessor shall so notify Lessee
within thirty (30) days after Lessor receives Lessee's notice of exercise of the
option to extend the lease term.
In the event that Lessee timely gives notice to Lessor of Lessee's
election to exercise the option to extend the lease term and Lessor does not
give Lessee notice in writing that Lessor disagrees with Lessee's determination
of fair market rent within the time period referred to above, Lessor and Lessee
shall execute an amendment to this Lease stating that the initial Monthly Base
Rent for the premises during the option extension period shall be equal to the
amount of Lessee's determination.
If Lessor notifies Lessee that Lessor disagrees with Lessee's
determination of the fair market rent for the premises within thirty (30) days
after Lessor receives Lessee's notice of exercise of option, then the two
parties shall confer for an additional period of ten (10) days to attempt in
good faith to reach agreement upon the fair market rent for the premises.
If after the expiration of said additional ten (10) day period the
parties have not reached a written agreement as to the amount of the fair market
rent for the premises, then such fair market rent shall be determined by
appraisal as provided in subparagraph (e) below, subject to the condition that
the Monthly Base Rent for the option extension period shall not be less than the
Monthly Base Rent in effect at the expiration of the initial term.
(e) If it becomes necessary to determine by appraisal the fair market
Monthly Base Rent for the premises as of the commencement of the option term,
real estate appraiser(s), each of whom shall be members of the American
Institute of Real Estate Appraisers (AIREA), with at least five (5) years' full-
time commercial real estate appraisal experience in the San Jose, California
Area, shall be appointed and shall act in accordance with the procedures set
forth below.
Either party may demand an appraisal by giving written notice to the
other party, which demand to be effective must state the name, address, and
qualifications of an appraiser selected by the party demanding an appraisal (the
"Notifying Party"). Within ten (10) days following the Notifying Party's
appraisal demand, the other party (the "Non-Notifying Party") shall either
approve the appraiser selected by the notifying party or select a second
properly qualified appraiser by giving written notice of the name, address, and
qualification of said appraiser to the Notifying Party. If the Non-Notifying
Party fails
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to select an appraiser within the ten (10) day period, the appraiser selected by
the Notifying Party shall be deemed selected by both parties and no other
appraiser shall be selected. If two appraisers are selected, they shall select
a third appropriately qualified appraiser within five (5) days of being
selected. If the two appraisers fail to select a third qualified appraiser
within such five (5) day period, then the third appraiser shall be appointed by
the then Presiding Judge of the Superior Court of Santa Clara County.
If only one appraiser is selected, that appraiser shall notify
the parties in simple letter form of its determination of the fair market
Monthly Base Rent for the premises within fifteen (15) days following his
selection, which appraisal shall be conclusively determinative and binding on
the parties as the appraised current fair market rental for the premises.
If multiple appraisers are selected, each appraiser shall within
ten (10) days of being selected make his determination of the current fair
market Monthly Base Rent for the premises in simple letter form. If two (2) or
more of the appraisers agree on the rent for the premises, such agreement shall
be determinative and binding upon the parties. If multiple appraisers are
selected and two (2) appraisers are unable to agree on the rent, the parties
shall then determine the fair market Monthly Base Rent for the premises by
taking the mean average of the appraisals; provided, that any high or low
appraisal, differing from the middle appraisal by more than ten percent (10%) of
the middle appraisal, shall be disregarded in calculating the average.
The appraisers' determination of the current fair market Monthly
Base Rent of the premises shall be based on the criteria refeffed to in
Paragraph 5(d)(1) above.
If only one appraiser is selected, then each party shall pay one-
half of the fees and expenses of that appraiser. If three appraisers are
selected, each party shall bear the fees and expenses of the appraiser it
selects and one-half of the fees and expenses of the third appraiser.
Thereafter, in the event that Lessee timely gives notice to
Lessor to extend the term of this Lease to include the option extension period,
Lessor and Lessee shall execute an amendment to this Lease stating that the
Monthly Base Rent for the premises during the option extension period shall be
equal to the greater of (1) the Monthly Base Rent as determined by appraisal;
or (2) the Monthly Base Rent in effect at the expiration of the initial term.
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6. ADDITIONAL RENT: INCREASES IN OPERATING EXPENSES AND TAXES.
(a) If Operating Expenses and/or Taxes for any calendar year
during the term of this Lease after the calendar year 1996 exceed Base Operating
Expenses and/or Base Taxes as defined in Paragraph 6(d) hereof, Lessee shall pay
to Lessor, as "Additional Rent," Lessee's Share of such increase in Operating
Expenses and Taxes in accordance with Paragraph 6(f) hereof.
(b) "Base Operating Expenses" and "Base Taxes" shall mean the
actual Operating Expenses and Taxes of the Complex for the calendar year 1996,
adjusted to reflect a ninety-five percent (95%) occupancy rate of the Complex
throughout such year.
(c) "Operating Expenses," as used herein, shall include all
direct costs of management, operation, maintenance, repair and replacement, of
the Complex and providing services to tenants of the Building as determined by
standard accounting practices (unless excluded by this Lease) including, but not
limited to:
Personal property taxes related to the Complex; fees and
assessments payable to Northpointe Business Park Association; rental and other
charges for the Hetch Hetchy lease which is used as additional parking area for
the Complex; any parking taxes or levies; a pro rata portion of the salaries and
wages of all employees of Lessor engaged in the operation and administration of
the Complex, in an aggregate amount not to exceed the amount of five percent
(5%) of the total of all other monthly Operating Expenses exclusive of such
amount of salaries and wages; water and sewer charges; waste disposal; insurance
premiums for insurance coverages maintained by Lessor pursuant to Paragraph 11
(b) hereof; license, permit, and inspection fees; charges for electricity,
heating, air conditioning, gas, and any other utilities (including, without
limitation, any temporary or permanent utility surcharge or other exaction);
security; janitorial services and maintenance contracts; painting and repairing,
interior and exterior; maintenance and replacement of floor and window
coverings; repair, maintenance, and replacement of air-conditioning, heating,
mechanical and electrical systems, elevators, plumbing and sewage systems;
landscaping and gardening of Outside Areas; glazing; repair, maintenance,
cleaning, sweeping, striping, and resurfacing of the parking area; supplies,
materials, equipment and tools in the maintenance of the Complex; costs for
accounting services incurred in the calculation of Operating Expenses and Taxes
and Lessee's Share thereof as defined herein; and the cost of any other capital
expenditures for any improvements or changes to the Building which are required
by laws, ordinances, or other governmental regulations adopted after the
Commencement Date or for any items which are intended to and have the effect of
reducing Operating Expenses; provided, however, that in the event Lessor makes
such capital improvements, Lessor shall amortize its investment in said
improvements (together with interest on the unamortized
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balance at the rate equal to the effective rate of interest on Lessor's bank
line of credit at the time of completion of said improvements, but in no event
in excess of ten percent (10%) per annum) as an Operating Expense in accordance
with standard accounting practices, except that with respect to capital
improvements made to save Operating Expenses such amortization shall not be at a
rate greater than the anticipated savings in Operating Expenses. Operating
Expenses shall also include any other expense or charge, whether or not
described herein not specifically excluded by other provisions of this Lease,
which in accordance with generally accepted accounting and management practices
would be considered an expense of managing, operating, maintaining, and
repairing the Complex.
(d) Real property taxes and assessments upon the Complex, during
each lease year or partial lease year during the term of this Lease are
referred to herein as "Taxes."
As used herein, "Taxes" shall mean:
(1) all real estate taxes, assessments and any other taxes
levied or assessed against the Complex including the underlying realty, the
Building, all improvements located thereon, and the Hetch Hetchy Lease area
(together with any increase in Taxes resulting from a reassessment following any
transfer of ownership of the Complex); and
(2) all other taxes which may be levied in lieu of real
estate taxes, assessments, and other fees, charges, and levies, general and
special, ordinary and extraordinary, unforeseen as well as foreseen, of any kind
and nature by any authority having the direct or indirect power to tax,
including without limitation any governmental authority or any improvement or
other district or division thereof, for public improvements, services, benefits,
or environmental matters which are assessed, levied, confirmed, imposed, or
become a lien (i) upon the Complex, and/or any legal or equitable interest of
Lessor in any part thereof; or (ii) upon this transaction or any document to
which Lessee is a party creating or transferring any interest in the premises;
and (iii) any tax or excise, however described, imposed in addition to, or in
substitution partially or totally of, any tax previously included within the
definition of "Taxes" or any tax the nature of which was previously included in
the definition "Taxes."
Not included within the definition of "Taxes" are any net
income, profits, transfer, franchise, capital stock, estate or inheritance taxes
imposed by any governmental authority; late payment penalties or interest,
provided that Lessee is not in default in the payment of Monthly Base Rent or
Additional Rent; or any increase in Taxes which are the result of leasehold
improvements for another tenant of the Complex which are substantially in excess
of building standard improvements.
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With respect to any assessments which may be levied against
or upon the Complex, or the underlying realty thereof, which under the laws then
in force may be evidenced by improvement or other bonds, or may be paid in
annual installments, only the amount of such annual installment (with
appropriate proration of any partial year) and statutory interest shall be
included within the computation of the annual Taxes levied against the Complex,
the Building and improvements thereon, and the underlying realty thereof.
(e) The following costs ("Costs") shall be excluded from the
definition of Operating Costs, and no portion of the Lessee Improvement
Allowance or Additional Lessee Improvement Allowance be applied to such Costs:
(1) Costs occasioned by the act, omission or violation of
law by Lessor, any other occupant of the Complex, or their respective agents,
employees or contractors.
(2) Costs for which Lessor has a right of reimbursement
from others.
(3) Costs (i) arising from the disproportionate use of any
utility or service supplied by Lessor to any other occupant of the Complex, or
(ii) associated with utilities and services of a type not provided to Lessee.
(4) The cost of any renovation, improvement, painting or
redecorating of any portion of the Complex not a common area or not made
available for Lessee's use in common with other Tenants.
(5) Fees, commissions, attorneys' fees, costs or other
disbursements incurred in connection with negotiations or disputes with any
other occupant of the Complex and costs arising from the violation by Lessor or
any occupant of the Complex (other than Lessee) of the terms and conditions of
any lease or other agreement.
(6) Depreciation, amortization or other expense reserves.
(7) Interest, charges and fees incurred on debt, payments
on mortgages and rent under ground leases (except for the rent payable under
the Hetch Hetchy Lease for additional parking in the Complex).
(8) Costs incurred in connection with the operation of any
parking or commercial concession within the Complex.
(9) Advertising or promotional costs.
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(10) Amortization of the cost of improvements by
Lessor to the Building or to the Complex which would properly be capitalized
under generally accepted accounting principles, except to the extent that
Lessee's share of such cost during any twelve-month period of this Lease is
equitably determined based on Lessee's usage and amortized over the useful life
of the capital item in question.
(11) Costs incurred in repairing, maintaining or replacing
any structural elements of the Building and the Complex for which Lessor is
responsible pursuant to Paragraph 14(a) hereof.
(12) Lease payments for capital machinery and equipment,
such as air conditioners, elevators, and the like.
(13) (i) Insurance costs for coverage not customarily
paid by tenants of similar projects in the vicinity of the premises, (ii)
increases in insurance costs caused by activities of another occupant of the
Complex, (iii) insurance deductibles in excess of $10,000 on all casualty
insurance other than earthquake, and (iv) earthquake insurance annual premium in
excess of Thirty Thousand Dollars ($30,000) for 1996, increased by not more than
five percent (5%) per year thereafter, provided that the portion of the
earthquake insurance deductible in excess of $10,000 shall be amortized over the
useful life of the improvement restored and the earthquake insurance deductible
shall not exceed ten percent (10%) of the replacement cost.
(14) Costs of sculptures, paintings and other art objects.
(15) Costs incurred to investigate the presence of any
Hazardous Material, costs to respond to any claim of Hazardous Material
contamination or damage, costs to remove any Hazardous Material from the Complex
and any judgments or other costs incurred in connection with any Hazardous
Material exposure or releases, except to the extent resulting from the breach by
Lessee of any provision of this Lease or caused by the storage, use, release or
disposal of the Hazardous Material in question by Lessee or by any employee,
agent, or contractor of Lessee.
(16) Any executive salary of any officer or employee of
Lessor, or any fee, profit or compensation retained by Lessor or its affiliates
for management and administration of the Complex in excess of the maximum sum
specified in Paragraph 6(c) of this Lease.
(17) General corporate overhead and general and
administrative expenses of Lessor, except as specifically provided in Paragraph
6(c).
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(18) Leasing expenses and broker commissions payable by
Lessor;
(19) The cost of maintenance and repair work at the Complex
to repair damage or loss caused by risk a or casualty for which Lessor is
obligated to carry insurance pursuant to Paragraph 11(b) (excluding earthquake
or flood).
(20) Costs and expenses for which Lessee reimburses Lessor
directly or which Lessee pays directly to a third person.
(f) As close as reasonably possible to the end of each calendar
year commencing with the calendar year 1996, Lessor shall notify Lessee of any
increases in Operating Expenses and/or Taxes over Base Operating Expenses and
Base Taxes estimated by Lessor for the following calendar year. Commencing on
the first day of January of each calendar year after 1996 for which Lessor has
estimated increases in Operating Expenses and/or Taxes, and on the first day of
every month thereafter in such year, Lessee shall pay to Lessor, as Additional
Rent, one-twelfth (1/12th) of Lessee's Share of the estimated increases. If at
any time during any such calendar year, it appears to Lessor that the Operating
Expenses or Taxes for such year will vary from Lessor's estimate, Lessor may, by
written notice to Lessee, revise Lessor's estimate for such year and the
Additional Rent payments by Lessee for such year shall thereafter be based upon
such revised estimate. Lessor shall furnish to Lessee with such revised
estimate written verification showing that the actual Operating Expenses or
Taxes are greater than Lessor's estimate. The increase in the monthly
installments of Additional Rent resulting from Lessor's revised estimate shall
not be retroactive, but the Additional Rent for each calendar year shall be
subject to adjustment between Lessor and Lessee after the close of the calendar
year, as provided below.
As soon as possible after each calendar year for which Lessee has
made estimated payments or is liable for increases in Operating Expenses and/or
Taxes, Lessor shall furnish Lessee a statement (the "Operating Statement") with
respect to such year, prepared by an employee or agent of Lessor, showing
Operating Expenses and Taxes, the increase in Operating Expenses and/or Taxes
over Base Operating Expenses and/or Base Taxes, Lessee's Share of such increase,
and the total payments made by Lessee on the basis of any previous estimate of
such increases. Unless Lessee raises any objections to the Operating Statement
within ninety (90) days after receipt of the same, such statement shall
conclusively be deemed correct and Lessee shall have no right thereafter to
dispute such statement or any item therein or the computation of increases of
Operating Expenses. If Lessee does object to such statement, Lessor shall
provide Lessee with reasonable verification of the figures shown on the
statement and the parties agree to negotiate in good faith to resolve any
disputes. If Lessee and Lessor cannot reach agreement within fifteen
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(15) days after Lessee's objection, the Operating Statement shall be reviewed by
an independent certified public accountant reasonably acceptable to both parties
who shall be appointed within thirty (30) days of the expiration of such fifteen
(15) day period, whose determination as to the actual Operating Expenses shall
be made within thirty (30) days of appointment and shall be final and binding
upon the parties and whose fees and expenses shall be borne (1) entirely by
Lessor if Lessee's Share of the Operating Expenses shown on Lessor's Operating
Statement is one hundred five percent (105%) or more of Lessee's Share of
Operating Expenses as determined by the accountant; (2) one-half by Lessor and
one-half by Lessee if the overcharge of Lessee on Lessor's Operating Statement
is less than five percent (5%) but more than one percent (1%); or (3) entirely
by Lessee if the overcharge of Lessee on Lessor's Operating Statement is one
percent (1%) or less. Any amounts due Lessor or Lessee shall be paid in the
manner set forth below. If Lessee objects to Lessor's Operating Statement,
Lessee shall continue to pay on a monthly basis Lessee's share of the increase
in Operating Expenses based upon the prior year's Operating Statement until the
dispute is resolved as provided above.
If Lessee's Share for the year as finally determined exceeds the
total payments made by Lessee based on Lessor's estimates, Lessee shall pay to
Lessor the deficiency, including Lessee's share of the cost of the audit, within
fifteen (15) days after Lessee's receipt of Lessor's Operating Statement. If
the total payments made by Lessee based on Lessor's estimate of the increases in
Operating Expenses and/or Taxes exceed Lessee's Share of the increases, as
determined by Lessor, Lessee's extra payment (but not more than Lessee's Share
of such increases) shall be credited against payments of Additional Rent next
due hereunder.
Notwithstanding the termination of this Lease, within thirty (30)
days after Lessee's receipt of Lessor's Operating Statement regarding the
determination of increases in Operating Expenses and/or Taxes for the calendar
year in which this Lease terminates, Lessee shall pay to Lessor or shall receive
from Lessor, as the case may be, an amount equal to the difference between
Lessee's Share (prorated to the expiration date or the termination date of this
Lease) of the increases in Operating Expenses and/or Taxes for such year, as
finally determined by Lessor, and the amount previously paid by Lessee toward
such increases.
7. PAYMENT OF RENT.
(a) All rent shall be due and payable in lawful money of the
United States of America at the address of Lessor set forth in Paragraph 24,
"Notices," without deduction or offset and without prior demand or notice,
unless otherwise specified herein. Monthly Base Rent and Additional Rent shall
be payable monthly, in advance, on the first day of each calendar month.
Lessee's obligation to pay rent for any partial month at the commencement
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of the lease term shall be as provided in Paragraph 5(a) hereof and rent for any
partial month at the expiration or termination of the lease term shall be
prorated on the basis of a thirty (30) day month.
(b) If any installment of Monthly Base Rent, Additional Rent or
any other sum due from Lessee is not received by Lessor within five (5) days
after Lessor's notice to Lessee that such amount has not been received when due,
Lessee shall pay to Lessor an additional sum equal to five percent (5%) of the
amount overdue as a late charge. The parties agree that this late charge
represents a fair and reasonable estimate of the costs that Lessor will incur by
reason of the late payment by Lessee. Acceptance of any late charge shall not
constitute a waiver of Lessee's default with respect to the overdue amount. Any
amount not paid within ten (10) days after Lessee's receipt of written notice
that such amount is due shall bear interest from the date due until paid at the
lesser rate of (i) the prime rate of interest plus one percent (1%) or (ii) the
maximum rate allowed by law in addition to the late payment charge.
Initials: Lessor WFB Lessee JM
8. USE. Lessee shall use and occupy the premises for general office use
and for such other lawful purposes reasonably related thereto which are
permitted by applicable zoning regulations, and for no other use or purpose
without Lessor's prior written consent. Lessor warrants to Lessee that under
zoning laws in effect as of the Commencement Date of this Lease the premises may
be used by Lessee for general office use.
9. HAZARDOUS MATERIALS.
(a) Lessor represents and warrants to Lessee to the best of
Lessor's actual knowledge without having made any independent investigation (1)
that any use, storage, treatment or transportation of "Hazardous Materials" (as
defined below) which has occurred in or on the premises, the Building or the
Complex prior to the date hereof has been in substantial compliance with all
applicable federal, state, and local laws, regulations and ordinances; (2) that
no release, leak, discharge, spill, disposal or emission of Hazardous Materials
has occurred in, on or under the premises, the Building or the Complex; and (3)
that the premises, the Building and the Complex are free of Hazardous Materials
as of the date hereof and will be free of Hazardous Materials upon the
commencement of the term of this Lease. As used herein, the term "Hazardous
Materials" shall mean any hazardous or toxic substance, material or waste which
is or becomes regulated by any local environmental authority, the State of
California or the United States government.
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(b) Lessor shall indemnify, defend and hold Lessee harmless from any
and all claims, damages, fines, judgments, penalties, costs, liabilities or
losses (including, without limitation, any and all sums paid for settlement of
claims, attorneys' fees, consultant and expert fees) arising before, during or
after the term (as such may be extended) from or in connection with the presence
of Hazardous Materials in or on the premises, the Building or the Complex,
unless the (1) Hazardous Materials are present in whole or in part as a result
of the breach of this Lease, negligence, willful misconduct, or other acts of
Lessee, Lessee's agents, employees, contractors or invitees; or (2) such
Hazardous Materials are present in whole or in part as a result of the acts or
omissions of other tenants or occupants of the Complex or their agents,
employees, contractors, or invitees, or (3) such Hazardous Materials have
flowed, diffused, migrated, or percolated into, onto, or under the premises, the
Building, or the Complex from other property. Without limitation of the
foregoing, this indemnification shall include any and all costs incurred due to
any investigation of the site or any cleanup, removal or restoration mandated by
a federal, state or local agency or political subdivision, unless the Hazardous
Materials are present solely as a result of negligence, willful misconduct or
other acts of Lessee, Lessee's agents, employees, contractors or invitees. This
indemnification shall specifically include any and all costs due to Hazardous
Materials which flow, diffuse, migrate or percolate into, onto or under the
premises, the Building or the Complex after the term commences and this
indemnification shall survive the expiration or earlier termination of this
Lease.
(c) Lessee and Lessee's agents, employees, and contractors shall not
cause any Hazardous Materials to be discharged into the plumbing or sewage
system of the Building or into or onto the land underlying or adjacent to the
Building in violation of any applicable law. Lessee shall indemnify, defend and
hold Lessor harmless from any and all claims, damages, fines, judgments,
penalties, costs, liabilities or losses (including, without limitation, any and
all sums paid for settlement of claims, attorneys' fees, consultant and expert
fees) arising during or after the term (as such may be extended) from or in
connection with the presence of Hazardous Materials in or on the premises, the
Building or the Complex as a result of the breach of the foregoing covenant, or
as a result of the negligence, willful misconduct or other acts of Lessee,
Lessee's agents, employees, and contractors or invitees. Without limitation of
the foregoing, this indemnification shall include any and all costs incurred due
to any investigation of the site or any cleanup, removal or restoration mandated
by a federal, state or local agency or political subdivision. The foregoing
indemnity shall survive the expiration or earlier termination of this Lease.
10. TAXES ON LESSEE'S PROPERTY. Lessee shall pay before delinquency
any and all taxes, assessments, license fees, and public charges levied,
assessed, or imposed and which become payable during the initial lease term and
any extension thereof upon Lessee's equipment, fixtures, furniture, and personal
property installed or located in the premises.
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11. INSURANCE.
(a) Lessee shall, at Lessee's sole cost and expense, provide and keep
in force during the initial lease term and any extension thereof, and for the
benefit of Lessor and Lessee, a general liability insurance policy with a
recognized casualty insurance company qualified to do business in California,
insuring Lessor and Lessee against any and all liability occasioned by any
occurrence in, on, about, or related to the premises, or arising out of the
condition, use, occupancy, alteration or maintenance of the premises, having a
combined single limit for both bodily injury and property damage in an amount
not less than Two Million Dollars ($2,000,000). Lessee agrees to furnish
certificates of insurance to Lessor naming Lessor as an additional insured upon
the written request of Lessor.
(b) Lessor shall obtain and carry in Lessor's name, as insured, as an
Operating Expense of the Complex as provided in Paragraph 6(c), during the
initial lease term and any extended term, standard fire and extended coverage
insurance (with rental loss insurance coverage for a period of one year), public
liability and property damage insurance, and insurance against such other risks
or casualties as Lessor shall determine, including, but not limited to,
earthquake insurance, insuring Lessor's interest in the Complex (including
leasehold improvements installed at Lessor's expense) in an amount not less than
the full replacement cost of the Building and improvements from time to time.
The proceeds of any such insurance shall be payable solely to Lessor and Lessee
shall have no right or interest therein. Lessor shall have no obligation to
insure against loss by Lessee to Lessee's leasehold improvements installed at
Lessee's expense, or Lessee's equipment, fixtures, furniture, or other personal
property of Lessee in or about the premises occurring from any cause whatsoever.
(c) The parties release each other, and their respective authorized
representatives, from any claims for damage to any person or to the premises and
to the fixtures, personal property, Lessee's improvements, and alterations of
either Lessor or Lessee in or on the premises that are caused by or result from
risks required by this Lease to be insured against or actually insured against
under any insurance policies carried by the parties and in force at the time of
any such damage. Lessor shall not be required to maintain plate glass
insurance.
(d) Each party shall cause each insurance policy obtained by it to
provide that the insurance company waives all right of recovery by way of
subrogation against either party in connection with any damage covered by any
policy. Neither party shall be liable to the other for any damage caused by
fire or any of the risks insured against under any insurance policy required by
this Lease.
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If any insurance policy cannot be obtained with a waiver of
subrogation, or is obtainable only by the payment of an additional premium
charge above that charged by insurance companies issuing policies without waiver
of subrogation, the party undertaking to obtain the insurance shall notify the
other party of this fact. The other party shall have a period of ten (10) days
after receiving the notice either to place the insurance with a company that is
reasonably satisfactory to the other party and that will carry the insurance
with a waiver of subrogation, or to agree to pay the additional premium if such
a policy is obtainable at additional cost. If the insurance cannot be obtained
or the party in whose favor a waiver of subrogation is desired refuses to pay
the additional premium charged, the other party is relieved of the obligation to
obtain a waiver of subrogation rights with respect to the particular insurance
involved.
12. INDEMNIFICATION.
(a) Lessee waives all claims against Lessor for damages to property,
or to goods, wares, and merchandise stored in, upon, or about the premises, and
for injuries to persons in, upon, or about the premises from any cause arising
at any time, except as may be caused by the negligence or willful misconduct of
Lessor or its employees, agents or contractors. Lessee agrees to indemnify and
hold Lessor exempt and harmless from and against any and all claims for damage
or injury to any person or property arising from the use or occupancy of the
premises by Lessee or from the failure of Lessee to keep the premises in good
condition as herein provided, unless caused by the negligence or willful
misconduct of Lessor or its employees, agents, or contractors.
(b) Except as may be caused by the negligence or willful misconduct
of Lessor or its employees, agents, or contractors, Lessor shall not be liable
to Lessee for any damage because of any act or negligence of any owner or
occupant of adjoining or contiguous property, nor for overflow, breakage, or
leakage of water, steam, gas, or electricity from pipes, wires, or otherwise.
Except as otherwise herein provided, Lessee will pay for damage to the premises
caused by the misuse or neglect of the premises by Lessee or its employees,
agents, or contractors, including, but not limited to, the breakage of glass in
the premises. Any damage to the premises caused by other tenants shall be paid
for by such other tenants or by Lessor.
13. CONSTRUCTION OF LEASEHOLD IMPROVEMENTS.
(a) Prior to commencement of the initial lease term and prior to the
occupancy of the premises by Lessee, Lessor shall cause to be constructed and
completed at Lessor's expense the leasehold improvements to the premises
described on Exhibit "C" attached hereto and incorporated by reference herein.
Lessor shall cause such improvements
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to be constructed promptly and diligently in a first class and workmanlike
manner. Lessor hereby represents and warrants to Lessee and covenants that the
premises (upon completion of such buildout), the Building, the parking area and
all other common areas appurtenant to the Building are and shall be, as of the
Commencement Date, in substantial compliance with all applicable laws,
ordinances, orders, regulations, and codes, except that with respect to the
Americans with Disabilities Act Lessor represents and warrants to Lessee and
covenants only that Lessor has made a good faith effort to cause the premises,
the Building, the parking area, and the common areas appurtenant to the Building
to comply therewith.
(b) Subject to the provisions of Paragraph 2(c) hereof, by accepting
possession of the premises Lessee shall be deemed to have acknowledged that the
premises are in good order and satisfactory condition, except as provided for
elsewhere in this Lease. Lessee waives all right to make repairs at the expense
of Lessor or to deduct the cost thereof from the rent, and Lessee waives all,
rights under Section 1941 and 1942 of the Civil Code of the State of California.
At the termination of this Lease, Lessee shall surrender the premises in a clean
and good condition, except for ordinary wear and tear and except for damage
caused by casualty, the elements, or acts of God.
14. MAINTENANCE AND REPAIRS; ALTERATIONS.
(a) Lessor shall, at Lessor's sole expense, keep in good order,
condition, and repair and replace when necessary, the roof, and the structural
elements of the foundation and exterior walls (except the interior faces
thereof), of the Building, and other structural elements of the Building and the
Complex as "structural elements" are defined in building codes applicable to the
Building.
(b) Lessor shall repair and maintain, as an Operating Expense
pursuant to Paragraph 6 hereof, the exterior entrances, all glass and window
moldings, and the common areas of the Building, and all partitions, doors, door
jambs, door closers, door hardware, fixtures, equipment, and appurtenances
thereof, including all electrical, lighting, heating, plumbing, and air
conditioning systems serving the premises, except for reasonable use and wear
and except for any damage caused by any act or negligence of Lessee or its
employees, agents, invitees, licensees, or contractors. In the event Lessee
provides Lessor with written notice of the need for any repairs, Lessor shall
commence any such repairs promptly following receipt by Lessor of such notice
and Lessor shall diligently prosecute such repairs to completion. Lessor shall
execute and maintain in force a service contract with an authorized air
conditioning service company and shall provide five-day a week janitorial
service to the premises. Lessor shall also repair and maintain as an Operating
Expense pursuant to Paragraph 6 hereof, the Outside Areas of the Complex,
including the landscaping, walkways, and parking area.
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(c) Subject to the foregoing and except as provided elsewhere in
this Lease, Lessee shall at all times at Lessee's expense keep the premises in
good and safe order, condition, and repair. Subject to the release of claims
and waiver of subrogation contained in Paragraphs 11 (c) and 11 (d), if Lessor
is required to make any repairs by reason of Lessee's negligent acts or omission
to act, Lessor may add the cost of such repairs to the next installment of rent
which shall thereafter become due, and Lessee shall promptly pay the same upon
receipt of an invoice therefor. Lessor shall exercise its good faith diligent
efforts to construct all Lessee Interior Improvements so that the Building and
the premises substantially comply with the Americans With Disabilities Act
("ADA"). Lessor shall hold Lessee harmless from any responsibility or cost
related to compliance with ADA, except for any alterations or additions to the
premises made by Lessee at Lessee's expense.
(d) Following completion of construction of the leasehold
improvements pursuant to Paragraph 13 hereof, Lessee shall not make any
additional alterations, improvements, or additions to the premises without
obtaining Lessor's prior written consent thereto. Lessor may condition its
consent to Lessee agreeing to remove any such alterations upon expiration of the
lease term and Lessee agreeing to restore the premises to its condition prior to
such alterations at Lessee's expense. Lessor shall advise Lessee in writing at
the time consent is granted whether Lessor reserves the right to require Lessee
to remove any alterations from the premises upon termination of this Lease or
else Lessor shall be deemed to have waived such right with respect to such
alterations.
Notwithstanding the preceding subparagraph to the contrary,
Lessee shall have the right to remove any of Lessee's leasehold improvements
which were paid for solely by Lessee, and provided that Lessee notifies Lessor
in writing prior to the installation on the premises of such leasehold
improvements that Lessee intends to remove such improvements upon the expiration
of the lease term. In the event of Lessee's removal of such leasehold
improvements, Lessee at Lessee's expense, shall immediately repair any damage to
the premises caused by such removal.
All alterations, trade fixtures and personal property installed
in the premises solely at Lessee's expense ("Lessee's Property) shall at all
times remain Lessee's property and Lessee shall be entitled to all depreciation,
amortization and other tax benefits with respect thereto. Except for
alterations, trade fixtures and personal property which cannot be removed
without structural injury to the premises, at any time Lessee may remove
Lessee's trade fixtures and personal property from the premises, provided Lessee
repairs all damage caused by such removal.
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Lessor shall execute and deliver to Lessee upon request a lieu
waiver relating to Lessee's Property in form approved by Lessor and its counsel,
provided that such lieu waiver is consistent with the foregoing provisions of
this Paragraph 14(d).
(e) Lessee, at Lessee's sole cost and expense, shall promptly
and properly observe and comply with all present and future orders, regulations,
rules, laws, and ordinances of all governmental agencies or authorities, and the
Board of Fire Underwriters, except that Lessee shall not be required to make any
structural changes or repairs or other repairs or changes of any nature which
would be considered a capital expenditure under generally accepted accounting
principles to the premises at Lessee's expense unless such structural repairs or
changes are required by reason of the specific nature of the use of the premises
by Lessee.
15. UTILITIES.
(a) Lessor shall, as an Operating Expense of the operation of
the Building pursuant to Paragraph 6(c) hereof, provide reasonable quantities of
electricity, gas, water, heat and air conditioning service Monday through Friday
during business hours from 8:00 a.m. to 6:00 p.m., except recognized holidays,
five-day a week janitorial service (comparable to janitorial service provided in
other Class A office buildings in the vicinity of the Complex), and refuse pick-
up service to the premises. Lessee, at its option, may contract for its own
janitorial service for Lessee's premises, provided that such service is
performed on a regular basis by a recognized professional janitorial service
firm. In such event, Lessor shall no longer bill Lessee for janitorial services
to the premises. Lessor shall provide Lessee and the premises with electricity
(overhead lighting and electrical outlets) without Lessee incurring any hourly
charges therefor.
(b) Lessor shall provide Lessee and the premises with heating
and air conditioning service, in addition to the hours set forth in subparagraph
(a) above, to the extent that such service is requested by Lessee. In the event
of such a request by Lessee, Lessee shall pay to Lessor monthly with Operating
Expenses Lessor's charge for such additional heating and air conditioning
service. Lessor's charge may be based on an hourly rate, which may include a
reasonable depreciation factor or replacement reserve for the system on account
of said additional hours of operation. As of the Commencement Date Lessor is
charging additional heating and air conditioning service at a minimum of
Twenty-five Dollars ($25.00) per hour for each pod/wing of the Building. Lessor
agrees that such hourly rate shall be established at an amount which will
reimburse Lessor for the actual cost to Lessor to supply the service plus a
reasonable reserve for depreciation or replacement of the HVAC equipment, but
without a profit to Lessor.
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(c) Lessor shall not be liable to Lessee for any interruption or
failure of any utility services to the Building or the premises which is not
caused by Lessor's willful acts or gross negligence; provided however, that if
service to the premises is interrupted for more than four (4) consecutive
business days, Lessee's Monthly Base Rent shall be abated proportionately on a
daily basis until service is restored.
16. LIENS. Lessee agrees to keep the premises and the Complex free
from all liens arising out of any work performed, materials furnished, or
obligations incurred by Lessee. Lessee shall give Lessor at least ten (1O) days
prior written notice before commencing any work of improvement on the premises.
Lessor shall have the right to post notices of non-responsibility with respect
to any such work.
17. ASSIGNMENT AND SUBLETTING.
(a) Lessee shall not assign this Lease, or any interest,
voluntarily or involuntarily, and shall not sublet the premises or any part
thereof, or any right or privilege appurtenant thereto, or suffer any other
person (the agents and servants of Lessee excepted) to occupy or use the
premises, or any portion thereof, without the prior written consent of Lessor in
each instance pursuant to the terms and conditions set forth below, which
consent shall not be unreasonably withheld.
(b) Prior to any assignment or sublease which Lessee desires to
make, Lessee shall provide to Lessor the name and address of the proposed
assignee or sublessee, and true and complete copies of all documents relating to
Lessee's prospective agreement to assign or sublease, a copy of a current
financial statement for such proposed assignee or sublessee, and shall specify
all consideration to be received by Lessee for such assignment or sublease in
the form of lump sum payments, installments of rent, or otherwise. For purposes
of this Paragraph 17, the term "consideration" shall include all money or other
consideration to be received by Lessee for such assignment or sublease. Within
fifteen (15) days after the receipt of such documentation and other
information, Lessor shall (1) notify Lessee in writing that Lessor elects to
consent to the proposed assignment or sublease subject to the terms and
conditions hereinafter set forth, or (2) notify Lessee in writing that Lessor
refuses such consent, specifying reasonable grounds for such refusal.
In deciding whether to consent to any proposed assignment or
sublease, Lessor may in its sole discretion consider the following criteria:
(1) In Lessor's reasonable judgment, the proposed assignee
or subtenant is engaged in such a business, that the premises, or the relevant
part thereof, will be used in such a manner which complies with Paragraph 8
hereof entitled "Use."
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(2) The proposed assignee or subtenant is a reputable
entity or individual with sufficient financial net worth so as to reasonably
indicate that it will be able to meet its obligations under this Lease or the
sublease in a timely manner;
(3) The proposed assignee or subtenant is not a person or
entity with whom Lessor is then negotiating to lease space in the Building; and
(4) The proposed assignment or sublease shall be in form
reasonably satisfactory to Lessor and Lessor's counsel.
(c) As a condition to Lessor's granting its consent to any
assignment or sublease, (1) Lessor may require that Lessee pay to Lessor, as and
when received by Lessee, fifty percent (50%) of the amount of any excess of the
consideration to be received by Lessee in connection with said assignment or
sublease over and above the rental amount fixed by this Lease and payable by
Lessee to Lessor, after deducting actual marketing costs and reasonable costs of
repair or rehabilitation of the premises and tenant improvement costs incurred
by Lessee in consummating such assignment or sublease; (2) Lessee and the
proposed assignee or sublessee shall demonstrate to Lessor's reasonable
satisfaction that each of the criteria referred to in subparagraph (b) above is
satisfied; and (3) Lessor may require a cash security deposit to be paid to
Lessor by an assignee in the amount of one month's Basic Rent, unless Lessor is
then holding the security deposit referred to in Paragraph 4.
(d) Each assignment or sublease agreement to which Lessor has
consented shall be an instrument in writing in form satisfactory to Lessor, and
shall be executed by both Lessee and the assignee or sublessee, as the case may
be. Each such assignment or sublease agreement shall recite that it is and
shall be subject and subordinate to the provisions of this Lease, that the
assignee or sublessee accepts such assignment or sublease and, except as
otherwise set forth in a sublease approved by Lessor, agrees to perform all of
the obligations of Lessee hereunder (to the extent such obligations relate to
the portion of the premises assigned or subleased), and that the termination of
this Lease shall, at Lessor's sole election, constitute a termination of every
such assignment or sublease.
(e) In the event Lessor shall consent to an assignment or
sublease, Lessee shall nonetheless remain primarily liable for all obligations
and liabilities of Lessee under this Lease, including but not limited to the
payment of rent. Lessee agrees to reimburse Lessor upon demand for reasonable
attorneys' fees incurred by Lessor in connection with the negotiation, review,
and documentation of any such requested assignment or sublease not to exceed
$1,000.
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(f) Lessee hereby stipulates that the foregoing terms and
conditions are reasonable.
(g) Any dissolution, or the transfer, either all at once or in a
series of related transfers, of a controlling percentage of the capital stock of
Lessee, or the sale, or series of sales within any one (1) year period, of all
or substantially all of Lessee's assets located in, on, or about the premises,
shall be deemed an assignment. The phrase "controlling percentage" means the
ownership of, and the right to vote, stock possessing at least fifty-one percent
(51%) of the total combined voting power of all classes of Lessee's capital
stock issued, outstanding, and entitled to vote for the election of directors.
Notwithstanding the foregoing, Lessee shall have the right to assign, sublease,
transfer to a subsidiary, parent, or affiliated company or to a successor by
merger, subject to the provisions of subparagraph (i) below.
(h) Any assignment or subletting described in subparagraph (g)
above shall be subject to the provisions for assignment and subletting set forth
in this Paragraph 17.
(i) Notwithstanding the foregoing, Lessee may, without Lessor's
prior written consent and without any participation by Lessor in assignment and
subletting proceeds, sublet the premises or assign this Lease to: (1) a
subsidiary, affiliate, division or corporation controlled or under common
control with Lessee; (2) a successor corporation related to Lessee by merger,
consolidation, nonautomatic reorganization, or government action; or (3) a
purchaser of substantially all of Lessee's assets located in the premises.
Lessee's foregoing rights to assign this Lease shall be subject to the following
conditions: (1) Lessee shall not be in default hereunder; (2) the transferee or
successor entity shall expressly assume Lessee's obligations hereunder; and (3)
Lessor may require that the transferee or successor entity post a security
deposit in an amount equal to the Monthly Base Rent then in effect hereunder to
assure performance of its obligations hereunder, unless Lessor is then holding
the security deposit referred to in Paragraph 4. For the purpose of this Lease,
sale of Lessee's capital stock through any public offering shall not be deemed
an assignment, subletting, or any other transfer of the Lease or the premises.
Lessor's consent to any proposed assignment or subletting shall not be
unreasonably withheld.
(j) Subject to the provisions of this Paragraph 17, any
assignment or sublease without Lessor's prior written consent shall at Lessor's
election be void, and shall constitute a default by Lessee hereunder. The
consent by Lessor to any assignment or sublease shall not constitute a waiver of
the provisions of this Paragraph 17, including the requirement of Lessor's prior
written consent, with respect to any subsequent assignment or sublease. If
Lessee shall purport to assign this Lease, or sublease all or any portion of the
premises, or permit any person or persons other than Lessee to occupy the
premises, without
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Lessor's prior written consent, Lessor may collect rent from the person or
persons then or thereafter occupying the premises and apply the net amount
collected to the rent reserved herein, but no such collection shall be deemed a
waiver of Lessor's rights and remedies under this Paragraph 17, or the
acceptance of any such purported assignee, sublessee, or occupant, or a release
of Lessee from the further performance by Lessee of covenants on the part of
Lessee herein contained.
(k) Lessee shall not hypothecate or encumber its interest under
this Lease or any rights of Lessee hereunder, or enter into any license or
concession agreement respecting all or any portion of the premises, without
Lessor's prior written consent which consent shall not unreasonably be withheld,
subject to the terms and conditions referred to in Paragraph 17(c) above, and
Lessee's granting of any such encumbrance, license, or concession agreement
shall constitute an assignment for purposes of this Paragraph 17.
(l) In the event of any sale or exchange of the premises by
Lessor and assignment of this Lease by Lessor, Lessor shall, upon providing
Lessee with written confirmation that Lessor has delivered any security deposit
held by Lessor to Lessor's successor in interest, be and hereby is entirely
relieved of all liability under any and all of Lessor's covenants and
obligations contained in or derived from this Lease with respect to the period
commencing with the consummation of the sale or exchange and assignment.
(m) The parties acknowledge that Lessor has the remedy described
in California Civil Code Section 1951.4 (Lessor may continue the Lease in effect
after Lessee's breach and abandonment and recover rent as it becomes due, if
Lessee has right to sublet or assign, subject only to reasonable limitations.)
18. WAIVER. The waiver by Lessor or Lessee of any breach of any
term, covenant, or condition contained herein shall not be deemed to be a waiver
of such term, covenant, or condition of any subsequent breach of the same or any
other term, covenant or condition contained herein. The subsequent acceptance
of rent hereunder by Lessor shall not be deemed to be a waiver of any preceding
breach by Lessee of any term, covenant, or condition of this Lease, other than
the failure of Lessee to pay the particular rent so accepted, regardless of
Lessor's knowledge of such preceding breach at the time of acceptance of such
rent.
19. HOLDING OVER. Lessee shall vacate the premiscs and deliver the
same to Lessor upon the expiration or sooner termination of this Lease. In the
event of holding over by Lessee after the expiration of termination of this
Lease, such hold over shall be on a month-to-month tenancy and all of the terms
and provisions of this Lease shall be applicable during such period, except that
Lessee shall pay Lessor as Monthly Base Rent during such
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holdover an amount equal to one hundred twenty-five percent (125%) of the
Monthly Base Rent in effect at the expiration of the term. If such holdover is
without Lessor's written consent, Lessee shall be liable to Lessor for all
costs, expenses, and consequential damages incurred by Lessor as a result of
such holdover. The rental payable during such holdover period shall be payable
to Lessor on demand.
20. DAMAGE OR DESTRUCTION.
(a) In the event of a total destruction of the Building and
improvements during the lease term from any cause, either party may elect to
terminate this Lease by giving written notice of termination to the other party
within thirty (30) days after the casualty occurs. A total destruction shall be
deemed to have occurred for this purpose if the Building and improvements of the
Complex are destroyed to the extent of seventy-five percent (75%) or more of the
replacement cost thereof. If the Lease is not terminated, Lessor shall repair
and restore the premises in a diligent manner and this Lease shall continue in
full force and effect, except that Monthly Base Rent and Additional Rent shall
be abated in accordance with Paragraph 20(e) below.
(b) In the event of a partial destruction of the Building and
improvements of the Complex to an extent not exceeding twenty-five percent (25%)
of the replacement cost thereof and if the damage thereto can be repaired,
reconstructed, or restored within a period of one hundred twenty (120) days from
the date of such casualty, and if the casualty is from a cause which is insured
under Lessor's fire and extended coverage insurance, or is insured under any
other coverage then carried by Lessor, and Lessor receives proceeds of insurance
sufficient to repair and restore the Building and improvements, Lessor shall
forthwith repair the same, and this Lease shall continue in full force and
effect, except that Monthly Base Rent and Additional Rent shall be abated in
accordance with Paragraph 20(e) below. If any of the foregoing conditions is
not met, Lessor shall have the option of either repairing and restoring the
Building and improvements, or terminating this Lease by giving written notice of
termination to Lessee within thirty (30) days after the casualty, subject to the
provisions of Paragraph 20(d).
(c) In the event of a partial destruction of the Building and
improvements of the Complex to an extent equal to or exceeding twenty-five
percent (25%) but less than seventy-five percent (75%) of the replacement cost
thereof, or if the damage thereto cannot be repaired, reconstructed, or restored
within a period of one hundred eighty (180) days from the date of such
casualty, either Lessor or Lessee may terminate this Lease by giving written
notice of termination to the other within thirty (30) days after the
casualty.
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Furthermore, if such casualty is from a cause which is not
insured under Lessor's fire and extended coverage insurance, or is not insured
under any other insurance carried by Lessor, or if the proceeds of insurance
received by Lessor are not sufficient to repair and restore the Building and
improvements, Lessor may elect to repair and restore the Building and
improvements (provided that Lessee has not elected to terminate this Lease
pursuant to the first sentence of this Paragraph 20(c)), or Lessor may terminate
this Lease by giving written notice of termination to Lessee. Lessor's election
to repair and restore the Building and improvements or to terminate this Lease,
shall be made and written notice thereof shall be given to Lessee within thirty
(30) days after the casualty. Notwithstanding the foregoing, (1) if Lessor has
not obtained all necessary governmental permits for the restoration and
commenced construction of the restoration within ninety (90) days after the
casualty, Lessee may terminate this Lease by written notice to Lessor given at
any time prior to the actual commencement of construction of the restoration; or
(2) if Lessor elects to repair and restore the Building and improvements under
subparagraph (b) or (c) above, but the repairs and restoration are not
substantially completed within one hundred eighty (I 80) days after the
casualty, Lessee may terminate this Lease by written notice to Lessor given
within thirty (30) days after the expiration of said period of one hundred
eighty (180) days after the casualty.
If this Lease is not terminated by Lessor or Lessee pursuant to
the foregoing provisions, Lessor shall complete the repairs in a diligent manner
and this Lease shall continue in full force and effect, except that Monthly Base
Rent and Additional Rent shall be abated in accordance with Paragraph 20(e)
below.
(d) In the case of damage which is not required to be covered by
insurance, or in case the casualty is covered by insurance but the proceeds are
insufficient to cover the entire cost of restoration, Lessor shall not have the
right to terminate this Lease, (i) if repair or restoration would cost less than
two percent (2%) of the replacement cost of the Building, or (ii) if Lessee
agrees to pay the cost of repair in excess of two percent (2%) of the
replacement cost and Lessee delivers said sum to Lessor within ten (10) days
after receipt of a written request therefor from Lessor.
(e) In the event of repair, reconstruction, or restoration as
provided herein, the Monthly Base Rent and Additional Rent shall be abated
proportionally in the ratio which the Lessee's use of the premises is impaired
during the period of such repair, reconstruction, or restoration.
(f) With respect to any destruction of the Complex which Lessor
is obligated to repair, or may elect to repair, under the terms of this
Paragraph 20, the provisions of Section 1932, Subdivision 2, and of Section
1933, Subdivision 4, of the Civil
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Code of the State of California are waived by the parties. Lessor's obligation
to repair and restore the Complex shall be limited to the improvements
originally constructed by Lessor at Lessor's expense. Lessee shall repair or
replace, at Lessee's expense, all leasehold improvements, fixtures, and
equipment installed by Lessee or paid for by Lessee. Lessor's time for
completion of the repairs and restoration of the Complex shall be extended by a
period equal to any delays caused by strikes, labor disputes, unavailability of
materials, inclement weather, acts of God, or other causes beyond Lessor's
control.
(g) In the event of termination of this Lease pursuant to any of the
provisions of this Paragraph 20, the monthly rent shall be apportioned on a per
diem basis and shall be paid to the date of the casualty. In no event shall
Lessor be liable to Lessee for any damages resulting to Lessee from the
occurrence of such casualty, or from the repairing or restoration of the
Building and improvements, or from the termination of this Lease as provided
herein, nor shall Lessee be relieved thereby from any of Lessee's obligations
hereunder, except to the extent and upon the conditions expressly set forth in
this Paragraph 20.
21. EMINENT DOMAIN.
(a) If the whole or any substantial part of the building or
appurtenant real property owned by Lessor shall be taken or condemned by any
competent public authority for any public use or purpose, the term of this Lease
shall end upon, and not before, the date when the possession of the part so
taken shall be required for such use or purpose. Rent shall be apportioned as
of the date of such termination. Lessee shall be entitled to receive any
damages awarded by the court for (i) leasehold improvements installed at
Lessee's expense or other property owned by Lessee, and (ii) reasonable costs of
moving by Lessee to another location in the San Francisco Bay Area. The entire
balance of the award shall be the property of Lessor.
(b) If there is a partial taking of the premises by eminent domain
which is not a substantial part of the Building and the balance of the premises
remains reasonably suitable for continued use and occupancy by Lessee for the
purposes referred to in Paragraph 8, Lessor shall complete any necessary repairs
in a diligent manner and this Lease shall remain in full force and effect with a
just and proportionate abatement of the Monthly Base Rent and Additional Rent,
to reflect the number of square feet of the premises taken and the number of
square feet remaining. If after a partial taking, the premises and parking are
not reasonably suitable for Lessee's continued use and occupancy for the uses
permitted herein, Lessee may terminate this Lease effective on the date
possession is taken. Subject to the provisions of Paragraph 21 (a), the entire
award for such taking shall be the property of Lessor.
26
<PAGE>
22. REMEDIES. If Lessee fails to make any payment of any sum due under
this Lease for ten (10) days after receipt by Lessee of written notice from
Lessor; or if Lessee breaches any other term of this Lease for thirty (30) days
after receipt by Lessee of written notice from Lessor (or for a reasonable time
if such default is incapable of cure within thirty (30) days, and if Lessee is
diligently proceeding to cure such default); or if Lessee's interest herein, or
any part thereof, is assigned or transferred, either voluntarily or by operation
of law (except as expressly permitted by other provisions of this Lease); or if
Lessee makes a general assignment for the benefit of its creditors; or if this
Lease is rejected (i) by a bankruptcy trustee for Lessee, (ii) by Lessee as
debtor in possession, or (iii) by failure of Lessee as a bankrupt debtor to act
timely in assuming or rejecting this Lease; then any of such events shall
constitute a default and breach of this Lease by Lessee and Lessor may, at its
option, elect the remedies specified in either subparagraph (a) or (b) below.
Any such rejection of this Lease referred to above shall not cause an automatic
termination of this Lease. Whenever in this Lease reference is made to a
default by Lessee, such reference shall refer to a Lessee's default as defined
in this Paragraph 22.
(a) Lessor may repossess the premises and remove all persons and
property therefrom. If Lessor repossesses the premises because of a breach of
this Lease, this Lease shall terminate and Lessor may recover from Lessee:
(1) the worth at the time of award of the unpaid rent which had
been earned at the time of termination including interest thereon at a rate
equal to the Federal discount rate plus one percent (1%) per annum, or the
maximum legal rate of interest, whichever is less, from the time of termination
until paid;
(2) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that Lessee proves could have been
reasonably avoided, including interest thereon at a rate equal to the Federal
discount rate plus one percent (1%) per annum, or the maximum legal rate of
interest, whichever is less, from the time of termination until paid;
(3) the worth at the time of award of the amount by which the
unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss for the same period that Lessee proves could be
reasonably avoided; and
(4) any other amount necessary to compensate Lessor for all the
detriment proximately caused by Lessee's breach or by Lessee's failure to
perform its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom.
27
<PAGE>
(b) If Lessor does not repossess the premises, then this Lease shall
continue in effect for so long as Lessor does not terminate Lessee's right to
possession and Lessor may enforce all of its rights and remedies under this
Lease, including the right to recover the rent and other sums due from Lessee
hereunder. For the purposes of this Paragraph 22, the following do not
constitute a repossession of the premises by Lessor or a termination of the
Lease by Lessor:
(1) Acts of maintenance or preservation by Lessor or efforts by
Lessor to relet the premises; or
(2) The appointment of a receiver by Lessor to protect Lessor's
interests under this Lease.
23. LESSEE'S PERSONAL PROPERTY. If any personal property of Lessee remains
on the premises after (1) Lessor terminates this Lease pursuant to Paragraph 22
above following a breach of this Lease by Lessee, or (2) after the expiration of
the Lease term or after the termination of this Lease pursuant to any other
provisions hereof, Lessor shall give written notice thereof to Lessee pursuant
to applicable law. Lessor shall thereafter release, store, and dispose of any
such personal property of Lessee in accordance with the provisions of applicable
law.
24. NOTICES. All notices, statements, demands, requests, or consents
given hereunder by either party to the other shall be in writing and shall be
personally delivered or sent by United States mail, registered or certified,
return receipt requested, postage prepaid, and addressed to the parties as
follows:
Lessor: W.F. Batton & Co., Inc.
1190 East Meadow Drive
Palo Alto, California 94303
Lessee: Novellus Systems, Inc.
3590 North First Street
San Jose, California 95134
or to such other address as either party may have furnished to the other as a
place for the service of notice.
28
<PAGE>
25. ESTOPPEL CERTIFICATE. Lessee and Lessor shall within fifteen (15)
days following request by the other party (the "Requesting Party"), execute and
deliver to the Requesting Party an estoppel certificate, in the form presented
by the Requesting Party (1) certifying that this Lease has not been modified and
certifying that this Lease is in full force and effect, or, if modified, stating
the nature of such modification and certifying that this Lease, as so modified,
is in full force and effect; (2) stating the date to which the rent and other
charges are paid in advance, if at all; (3) stating the amount of any security
deposit held by Lessor; (4) acknowledging that there are not, to the responding
party's knowledge, any uncured defaults on the part of the Requesting Party
hereunder, or if there are uncured defaults on the part of the Requesting Party,
stating the nature of such uncured defaults; and (5) evidencing the status of
this Lease as may be reasonably required either by a lender making a loan to
Lessor to be secured by a deed of trust or mortgage encumbering the premises or
a purchaser of the premises from Lessor or as reasonably required by the
Requesting Party. The responding party's failure to deliver an estoppel
certificate within ten(10)days following such request shall be an event of
default under this Lease.
26. Parking. Lessee shall have the right to use in common with other
tenants or occupants of the Complex Lessee's proportionate share of the parking
facilities of the Complex, subject to such rules and regulations for such
parking facilities which may be established or altered by Lessor at any time or
from time to time during the lease term, provided that such rules and
regulations shall not unreasonably interfere with Lessee's parking rights.
Vehicles of Lessee or its employees shall not park in driveways or occupy
parking spaces or other areas reserved for any use such as handicap parking,
visitors, deliveries, or loading. Subject to the foregoing, Lessee shall be
entitled to the non-exclusive use of twenty-three (23) parking spaces based upon
Lessee's occupancy of Six Thousand Two Hundred Sixty-eight (6,268) rentable
square feet (3.68 x 6,268).
27. REAL ESTATE BROKERS. Lessor shall pay a leasing commission to CPS, a
Commercial Real Estate Company ("CPS"), representative of Lessor, pursuant to a
separate commission agreement with said broker. Except for the foregoing, each
party represents to the other that it has not had any dealings with any real
estate broker, finder, or other person with respect to this Lease, and each
party shall hold harmless the other party from all damages, expenses, and
liabilities resulting from any claims that may be asserted against the other
party by any broker, finder, or other person with whom the other party has or
purportedly has dealt.
28. EXPANSION SPACE. Subject to the renewal rights of the existing tenants
occupying other space in the Building, Lessor shall deliver to Lessee written
notice of the availability of space for lease in the Building and the rental and
other terms of conditions on which said space is offered for lease by Lessor.
If Lessee elects to lease such space at such
29
<PAGE>
rental and upon said terms and conditions, Lessee shall deliver written notice
to Lessor of Lessee's acceptance and agreement to lease such space for such
rental and upon said terms and conditions within three (3) business days after
receipt by Lessee of the notice of availability of said space. Lessee shall
have no right to lease such space if Lessee fails to deliver such written notice
to Lessor within said period of three (3) days.
29. SUBORDINATION. This Lease, without any further instrument, shall at
all times be subject and subordinate to any and all now effective or hereafter
executed ground or underlying leases, and to any and all mortgages and deeds of
trust which may now or hereafter affect Lessor's estate in the real property of
which the premises form a part, and to all advances made or hereafter to be made
upon the security thereof, and to all renewals, modifications, consolidations,
replacements and extensions thereof, provided, however, this Lease shall not be
subject to or subordinate to any such mortgage or deed of trust unless the
holder of such interest to which this Lease shall be subordinated executes a
recognition and non-disturbance agreement which provides (1) that this Lease
shall not be terminated so long as Lessee is not in default under this Lease,
and (2) that upon acquiring title to the Complex by foreclosure or otherwise
such holder shall recognize all of Lessee's rights hereunder which accrue
thereafter. In confirmation of such subordination, Lessee shall promptly
execute any certificate or other instrument which Lessor may deem proper to
evidence such subordination, without expense to Lessor; provided, however, that
if any person or persons purchasing or otherwise acquiring the real property of
which the premises form a part by any ground lease termination, or any sale,
sales and/or other proceedings under such mortgages and/or deeds of trust, shall
elect to continue this lease in full force and effect in the same manner and
with like effect as if such person or persons had been named as Lessor herein,
then this Lease shall continue in full force and effect as aforesaid, and Lessee
hereby attorns and agrees to attorn to such person or persons. Lessor shall use
its reasonable good faith efforts to cause any existing lender to execute a
recognition and non-disturbance agreement within thirty (30) days of the
execution of this Lease.
30. NO TERMINATION RIGHT. Except as otherwise expressly set forth in this
Lease, Lessee shall not have the right to terminate this Lease as a result of
any default by Lessor and Lessee's remedies shall be limited to damages and/or
injunction. Lessee expressly waives the defense of constructive eviction.
31. APPROVALS. Notwithstanding anything to the contrary in this Lease,
whenever this Lease requires an approval, consent, designation, determination or
judgment by either Lessor or Lessee, such approval, consent, designation,
determination, or judgment (including, without limiting the generality of the
foregoing, those required in connection with assignment and subletting) shall
not be unreasonably withheld or delayed and in exercising any right or remedy
hereunder, each party shall at all times act reasonably and in good faith.
30
<PAGE>
32. LESSOR'S ENTRY. Lessor and Lessor's agents, except in the case of an
emergency, shall provide Lessee with twenty-four (24) hours' notice prior to
entry of the premises. Such entry by Lessor and Lessor's agents shall not
impair Lessee's operations more than reasonably necessary. Lessor and Lessor's
agents shall at all times be accompanied by Lessee during any such entry except
in case of emergency and except for janitorial work.
33. REASONABLE EXPENDITURES. Notwithstanding anything to the contrary in
this Lease, any expenditure by a party permitted or required under this Lease,
for which such party is entitled to demand and does demand reimbursement from
the other party, shall be limited to the fair market value of the goods and
services involved, shall be reasonably incurred, and shall be substantiated by
documentary evidence available for inspection and review by the other party or
its representative during normal business hours.
34. ATTORNEYS' FEES. If any action at law or in equity shall be brought
to recover any rent under this Lease, or for or on account of any breach of or
to enforce or interpret any of the provisions of this Lease or for recovery of
the possession of the Premises, the prevailing party shall be entitled to
recover from the other party costs of suit and reasonable attorneys' fees, the
amount of which shall be fixed by the court and shall be made a part of any
judgment rendered.
35. GENERAL PROVISIONS.
(a) Nothing contained in this Lease shall be deemed or construed by
the parties hereto or by any third person to create the relationship of
principal and agent or of partnership or of joint venture of any association
between Lessor and Lessee, and neither the method of computation of rent nor any
other provisions contained in this Lease nor any acts of the parties hereto
shall be deemed to create any relationship between Lessor and Lessee other than
the relationship of landlord and tenant.
(b) Whenever the consent of a party is required as a condition to any
action pursuant to any provision of this Lease such consent shall not be
unreasonably withheld or delayed.
(c) Each and all of the provisions of this Lease shall be binding
upon and inure to the benefit of the parties hereto, and except as otherwise
specifically provided elsewhere in this Lease, their respective heirs,
executors, administrators, successors, and assigns, subject at all times,
nevertheless, to all agreements and restrictions contained elsewhere in this
Lease with respect to the assignment, transfer, encumbering, or subletting of
all or any part of Lessee's interest in this Lease.
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<PAGE>
(d) The captions of the paragraphs of this Lease are for convenience
only and shall not be considered or referred to in resolving questions of
interpretation or construction.
(e) This Lease is and shall be considered to be the only agreement
between the parties hereto and their representatives and agents. All
negotiations and oral agreements acceptable to both parties have been merged
into and are included herein. There are no other representations or warranties
between the parties and all reliance with respect to representations is solely
upon the representations and agreements contained in this instrument.
(f) The laws of the State of California shall govern the validity,
performance, and enforcement of this Lease. Notwithstanding which of the
parties may be deemed to have prepared this Lease, this Lease shall not be
interpreted either for or against Lessor or Lessee, but this Lease shall be
interpreted in accordance with the general tenor of the language in an effort to
reach an equitable result.
(g) Time is of the essence with respect to the performance of each of
the covenants and agreements contained in this Lease.
(h) Lessee hereby expressly waives any and all rights of redemption
granted by or under any present or future law in the event of Lessee being
evicted or dispossessed for any cause, or in the event of Lessor obtaining
possession of the premises by reason of the breach by Lessee of any of the
covenants and conditions of the Lease or otherwise. The rights given to Lessor
herein are in addition to any rights that may be given to Lessor by any statute
or otherwise.
(i) Any provision or provisions of this Lease which shall prove to be
invalid, void or illegal, shall in no way affect, impair, or invalidate any
other provisions hereof, and the remaining provisions hereof shall nevertheless
remain in full force and effect.
(j) Because Lessee is a corporation, this Lease must be executed by
the President and/or the Vice President of the corporation, unless the Bylaws or
a resolution of the Board of Directors shall otherwise provided, in which event
the Bylaws or a certified copy of the resolution, as the case may be, must be
furnished.
(k) Delivery of this Lease, duly executed by Lessee, constitute an
offer to lease the premises as herein set forth, and under no circumstances
shall such delivery be deemed to create an option or reservation to lease the
premises for the benefit of Lessee.
32
<PAGE>
This Lease shall only become effective and binding upon execution hereof by
Lessor and delivery of a signed copy to Lessee.
(1) Lessor shall provide monument signage for the Complex upon which
Lessee's name shall be shown, subject to the signage rights of the existing
tenants in the Building.
IN WITNESS WHEREOF, the Lessor and Lessee have duly executed this Lease as
of the date first set forth herein.
"Lessor"
W. F. BATTON & CO., INC.,
a California corporation
By /s/ W. F. Batton
------------------
Its President
----------
"Lessee"
NOVELLUS SYSTEMS, INC.,
a California corporation
By /s/ John. P. Root
-------------------
Its Treasurer
------------
33
<PAGE>
LEGAL DESCRIPTION:
All that real property situate in the City of San Jose, County of Santa Clara,
State of California, described as follows:
PARCEL ONE:
LOT 14, as shown on that certain Map of Tract No. 7544, which map was filed for
record in the office of the Recorder of the County of Santa Clara, State of
California on March 7, 1984 in Book 525 of Maps, page(s) 45 and 46, and the
Certificate of Correction recorded August 8, 1985 in Book J422, page 1784,
Official Records.
Excepting therefrom that portion conveyed to the Santa Clara County Transit
District by deed recorded May 28, 1987 in Book K165, page 2153 of Official
Records, described as follows:
Beginning at the Southwesterly corner of Lot 14, as said Lot is shown on said
Tract Map; thence Easterly along the dividing line between Lot 14 and the Lands
of the City and County of San Francisco, as shown on said Tract Map, N. 66 deg.
00' 56" E. 210.13 feet to the true point of beginning of this description;
thence continuing Easterly along said dividing line N. 66 deg. 00' 56" E. 68.00
feet; thence Northerly at right angles N. 23 deg. 59' 04" W. 40.00 feet to a
point on a line that is parallel with and 40.00 feet, measured at right angles,
Northerly of the said Southerly line of Lot 14; thence Westerly along said
parallel line S. 23 deg. 59' 04" E. 40.00 feet to the true point of beginning.
Also excepting therefrom that portion that conveyed to the Santa Clara County
Transit District by Grant Deed recorded September 6, 1990 in Book L471, page
1534, Official Records, described as follows:
All that portion situated in the City of San Jose, County of Santa Clara, State
of California and being a portion of Lot 14, as said Lot is shown on that
certain Tract No. 7544, filed in Book 525 of Maps, pages 45 and 46, Records of
Santa Clara County, California, and more particularly described as follows:
Beginning at the Southwesterly corner of Lot 14, as said Lot is shown on said
Tract Map; thence easterly along the dividing line between Lot 14 and the lands
of the City and County of San Francisco, as shown on said Tract Map, N. 66 deg.
00' 56" E. 205.13 feet to the true point of beginning of this description;
thence continuing Easterly along said dividing line N. 66 deg. 00' 56" E. 5.00
feet; thence Northerly at right angles N. 23 deg. 59' 04" W. 40.00 feet to a
point on a line that is parallel with and 40.00 feet, measured at right angles
Northerly of the said Southerly line of Lot 14; thence Westerly along said
parallel line S. 66 deg. 00' 56" W. 5.00 feet; thence Southerly at right angles
S. 23 deg. 59' 04" E. 40.00 feet to the true point of the beginning.
PARCEL TWO:
A non-exclusive easement for the parking of vehicles on that certain portion
EXHIBIT "A"
<PAGE>
Page 2
of the real property commonly known as the Hetch Hetchy right-of-way as granted
in that certain instrument recorded May 16, 1986 in Book J695, page 1295,
Official Records.
ARB No. ht
<PAGE>
3590 North First Street, San Jose
Third Floor
[FLOOR PLAN]
North Tower
13,425+/- Rentable Square Feet
[FLOOR PLAN]
South Tower
12,905+/- Rentable Square Feet
[LOGO]
EXHIBIT B
<PAGE>
DEVCON CONSTRUCTION INC.
SCHEDULE OF VALUES
JOB #= NAME: NOVELLUS
------
SITE= NORTHPOINTE 3rd FLR WEST
DRAWING= OCT 8/30 SPACE PLAN
AREA= SF DATE:9/6 ESTIMATE #1
-------
<TABLE>
<CAPTION>
ITEM TOTAL
-------------------------------------
<S> <C>
1 SUPERVISION & LAYOUT $1,600
2 TEMPORARY FACILITIES 200
3 CLEAN UP 600
4 DEMOLITION 1,900
5 CABINETS & MILLWORK 2,200
6 DOORS/FRAMES/ 550
7 DRYWALL & FRAMING 1,800
8 ACOUSTICAL CEILING 600
9 FLOORCOVERING 3,800
10 PAINT 600
11 PLUMBING 4,000
12 FIRE SPRINKLERS 500
13 HVAC 300
14 ELECTRICAL 1,700
15 SYSTEM PTM CONNECTION 500 ALLOWANCE
--------
SUB TOTAL $20,850
CONTRACTORS O.H. & PROFIT 1,043
ARCHITECTURAL DESIGN COSTS 0
TESTING & INSPECTION 0
CONSULTANT FEES 0
PLAN CHECK/PERMIT FEES 0
LABOR LIABILITY INSURANCE 0
-------
-------
JOB TOTAL $22,693
ALTERNATES
#1 - RECARPET ENTIRE SUITE ADD $40,193
#2 - REPAINT ENTIRE SUITE ADD 3,500
</TABLE>
QUALIFICATIONS
ALL WORK TO BE DONE DURING REGULAR HOURS.
COFFEE SINK WASTE LINE WILL NOT FIT INTO 2ND FLOOR ABOVE-CEILING SPACE.
WE ASSUME BLDG DEPT WILL ALLOW WASTE LINE TO BE PUMPED OVERHEAD.
ALLOWANCE INCLUDED TO CONNECT SYSTEM PARTITIONS TO EXISTING OVERHEAD
JUNCTION BOXES.
NEW CARPET LABS ASSUMED TO BE LEAD OVER EXISTING VCT.
WE ASSUME THIS WORK TO BE DONE WITHOUT PERMITS
EXISTING RVAC/ELECTRICAL IMPROVEMENTS ASSUMED TO BE ADEQUATE.
INCLUSIONS
PHONE/DATA CABLING
ADDITIONAL ELECTRICAL POWER
SECURITY SYSTEM
REVISED ELECTRICAL METERING
EXHIBIT "C"
<PAGE>
SUBLEASE AGREEMENT
This Sublease ("Sublease") is made as of this 13th day of January, 1995, by
and between LTX CORPORATION, a Massachusetts corporation ("Sublandlord") and
NOVELLUS SYSTEMS, INC., a California corporation ("Subtenant").
WITNESSETH:
1. RECITALS. This Sublease is made with reference to the following facts:
1.1 California Second, Ltd., a Florida limited partnership, as landlord
("Master Landlord"), and Sublandlord, as tenant, entered into a written lease
dated March 8, 1984 (the "Original Lease"), covering premises described in the
Original Lease.
1.2 The Original Lease was amended by that certain (i) First Addendum to
Lease, dated May 7, 1984, (ii) Addendum No. 2, dated May 30, 1990, (iii) Third
Amendment to Lease, dated February 17, 1994, and (iv) Fourth Amendment
to Lease, executed contemporaneously herewith. The Original Lease and said
amendments are hereinafter collectively referred to as the "Master Lease", a
copy of which is attached hereto and incorporated herein as EXHIBIT A.
1.3 Subtenant desires to sublet all the premises described in the Master
Lease (the "Premises") from Sublandlord on the terms and conditions contained in
this Sublease.
2. BASIC SUBLEASE PROVISIONS.
2.1 Project Name: McCandless Business Park
Premises Address: 3970 North First Street,
San Jose, California
2.2 Rentable Area of Premises: 42,048 square feet.
2.3 Subtenant's Percentage Share: 28.63% of the Project
Common Area Charges.
2.4 Commencement Date: March 1, 1995.
Notwithstanding the foregoing, Sublandlord shall provide Subtenant
with thirty (30) days advance written notice confirming the date that
the Premises will be available for occupancy. In the event that
Sublandlord is unable to deliver possession of the Premises to
Subtenant on or before March 17, 1995, Subtenant shall be credited
with one (1) day of free rent for each day possession is not delivered
after March 17, 1995. In the further event that Sublandlord is unable
to deliver the Premises on or before May 1, 1995, Sublandlord shall
deliver written notice to Subtenant no later than April 26, 1995,
notifying Subtenant of Sublandlord's
1
<PAGE>
inability to deliver to Premises by May 1, 1995; if Sublandlord is
unable to deliver the Premises on or before May 1, 1995, Subtenant
shall have the right in its sole discretion either to continue or to
terminate this Sublease. If Subtenant does not deliver to Sublandlord
written notice of its election to continue this Sublease by May 5,
1995, this Sublease shall automatically terminate and any sums
previously delivered to Sublandlord by Subtenant shall be returned to
Subtenant and the parties shall have no further rights and obligations
hereunder.
If Sublandlord permits Subtenant to
occupy the Premises prior to February 1, 1995, and Subtenant accepts
such early possession (in its sole discretion), such occupancy shall
be subject to all of the provisions of this Sublease. Such early
possession shall not advance the Expiration Date of this Sublease.
2.5 Expiration Date: June 20, 1999.
2.6 Rent Commencement Date: March 1, 1995; provided, however,
Subtenant shall not be obligated to pay Basic Monthly Rent or Common
Area Charges or any other tenant charges until possession of the
Premises is delivered to Subtenant pursuant to Subparagraph 2.4 above.
Upon the Commencement Date, Subtenant shall deliver to Sublandlord the
sum of Twenty-Seven Thousand Three Hundred Thirty-One and 20/100
Dollars ($27,331.20) to be credited against Subtenant's first month of
rent ("Advance Rent").
2.7 Basic Monthly Rent: $27,331.20 commencing on the Rent
Commencement Date. All rent shall be paid without demand, deduction,
set-off or counterclaim, in advance on the first day of each calendar
month during the term of this Sublease, and in the event of a partial
rental month, rent shall be prorated.
2.8 Permitted Use: The Premises may be used for the
following purposes: (i) general office uses, (ii) research and
development of semiconductor equipment, (iii) light manufacturing and
assembly of semiconductor equipment, (iv) processing of semiconductor
wafers, and (v) any other lawful use permitted under the Master Lease.
2.9 Subtenant Improvement Allowance: Upon the Commencement Date,
Sublandlord shall provide Subtenant with One Hundred Twenty-Five
Thousand Dollars ($125,000) to be utilized for improvement of the
Premises. Sublandlord shall net Subtenant's Advance Rent and Security
Deposit against the Subtenant Improvement Allowance for a net payment
to Subtenant of Seventy Thousand Three Hundred Thirty-Seven and
60/100 Dollars. ($70,337.60). The
2
<PAGE>
Subtenant Improvements to be constructed by Subtenant shall be
constructed by McCandless Construction pursuant to plans and
specifications to be prepared by Craig Almeleh/McCandless Construction
based on the description of tenant improvements attached hereto and
incorporated herein as EXHIBIT B and the final plans and
specifications are subject to Master Landlord's consent and approval
as required under Paragraph 8 of the Master Lease. Sublandlord hereby
consents to Subtenant's construction of said Subtenant Improvements
and Construction of the alterations shall be made in accordance with
the terms of Paragraph 8 of the Master Lease, subject to obtaining
Master Landlord's consent.
2.10 Option to Extend: Sublandlord hereby assigns to
Subtenant all its rights in the Option to Extend Term set forth in
Paragraph 3 of the Third Amendment to Lease, as modified by Paragraph
1 of the Fourth Amendment to Lease. In the event that the option is
timely exercised by Subtenant, Subtenant and Master Landlord shall
enter into a direct lease under all the provisions of the Master
Lease, including without limitation, the amount of basic rent which
shall be determined pursuant to the terms and conditions of Paragraph
3 of the Third Amendment to Lease, and the Master Lease shall
terminate upon execution of a binding direct lease between Subtenant
and Master landlord on said terms.
2.11 Acceptance of Premises: Subtenant agrees to accept the
Premises in an "as is" condition. Without limiting the foregoing,
Subtenant's rights in the Premises are subject to all local, state and
federal laws, regulations and ordinances governing and regulating the
use and occupancy of the Premises. Subtenant acknowledges that
neither Sublandlord nor Sublandlord's agent has made any
representation or warranty as to the present or future suitability of
the Premises for the conduct of Subtenant's business.
2.12 Address for payment of rent and notices:
SUBLANDLORD: SUBTENANT:
LTX Corporation Novellus System, Inc.
LTX Park at University Ave. 81 Vista Montana
Westwood, MA 02090-2306 San Jose, CA 95134
Att'n: Glenn Meloni, Att'n: John Root
Corporate Controller (408) 943-3422 fax
(617) 329-8886 fax
2.13 Security Deposit: Upon the Commencement Date,
Subtenant shall deposit with Sublandlord the sum
3
<PAGE>
of Twenty-Seven Thousand Three Hundred Thirty-One and 20/100 Dollars
($27,331.20) ("Deposit") as security for Subtenant's faithful
performance of Subtenant's obligations hereunder. If there is an
Event of Default by Subtenant hereunder, Sublandlord may use, apply
or retain all or any portion of the Deposit for the payment of any
rent or other charge in default or for the payment of any other sum
which Sublandlord incurs by reason of Subtenant's default , or to
compensate Sublandlord for any loss or damage which Sublandlord may
suffer thereby. If Sublandlord uses or applies all or any portion
of the Deposit, Subtenant shall within ten (10) days after written
demand therefor deposit cash with Sublandlord in an amount sufficient
to restore the Deposit to its full amount and Subtenant's failure to
do so shall be a material breach of this Sublease. Sublandlord shall
not be required to keep the Deposit separate from its general
accounts. If Subtenant performs all of Subtenant's obligations
hereunder, the Deposit, or so much therof as has not been used or
applied by Sublandlord, shall be returned with payment of interest,
to Subtenant within ten (10) days after the Expiration date.
2.14 Broker: The Commercial Property Service
Company ("CPS). Sublandlord and Subtenant hereby acknowledge and
agree that CPS is acting as a dual agent.
3. INCORPORATION BY REFERENCE; ASSUMPTION. All of the Paragraphs of the
Master Lease are incorporated into this Sublease as if fully set forth in this
Sublease except for the following: Paragraphs 2,3,4 (a), 4 (b), 4 (d),
5,31,49,50, and Exhibit C of the Original Lease; the First Amendment to Lease;
Addendum No. 2; and Paragraphs 2, 3 (e), and 6 of the Third Amendment to Lease.
3.1 If any provisions of this Sublease conflict with any portion of the
Master Lease as incorporated herin, the terms of this Sublease shall govern.
3.2 Subtenant shall assume and perform to Sublandlord the Tenant's
obligations under the Master Lease provisions to the extent that the provisions
are applicable to the Premises. Subtenant shall pay to Sublandlord all taxes,
utilities, common area charges and any other sums payable by Sublandlord under
the Master Lease prior to the date any such amounts are due and payable by
Sublandlord.
3.3 With respect to work, services, repairs, repainting, restoration, the
provision of utilities, elevator or HVAC services, or the performance of other
obligations required of Master Landlord uner the Master Lease, Sublandlord shall
be obligated to request the same, on request in writing by subtenant, and to use
diligent efforts to obtain the same from Master Landlord. Subtenant shall
cooperate with Sublandlord as
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may be required to obtain from Master Landlord any such work, services, repairs,
repainting restoration, the provision of utilities, elevator or HVAC services,
or the performance of any of Master Landlord's other obligations under the
Master Lease.
4. COVENANT OF QUIET ENJOYEMNT. Sublandlord represents that the Master Lease
is in full force and effect and that there are no defaults on Sublandlord's or
Master Landlord's part under it as of the Commencement Date. Subject to the
terms of this Sublease and the Master Lease, Sublandlord represents that if
Subtenant performs all the provisions in this Sublease to be performed by
Subtenant, Subtenant shall have and enjoy throughout the term of this Sublease
the quiet and undisturbed possession of the Premises.
5. MASTER LEASE.
5.1 Subtenant and Sublandlord, and each of them, hereby agree that they
will not do or permit to be done anything which would constitute a violation or
breach of any of the terms, conditions or provisions of the Master Lease or
which would cause the Master Lease to be terminated or forfeited by virtue of
any risks of termination or forfeiture reserved by or vested in Master Landlord.
5.2 If Sublandlord defaults under the Master Lease, Master Landlord hereby
agrees to give Subtenant written notice of the default and Subtenant shall have
five (5) days from the date such notice is given to Subtenant to cure such
default or a reasonable time if a non-monetary default can not reasonably be
cured within five (5) days; provided that Subtenant shall have no obligation to
cure any such default by Sublandlord. Notwithstanding anything to the contrary
contained herein, any and all amounts expended by Subenant to cure Sublandlord's
default under the Master Lease shall serve as an offset against any monies owed
to Sublandlord by Subtenant under this Sublease.
5.3 If there is a default under the Master Lease by Sublandlord, and
Master Landlord and Subtenant are able to agree on the terms of the new
direct lease between Master Landlord and Subtenant, including payment of all
past-due monetary payments and cure of any other defaults under the Master
Lease, Sublandlord hereby agrees that the Master Lease may be terminated by
Master Landlord and that Master Landlord and Subtenant shall have the right,
without any other further action, agreement or document from or on behalf of
Sublandlord, to enter into the new direct lease, and the Master Lease shall
be deemed terminated as of the date of execution of such new direct lease
(the "Master Lease Termination Date") between Master Landlord and Subtenant
and Sublandlord shall be released of all obligations under the Master Lease
accruing after the Master Lease Termination Date; provided, however, Master
Landlord and Subtenant may enter into such new lease without waiving any
rights, remedies or claims either may have against Sublandlord as a result of
the default under the Master Lease which accrued prior to the Master Lease
Termination Date, and all such rights, remedies and claims shall
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be deemed preserved and survive the termination of Master Lease as specified
herein.
5.4 If Sublandlord is given the right under the Master Lease to terminate
the Master Lease (e.g. in case of destruction or condemnation), Subtenant shall
have the right, in its sole discretion, to determine whether it wishes to have
the Master Lease terminated. If Subtenant elects to have the Master Lease
terminated, Subtenant shall terminate this Sublease and Sublandlord shall
terminate the Master Lease. If Subtenant elects not to terminate this Sublease,
then Sublandlord shall promptly take such action as is necessary
under the Master Lease, if any, to prevent any such termination from occurring.
6. REPRESENTATIONS AND WARRANTIES OF SUBLANDLORD. Sublandlord represents
and warrants as follows: (i) the Master Lease is the entire agreement between
Master Landlord and Sublandlord regarding the Premises, and the Master Lease has
not been amended or modified except as expressly set forth in this Sublease,
(ii) Master Landlord and Sublandlord are not now, and at the Commencement Date
will not be, in breach or default of any of the provisions of the Master Lease,
and (iii) Sublandlord has now, and will have as of the Commencement Date,
complied with all laws and regulations relating to the use and occupancy of
the Premises
7. HAZARDOUS MATERIALS. Sublandlord represents that to the best of its
knowledge there are no Hazardous Materials (as defined in the Master Lease) on,
in, under or about the Premises. Sublandlord further represents that it has
complied with all Hazardous Materials Laws (as defined in the Master Lease)
during its tenancy on the Premises.
8. REAL ESTATE BROKERS. Each party warrants to the other that there are no
brokerage commissions or fees payable in connection with this Sublease except to
the broker set forth in Paragraph 2.14 above, whose commission shall be paid by
Sublandlord. Each party further agrees to indemnify and hold the other party
harmless, from any cost, liability and expense (including attorneys' fees) which
the other party may incur as the result of any breach of this Paragraph 8.
9. ARBITRATION. The provisions of this Paragraph 9 shall apply to the
resolution of disputes between Sublandlord and Subtenant unless the Master
Landlord is or may become a party to the dispute, in which event the provisions
of this Paragraph 9 shall apply only if the Master Landlord agrees to settle the
dispute pursuant to the terms hereof.
DISPUTE RESOLUTION: NOTICE: BY INITIALLING IN THE SPACE BELOW,
SUBLANDLORD AND SUBTENANT AGREE TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS
INCLUDED IN THIS DISPUTE RESOLUTION PROVISION DECIDED BY NEUTRAL ARBITRATION AS
PROVIDED UNDER CALIFORNIA LAW AND SUBLANDLORD AND SUBTENANT AGREE TO GIVE UP ANY
RIGHTS EACH MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT BY JURY
TRIAL. BY INITIALLING IN THE SPACE BELOW, SUBLANDLORD AND SUBTENANT EACH AGREE
TO GIVE UP THEIR JUDICIAL
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RIGHTS TO DISCOVERY AND APPEAL UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN
THE DISPUTE RESOLUTION PROVISION. IF EITHER PARTY REFUSES TO SUBMIT TO
ARBITRATION AFTER AGREEING TO THIS PROVISION, THE NONCOMPLYING PARTY MAY BE
COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL
PROCEDURE. SUBLANDLORD'S AND SUBTENANT'S AGREEMENT TO THIS ARBITRATION
PROVISION IS VOLUNTARY.
EACH PARTY HAS READ AND UNDERSTANDS THE FOREGOING AND AGREES TO SUBMIT DISPUTES
ARISING OUT OF THE MATTERS INCLUDED IN THE DISPUTE RESOLUTION PROVISION TO
NEUTRAL ARBITRATION.
Subtenant: /s/ Sublandlord:/s/
-------------- --------------
EXCEPT AS PROVIDED IN THE FIRST PARAGRAPH AND THE LAST PARAGRAPH OF THIS
PARAGRAPH 9, ANY CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS
SUBLEASE OR ANY AGREEMENT OR INSTRUMENTS RELATING HERETO OR DELIVERED IN
CONNECTION HEREWITH, INCLUDING, BUT NOT LIMITED TO, A CLAIM BASED ON OR ARISING
FROM AN ALLEGED TORT, WILL, AT THE REQUEST OF ANY PARTY, BE DETERMINED BY
ARBITRATION IN ACCORDANCE WITH CALIFORNIA LAW UNDER THE AUSPICES AND RULES OF
THE AMERICAN ARBITRATION ASSOCIATION ("AAA"). THE AAA WILL BE INSTRUCTED BY
EITHER OR BOTH PARTIES TO PREPARE A LIST OF THREE JUDGES WHO HAVE RETIRED FROM
THE SUPERIOR COURT OF THE STATE OF CALIFORNIA, A HIGHER CALIFORNIA COURT OR ANY
FEDERAL COURT. WITHIN 10 DAYS OF RECEIPT OF THE LIST, EACH PARTY MAY STRIKE 1
NAME FROM THE LIST. THE AAA WILL THEN APPOINT THE ARBITRATOR FROM THE NAME(S)
REMAINING ON THE LIST. THE ARBITRATION WILL BE CONDUCTED IN SAN JOSE, OR IN A
LOCATION AGREED TO BY THE PARTIES. ANY CONTROVERSY IN INTERPRETATION OR
ENFORCEMENT OF THIS PR0VISION, OR WHETHER A DISPUTE IS ARBITRABLE, WILL BE
DETERMINED BY THE ARBITRATORS. JUDGMENT UPON THE AWARD RENDERED BY THE
ARBITRATOR(S) MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. THE INSTITUTION
AND MAINTENANCE OF AN ACTION FOR JUDICIAL RELIEF OR IN PURSUANT OF AN ANCILLARY
REMEDY DOES NOT CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE
PLAINTIFF, TO SUBMIT THE CONTROVERSY OR CLAIM TO ARBITRATION.
10. ATTORNEYS' FEES. If there is any legal or arbitration action or
proceeding between Sublandlord and Subtenant to enforce any provision of this
Sublease or to protect or establish any right or remedy of either Sublandlord or
Subtenant hereunder, the unsuccessful party to such action or proceeding will
pay to the prevailing party all costs and expenses, including reasonable
attorneys' fees incurred by such prevailing party in such action or proceeding
and in any appearance in connection therewith, and if such prevailing party
recovers a judgment in any such action, proceeding or appeal, such costs,
expenses and attorneys' fees will be determined by the court or arbitration
panel handling the proceeding and will be included in and as a part of such
judgment.
11. NOTICES. All notices given under this Sublease must be in writing and
shall be effectively served upon delivery, or if mailed, upon the first to occur
of receipt or the expiration of forty-eight hours after deposit in certified
United States mail,
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postage prepaid, sent to the party at its address set forth in Paragraph 2.12.
Those addresses may be changed by either party by notice to the other party.
12. AUTHORIZATION. Each party hereto represents that it has the authority to
enter into this Sublease, and that all requirements or conditions precedent to
its execution of this Sublease have been satisfied.
13. MASTER LANDLORD'S CONSENT. This Sublease is expressly conditioned upon
receipt of the written consent of Master Landlord in the form attached hereto
within five (5) days from the date of this Sublease.
IN WITNESS WHEREOF, Sublandlord and Subtenant have executed this Sublease
as of the day and year first above written.
Sublandlord: LTX CORPORATION, a Massachusetts corporation
By /s/ John F. Anori
-----------------------------------------
Its Chief Financial Officer
----------------------------------------
Subtenant: NOVELLUS SYSTEMS, INC., a California
corporation
By /s/
------------------------------
Its V.P. and Chief Financial Officer
-----------------------------
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CONSENT OF MASTER LANDLORD
California Second, Ltd., a Florida limited partnership ("Master Landlord"),
hereby certifies to Subtenant that (i) the Master Lease (as defined in the
Sublease and attached thereto as EXHIBIT A) is the entire agreement between
Master Landlord and Sublandlord regarding the Premises, and the Master Lease has
not been amended or modified, (ii) Master Landlord is not now, and at the
Commencement Date will not be, in breach or default of any of the provisions of
the Master Lease, and (iii) to the best of Master Landlord's knowledge,
Sublandlord is not in breach or default of any provision of the Master Lease.
Master Landlord hereby consents to the foregoing Sublease, and specifically
agrees to the permitted uses specified in Paragraph 2.8 of the Sublease, the
assignment of the option to extend the term as specified in Paragraph 2.10 of
the Sublease, the notice provisions specified in Paragraph 5.2 of the Sublease,
and the provisions of Paragraph 5.3 of the Sublease.
Date: February 3, 1995
Master Landlord: CALIFORNIA SECOND, LTD., a Florida
limited partnership
By: McCandless Partnership, a
California general
partnership, as its general
partner
By: /s/ Birk S. McCandless
----------------------------
Birk S. McCandless, as
Trustee under the Birk S.
McCandless and Mary
McCandless Inter Vivos
Trust Agreement, dated
February 17, 1982, as a
general partner
<PAGE>
EXHIBIT A
MASTER LEASE
<PAGE>
EXHIBIT B
DESCRIPTION OF TENANT IMPROVEMENTS
Sublandlord and Master Landlord acknowledge Subtenant intends to install
the following improvements in the Premises and approves the same subject to
Master Landlord's approval of the final plans and specifications:
1. The building will be remodeled to be a standard open office type
of environment except for a warehouse adjoining the loading dock
no less than 5,000 square feet no greater than 15,000 square
feet.
2. The office area will have a standard 9' drop ceiling and the
warehouse ceiling will be open to the roof structure.
3. The raised computer floors and computer rooms will be removed.
Existing roof top HVAC units will remain. The office area will
be serviced by a standard variable air volume HVAC system.
4. The existing restroom cores will be utilized and modified as
needed to meet current codes.
5. Private offices and conference rooms will be distributed
throughout the office area. Doors will be full height, solid
core.
6. Lighting and electrical distribution will be standard for similar
office space in other buildings in the project.
7. Floor coverings will consist of standard grade glue down carpet
in the general office areas, with upgrades (at Subtenant's
election) in executive offices and conference rooms. Lobbies and
lunch room areas may have hard surface finishes of Subtenant's
choice.
Subtenant will submit final plans and specifications to Master Landlord for
final approval prior to the commencement of construction. Master Landlord will
approve the final plans within (5) five days of receipt. Subtenant will submit
preliminary plans to Master Landlord for comment prior to the commencement of
construction documents.
<PAGE>
LEASE
THIS LEASE is made MARCH 8, 1984 between CALIFORNIA SECOND, LTD.
("Landlord") and LTX CORPORATION ("Tenant").
WITNESSETH:
Landlord leases to Tenant and Tenant leases from Landlord those certain
premises (the "Premises") outlined in red on Exhibit A, which Landlord and
Tenant hereby agree consists of approximately forty-two thousand forty-eight
(42,048) square feet in McCandless Business Park - San Jose (the "Project"). As
used herein the term Project shall mean and include all of the land described in
Exhibit B and all of the buildings, improvements, fixtures and equipment now or
hereafter situated on said land.
Improvements for Tenant shall be constructed in accordance with the plans
and specifications, and other terms and conditions, set forth in Exhibit C.
Said work shall be at the expense of Landlord and/or Tenant as set forth in
Exhibit C and shall in each case be performed diligently and in a first-class,
workmanlike manner.
Tenant covenants, as a material part of the consideration of this lease, to
perform and observe each and all of the terms, covenants and conditions set
forth below, and this lease is made upon the condition of such performance and
observance.
1. USE
Tenant shall use the Premises for offices, research and
development, and light manufacturing and shall not use or permit the Premises to
be used for any other purpose.
2. TERM
(a) The term shall be for ten (10) years (unless sooner
terminated as hereinafter provided) and, subject to paragraphs 2(b) and 3, shall
commence on May 15, 1984 and end on May 14, 1994.
(b) Possession of the Premises shall not be deemed tendered and
the term shall not commence until the first to occur of the following:
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(1) One day after a Certificate of Occupancy is granted by
the proper governmental agency, or, if the governmental agency having
jurisdiction over the area in which the Premises are situated does not issue
Certificates of Occupancy and no such certificate is required by law, then one
day after certification by Landlord's architect or contractor that the
Landlord's construction work has been completed;
(2) Upon the occupancy of the Premises by any of Tenant's
operating personnel; or
(3) Upon substantial completion of all work to be done by
Landlord pursuant to Exhibit C, exclusive of telephones or other communication
systems and punchlist items, or, if Landlord is prevented from or delayed in
completing its work under Exhibit C due to the acts or omissions of Tenant, then
upon the date by which such work would have been completed but for such acts or
omissions by Tenant.
3. POSSESSION
If Landlord for any reason cannot deliver possession of the
Premises to Tenant at the date of commencement set forth in paragraph 2(a), this
lease shall not be void or voidable and Landlord shall not be liable to Tenant
for any loss or damage on account thereof. Tenant shall not be liable for rent
until Landlord delivers possession of the Premises to Tenant, as defined in
paragraph 2. If the term commences on a date other than specified in 2(a)
above, then the parties shall immediately execute an amendment to this lease
stating the actual date of commencement. The expiration date of the term shall
be extended by the same number of days that Tenant's possession of the Premises
was delayed from that set forth in paragraph 2(a). Notwithstanding the above,
the period of delay shall not exceed ninety (90) days from May 15, 1984 plus the
number of days of delay caused by strike or other causes beyond Landlord's
reasonable control. If the period of delay exceeds the allowable delay,
Landlord shall not be liable to Tenant for any loss or damage on account
thereof, but Tenant may, at its option, declare this lease void, and, if Tenant
so elects, all amounts deposited with Landlord shall be returned to Tenant.
4. MONTHLY RENT
(a) MONTHLY RENT. Tenant shall pay to Landlord as monthly rent
for the Premises, in advance and subject to adjustment as provided in paragraph
5, the sum of Thirty-Two Thousand Two Hundred Twenty and no/100 Dollars
($32,220.00) on or before the first day of the first full calendar month
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<PAGE>
of the term and on or before the first day of each and every successive calendar
month Rent for any partial month shall be payable in advance and shall be
prorated at the rate of 1/30th of the monthly rent per day.
(b) PLACE OF PAYMENT. All rent and other amounts due Landlord
hereunder shall be paid to Landlord, without deduction or offset, in lawful
money of the United States of America, at the office of Landlord at 710 Lakeway,
Suite 200, Sunnyvale, California 94086 or to such other person or place as
Landlord may from time to time designate in writing.
(d) SECURITY DEPOSIT. Concurrently with Tenant's execution of
this lease, Tenant shall deliver to Landlord an unconditional and irrevocable
Letter of Credit in the amount of Forty-Five Thousand Four Hundred Eleven and
84/100 Dollars ($45,411.84) to secure the faithful performance by Tenant of all
of the terms, covenants and conditions of this lease to be kept and performed by
Tenant. The Letter of Credit shall be available by draft at sight, subject only
to receipt by the bank of a notarized statement from Birk S. McCandless or
Steven E. Sund stating that the amount demanded is due and owing to Landlord.
The Letter of Credit shall by its terms terminate on May 14, 1989.
If Tenant fails to comply with any provision of this lease,
including without limitation the payment of rent and other amounts due Landlord,
after three (3) business days' written notice to Tenant, Landlord may
immediately and without further notice resort to said Letter of Credit and use
or apply all or any part of same to compensate Landlord for any loss and expense
occasioned thereby and for the payment of any amount due Landlord under the
terms of this lease.
If any portion of said Letter of Credit is used as specified
above, Tenant shall, within ten (10) business days after written demand
therefor, restore the Letter of Credit to its original amount; Tenant's failure
to do so shall be a material breach of this lease.
Landlord's resort to said Letter of Credit shall in no way or
manner constitute an acceptance of or waiver of such failure by Tenant to comply
with this lease; nor shall resort to said Letter of Credit terminate, or permit
Tenant to terminate, or constitute a forfeiture of, or be
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<PAGE>
construed as an election by Landlord to terminate, this lease; nor shall such
resort affect Landlord's remedies otherwise available under this lease or at
law.
5. ADJUSTMENTS TO MONTHLY RENT
The monthly rent provided for in paragraph 4(a) shall be increase
as follows:
(a) The monthly rent shall be increased commencing on the first
day of the eleventh (11th), thirty-seventh (37th) and forty-ninth (49th) months
of the term, as follows:
Months 11 - 36 $45,411.84 per month
Months 37 - 48 $50,833.00 per month
Months 49 - 60 $53,583.00 per month.
(b) The monthly rent shall be adjusted to market rent on the
first day of the sixty-first (61st) month of the term, such adjusted monthly
rent being hereafter called "Revised Base Rent." If the parties are unable to
agree on the Revised Base Rent at least thirty (30) business days before the
first day of the sixty-first (61st) month of the term, the Revised Base Rent
shall be set in the following manner: (i) Landlord and Tenant shall each select
a licensed real estate broker with not less than five years' experience in the
business of commercial leasing of property of the same type and use as the
Premises and in the same geographial vicinity, (ii) such two real estate brokers
shall select a third similarly qualified broker, and the three brokers so
selected shall determine the Revised Base Rent, (iii) the decision of the
brokers shall be final and binding upon the parties hereto, and (iv) the brokers
shall base their determination of the Revised Base Rent on the monthly rent
obtained for property of comparable location, type and use as the Premises with
leases of comparable terms, provided that in no case shall the Revise Base Rent
be greater than $1.59 per square foot per month nor less than the monthly rent
in effect at the sixtieth (60th) month increased by eight percent (8%). Each
party shall pay the expenses and charges of the broker appointed by it and the
parties shall pay the expenses and charges of the third broker in equal shares.
As soon as the Revised Base Rent is so determined, Landlord and Tenant shall
immediately execute an amendment to this lease stating the Revised Base Rent.
(c) The Revised Base Rent shall thereafter be adjusted annually
commencing with the seventy-third (73rd) month of the term and every year
thereafter in accordance
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<PAGE>
with any increases in the Consumer Price Index for the United States, All Urban
Consumers (1967=100) (the "Index"). For the purpose of the adjustments, the
base index shall be the Index in effect the first day of the sixty-first (61st)
month of the term, and the Extension Index shall be the Index in effect on the
date each respective adjustment becomes effective. If the Extension Index has
increased over the Base Index, that percentage increase shall be applied to the
Revised Base Rent to establish the adjusted monthly rent; provided, however,
that in no event shall the monthly rent as so adjusted be less than four percent
(4%) per year compounded, or greater than eight percent (8%) compounded, over
the Revised Base Rent.
6. RESTRICTIONS ON USE
Tenant shall not do or permit to be done in or about the Premises
or the Project, nor bring or keep or permit to be brought or kept in or about
the Premises or Project, anything which is prohibited by or will in any way
increase the existing rate of (or otherwise effect) fire or any other insurance
covering the Project or any part thereof, or any of its contents, or will cause
a cancellation of any insurance covering the Project or any part thereof, or any
of its contents. Tenant shall not do or permit to be done anything in or about
the Premises or the Project which will constitute waste or which will in any way
obstruct or interfere with the rights of other tenants or occupants of the
Project or injure or annoy them, or use or allow the Premises to be used for any
unlawful purpose, nor shall tenant cause, maintain or permit any nuisance in or
about the Premises or the Project. No loudspeaker or other device, system or
apparatus which can be heard outside the Premises shall be used in or at the
Premises without the prior written consent of Landlord. Tenant shall not use
the Premises for sleeping, washing clothes, or the preparation, manufacture or
mixing of anything that might emit any objectionable odor, noises or lights into
the adjoining premises or common areas, or the Project. Tenant shall not do
anything on the Premises that will cause damage to the project or the building
in which the Premises are located and the Premises shall not be overloaded. No
machinery, apparatus or other appliance shall be used or operated in the
Premises that will in any manner injure, vibrate or shake the Premises.
Landlord shall be the sole judge of whether such odors, noises, lights or
vibrations are such as to violate the provisions of this paragraph. No waste
materials or refuse shall be dumped upon or permitted to remain upon any part of
the Premises or outside of the building proper except in trash containers placed
inside exterior enclosures designated for that purpose by Landlord, or inside of
the building proper where designated; and no toxic
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<PAGE>
or hazardous materials shall be disposed of through the plumbing or sewage
system. No materials, supplies, equipment, finished products or semi-finished
projects, raw materials or articles of any nature shall be stored or permitted
to remain outside of the building proper. No retail sales shall be made on the
Premises.
7. COMPLIANCE WITH LAWS
Tenant shall, in connection with its use and occupation of the
Premises, at its sole cost and expense, promptly observe and comply with (i) all
laws, statutes, ordinances and governmental rules, regulations or requirements
now or hereafter in effect,(ii) with the requirements of any board of fire
underwriters or any other similar body now or hereafter constituted and (iii)
with any direction or occupancy certificate issued pursuant to law by any public
authority; provided, however, that no such failure shall be deemed a breach of
these provisions if Tenant, immediately upon notification, commences to remedy
or rectify said failure, and provided further that as to any required capital
improvement having a useful life of more than one year and which is not required
by reason of Tenant's specific use of the Premises, Landlord shall make such
capital improvement and Tenant shall pay to Landlord, as additional rent and in
cash, the fraction of the cost of such capital improvement equal to the
remaining term of this lease over the useful life of the capital improvement.
The judgment of any court of competent jurisdiction or the
admission of Tenant in any action against Tenant, whether Landlord be a party
thereto or not, that Tenant has violated any such law, statute, ordinance or
governmental rule, regulation, requirement, direction or provision, shall be
conclusive of that act as between Landlord and Tenant. This lease shall remain
in full force and effect notwithstanding the any loss or use or other effect on
Tenant's enjoyment of the Premises by reason of any governmental laws, statutes,
ordinances, rules, regulations, and requirements now and hereafter in effect.
Notwithstanding the above and except as otherwise specifically
provided in Exhibit C , Landlord shall, at its sole cost and expense, make any
additions or changes to the Premises as may be required to bring the Premises
into compliance with laws, statutes, ordinances and governmental rules,
regulations or requirements in effect at the commencement date of this lease.
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<PAGE>
8. ALTERATIONS
Tenant shall not make or suffer to be made any alteration,
addition or improvement to or of the Premises or any part thereof (collectively
referred to herein as "alterations") without (i) the prior written consent of
Landlord (provided that no prior consent shall be required in the case of non-
structural improvements costing less than $2,500) and (ii) a valid building
permit issued by the appropriate governmental authority. Any alteration made by
Tenant (excluding moveable furniture and trade fixtures which have not become an
integral part of the building) shall at once become a part of the Premises and
belong to Landlord. Without limiting the foregoing, all heating, lighting,
electrical (including all wiring, conduit, outlets, drops, buss ducts, main and
sub-panels), air conditioning, partitioning, drapery and carpet installations
made by Tenant, regardless of how attached to the Premises, together with all
other alterations that have become an integral part of the building of which the
Premises are a part, shall be and become part of the Premises and belong to
Landlord upon installation and shall not be deemed trade fixtures, and shall
remain upon and be surrendered with the Premises at the termination of this
lease.
Any alteration by Tenant shall be made by Tenant at its sole
risk, cost and expense. Alterations requiring Landlord's consent shall be made
only after Landlord's written approval of any contractor or person selected by
Tenant for that purpose. Upon the expiration or sooner termination of the term,
Landlord may, at its sole option, require Tenant, at Tenant's sole cost and
expense, to promptly both remove any such alteration made by Tenant and Tenant
shall repair any damage to the Premises caused by such removal. Any movable
furniture and equipment or trade fixtures remaining on the Premises at the
expiration or other termination of the term shall become the property of
Landlord unless promptly removed by Tenant.
If during the term any alteration, addition or change of the
Premises is required by law, regulation, ordinance or order of any public
authority, Tenant, at its sole cost and expense, shall promptly make the same;
provided that as to any such required capital improvement having a useful life
of more than one year and which is not required by reason of Tenant's specific
use of the Premises, Landlord shall make such capital improvement and Tenant
shall pay to Landlord, as additional rent and in cash, the fraction of the cost
of such capital improvement equal to the remaining term of this lease over the
useful life of such capital improvement. If during the term any alteration or
change to the Common Area (or to the Project or building in which the Premises
is
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<PAGE>
located and it being, in Landlord's judgment, impractical for the affected
tenants to individually make such alterations, additions or changes) is required
by law, regulation, ordinance or order of any public or quasi-public authority,
the cost of such alteration or change shall be a Common Area Charge and Tenant
shall pay its percentage share of said costs to Landlord as provided in
paragraph 16.
9. REPAIR AND MAINTENANCE
By entry hereunder Tenant accepts the Premises as being in good
and sanitary order, condition and repair (excepting only "punch list" items).
Except as expressly provided below, Tenant shall at its sole cost keep and
maintain the entire Premises and every part thereof including, without
limitation, the windows, window frames, plate glass, glazing, truck doors, doors
and all door hardware, the interior walls and partitions, lighting and the
electrical and plumbing systems. Tenant shall also repair and maintain the
heating and air conditioning systems (unless Landlord has elected to keep and
maintain the heating and air conditioning systems as provided below) which shall
include, without limitation, a periodic maintenance agreement with a reputable
and licensed heating and air conditioning service company. If Tenant's use of
the heating and air conditioning systems is limited to normal business hours (8
a.m. to 6 p.m.), such agreement shall provide for service at least as often as
every sixty days; if Tenant's use of the heating or air conditioning systems
extends beyond such normal business hours, this service shall be as often as may
be required by Landlord; and in any event such service shall meet all warranty
enforcement requirements of such equipment and comply with all manufacturer
recommended maintenance. Landlord may elect, at its option, to keep and
maintain the heating and air conditioning systems of the Premises and in such
event, Tenant shall pay to Landlord upon demand the full cost of such
maintenance and of repairs to such systems. To the full extent that it may do
so, Landlord agrees to pass on to Tenant all applicable warranties with respect
to items that Tenant is obligated to repair and maintain.
Subject to the provisions of paragraph 17, Landlord shall keep
and maintain the roof and structural elements of the buildings constituting the
Project, and Common Area, in good order and repair. As used herein, "roof" is
defined as the building's roofing membrane and tiles, and "structural elements"
is defined as the building's foundation, slab-on-grade, columns, shear walls,
floor trusses, metal deck and concrete fill, and the roof beams, purlins and
roof plywood. Tenant waives all rights under and benefits of California Civil
Code Sections 1932(1), 1941 and 1942 and under any
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similar law, statute or ordinance now or hereafter in effect. The cost of the
repairs and maintenance which are the obligation of Landlord hereunder shall be
a Common Area Charge and Tenant shall pay its percentage share of such costs to
Landlord as provided in paragraph 16; provided, however, that if Landlord
replaces the entire roof of the building containing the Premises during the
term, the Landlord shall bear the cost thereof and no part thereof shall be
included in a Common Area Charge, and provided, further, that if any repairs or
maintenance is required because of an act or omission of Tenant, or its agents,
employees or invitees, Tenant shall pay to Landlord upon demand the full costs
of such repair or maintenance.
10. LIENS
Tenant shall keep the Premises and the Project free from any
liens arising out of any work performed, materials furnished or obligations
incurred by Tenant. In the event that Tenant shall not, within ten (10) days
following the imposition of such lien, cause the same to be released of record,
Landlord shall have, in addition to all other remedies provided herein and by
law, the right, but no obligation, to cause the same to be released by such
means as it shall deem proper, including payment of the claim giving rise to
such lien. All sums paid by Landlord for such purpose, and all expenses
incurred by it in connection therewith, shall be payable to Landlord by Tenant
on demand with interest at the rate of eighteen percent (18%) per annum or the
maximum rate permitted by law, whichever is less. Landlord shall have the right
at all times to post and keep posted on the Premises any notices permitted or
required by law, or which Landlord shall deem proper for the protection of
Landlord, the Premises and the Project and any other party having an interest
therein, from mechanics' and materialmen's liens and like liens. Tenant shall
give Landlord at least fifteen (15) days' prior notice of the date of
commencement of any construction on the Premises in order to permit the posting
of such notices.
11. INSURANCE
Tenant, At it's sole cost and expense, shall keep in force during
the term (i) public liability insurance with limits of at least $2,000,000 per
occurrence for injuries to or death of persons occurring in, on or about the
Premises or the Project and property damage insurance with limits of at least
$2,000,000 per occurrence and (iii) Worker's Compensation insurance as required
by the State of California. All such policies shall be primary and shall
provide that said insurance shall not be canceled or reduced except upon at
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least thirty (30) days' prior written notice to Landlord. Further, Tenant's
public liability insurance shall name Landlord as Additional Insured using ISO
Bureau Form G109 or G112001 (or a successor form); shall contain cross-liability
endorsements; and shall be issued by an insurance company admitted to transact
business in the State of California. Landlord agrees to pay on demand up to
$25.00 for the Additional Insured Endorsement.
Tenant shall, prior to the commencement of the term, provide
landlord with a completed Certificate of Insurance using Acord Form 25, a blank
copy of which is attached to this lease. Tenant agrees to increase the coverages
or otherwise comply with changes in connection with said public liability,
property damage and Workers Compensation insurance as Landlord or Landlord's
lender may from time to time require.
Landlord shall obtain and keep in force a policy or policies of
insurance covering loss or damage to the project, in the amount of the full
replacement value thereof, providing protection against those perils included
within the classification of "all risk" insurance, with increased cost of
reconstruction and contingent liability (including demolition) and flood and/or
earthquake insurance if available, plus a policy of rental income insurance in
the amount of 100% of twelve (12) months' rent (including sums paid as
additional rent) and such other insurance as Landlord or Landlord's lender may
from time to time require. The cost of all such insurance purchased by Landlord,
plus any charges for deferred payment of premiums and any deductible paid by
Landlord, shall be Common Area Charges and Tenant shall pay its percentage share
of such costs as provided in paragraph 16. If insurance costs are increased due
to Tenant's use of the Premises, then tenant shall pay to Landlord upon demand
the full cost of such increase.
Landlord and Tenant hereby mutually waive any and all rights of
recovery against one another for real or personal property loss or damage
occurring to the Premises, the Project, or any part thereof, or any personal
property therein, from perils insured against under fire and extended insurance
and any other property insurance policies existing for the benefit of the
respective parties so long as such insurance permits waiver of liability and
contains a waiver of subrogation without additional premiums. If additional
premiums must be paid, Tenant shall pay such additional premiums necessary to
obtain such waiver. A copy of the Waiver of Subrogation in favor of Landlord
shall be attached to the Tenant's completed Acord Form 25.
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Notwithstanding anything hereinabove contained, Tenant shall be
responsible for carrying, and shall pay the cost of, any casualty insurance as
Tenant deems appropriate with respect to any Tenant's personal property and
fixtures and any tenant improvements not the property of Landlord.
12. UTILITIES AND SERVICES
Tenant shall pay for all water, gas, light, heat, power,
electricity, telephone, trash pick-up, sewer charges and all other services
supplied to or consumed on the Premises. Landlord shall install separate meters
for interior gas, electricity and water. The cost of any utility or service not
separately metered or billed to the premises shall be a Common Area Charge and
Tenant shall pay its percentage share of such cost to Landlord as provided in
paragraph 16. In addition, the cost of all utilities and services supplied
to the Common Area shall be a Common Area Charge and Tenant shall pay its
percentage share of such cost to Landlord as provided in paragraph 16.
If Tenant's use of any such utility or service is materially in
excess of the average furnished to the other tenants of the Project, and such
utility or service is not separately metered, then Tenant shall pay to Landlord
upon demand the full cost of such excess, or Landlord may cause such utility or
service to be separately metered, in which case Tenant shall pay the full cost
of such utility or service and reimburse Landlord upon demand for the cost of
installing the separate meter.
Landlord shall not be liable for, and Tenant shall not be
entitled to, any abatement or reduction of rent by reason of the failure by any
person or entity to furnish any of the foregoing utilities or services when such
failure is caused by any cause beyond the reasonable control of Landlord.
13. TAXES AND OTHER CHARGES
All real estate taxes and assessments and other taxes, fees and
charges of every kind or nature levied or assessed against the Project or any
part thereof during the term by any federal, state, county, regional, municipal
or other governmental or quasi-public authority shall be a Common Area Charge
and payable by Tenant as set forth in paragraph 16. By way of illustration and
not limitation, "other taxes, fees, and charges" as used herein include any and
all taxes payable by Landlord (other than state and federal personal or
corporate income taxes measured by the
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net income of Landlord from all sources, and premium taxes), whether or not now
customary or within the contemplation of the parties hereto, (i) upon, allocable
to, or measured by the rent payable hereunder, including, without limitation,
any gross income or excise tax levied by the local, state or federal government
with respect to the receipt of such rent, (ii) upon or with respect to the
possession, leasing, operation, management, maintenance, alteration, repair, use
or occupancy by Tenant of the premises or any part thereof, (iii) upon or
measured by the value of Tenant's personal property or leasehold improvements
located in the Premises, (iv) upon this transaction or any document to which
Tenant is a party creating or transferring an interest or estate in the
Premises, (v) upon or with respect to parking or the number of persons employed
in or about the Project, and (vi) any tax, license, franchise fee or other
imposition upon Landlord which is otherwise measured by or based in whole or in
part upon the Project or any portion thereof. If Landlord contests any such tax,
fee or charge, the cost and expense incurred by Landlord thereby shall also be a
Common Area Charge and payable by Tenant as set forth in paragraph 16. In the
event the premises and any improvements installed therein by Tenant or Landlord
are valued by the assessor disproportionately higher than those of other tenants
in the building or project or in the event alterations or improvements are made
to the Premises, Tenant's percentage share of such taxes, assessments , fees
and/or charges shall be adjusted upward accordingly and Tenant agrees to pay
such readjusted share. Such determination shall be made by Landlord from the
respective valuations assigned in the assessors work sheet or such other
information as may be reasonably available and Landlord's determination thereof
shall be conclusive.
Tenant at its cost shall have the right at any time to seek a
reduction in the assessed valuation of the Premises or the Project or to contest
any real property taxes, assessments, fees or other taxes that are to be paid by
Tenant; provided, however, that any such contest or proceeding shall be at
Tenant's sole cost and expense and provided further that Tenant shall hold
Landlord and the Premises and the Project harmless therefrom. Landlord shall not
be required to join in any proceeding or contest brought by Tenant unless the
provisions of any law require that the proceeding or contest be brought by or in
the name of Landlord or any owner of the Premises. In that case Landlord shall
cooperate and join in the proceeding or contest or permit it to be brought in
Landlord's name as long as Landlord is not required to bear any cost. If Tenant
seeks to reduce or contest any such tax, assessment, fee or other charge and if
requested by Tenant, Landlord agrees to pay such tax, assessment, fee or charge
under protest and to
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otherwise deal with the appropriate authority in a manner consistent with
Tenant's contest or proceeding and the applicable rules, regulations or
procedures of such authority. In the event Tenant obtains any refund
attributable to the Premises, such refund shall belong to Tenant.
Tenant agrees to pay, before delinquency, any and all taxes
levied or assessed during the term hereof upon Tenant's equipment, furniture,
fixtures and other personal property located in the Premises, including
carpeting and other property installed by Tenant notwithstanding that such
carpeting or other property has become part of the Premises.
14. ENTRY BY LANDLORD
Landlord reserves, and shall at all reasonable times have, the
right to enter the Premises (i) to inspect the Premises, (ii) to supply services
to be provided by Landlord hereunder, (iii) to show the Premises to prospective
purchasers, lenders or tenants and to put 'for sale' or 'for lease' signs
thereon, (iv) to post notices required or allowed by this lease or by law, (v)
to alter, improve or repair the Premises and any portion of the Project, and
(vi) to erect scaffolding and other necessary structures in or through the
Premises or the Project where reasonably required by the character of the work
to be performed. Landlord shall not be liable in any manner for any
inconvenience, disturbance, loss of business, nuisance or other damage arising
from Landlord's entry and acts pursuant to this paragraph and Tenant shall not
be entitled to any abatement or reduction of rent if Landlord exercises any
rights reserved in this paragraph. For each of the foregoing purposes,
Landlord shall at all times have and retain a key with which to unlock all of
the doors in, on and about the Premises (excluding Tenants vaults, safes and
similar areas designated in writing by Tenant in advance), and Landlord shall
have the right to use any and all means which Landlord may deem proper to open
said doors in an emergency in order to obtain entry to the Premises. Any entry
by Landlord to the Premises pursuant to this paragraph shall not under any
circumstances be construed or deemed to be a forcible or unlawful entry into or
a detainer of the Premises or an eviction, actual or constructive, of Tenant
from the Premises or any portion thereof. Landlord shall also have the right
at any time to change the name, number or designation by which the Project is
commonly known.
15. COMMON AREA
Subject to the terms and conditions of this lease and such
reasonable rules and regulations as Landlord may from time to time prescribe,
Tenant and Tenant's employees,
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invitees and customers shall, in common with other occupants of the Project in
which the Premises are located, and their respective employees, invitees and
customers and others entitled to the use thereof, have the nonexclusive right to
use the access roads, parking areas and facilities provided and designated by
Landlord for the general use and convenience of the occupants of the Project,
which areas and facilities are referred to herein as "Common Area." This right
shall terminate upon the termination of this lease.
Landlord reserves the right from time to time to make changes in
the shape, size, location, amount and extent of the Common Area. Landlord
further reserves the right to promulgate such reasonable rules and regulations
relating to the use of the Common Area, and any part thereof, as Landlord may
deem appropriate for the best interests of the occupants of the Project. The
rules and regulations shall be binding upon Tenant upon delivery of a copy of
them to Tenant and Tenant shall abide by them and cooperate in their observance.
Such rules and regulations may be amended by Landlord from time to time, with or
without advance notice.
Tenant shall have the use of one hundred sixty-eight (168)
parking spaces in the Common Area as designated in Exhibit A. Tenant shall not
label or otherwise mark its assigned parking spaces without the prior written
approval of Landlord, provided that such approval shall not unreasonably be
withheld. Tenant shall be solely responsible for policing its assigned parking
spaces with respect to unauthorized use by others. Tenant shall not at any time
park or permit the parking of Tenant's trucks or other vehicles, or the trucks
or other vehicles of others, adjacent to loading areas so as to interfere in
any way with the use of such areas; nor shall Tenant at any time park or permit
the parking of Tenant's vehicles or trucks, or the vehicles or trucks of
Tenant's suppliers or others, in any portion of the Common Area not designated
by Landlord for such use by Tenant. Tenant shall not park or permit any
inoperative vehicle or equipment to be parked on any portion of the Common
Area.
Landlord shall operate, manage and maintain the Common Area. The
manner in which the Common Area shall be operated, managed and maintained and
the expenditures for such operation, management and maintenance shall be at the
sole discretion of Landlord, provided that such maintenance shall be in a manner
equal to that usually provided for other first class buildings in the same
general area as the Project. The cost of such maintenance, operation and
management, including but not limited to landscaping, repair of paving, parking
lots and sidewalks, security services and salaries and employee benefits
(including union benefits) of on-site
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and accounting personnel engaged in such maintenance and operations management,
shall be a Common Area Charge and Tenant shall pay to Landlord its percentage
share of such costs as provided in paragraph 16.
16. COMMON AREA CHARGES
Tenant shall pay to Landlord, as additional rent, an amount equal
to 28.63% of the total Common Area Charges as defined in this lease. Tenant
further agrees that Common Area Charges shall include an additional 5% of the
actual expenditures for the aggregate of all other Common Area Charges in
order to compensate Landlord for accounting and processing services.
Tenant's percentage share of Common Area Charges shall be paid as follows:
At or prior to the commencement of the term and to the commencement
of each calendar year of the term, Landlord shall deliver to Tenant a written
estimate of total Common Area Charges during the balance of the calendar year
in which the term commences and each succeeding calendar year, respectively.
Tenant shall pay, as additional rent, on the first day of each month during
the calendar year (or portion thereof covered by such estimate) its
percentage monthly share of Common Area Charges as shown on such estimate.
Within thirty (30) days of the end of each calendar year and of the end of
the term, Landlord shall deliver to Tenant a statement of the actual Common
Area Charges incurred for the preceding year, or, in the case of a statement
after the end of the term, covering the year in which the lease terminates.
If such statement shows that Tenant has paid less than its actual percentage
then Tenant shall on demand pay to Landlord the amount of such deficiency.
If such statement shows that Tenant has paid more than its percentage share
then Landlord shall, at its option, promptly refund such excess to Tenant or
credit the amount thereof to the rent next becoming due from Tenant.
Landlord reserves the right to revise any estimate of Common Area Charges if
actual or projected Common Area Charges show an increase or decrease in
excess of 10% from any earlier estimate for the same period. In such event,
Landlord shall deliver the revised estimate to Tenant, together with an
explanation of the reasons therefor, and Tenant shall revise its payments
accordingly. Landlord's and Tenant's obligations with respect to adjustments
at the expiration or earlier termination of this lease shall survive such
termination.
17. DAMAGE BY FIRE; CASUALTY
If the Premises or any part of the Project is damaged by fire or
other casualty, Landlord shall promptly repair such damage if, in Landlord's
judgement, such repair
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can be made within one hundred twenty (120) days consistent with the laws and
regulations of the state, federal, county and municipal authorities having
jurisdiction, and this lease shall remain in full force and effect, provided
that if there shall be damage to the Premises from any such cause, Tenant
shall be entitled to a reduction of rent, as reasonably calculated by
Landlord, while such repair is being made in the proportion that the area of
the Premises rendered untenantable by such damage bears to the total area of
the Premises. Tenant hereby waives the provisions of Sections 1932 (2) and
1933 (4) of the California Civil Code. If such repairs cannot, in Landlord's
judgement, be made within one hundred twenty (120) days, Landlord shall have
the option to either (i) repair such damage, this lease continuing in full
force and effect but with the rent proportionately reduced upon the condition
and as above provided, or (ii) give notice to Tenant at any time within
thirty (30) days after the occurrence of such damage terminating this lease
as of the date specified in such notice, which shall be not less than thirty
(30) nor more than one hundred twenty (120) days after the giving of such
notice. If such notice of termination is given, this lease and all interest
of Tenant in the Premises shall terminate on the date specified in the notice
and all payments of rent reduced by any proportionate reduction, shall be
paid up to the date of such termination. Landlord shall refund to Tenant any
rent previously paid for any period of time subsequent to the date of
termination. If (i) the damage to the Premises renders more than fifty
percent (50%) of the Premises untenantable, (ii) the damage is not due to the
act or omission of Tenant, and (iii) Landlord has not completed the repairs
within one hundred eighty (180) days from the date of occurrence of such
damage, then Tenant may terminate this lease by giving notice to Landlord at
any time within thirty (30) days after the end of said one hundred eighty
(180) day period, said notice to specify a termination date of no later than
sixty (60) days from the date of such notice. Notwithstanding any other
provision of this lease, Landlord shall in no event be required to repair any
injury or damage by fire or other cause whatsoever to, or make any repairs or
replacements of, any paneling, decorations, movable partitions, trade of
office fixtures or any other property of, or improvements installed on the
Premises by, Tenant.
Notwithstanding anything to the contrary contained in this paragraph
17: (i) Tenant shall not be entitled to any compensation or damages for loss of
use of the whole or any part of the Premises and/or for any inconvenience or
annoyance occasioned by such damage or from the repair, restoration or
reconstruction thereof; (ii) in the event that the damage is due to any cause
other than fire or other peril covered by extended coverage insurance, then
Landlord may
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elect to terminate this lease; (iii) should Landlord be delayed or prevented
from repairing the damaged Premises within one year after the occurrence of
such damage by act of God, war, governmental restriction, inability to
produce necessary labor or materials or other causes beyond the reasonable
control of Landlord, then Landlord shall be relieved of its obligation to
make such repair or restoration and Tenant shall be released from its
obligation under this lease as of the end of said one-year period.
18. INDEMNIFICATION
Landlord shall not be liable to Tenant and Tenant hereby
waives all claims against Landlord for any injury to or death of any person
or damage to or destruction of property in or about the Premises or the
Project by or from any cause whatsoever except the negligence of Landlord or
its authorized representatives. Except as to injury to persons or damage to
property the principal cause of which is the negligence of Landlord or its
authorized representatives, Tenant shall hold Landlord harmless from and
defend Landlord against any liability, loss, damage or expense, including
attorney fees, arising out of any injury to or death of any person or damage
to or destruction of property occurring in, on or about the Premises from any
cause whatsoever. Tenant shall hold Landlord harmless from and defend
Landlord against any liability, loss, damage or expense, including attorney
fees, arising (i) out of the failure of Tenant to observe or comply with laws
or other requirements as set forth in paragraph 7, (ii) by reason of Tenant's
use, handling, storage or disposal of toxic or hazardous materials or waste,
or (iii) by reason of any labor or services performed for, or materials used
by or furnished to, Tenant or any contractor engaged by Tenant with respect
to the Premises. The provisions of this paragraph 18 shall survive the
expiration or termination, however caused, of this lease.
19. ASSIGNMENT AND SUBLETTING
Tenant shall not voluntarily assign, encumber or otherwise
transfer its interest in this lease or in the Premises, or sublease all or any
part of the Premises, or allow any other person or entity to occupy or use all
or any part of the Premises, without first complying with the terms of this
paragraph 19 and without first obtaining Landlord's written consent. Any
assignment, encumbrance or sublease made without complying with this paragraph
19 and without Landlord's written consent shall be void and, at Landlord's
election, shall constitute a material default by Tenant. No consent to any
assignment, encumbrance or sublease shall constitute a waiver of any provisions
of this paragraph 19.
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If Tenant desires to sublet or assign all or any portion of the
Premises, Tenant shall give Landlord written notice thereof, specifying the
projected commencement date of the proposed sublet or assignment (which date
shall be not less than thirty (30) days or more than ninety (90) days after
the date of such notice), the portions of the Premises proposed to be sublet
or assigned, and the identity of the proposed assignee or subtenant. Tenant
shall further provide Landlord with such other information concerning the
proposed assignee or subtenant as requested by Landlord. In the case of any
proposed assignment, or if the proposed sublet for all or any portion of the
Premises is for a sublet term ending within the last twelve (12) months of
the term of this lease, or if the proposed sublet is for more than 35% of the
Premises, then Landlord shall have the right, exercisable by written notice
to be delivered to Tenant within thirty (30) days of receipt of Tenant's
notice, to terminate this lease as to the portion proposed to be assigned or
sublet effective as of the date specified in Tenant's notice as the proposed
commencement date of the assignment or sublease. If this lease is so
terminated as to only a portion of the Premises, the monthly rent and other
payments hereunder shall be adjusted on a pro rata basis based on the number
of square feet retained by Tenant, and this lease as so amended shall
continue in full force and effect, provided that Tenant shall have no further
liability or obligation to Landlord with respect to such surrendered portion
of the Premises (excepting obligations of Tenant arising prior to the
effective date of such surrender and such obligations as expressly survive
termination), and provided, further, that nothing herein shall affect
Landlord's rights under paragraph 8 with respect to the surrendered protion
of the Premises.) If Landlord does not elect to terminate this lease as
provided above, or if Landlord did not have a right to terminate with respect
to the proposed sublet, and Landlord consents in writing to the proposed
assignment or sublet, Tenant shall be free to assign or sublet as specified
in the notice to Landlord, subject to the following conditions: (i) any
sublease shall be on the same terms set forth in the notice given to
Landlord; (ii) no sublease shall be valid and no subtenant shall take
possession of the sublet premises until an executed counterpart of such
sublease has been delivered to Landlord; (iii) no subtenant shall have a
further right to sublet; (iv) one-half of any sums or other economic
consideration received by Tenant as a result of such assignment or sublet
(except rental or other payments received which are attributable to the
amortization over the term of this lease of the cost of leasehold
improvements constructed for such assignee or subtenant, and brokerage fees)
whether denominated rentals or otherwise, which exceed, in the aggregate, the
total sums which Tenant is
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obligated to pay Landlord under this lease (prorated to reflect obligations
allocable to that portion of the Premises subject to such sublease), shall be
payable to Landlord as additional rent under this lease without affecting or
reducing any other obligation of Tenant hereunder; and (v) no sublet or
assignment shall release Tenant of Tenant's obligation or alter the primary
liability of Tenant to pay the rent and to perform all other obligations to be
performed by Tenant hereunder.
The acceptance of rent by Landlord from any other person shall not be
deemed to be a waiver by Landlord of any provision hereof. Consent to one
assignment or sublet shall not be deemed consent to any subsequent assignment or
sublet. In the event of default by any assignee of Tenant or any successor of
Tenant in the performance of any of the terms hereof, Landlord may proceed
directly against Tenant without the necessity of exhausting remedies against
such assignee or successor. Landlord may consent to subsequent assignments or
sublets of this lease or amendments or modifications to this lease with
assignees of Tenant, without notifying Tenant, or any successor of Tenant, and
without obtaining its or their consent thereto and such action shall not relieve
Tenant of liability under this lease.
Notwithstanding the above provisions of this paragraph 19, Tenant may,
without obtaining the consent of Landlord and without Landlord having the right
to terminate this lease as set forth above, assign or sublease the whole or any
part of the Premises to any corporation or other entity which acquires or is
acquired by LTX Corporation or which results from a merger or consolidation with
LTX Corporation or which either controls or is controlled by LTX Corporation or
which is controlled by any of the foregoing, provided that (i) Tenant shall
continue to be fully obligated for the timely performance of all the terms,
covenants, agreements and conditions of this lease and (ii) such assignee or
subtenant agrees in writing to be subject to and governed by all of the terms,
covenants, agreements and conditions of this lease and such agreement by
assignee or subtenant is promptly given to Tenant. Tenant shall give Landlord
written notice of any such assignment or sublease as provided above in this
paragraph 19, and any such assignment or subletting shall be subject to the
conditions for other assignments and sublettings set forth above.
No interest of Tenant in this lease shall be assignable by operation
of law (including, without limitation, the transfer of this lease by testacy
or intestacy). Each of the following acts shall be considered an
involuntary assignment: (i) if Tenant is or becomes bankrupt or insolvent,
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makes an assignment for the benefits of creditors or institutes, a proceeding
under the Bankruptcy Act in which Tenant is the bankrupt; or, if Tenant is a
partnership or consist of more than one person or entity, if any partner of the
partnership or other person or entity is or becomes bankrupt or insolvent, or
makes an assignment for the benefit of creditors; (ii) if a writ of attachment
or execution is levied on this lease; or (iii) if, in any proceeding or action
to which Tenant is a party, a receiver is appointed with authority to take
possession of the Premises. An involuntary assignment shall constitute a
default by Tenant and Landlord shall have the right to elect to terminate this
lease, in which case this lease shall not be treated as an asset of Tenant.
Tenant immediately and irrevocably assigns to Landlord, as
security for Tenant's obligations under this lease, all rent from any subletting
of all or a part of the Premises a permitted by this lease, and Landlord, as
assignee and as attorney-in-fact for Tenant, or a receiver for Tenant appointed
on Landlord's application, may collect such rent and apply it toward Tenant's
obligations under this lease: except that, until the occurrence of an act of
default by Tenant, Tenant shall have the right to collect such rent, subject to
promptly forwarding to Landlord any portion thereof to which Landlord is
entitled pursuant to this paragraph 19.
20. DEFAULT
The occurrence of any of the following shall constitute a default
by Tenant: (i) failure to pay any rent or other sum payable hereunder within
three (3) business days of written notice from Landlord of failure to make such
payment when due; (ii) abandonment of the Premises; or (iii) failure to perform
any other term, covenant or condition of this lease if the failure to perform is
not cured within thirty (30) days after notice thereof has been given to Tenant
(provided that if such default cannot reasonably be cured within thirty (30)
days, Tenant shall not be in default of this lease if Tenant commences to cure
the default within the thirty (30) day period and diligently and in good faith
continues to cure the default). The notice referred to in (iii) above shall
specify the alleged default and the applicable lease provision and shall demand
that Tenant perform the provisions of this lease within the applicable period of
time and no such notice shall be deemed a forfeiture or termination of this
lease unless Landlord so elects in the notice. No notice shall be required in
the event of failure to pay any rent or other sum or in the event of abandonment
or vacation of the Premises.
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In the event of a default by Tenant, then Landlord, in addition
to any other rights and remedies at law or in equity, shall have the right
either to terminate Tenant's rights to possession of the Premises and thereby
terminate this lease or, from time to time and without termination this lease,
relet the Premises or any part thereof for the account and in the name of Tenant
for such term and on such terms and conditions as Landlord in its sole
discretion may deem advisable, with the right to make alterations and repairs to
the Premises.
Should Landlord elect to keep this lease in full force and
effect, Landlord shall have the right to enforce all of Landlord's rights and
remedies under this lease, including but not limited to the right to recover the
installments of monthly rent and Common Area Charges as they become due, and to
relet the Premises. If Landlord relets the Premises, then Tenant shall pay to
Landlord, as soon as ascertained, the costs and expenses incurred by Landlord in
such reletting and in making alterations and repairs. Rentals received by
landlords from such reletting shall be applied (i) to the payment of any
indebtness due hereunder, other than monthly rent, from Tenant to Landlord; (ii)
to the payment of the coast of any repairs necessary to return to the Premises
to good conditions, normal wear and tear excepted, including the cost of
alterations and the cost of storing any of Tenant's property left on the
Premises ant the time of the reletting; and (iii) to the payment of monthly rent
due and unpaid hereunder. The residue, if any, shall be held by Landlord and
applied in payment of future rent or damages in the event of termination as the
same may become due and payable hereunder and the balance, if any at the end of
the term of this lease, shall be paid to Tenant. Should the monthly rent and
Common Area Charges received from time to time from such reletting during any
month be less than agreed to be paid during that month by Tenant hereunder,
Tenant shall pay such deficiency to Landlord. Such deficiency shall be
calculated and paid monthly. No such reletting of the Premises by Landlord
shall be construed as election on its part to terminate this lease unless a
notice of such intention is given to Tenant or unless the termination hereof is
decreed by a court of competent jurisdiction. Notwithstanding any such
reletting without termination, Landlord may at any time thereafter elect to
terminate this lease for such previous breach, provided it has not been cured.
Should Landlord at any time terminate this lease for any breach
in addition to any other remedy it may have, it shall have the immediate right
of entry and may remove all persons and property from the Premises and, in addi-
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tion to all its other rights and remedies, shall be entitled to recover from
Tenant all damages it may incur by reason of such breach, including the cost of
recovering the Premises and including (i) all amounts that would have fallen due
as rent between the time of termination of this lease and the time of the
judgement or other award plus interest on the balance at the rate of twelve
percent (12%) per year, but less the avails of relettings and attornments; (ii)
the worth at the time of the judgement or other award of the amount by which the
unpaid rent for the balance of the term exceeds the amount of such rental loss
that Tenant proves could be reasonably avoided; (iii) any other amount necessary
to compensate Landlord for all the detriment proximately cause by Tenant's
failure to perform its obligations under this lease or which in the ordinary
course of things would be likely to result therefrom. "Worth" as used in this
provision is computed by discounting the total at the discount rate of the
Federal Reserve Bank of San Francisco at the time of the judgment or award plus
one percent (1%). Property removed from the Premises may be stored in a public
or private warehouse or elsewhere at the sole cost and expense of Tenant. In
the event that Tenant shall not immediately pay the cost of storage of such
property after the same has been stored for a period of thirty (30) days or
more, Landlord may sell any or all there at a public or private sale in such a
manner and at such times and places at Landlord in its sole discretion may deem
proper, without notice to or demand upon Tenant.
Any proof by Tenant under subparagraphs (2) and (3) of Section
1951.2(a) of the California Civil Code of the amount of rental loss that could
be reasonably avoided shall be made in the following manner: Landlord and
Tenant shall each select a licensed real estate broker in the business of
renting property of the same type and use as the Premises in the same
geographical vicinity. Such two real estate and brokers shall select a third
licensed real estate broker, and the three licensed real estate brokers so
selected shall determine the amount of the rental loss that could be reasonably
avoided for the balance of the term after the time of award. The decision of
the majority of said licensed real estate brokers shall be final and binding
upon the parties hereto.
21. LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT
Landlord, at any time after Tenant commits a default, can cure
the default at Tenant's cost. If Landlord at any time, by reason of Tenant's
default, pays any sum or does any act that requires the payment of any sum, the
sum paid by Landlord shall be due immediately from Tenant to Landlord at the
time the sum is paid, and if paid at
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a later date shall bear interest at the rate of eighteen percent (18%) per annum
or the maximum rate permitted by law, whichever is less, from the date the sum
is paid by Landlord until Landlord is reimbursed by Tenant. This sum, together
with interest on it, shall be additional rent.
22. EMINENT DOMAIN
If all or any part of the Premises shall be taken by any public
or quasi-public authority under the power of eminent domain or conveyance in
lieu thereof, this lease shall terminate as to any portion of the Premises so
taken or conveyed on the date when title vests in the condemnor, and Landlord
shall be entitled to any and all payment, income, rent, award of any interest
therein whatsoever which may be paid or made in connection with such taking or
conveyance. Tenant shall have no claim against Landlord or otherwise for the
value of any unexpired term of this lease. Notwithstanding the foregoing, any
compensation for depreciation to and cost of removal of equipment and fixtures
shall be and remain the property of Tenant. Each party waives the provisions of
Section 1265.130 of the Code of Civil Procedure (which Section allows either
party to petition the Superior Court to terminate this lease in the event or a
partial taking of the premises).
If any action or proceeding is commenced for such taking of the
Premises or any portion thereof or of any other space in the Project, or if
Landlord is advised in writing by any entity or body having the right or power
of condemnation of its intention to condemn the Premises or any portion thereof
or of any other space in the Project, and Landlord shall decide to discontinue
the use and operation of the Project or decide to demolish, alter or rebuild the
Project, then Landlord shall have the right to terminate this lease by giving
Tenant written notice thereof within sixty (60) days of the date of receipt of
said written advice or the commencement of said action or proceeding. Such
termination shall take place on the last day of the calendar month next
following the month in which such notice is given or the date on which title
shall vest in the condemnor, whichever occurs first.
In the event a partial taking, or conveyance in lieu thereof, of
the Premises and thirty-five percent (35%) or more of the number of square feet
in the Premises or in Tenant's designated parking area are taken then Tenant may
terminate this lease. Any election by Tenant to so terminate shall be by
written notice given to Landlord within sixty
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(60) days from the date of such taking or conveyance and shall be effective on
the last day of the calendar month next following the month in which such notice
is given or the date on which title shall vest in the condemnor. whichever
occurs first.
If a portion of the Premises be taken by power of eminent domain
or conveyance in lieu thereof and neither Landlord nor Tenant shall terminate
this lease then this lease shall continue in full force and effect as to the
part of the Premises not so taken or conveyed and all payments of rent shall be
apportioned as of the date of such taking or conveyance so that thereafter the
amounts to be paid by Tenant shall be in the ratio that the area of the portion
of the Premises not so taken bears to the total area of the Premises prior to
such taking.
23. NOTICE AND COVENANT TO SURRENDER
On the last day of the term or on the effective date of any
earlier termination, Tenant shall surrender to Landlord the Premises and all of
Tenant's improvements and alterations in their condition existing as of the
commencement of the term, with all originally painted interior walls washed, or
repainted if marked or damaged interior vinyl covered walls cleaned and repaired
or replaced if marked or damaged, all carpets shampooed and cleaned, the air
conditioning and heating systems serviced and repaired by a reputable and
licensed service firm (unless Landlord has elected to maintain such system
pursuant to paragraph 9 above) and all floors cleaned and waxed; all to the
reasonable satisfaction of Landlord. Tenant shall remove all of Tenant's
personal property and trade fixtures, together with improvements or alterations
that Tenant is obligated to remove pursuant to the provisions of paragraph 8,
from the Premises, and all such property not removed shall be deemed abandoned.
If the Premises are not surrendered as required in this
paragraph, Tenant shall indemnify Landlord against all loss and liability
resulting from the failure by Tenant in so surrendering the Premises, including,
without limitation, any claim made by any succeeding tenant, or losses to
Landlord due to lost opportunities to lease to succeeding tenants. It is agreed
between Landlord and Tenant that the provisions of this paragraph shall survive
termination of this lease.
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24. TENANT'S QUITCLAIM
At the expiration or earlier termination of this lease, Tenant
shall execute, acknowledge and deliver to Landlord, within ten (10) business
days after written demand from Landlord to Tenant, any quitclaim deed or other
document required by any reputable title company, licensed to operate in the
State of California, to remove the cloud or encumbrance created by this lease
from the real property of which the Premises are a part. This obligation shall
survive said expiration or termination.
25. HOLDING OVER
Any holding over after the expiration or termination of this
lease (with the written consent of Landlord delivered to Tenant) shall be
construed to be a tenancy from month to month at the monthly rent, as adjusted,
in effect on the date of such expiration or termination. All provisions of this
lease, except those pertaining to the term and any option to extend, shall apply
to the month to month tenancy. The provisions of this paragraph are in addition
to, and do not affect, Landlord's right to re-entry or other rights hereunder or
provided by law.
If Tenant shall retain possession of the Premises or any part
thereof without Landlord's consent following the expiration or sooner
termination of this lease for any reason, then Tenant shall pay to Landlord for
each day of such retention double the amount of the daily rental in effect
during the last month prior to the date of such expiration or termination.
Tenant shall also indemnify and hold Landlord harmless from any loss or
liability resulting from delay by Tenant in surrendering the Premises including,
without limitation, any claims made by any succeeding tenant founded on such
delay. Acceptance of rent by Landlord following expiration or termination shall
not constitute a renewal of this lease, and nothing contained in this paragraph
shall waive Landlord's right of re-entry or any other right. Tenant shall be
only a Tenant at sufferance, whether or not Landlord accepts any rent from
Tenant, while Tenant is holding over without Landlord's written consent.
26. SUBORDINATION
Landlord shall deliver to Tenant promptly after execution
hereof a non-disturbance agreement from each and every lender holding a
mortgage or deed of trust encumbering all or any portion of the Premises and
which is prior and superior to this lease and in existence as of the date of
execution hereof, which non-disturbance agreement shall
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provide that such lender agrees that Tenant's possession and quiet enjoyment of
the Premises shall not be disturbed by such lender so long as Tenant performs
all of its obligations under this lease, and which shall otherwise be in form
reasonably satisfactor to Tenant and such lender.
In the event that any lender requires that this lease be
subordinated to any encumbrance recorded after the date of this lease
affecting the Premises, this lease shall be subordinate to that encumbrance
and Tenant agrees to execute in writing an agreement effecting such
subordination, provided Landlord first obtains from such lender a written
agreement that provides in substance that as long as Tenant performs its
obligations under this lease, no foreclosure of, deed given in lieu of
foreclosure of, or sale under the encumbrance, shall affect Tenant's rights
under this lease.
27. CERTIFICATE OR ESTOPPEL
Each party shall, within ten (10) days after request therefor,
execute and deliver to the other party, in recordable form, a certificate
stating that the lease is unmodified and in full force and effect, or in full
force and effect as modified and stating the modifications. The certificate
shall also state the amount of the monthly rent, the date to which monthly
rent has been paid in advance, the amount of the security deposit and/or
prepaid monthly rent, and, if the request is made by Landlord, shall include
such other items as Landlord or Landlord's lender may reasonably request.
Failure to deliver such certificate within such time shall constitute a
conclusive acknowledgment by the party failing to deliver the certificate
that the lease is in full force and effect and has not been modified except
as may be represented by the party requesting the certificate. Any such
certificate requested by Landlord may be conclusively relied upon by any
prospective purchaser or encumbrancer of the Premises or Project. Further,
within ten (10) days following written request made from time to time by
Landlord, Tenant shall furnish to Landlord current quarterly financial
reports of Tenant.
28. SALE BY LANDLORD
In the event the original Landlord hereunder, or any successor
owner of the Project or Premises, shall sell or convey the Project or Premises,
all liabilities and obligations on the part of the original Landlord, or such
successor owner, under this lease accruing thereafter shall terminate, and
thereupon all such liabilities and obligations shall be binding upon the new
owner. Tenant agrees to attorn
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to such new owner and to look solely to such new owner for performance of any
and all such liabilities and obligations arising under this lease.
29. ATTORNMENT TO LENDER OR THIRD PARTY
In the event the interest of Landlord in the land and buildings
in which the Premises are located (whether such interest of Landlord is a fee
title interest or a leasehold interest) is encumbered by deed of trust, and such
interest is acquired by a lender or any other third party through judicial
foreclosure or by exercise of a power of sale at private trustee's foreclosure
sale and to recognize such purchaser as the Landlord under this lease.
30. DEFAULT BY LANDLORD
Landlord shall not be in default unless Landlord fails to perform
obligations required of Landlord within a reasonable time, but in no event
earlier than thirty (30) days after written notice by Tenant to Landlord and to
the holder of any first mortgage or deed of trust covering the Premises
specifying wherein Landlord has failed to perform such obligations; provided,
however, that if the nature of Landlord's obligations is such that more than
thirty (30) day period and thereafter diligently prosecutes the same to
completion.
If Landlord is in default of this lease, and as a consequence
Tenant recovers a money judgement against Landlord, the judgement shall be
satisfied only out of the proceeds of sale received on execution of the
judgement and levy against the right, title and interest of Landlord in the
Project of which the Premises are a part, and out of rent or other income from
such real property receivable by Landlord or out of the consideration received
by Landlord from the sale or other disposition of all or any part of Landlord's
right, title and interest in the Project of which the Premises are a part.
Neither Landlord nor any of the partners comprising the partnership designated
as Landlord shall be personally liable for any deficiency.
31. CONSTRUCTION CHANGES
It is understood that the description of the Premises and the
Location of ductwork, plumbing and other facilities therein are subject to such
minor changes as Landlord's architect determines to be desirable in
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the course of construction of the Premises and/or the improvements constructed
or being constructed thereon, and no such changes, or any changes in plans for
any other portions of the Project, shall affect this lease or entitle Tenant to
any reduction of rent hereunder or result in any liability of Landlord to
Tenant.
32. MEASUREMENT OF PREMISES
Tenant understands and agrees that any reference to square
footage of the Premises is approximate only and includes all interior partitions
and columns, one-half of the partitions separating the Premises from the rest of
the Project, and any outside entry overhang, if applicable. Tenant waives any
claim against Landlord regarding the accuracy of any such measurement and agrees
that there shall not be any adjustment in monthly rent or Common Area Charges or
other amounts payable hereunder by reason of inaccuracies in such measurement.
33. EXHIBITS AND ATTACHMENTS
All exhibits and attachments to this lease are a part hereof.
34. ATTORNEY FEES
If either party commences an action against the other party
arising out of or in connection with this lease, the prevailing party shall
be entitled to have and recover from the losing party all expenses of
litigation, including, without limitation, travel expenses, attorney fees,
expert witness fees, trial and appellate court costs, and deposition and
transcript expenses. If either party becomes a party to any litigation
concerning this lease, the Premises, or the Project by reason of any act or
omission of the other party or its authorized representative, the party that
causes the other party to become involved in the litigation shall be liable
to that party for all expenses of litigation, including, without limitation,
travel expenses, attorney fees, expert witness fees, trial and appellate
court costs, and deposition and transcript expenses.
35. SURRENDER
The voluntary or other surrender of this lease or the Premises by
Tenant, or a mutual cancellation of this lease, shall not work a merger, and at
the option of Landlord shall either terminate all or any existing subleases or
subtenancies or operate as an assignment to Landlord of all or any such
subleases or subtenancies.
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36. WAIVER
No delay or omission in the exercise of any right or remedy of
Landlord on any default by Tenant shall impair such right or remedy or be
construed as a waiver. The receipt and acceptance by Landlord of delinquent
rent or other payments shall not constitute a waiver of any other default and
acceptance of partial payments shall not be construed as a waiver of the balance
of such payment due. No act or conduct of Landlord, including, without
limitation, the acceptance of the keys to the Premises, shall constitute an
acceptance of the surrender of the Premises by Tenant before the expiration of
the term. Only a written notice from Landlord to Tenant shall constitute
acceptance of the surrender of the Premises and accomplish a termination of this
lease. Landlord's consent to or approval of any act by Tenant requiring
Landlord's consent or approval shall not be deemed to waive or render
unnecessary Landlord's consent to or approval of any subsequent act by Tenant.
Any waiver by Landlord of any default must be in writing and shall not a waiver
of any other default concerning the same or any other provision of this lease.
37. EASEMENTS; AIRSPACE RIGHTS
Landlord reserves the right to alter the boundaries of the
Project and grant easements and dedicate for public use portions of the Project
without Tenant's consent, provided that no such grant or dedication shall
interfere with Tenant's use of the Premises or otherwise cause Tenant to incur
cost or expense. From time to time, and upon Landlord's demand, Tenant shall
execute, acknowledge and deliver to Landlord, or in accordance with Landlord's
instructions, and any all documents, instruments, maps or plans necessary to
effectuate Tenant's covenants hereunder.
This lease confers no rights either with regard to the subsurface
of the land on which the Premises are located or with regard to airspace above
the ceiling of the Premises. Tenant agrees that no diminution or shutting off
of light or view by an structure which is or may be erected (whether or not by
Landlord) on property adjacent to the building of which the Premises are a part
or to property adjacent thereto, shall in any way affect this lease, or entitle
Tenant to any reduction of rent, or result in any liability of Landlord to
Tenant.
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38. RULES AND REGULATIONS
Landlord shall have the right from time to time to promulgate
reasonable rules and regulations for the safety, care and cleanliness of the
Premises, the Project and the Common Area, or for the preservation of good
order. On delivery of a copy of such rules and regulations to Tenant, Tenant
shall comply with the rules and regulations, and a violation of any of them
shall constitute a default by Tenant under this lease. If there is a conflict
between the rules and regulations and any of the provisions of this lease, the
provisions of this lease shall prevail. Landlord shall make all reasonable
efforts to enforce the rules and regulations uniformly against all tenants in
the Project, and no such rules and regulations shall require Tenant to pay
additional rent under this lease. Such rules and regulations may be amended by
Landlord from time to time with or without advance notice.
39. NOTICES
All notices, demands, requests, consents and other communications
which may be given or are required to be given by either party to the other
shall be in writing and shall be sufficiently made and delivered if personally
served or if sent by United States first class mail, postage prepaid. All such
communications from Landlord to Tenant shall be addressed to Tenant at the
Premises. All such communications by Tenant to Landlord shall be sent to
Landlord at its offices at 710 Lakeway, Suite 200, Sunnyvale, California 94086.
Either party may change its address by notifying the other of such change. Each
such communication shall be deemed received on the date of the personal service
or mailing thereof in the manner herein provided, as the case may be.
40. NAME
Tenant shall not use the name of the Project for any purpose
other than as the address of the business conducted by Tenant in the Premises
without the prior written consent of Landlord.
41. GOVERNING LAW; SEVERABILITY
This lease shall in all respects be governed by and construed in
accordance with the laws of the State of California. If any provision of this
lease shall be invalid, unenforceable or ineffective for any reason whatsoever,
all other provisions hereof shall be and remain in full force and effect.
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42. DEFINITIONS
As used in this lease, the following words and phrases shall have
the following meanings:
AUTHORIZED REPRESENTATIVE: any officer, agent, employee or
independent contractor retained or employed by either party, acting within
authority given him by that party.
ENCUMBRANCE: any deed or trust, mortgage or other written
security device or agreement affecting the Premises or the Project that
constitutes security for the payment of a debt or performance of an obligation,
and the note or obligation secured by such deed of trust, mortgage or other
written security device or agreement.
LENDER: the beneficiary, mortgagee or other holder of an
encumbrance, as defined above
LIEN: a charge imposed on the Premises by someone other than
Landlord, by which the Premises are made security for the performance of an act.
Most of the liens referred to in this lease are mechanic's liens.
MAINTENANCE: repairs, replacement, repainting and cleaning.
PERSON: one or more human beings, or legal entities or other
artificial persons, including, without limitation, partnerships, corporations,
trusts, estates, associations and any combination of human beings and legal
entities.
PROVISION: any term, agreement, covenant, condition, clause,
qualification, restriction, reservation or other stipulation in the lease that
defines or otherwise controls, establishes or limits the performance required or
permitted by either party.
RENT: monthly rent, additional rent, Common Area Charges, and
all other amounts payable by Tenant to Landlord required by this lease or
arising by subsequent actions of the parties made pursuant to this lease.
Words used in any gender include other genders. If there be more than one
Tenant the obligations of Tenant hereunder are joint and several. All
provisions, whether covenants or conditions, on the part of Tenant shall be
deemed to be
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both covenants and condtions. The paragraph headings are for convenience of
reference only and shall have no effect upon the construction or interpretation
of any provision hereof.
43. TIME
Time is of the essence of this lease and of each and all of its
provisions.
44. EXAMINATION OF LEASE
Submission of this lease for examination or signature by Tenant
does not constitute a reservation or option for a lease, and this lease is not
effective until its execution and delivery by both Landlord and Tenant.
45. INTEREST ON PAST DUE OBLIGATIONS; LATE CHARGES
Any amount due from Tenant to Landlord hereunder which is not
paid when due shall bear interest at the rate of ten percent (10%) per annum
from when due until paid, unless otherwise specifically provided herein, but the
payment of such interest shall not excuse or cure any default by Tenant under
this lease. In additon, Tenant acknowledges that late payment by Tenant to
Landlord of monthly rent, or of Tenant's monthly Common Area Charge, or of any
other amount due Landlord from Tenant, will cause Landlord to incur costs not
contemplated by this lease, the exact amount of such costs being extremely
difficult and impractical to fix. Such costs include, without limitation,
processing and accounting charges, and late charges that may be imposed on
Landlord, e.g., by the terms of any encumbrance and note secured by any
encumbrance covering the Premises. Therefore, if any such payment due from
Tenant is not received by Landlord when due, Tenant shall pay to Landlored an
additional sum of five percent (5%) of the overdue payment as a late charge.
The parties agree that this late charge represents a fair and reasonable
estimate of the costs that Landlord will incur by reason of late payment by
Tenant. Acceptance of any late charge shall not constitute a waiver of Tenant's
default with respect to the overdue amount, nor prevent Landlord from exercising
any of the other rights and remedies available to Landlord. No notice to Tenant
of failure to pay shall be required prior to the imposition of such interest
and/or late charge, and any notice period provided for in paragraph 20 shall not
affect the imposition of such interest and/or late charge.
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46. ENTIRE AGREEMENT
This lease, including any exhibits and attachments, constitutes
the entire agreement between Landlord and Tenant relative to the Premises and
this lease and the exhibits and attachments may be altered, amended or revoked
only by an instrument in writing signed by both Landlord and Tenant. Landlord
and Tenant agree hereby that all prior or contemporaneous oral agreements
between and among themselves or their agents or representatives relative to the
leasing of the Premises are merged in or revoked by this lease.
47. CORPORATE AUTHORITY
Each individual 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 and that this lease is binding upon Tenant in
accordance with its terms. Tenant shall deliver to Landlord, within twenty (20)
days of the execution of this lease, either a copy of a duly adopted resolution
of the Board of Directors of Tenant approving this lease (which copy shall be
certified by Tenant's president or secretary as correct and in full force and
effect) or the certificate of Tenant's secretary setting forth the authority of
the person signing this lease on behalf of Tenant in such form as shall be
reasonably acceptable to Landlord.
48. RECORDING
Upon request by Tenant, Landlord shall record this lease or a
short form memorandum hereof in form reasonably satisfactory to Tenant. Tenant
agrees to concurrently on termination or expiration of the term to execute and
record a release, quitclaim or other document reasonably requested by Landlord.
49. REAL ESTATE BROKERS
Each party represents that it has not had dealing with any real
estate broker, finder or other person with respect to this lease in any manner,
except Dick Treakle. Each party shall hold harmless the other party from all
damages resulting from any claims that may be asserted against the other party
by any broker, finder or other person with whom the other party has or
purportedly has dealt.
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50. SUBLETTING DURING THE FIRST
TWO YEARS OF THE TERM
Notwithstanding anything to the contrary in paragraph 19 above,
Tenant may, during the first two years of the term only and without Landlord's
prior consent, sublet up to thirty-five percent (35%) of the Premises for a term
ending on or before the last day of the twenty-fourth month of the term for uses
authorized under paragraph 1 above (plus for storage); provided, however, that
Tenant shall give written notice to Landlord of any such sublet, and such sublet
shall otherwise be subject to the requirement and conditions for sublets
generally as set forth in paragraph 19 (except that Landlord shall not be
entitled to receive any portion of the amounts received by Tenant from any such
sublet).
IN WITNESS WHEREOF, Landlord and Tenant have executed and delivered this
lease on the date first above written.
LANDLORD: TENANT:
CALIFORNIA SECOND, LTD. LTX CORPORATION
By /s/ By /s/ Adrian E. Hohn
-------------------------------- -------------------------------------
(Signature) (Signature)
Steve S. M. Childers Adrian E. Hohn
- ----------------------------------- ----------------------------------------
(Printed Name) (Printed Name)
President Vice President Western Operations
- ----------------------------------- ----------------------------------------
(Title) (Title)
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EXHIBIT "A"
[Map]
EXHIBIT "B"
[Map]
CONSTRUCTION EXHIBIT C
- -------------------------------------------------------------------------------
The premises shall be improved in accordance with the following:
1. Tenant acknowledges having reviewed the Drawings listed in
Exhibit C-1 and the improvements constructed or to be constructed in
accordance therewith, and Tenant hereby approves the same as installed.
Such improvements are called Shell improvements.
2. Landlord shall construct Standard Tenant Improvements in
accordance with the following:
a. As used herein. "Standard Tenant Improvements"
includes, but is not necessary limited to, partitions, doors, electrical,
ventilation and air conditioning, floor coverings, telephone outlets and
other standard finish schedules.
b. The plans and specifications for the Standard Tenant
Improvements shall be finalized in accordance with the following:
(1) Tenant shall have submitted preliminary floor plan
layouts to Landlord not later than March 2, 1984, showing walls, doors, and
other Standard Tenant Improvements in sufficient detail for Landlord to
prepare final plans ready to submit for a building permit.
(2) Landlord's in-house architect shall prepare City
ready plans no later than March 9, 1984. Between March 2 and March 9,
Landlord's architect and Tenant representative shall meet as needed to
review and finalize the details related to the plans, so that the resulting
March 9, 1984 plans are subject only to minor changes.
(3) Concurrently with the design of the basic plans set
forth in (1) and (2) above, Landlord's contractor and subcontractors shall
prepare bid design specifications outlining in reasonable detail the
electrical, mechanical, and any other requirements not included on the
plans set forth above. NO later tham March 9, 1984, said specifications
and/or plans shall be completed in enough detail to bid the work, select a
subcontractor, and proceed toward final electrical, mechanical and other
plans in conformance therewith. Tenant shall supply Landlord with the
necessary information and make decisions required thereby in a time frame
adequate to complete the above.
(4) Tenant shall have decided upon colors and material
specifications no later than March 14, 1984.
<PAGE>
EXHIBIT C - page 2
(5) Landlord shall prepare a preliminary budget for
these improvements no later than March 14, 1984, with a final budget to be
set no later than March 21, 1984.
c. All work shall be in accordance with the Work Letter
attached as Exhibit C-2 and by this reference incorporated herein.
3. Standard Tenant Improvement Allowance:
Landlord shall provide a maximum Standard Tenant Improvement
Allowance of $840,960 ($20.00/SF x 42,048 SF) to be applied toward the
"cost of the aggregate of Tenant's Improvements" to be installed in
accordance with this Exhibit C.
4. The above allowance shall be applied to the area improved
and occupied at the rate of $20.00 per square foot. In the event the "cost
of the aggregate of Tenant's improvements" exceeds the Standard Tenant
Improvement allowance set forth above, then Tenant shall pay the amount
over and above such allowance, 50% of any excess to be paid within five (5)
days of the final budget for each phase of improvements and 50% within five
(5) days of lease commencement.
As used herein, "cost of the aggregate of Tenant's
improvements" shall include (i) the cost of Standard Tenant Improvements;
(ii) increases, if any, in the cost of any Standard Tenant Improvements
caused by changes requested by Tenant; (iii) all costs related to change
orders and changes required by governmental authority; (iv) permit fees and
other fees not previously paid by Landlord as part of Shell costs; (v) the
cost of outside consultants approved by both Landlord and Tenant (except
that Landlord shall pay for its general outside facilities consultants);
(vi) an amount equal to 7% of the aggregate cost of items (i) through (v)
above as and for the general contractor's miscellaneous job costs and
supervision in performing the work; and (vii) an amount equal to 9% of the
sum of items (i) through (vi) above as and for the general contractor's
overhead and profit.
<PAGE>
EXHIBIT C - Page 3
5. Tenant may request changes or additions to the Standard
Tenant Improvements agreed upon as set forth above; provided, however, that
the effectiveness of any such requested change or addition shall be subject
to written approval by an authorized representative of Landlord, to
obtaining any required governmental permits or other approvals, and to
Tenant's responsibility for any delay occasioned thereby as provided for in
this lease.
6. Tenant agrees that if any change, deletion or addition to
any of the improvements proposed to be constructed or installed is required
by any governmental authority in connection with obtaining any permit or
approval, or otherwise, then such change, deletion or addition shall
promptly be made. Failure to obtain governmental approval or permit for
any Special Improvements desired by Tenant shall in no way be cause to
terminate this lease.
7. If the commencement of the term is delayed due in a material
respect to Tenant's failure to meet the schedule set forth in paragraph
2(b) above, or construction delays because of any changes required by
Tenant, or due to any other failures by Tenant to perform its obligations
under this lease, then the lease payments due thereunder shall nonetheless
commence as of the date by which Landlord's work would have been, in
Landlord's reasonable judgement, completed but for such delays or failure
to perform by Tenant.
8. Within ten (10) days after commencement of the term, Tenant
shall deliver to Landlord a list of items ("punch list") that Tenant
believes Landlord should complete or correct in order for the Premises to
be acceptable. Landlord shall commence to complete or correct the items as
soon as possible, except those that it contends are not justified. If
Tenant does not deliver the list to Landlord within the ten (10) day
period, Tenant shall be deemed to have accepted the Premises and approved
the construction. Nothing in this paragraph 7 shall delay the commencement
of the term or Tenant's obligation to pay rent or to make other payments
due Landlord under the lease.
9. All references in this lease to Exhibit C shall be deemed to
also include Exhibits C-1 and C-2.
<PAGE>
EXHIBIT C-1
SHELL IMPROVEMENTS
Dated By
C-1 thru C-4B 7-21-83 Nolte & Assoc.
A thru A-14 4-25-83 V.C. Wong & Assoc.
S-1 thru S-10 3-17-83 Kee Wong Eng. Inc.
L-1 thru L-10 5-16-83 Hoffman Associates
<PAGE>
EXHIBIT C-2
WORK LETTER
The purpose of this Work Letter is to outline specifications,
guidelines, and allowances for Standard Tenant Improvements to be installed in
the Premises by Landlord in addition to the Shell Improvements in place per
Exhibit C-1.
Landlord and Tenant acknowledge that the Standard Tenant Improvements
have not yet been determined and that Landlord requires certain improvements to
be installed and apportioned throughout the Premises based on the following
guidelines.
The following guidelines and specifications which set forth the basic
requirements of Landlord to be conformed with during the design and installation
of Tenant Improvements in the Premises:
1. FLOOR COVERINGS:
The floor coverings in the Premises shall be standard Antron
Nylon II carpet (or equivalent), vinyl asbestos tile (1/8"), or ceramic tile in
the lobbies. Areas under computer floors, if any, or warehouse areas may remain
concrete.
2. ELECTRICAL:
A portion of the tenant electrical system is in place as
referenced in Exhibit C-1.
The balance of the finish electrical system may be installed
as required by Tenant, subject to the following guidelines (based on 42,048
square feet):
Minimum Maximum
Amount Amount
------- -------
Duplex outlets, power
poles, or floor outlets 1 per 200 S.F. 1 per 100 S.F.
Switches (as needed) (as needed)
Lighting 80 Foot Candles 100 Foot Candles
Phone outlets (as needed) (as needed)
3. HEATING, VENTILATION AND AIR CONDITIONING (HVAC):
The entire Premises shall be heated and air conditioned with a
variable volume system, with no less than one (1) ton of air conditioning per
350 square feet on average.
<PAGE>
EXHIBIT C-2 - page 2
4. INTERIOR PARTITIONS:
Interior partitions in the Premises shall be floor to ceiling
vinyl covered ultrawall partitions or sheetrock partitions, all to be installed
below the dropped ceiling where permitted by Building Codes and the City of San
Jose. All partitions shall be one hour fire rated construction.
Partitions shall be installed in the Premises as selected by
Tenant within the following guidelines:
The partitions shall be U.S. Gypsum ultrawall, and/or textured,
painted (or vinyl covered) sheetrock partitions and carpet base as needed.
Moveable partitions which are not permanently affixed floor to ceiling
partitions, if any, shall be purchased directly from suppliers by Tenant and
installed as furniture, with ownership being retained by Tenant.
5. DOORS AND FRAMES:
Landlord and Tenant agree to use the doors in the Premises per
the following guidelines:
Doors shall be full height solid core. Doors shall have
automatic door closers or spring loaded hinges where required by code (or
desired by Tenant) including oil rubbed bronze finish hardware. Location and
number of latchsets and locksets shall be selected by Tenant. All doors shall
have dark bronze aluminum frames throughout the Premises (both in sheetrock and
ultrawall partitions).
6. CEILING:
Landlord requires standard dropped ceiling in all areas except
warehouses.
All Tenant Improvement work to be performed in the Premises shall
be performed by Landlord's Contractor in accordance with union requirements.
<PAGE>
STATE OF CALIFORNIA )
) SS
County of San Francisco )
On this 15th day of March, in the year 1985, before me, Holly Adams Cowan,
Notary Public in and for the State of California, personally appeared Don L.
Dornan and___________________________, personally known to me (or proved to me
on the basis of satisfactory evidence) to be the person(s) who executed the
within instrument as Vice President or on behalf of Wells Fargo Bank, N.A. and
acknowledged to me that said Bank executed same pursuant to its bylaws. IN
WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal in the
County of San Francisco the day and year in this certificate first above
written.
[SEAL] /s/ Holly Adams Dornan
----------------------
NOTARY PUBLIC
State of California
My Commission Expires:
March 21,1986
----------------------
<PAGE>
STATE OF CALIFORNIA)
SS
COUNTY OF SANTA CLARA)
On this the 28th day of March, 1985, before me, P.A. Jones, the undersigned
Notary Public, personally appeared Michael J. Chalker, personally known to me
(or proved to me on the basis of satisfactory evidence) to be the person who
executed the within instrument as President or on behalf of Trillium Corporation
and acknowledged to me that said corporation executed it.
WITNESS my hand and official seal.
[SEAL]
/s/s P.A. Jones
---------------------
Notary's Signature
<PAGE>
EXHIBIT C-4
STANDARD TENANT IMPROVEMENTS
LAYOUT SPECIFICATIONS
The Standard Tenant Improvements shall be constructed in compliance with
the following layout specifications:
1. Private offices no smaller than 110 square feet per office.
2. HVAC zonings as recommended by Landlord's mechanical engineer. Zones
shall be distributed at an average ratio of approximately one (1) zone
per each 1,000 to 1,500 square feet of floor space.
3. Electrical capacity and design as recommended by Landlord's electrical
subcontractor and distributed according to the following schedule:
<TABLE>
<CAPTION>
Minimum Maximum
Amount Amount
------ ------
<S> <C> <C>
Duplex outlets, power
poles, or floor outlets
(for office areas only) 1 per 200 S.F. 1 per 100 S.F.
Switches (as needed) (as needed)
Lighting 80 Foot Candles 100 Foot
Candles
Phone Outlets (as needed) (as needed)
</TABLE>
4. All restroom finishes to match those installed in or planned for the
building if such other restroom finishes have been determined by the
date of this Lease.
5. Interior partitions shall be installed above the floor covering and
below the ceiling where permitted by Building Codes and the City of
San Jose.
6. Dropped ceiling shall be installed in a minimum of 40% of the
Premises.
7. All Tenant Improvement work to be performed in the Premises shall be
performed by Landlord's Contractor in accordance with union
requirements.
8. All handicap and fire sprinkler codes shall be conformed with as
required by the City of San Jose.
<PAGE>
May 7, 1984
FIRST ADDENDUM TO LEASE
To that certain lease by and between California Second, Ltd., Landlord, and
LTX Corporation, Tenant, for approximately 42,048 square feet located at 3970
North First Street, San Jose, California, dated March 8, 1984 ("Lease").
RECITALS:
1. Landlord and Tenant entered into the Lease with Landlord providing a
Standard Tenant Improvement Allowance of $840,960.00 ($20.00/SF x
42,048 SF) ("Allowance") for tenant improvements to be installed in
the Premises. The Monthly Rent established in the Lease was based on
the Allowance.
2. In the event the Cost of The Aggregate of Tenant's Improvements
exceeded the Allowance, Tenant agreed to pay the amount over and above
such Allowance, 50% of any excess to be paid within five (5) days of
the final budget and 50% within five (5) days of Lease commencement.
3. The final budget exceeds the Allowance more than originally
anticipated by Tenant.
4. Tenant requests that Landlord increase Allowance to $925,056.00
($22.00/SF x 42,048 SF) ("Maximum Allowance"), with the rent to be
increased to the amounts set forth below at the rate of $20.00 per
month for every $1,000.00 increase in the Allowance, and Tenant being
responsible for costs above the Maximum Allowance.
5. In establishing the improvements, delays were caused by Tenant
totalling thirty (30) days, thereby causing the Lease to commence
thirty (30) days prior to the date which would otherwise be
established by the provision of paragraph 2(b) of the Lease. Fifteen
(15) of the thirty (30) days delay were acknowledged in the letter of
March 19, 1984, and fifteen (15) days additional delay caused by
Tenant are hereby acknowledged.
6. At Tenant's request, Landlord agrees to defer payment of any amounts
in excess of the Maximum Allowance to September 1, 1984.
THEREFORE, the parties agree as follows:
1. Tenant requests and Landlord hereby provides the Maximum Allowance of
$925,056.00 as defined in Exhibit C, Item 4 of the Lease. Tenant
agrees to pay cash on or before
- 1 -
<PAGE>
September 1, 1984, for the improvement Costs to the extent the Final
Budget (established per paragraph 2(b) 5 of Exhibit C to the Lease),
as adjusted for change orders or revised by Landlord prior to Lease
commencement, exceeds the Maximum Allowance. In the event Tenant does
not pay said amount on or before September 1, 1984, Tenant shall be in
default of the Lease.
2. Notwithstanding the provisions of Exhibit C of the Lease, the Final
Budget of $1,086,649.00 and resulting payment of $161,593.00
representing the excess of the Cost of The Aggregate of Tenant's
Improvements over the maximum Allowance shall be a fixed amount, plus
or minus any change orders requested by Tenant. Landlord shall not be
required to reconcile or document the actual job costs in any way.
3. Monthly Rent Revisions
a. The Monthly Rent of $32,220.00 set forth in paragraph 4(a) of the
Lease is hereby increased by $1,681.92 per month to $33,901.92
per month ($925,056.00 - $840,960.00 = $85,096.00 divided by
$1,000.00 x $20.00).
b. The Agreement Letter dated March 19, 1984, stated that the first
month's rent deposit in the amount of $32,220.00 was due June 1,
1984. The date for payment of the deposit is hereby revised to
June 15, 1984 and the first month's rent deposit is increased to
$33,901.92 (as set forth above) to be applied against the rent
for the first full month of term.
c. The adjustments to Monthly Rent set forth in paragraph 5(a) of
the Lease is hereby amended as follows:
Months 11 - 36 $47,093.76
Months 37 - 48 $52,514.92
Months 49 - 60 $55,264.92
d. The Maximum Revised Base Rent figure of $1.59 per square foot per
month set forth in paragraph 5(b), line 21, shall be increased to
$1.65 per square foot per month.
4. Tenant agrees that prior to receipt of complete and final information
to proceed with construction, there was a delay totalling thirty (30)
days. Therefore, pursuant to Exhibit C, Item 6 and not withstanding
anything to the contrary in paragraphs 2 and/or 3 of the Lease, the
Lease shall commence and Tenant shall pay the rent and other charges
the thirty (30) days prior to the commencement date as otherwise
determined in accordance with paragraph 2(b) of the Lease, provided
that in no event shall the Lease commence prior to June 15, 1984.
- 2 -
<PAGE>
LANDLORD: TENANT:
CALIFORNIA SECOND, LTD. LTX CORPORATION
McCandless Partnership
/s/ Birk S. McCandless /s/ Adrian E. Hohn
- ------------------------------ ------------------------------
(Signature) (Signature)
Birk S. McCandless Adrian E. Hohn
- ------------------------------ ------------------------------
(Printed Name) (Printed Name)
President Vice President Western Operations
- ------------------------------ ------------------------------
(Title) (Title)
6/4/84 May 18, 1984
- ------------------------------ ------------------------------
(Date) (Date)
- 3 -
<PAGE>
ADDENDUM NO. 2
THIS ADDENDUM NO. 2 (hereinafter "Amendment"), is made this 30 day of May,
1990, by and between CALIFORNIA SECOND., LTD. a Florida limited partnership
("Landlord") and LTX CORPORATION, a Massachusetts corporation ("Tenant").
RECITALS
A. Tenant currently leases from Landlord approximately forty-two thousand
forty-eight (42,048) square feet of space at 3970 North First Street, San Hose,
California ("Premises") pursuant to that certain lease dated March 8, 1984 as
amended by that certain First Addendum to Lease dated May 7, 1984 (the lease as
amended shall herinafter be referred to as the "Lease").
B. Pursuant to paragraph 5 of the Lease, on the first day of the sixty-
first (61st) month of the term the monthly rent was adjusted to market rent and
beginning with the seventy-third (73rd) month of the term and every year
thereafter, such monthly rent is to be adjusted in accordance with any
increases in the Consumer Price Index.
C. Landlord and Tenant desire to amend the Lease to set forth a flat rate
monthly rent to take effect upon execution of this Amendment and to continue in
effect for the remainder of the term.
NOW, THEREFORE, the parties hereto agree to the following:
1. BASIC RENT.
Upon execution of this Amendment by the parties hereto, the
monthly rent as set forth in paragraph 4 (a) and as adjusted prior to the
execution hereof, shall be Fifty-Nine Thousand Six Hundred Eighty-Six and 11/100
Dollars ($59,686.11) per month and shall remain at said amount for the remainder
of the term.
1
<PAGE>
2. RESTATEMENT OF OTHER LEASE TERMS.
All terms, covenants and conditions of the Lease shall remain in
full force and effect except as specifically modified herein.
IN WITNESS WHEREOF, the parties execute this Amendment on the
date set forth below their signature.
LANDLORD: TENANT:
CALIFORNIA SECOND, LTD., LTX CORPORATION,
a Florida limited partnership a Massachusetts corporation
By: McCandless Partnership, a
California limited partnership,
a General Partner
By: /s/ By: /s/ David A. Adley
--------------------------- ------------------------------
Birk S. McCandless, as (Signature)
Trustee under the Birk S.
McCandless and Mary David A. Adley
McCandless Inter Vivos -------------------------------
Trust Agreement dated (Printed Name)
February 17, 1982, a V.P. Administration
General Partner -------------------------------
(Title)
5/30/90 5/30/90
----------------------------- --------------------------------
(Date) (Date)
2
<PAGE>
THIRD AMENDMENT TO LEASE
THIS THIRD AMENDMENT TO LEASE (this "Third Amendment") is made this 17th
day of February, 1994 by and between CALIFORNIA SECOND, LTD,. a Florida limited
partnership ("Landlord") and LTX CORPORATION, a Massachusetts corporation
("Tenant").
RECITALS
A. Tenant currently leases from Landlord approximately forty-two thousand
forty-eight (42,048) square feet of space located at 3970 North First Street,
San Jose, California (the "Premises") pursuant to that certain lease dated March
8, 1984, as amended by that certain Addendum No. 1 dated May 7, 1984, as
further amended by that certain Addendum No. 2 dated May 30, 1990
(collectively, the "Lease").
B. The Lease provides for a termination date of June 20, 1994.
C. Landlord and Tenant desire to extend the term of the Lease on the
terms and conditions specified herein.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual covenants and promises contained herein, the parties hereto agree to
amend the Lease as follows:
1. TERM. THe term of the Lease is hereby extended to June 20, 1999. The
five (5) year period commencing on June 21, 1994 and ending on June 20, 1999 is
referred to herein as the "Extended Term."
2, Basic Rent. The basic rent for the period commencing January 1. 1994
through June 20, 1994 is modified as specified below and the basic rent during
the Extended Term is as specified below:
January 1, 1994 through
May 31, 1994 $31,788.29 per month
1
<PAGE>
June 1, 1994 through
June 20, 1994 $21,192.19 (total for
the twenty (20) day
period)
June 21, 1994 through $9,563.12 (total for
June 30, 1994 the ten (10) day
period)
July 1, 1994 through
June 20, 1999 $28, 689.35 per month
3. OPTION TO EXTEND TERM. Landlord grants to Tenant the option to extend
the term for one period of five (5) years (the "Second Extended Term")
following the expiration of the Extended Term set forth in paragraph 1 under all
the provisions of this Amendment except for the amount of the basic rent. The
basic rent for the Second Extended Term shall be adjusted to ninety-five percent
(95%) of the market rate provided that in no event shall the basic rent for the
Second Extended Term be less than the Basic rent in effect at the expiration of
the Extended Term. This option is further subject to the following terms and
conditions:
(a) Tenant must deliver its irrevocable written notice of Tenant's
exercise of this option to Landlord not less than six (6) lease months, nor more
than twelve (12) lease months, prior tot he expiration of the Extended Term.
Time is of the essence with respect to the time period during which Tenant must
deliver to Landlord its written notice of exercise and , therefore, if Tenant
fails to give Landlord its irrevocable written notice of its exercise of this
option within the time period provided above then this option shall expire and
be of no further force or effect.
(b) The parties shall have thirty (30) days from the date Landlord
receives Tenant's notice of exercise in which to agree on the amount
constituting the market rate. If Landlord and Tenant agree on the amount f the
market rate. If Landlord and Tenant agree on the amount of the market rate,
they shall immediately execute an amendment to this lease setting forth the
expiration date of the Second Extended Term and the amount of the basic rent to
be paid by Tenant during the Second Extended Term. If Landlord and Tenant are
unable to agree on the amount of the market rate within such time period, then,
at the request of either party, the market rate shall be determined in the
following manner: (i) within thirty (30) days of the request of either party,
Landlord and Tenant shall each select a licensed real estate appraiser with not
less than five (5) years primary experience in the business of appraising
commercial property and commercial leases of property of the same type use and
in the same geographic area as the
2
<PAGE>
Premises; (ii) within fifteen (15) days of their appointment, such two real
estate appraisers shall select a third appraiser who is similarly qualified;
(iii) within thirty (30) days from the appointment of the third appraiser, the
three appraisers so selected shall, acting as a board of arbitrators, then
determine the amount of the market rate, basing their determination on standard
procedures and test normally employed in determining market rates and applying
the factors included within the definition of market rate set forth in
subparagraph (c) below. The decision of the majority of said appraisers shall
be final and binding upon the parties hereto. If a majority of the appraisers
are unable to agree on the market rate within the stipulated period of time, the
three opinions of the market rate shall be added together and their total
divided by three; the resulting quotient shall be the market rate. If, however,
the low opinion and/or the high opinion are/is more than 15% lower and/or higher
than the middle opinion, the low opinion and /or the high opinion , as the case
bay be, shall be disregarded. If only one opinion is disregarded, the remaining
two opinions shall be added together and their total divided by two and the
resulting quotient shall be the market rate. If both the low opinion and the
high opinion ar disregarded as stated in this paragraph, the middle opinion
shall be the market rate. If a party does not appoint a qualified appraiser
within the required time period the appraiser appointed by the other party shall
be the sole appraiser and shall determine the market rate. If the two
appraisers appointed by the parties are unable to agree on the third appraiser,
either of the parties to the lease, by giving ten (10) days ' notice to the
other party, can apply to the then president of the county real estate board of
the county in which the Premises are located, or to the presiding judge of the
superior court of that county, for the selection of a third appraiser who meets
the qualifications stated in this paragraph. Each party shall pay the expenses
and charges of the appraisers appointed by it and the parties shall pay the
expenses and charges of the third appraiser in qual shares. When the market
rate has been so determined, Landlord and Tenant shall immediately execute an
amendment to this lease stating the basic rent for the Second Extended Term.
(c) As used herein, the "market rate" shall be the monthly rent
(triple net) then obtained for five (5) year fixed rent leases of comparable
terms for premises in the Project and in buildings and/or projects within the
same geographical area of similar types and identity, quality and location as
the Project.
(d) Common area charges shall continue to be determined and payable
as provided in paragraph 16 of the Lease.
(e) Tenant shall not assign or otherwise transfer this option or any
interest therein and any attempt to do so shall render this option null and
void. Tenant shall have no right to
3
<PAGE>
extend the term beyond the Second Extended Term. If Tenant is in default under
the Lease as amended hereby at the date of delivery of Tenant's notice of
exercise to Landlord, then such notice shall be of no effect and this lease
shall expire at the end of the Second Extended Term. If Tenant is in default
under this lease at the last day of the Extended Term, then Landlord may in its
sole discretion elect to have Tenant's exercise of this option be of no effect,
in which case this lease shall expire at the end of the Extended Term.
4. INSURANCE. Landlord's obligations to obtain and keep in force certain
insurance policies, as specified in paragraph 11 of the Original Lease, is
hereby modified to provide that Landlord may, but shall not be obligated to,
obtain flood and/or earthquake insurance. Landlord shall have no liability to
Tenant if Landlord elects not to obtain flood and/or earthquake insurance. The
cost of such insurance shall be a Common Area Charge as provided in paragraph
11.
5. ALTERATIONS. With respect to alterations made to the Premises from
and after the date of this Amendment, paragraph 8 of the lease is hereby
modified to provide that with respect to such alterations which Tenant is
required by Landlord to remove at the end of the lease term, in addition to
removing the alteration and repairing any damage to the Premises caused by such
removal and complying with the surrender provisions in paragraph 23 of the
lease, Tenant shall also be obligated to restore the Premises to their condition
as it existed prior to Tenant making such alteration. Tenant's obligation to
remove, repair and restore with respect to alterations which Tenant has made to
the Premises prior to the date of this Amendment shall be governed by the Lease
and such agreements as the parties previously agreed without modification by the
preceding sentence.
6. REAL ESTATE BROKERS. Each party represents and warrants to the other
party that it has not had dealings in any manner with any real estate broker,
finder or other person with respect to the Premises and the negotiation and
execution of this Amendment except Cooper Brady. Except as to commissions and
fees to be paid as provided in this paragraph, each party shall indemnify and
hold harmless the other party from all damage, loss, liability and expense
(including attorney's fees and related costs) arising out of or resulting from
any claims for commissions or fees that may or have been asserted against the
other party by any broker, finder or other person with whom Tenant or Landlord
has or purportedly has dealt with in connection with the Premises and the
negotiation and execution of this Amendment. To the extent agreed to between
Landlord and Cooper Brady, Landlord shall pay all broker leasing
4
<PAGE>
commissions to Cooper Brady in connection with this transaction. Landlord and
Tenant agree that Landlord shall not be obligated to pay any broker leasing
commissions arising out of or relating to any extended term beyond the Extended
Term or to any expansion or relocation of the Premises at any time.
7. MODIFICATION TO ENTRY BY LANDLORD PROVISION. Paragraph 14 of the
Original Lease is hereby modified by adding the following language at the end of
said paragraph 14:
"Notwithstanding anything to the contrary contained in this
paragraph 14, Landlord may not enter the Premises without
Tenant's consent, except in the case of emergency, unless
Landlord has given Tenant at least twenty-four (24) hours
prior notice of its intent to enter. In any event, entry by
Landlord shall not unreasonably interfere with Tenant's use
of the Premises."
8. MODIFICATION OF COMMON AREA CHARGES PROVISION. Paragraph 16 of the
Original Lease is hereby modified by replacing the second sentence in the first
subparagraph of paragraph 16 in its entirety with the following sentence:
"Tenant further agrees that Common Area Charges shall
include an additional 5% of the actual expenditures for the
aggregate of all other Common Area Charges (excluding any
management fees) in order to compensate Landlord for
accounting and processing services."
9. MODIFICATION OF DEFAULT PROVISION. Paragraph 20 of the Original Lease
is hereby modified by deleting the last sentence of the first subparagraph in
its entirety and substituting in lieu thereof the following sentence:
"No notice shall be required in the event of failure to pay
any rent or other or other sum or in the event of
abandonment or vacation of the Premises, except as required
by California law."
10. REPAIR AND MAINTENANCE. The second subparagraph of paragraph 9 of the
Lease regarding Repair and Maintenance is hereby
5
<PAGE>
modified by deleting the second subparagraph in its entirety and substituting in
lieu thereof the following second subparagraph:
"Subject to the provisions of paragraph 17, Landlord shall
keep and maintain the roof and structural elements of the
building constituting the Project, and Common Area, in good
order and repair. As used herein, "roof" is defined as the
building's roofing membrane and tiles, and "structural
elements" is defined as the building's foundation, slab-on-
crate, columns, shear walls, floor trusses, metal deck and
concrete fill, and the roof beams, purlins and roof plywood.
Further, if the interior walls are damaged by a casualty and
insurance proceeds are paid to Landlord for such damage and
in an amount sufficient do repair such damage, then Landlord
shall promptly repair such damage. In all other cases,
damage to the interior walls (whether caused by an uninsured
casualty or otherwise) shall be the Tenant's responsibility
as provided above. Tenant waives all rights under and
benefits of California Civil Code Sections 1932(1), 1941 and
1942 and under any similar law, statute or ordinance now or
hereafter in affect. The cost of the repairs and
maintenance which are the obligation of Landlord hereunder
shall be a Common Area Charge and Tenant shall pay its
percentage share of such costs to Landlord as provided in
paragraph 16; provided, however, that if Landlord replaces
the entire roof of the building containing the Premises
during the term, Landlord shall bear the cost thereof and no
part thereof shall be included in a Common Area Charge and
provided, further, that if any repairs or maintenance are
required because of an act or omission of Tenant, or its
agents, employees or invitees, Tenant shall pay to Landlord
upon demand the full costs of such repair or maintenance.
Notwithstanding anything to the contrary in this paragraph
above, any capital improvement to the structural elements
(as defined above), which is not required by reason of
Tenant's specific use of or activities on the Premises,
which are required to be made by Landlord shall be made by
Landlord, and the cost thereof shall be included within
Common Area Charges ratably
6
<PAGE>
Over the useful life of such capital improvement and Tenant
shall pay its proportionate share thereof. The
determination of what constitutes a "capital improvement"
and the useful life of the capital improvement shall be made
by Landlord in accordance with generally accepted accounting
principles."
11. INSURANCE. The first subparagraph of paragraph 11 of the Original
Lease regarding Insurance is hereby modified by deleting the first subparagraph
in its entirety and substituting in lieu thereof the following first
subparagraph:
"Tenant, at its sole cost and expense, shall keep in force
during the term (i) public liability insurance with limits
of at least $2,000,000 per occurrence for injuries to or
death of persons occurring in, on or about the Premises or
the Project, and property damage insurance with limits of at
least $2,000,000 per occurrence (which insurance may, or may
not, without obligation, include flood and/or earthquake
insurance coverage and Tenant shall have no liability to
Landlord for electing not to obtain flood and/or earthquake
insurance) and (ii) Worker's Compensation insurance as
required by the State of California. All such policies
shall be primary and shall provide that said insurance shall
not be cancelled or reduced except upon (a) at least thirty
(30) days prior written notice to Landlord if such
cancellation or reduction results from any reason other than
non-payment of premium or (b) at least ten (10) days prior
written notice to Landlord if such cancellation or reduction
results from non-payment of premium. Further, Tenant's public
liability insurance shall name Landlord as Additional Insured
using ISO Bureau Form G109 or G112001 (or a successor form),
shall contain cross-liability endorsements, and shall be issued
by an insurance company admitted to transact business in the
State of California. Landlord agrees to pay on demand up to
$25 for the Additional Insured Endorsement."
7
<PAGE>
The third subparagraph of paragraph 11 of the Original Lease is hereby
modified by adding the following sentence to the end of the third subparagraph:
"The amount of the deductible which Landlord may pass
through to Tenant as a Common Area Charge shall not exceed
commercially reasonable amounts (i.e. deductible amounts
which are customarily provided by insurance companies for
comparable insurance on similar projects to this Project, or
customarily obtained by landlords in similar situations).
Deductibles up to $10,000 per incident shall be conclusively
presumed to be commercially reasonable for purposes of this
paragraph."
12. DAMAGE BY FIRE; CASUALTY. The second subparagraph of paragraph 17 of
the Lease is hereby modified by deleting clause (ii) in its entirety and
substituting in lieu thereof the following clause (ii):
"(ii) in the event that the damage is due to any cause other
than fire or other peril covered by the insurance required
by paragraph 11, then Landlord may terminate this lease;"
13. INDEMNIFICATION. The second sentence of paragraph 18 of the Lease
regarding Indemnification is hereby modified by deleting the second sentence of
paragraph 18 in its entirety and substituting in lieu thereof the following
second sentence:
"Except as to injury to persons or damage to property, the
principal cause of which is the negligence of Landlord or
its authorized representatives, Tenant shall hold Landlord
harmless from and defend Landlord against any liability,
loss, damage or expense, including reasonable attorneys'
fees, arising out of any injury to or death of any person or
damage to or destruction of property (other than Landlord's
property) occurring in, on or about the Premises from any
cause whatsoever."
14. NOTICE AND COVENANT TO SURRENDER. The first sentence of the first
subparagraph of paragraph 23 of the Lease regarding
8
<PAGE>
Notice and Covenant to Surrender is hereby modified by deleting such first
sentence in its entirety and substituting in lieu of thereof the following first
sentence:
"On the last day of the term or on the effective date of any
earlier termination, Tenant shall surrender to Landlord the
Premises and all of Tenant's improvements and alterations in
their condition existing as of the commencement of the term,
normal wear and tear excepted, and all floors clean, all to
the reasonable satisfaction of Landlord."
15. RESTATEMENT OF OTHER LEASE TERMS. Except as specifically modified
above, all other terms, covenants and conditions of the Lease shall remain in
full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Fifth Amendment
as of the date first set forth above.
LANDLORD: TENANT:
CALIFORNIA SECOND, LTD., LTX CORPORATION,
a Florida limited partnership a Massachusetts corporation
By: McCandless Partnership, By: /s/ David A. Adey
a California general partnership, --------------------------
A General Partner (Signature)
David A. Adey
By: /s/ Birk S. McCandless --------------------------
-------------------------------- (Printed Name)
Birk S. McCandless, as Trustee
under the Birk S. McCandless Senior Vice President Administration
and Mary McCandless Inter --------------------------
Vivos Trust Agreement dated (Title)
February 17, 1982, a General
Partner February 17, 1994
--------------------------
(Date)
9
<PAGE>
FOURTH AMENDMENT TO LEASE
THIS FOURTH AMENDMENT TO LEASE (this "Fourth Amendment") is made this
day of , 1994 by and between CALIFORNIA SECOND, LTD., a
--------------------
limited partnership ("Landlord") and LTX CORPORATION, a Massachusetts
corporation ("Tenant").
RECITALS
A. Tenant currently leases from Landlord approximately forty-two thousand
forty-eight (42,048) square feet of space located at 3970 North First Street,
San Jose, California (the "Premises") pursuant to that certain lease dated March
8, 1984, as amended by (i) that certain First Addendum to Lease dated May 7,
1984, (ii) that certain Addendum No. 2 dated May 30, 1990, and (iii) that
certain Third Amendment to Lease dated February 17, 1994 (collectively, the
"Lease").
B. Tenant desires to enter into a sublease (the "Sublease") with Novellus
Systems, Inc., a California Corporation ("Novellus") to be executed
substantially concurrently herewith, which requires certain modifications to the
Lease, as more specifically provided hereinbelow.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements contained herein, the parties hereto agree to amend the
Lease as follows:
1. OPTION TO EXTEND TERM. Paragraph 3(e) of the Third Amendment to Lease
is hereby modified by adding a new sentence which shall be inserted after the
first sentence of such subparagraph, which shall read as follows:
"Notwithstanding the preceding sentence, Tenant shall be permitted to
assign its rights under this option to Novellus Systems, Inc., in
connection with that certain Sublease Agreement to be executed
substantially concurrently herewith."
2. ALTERATIONS. Paragraph 8 of the Master Lease is hereby modified by
adding the following subparagraph at the end of Section 8:
1
<PAGE>
"Notwithstanding any provision to the contrary, Landlord agrees that
it will not unreasonably withhold or delay its consent to alterations
that comport with the proposed tenant improvements specified in
Paragraph 2.9 of the Sublease and Exhibit B attached thereto and
construction thereof otherwise complies with all other terms of this
Paragraph 8."
3. NOTICE AND COVENANT TO SURRENDER. Paragraph 23 of the Lease, "Notice
and Covenant to Surrender" is hereby modified by deleting the first sentence of
paragraph 23 in its entirety and substituting in lieu thereof the following:
"On the last day of the term or on the effective date of any earlier
termination, Tenant shall surrender the Premises and all of Tenant's
improvements and alterations in their condition as they will exist upon
completion of the improvements contemplated in paragraph 2.9 of the
Sublease and as described in Exhibit B attached thereto, reasonable wear
and tear excepted. Landlord acknowledges that Tenant shall have no
obligation to restore the Premises to its condition existing at the
commencement of the term."
4. ENVIRONMENTAL MATTERS. The following section regarding "Environmental
Matters" is hereby added to the Lease as paragraph 51:
"51. ENVIRONMENTAL MATTERS
A. TENANT'S COVENANTS REGARDING HAZARDOUS MATERIALS.
(1) HAZARDOUS MATERIALS HANDLING. Except as specifically
provided in paragraph 51.D below, Tenant, its agents, invitees, employees,
contractors, sublessees, assigns and/or successors shall not use, store,
dispose, release or otherwise cause to be present or permit the use, storage,
disposal, release or presence of Hazardous Materials (as defined below) on or
about the Premises or Proejct. As used herein "Hazardous Materials" shall mean
any petroleum or petroleum by-products, flammable explosives, asbestos, urea
formaldehyde, radioactive materials or waste and any "hazardous substance",
"hazardous waste", "hazardous materials', "toxic substance" or "toxic waste" as
those terms are defined under the provisions of the California Health and Safety
Code and/or the provisions of the Comprehensive Environmental Response,
Compensation and Liability Act (42 U.S.C. Section 9601 et seq.), as amended by
the Superfund Amendments and Reauthorization Act of 1986 (42 U.S.C. Section 9601
et seq.), or any other hazardous or toxic substance, material or waste which is
or becomes regulated by any local governmental authority, the State of
California or any agency thereof, or the United States Government or any agency
thereof.
2
<PAGE>
(2) NOTICES. Tenant and Novellus Systems, Inc. (as a Subtenant
who is bound to comply with the terms of the Master Lease) shall immediately
notify Landlord in writing of: (i) any enforcement, cleanup, removal or other
governmental or regulatory action instituted, completed or threatened pursuant
to any law, regulation or ordinance relating to the industrial hygiene,
environmental protection or the use, analysis, generation, manufacture, storage,
presence, disposal or transportation of any hazardous Materials (collectively
"Hazardous Materials Laws"); (ii) any claim made or threatened by any person
against Tenant or Novellus, the Premises, Project or buildings within the
Project relating to damage, contribution, cost recovery, compensation, loss or
injury resulting from or claimed to result from any Hazardous Materials; and
(iii) any reports made to any environmental agency arising out of or in
connection with any Hazardous Materials in, on or removed from the Premises,
Project or buildings within the Project, including any complaints, notices,
warnings, reports or asserted violations in connection therewith. Tenant and
Novellus shall also supply to Landlord as promptly as possible, and in any event
within five (5) business days after Tenant or Novellus first receives or sends
the same, with copies of all claims, reports, complaints, notices, warnings or
asserted violations relating in any way to the Premises, Project or buildings
within the Project or Tenant's or Novellus' use thereof. Tenant and Novellus
shall promptly deliver to Landlord copies of hazardous waste manifests
reflecting the legal and proper disposal of all Hazardous Materials removed from
the Premises.
B. INDEMNIFICATION OF LANDLORD. Tenant and Novellus shall indemnify,
defend (by counsel acceptable to Landlord), protect, and hold Landlord, and each
of Landlord's partners, employees, agents, attorneys, successors and assigns,
free and harmless from and against any and all claims, liabilities, penalties,
forfeitures, losses or expenses (including attorneys' fees) for death of or
injury to any person or damage to any property whatsoever (including water
tables and atmosphere), arising from or caused in whole or in part, directly or
indirectly, by (i) the presence in, on, under or about the Premises, Project or
buildings within the Project or discharge in or from the Premises, Project or
buildings within the Project of any hazardous Materials which is caused by
Tenant's or Novellus' use, analysis, storage, transportation, disposal, release,
threatened release, discharge or generation of Hazardous Materials to, in, on,
under, about or from the Premises, Project or buildings within the Project, (ii)
Tenant's or Novellus' failure to comply with any Hazardous Materials Laws
whether knowingly, unknowingly, intentionally or unintentionally, or (iii) any
breach or inaccuracy in any of the representations or warranties made by Tenant
or Novellus herein, or any breach of any of the obligations of Tenant or
Novellus contained in this paragraph 51. Tenant's and Novellus' obligations as
specified in the preceding sentence shall include, without
3
<PAGE>
limitation, and whether foreseeable or unforeseeable, all costs of any required
or necessary repair, cleanup or detoxification or decontamination of the
Premises, Project or buildings within the Project, and the preparation and
implementation of any closure, remedial action or other required plans in
connection therewith. In addition, Tenant and Novellus shall reimburse Landlord
for (i) losses in or reductions to rental income resulting from Tenant's or
Novellus' use, storage or disposal of Hazardous materials, (ii) all costs of
refitting or other alterations to the Premises, Project or buildings within the
Project required as a result of Tenant's or Novellus' use, storage, or disposal
of Hazardous Materials including, without limitations, alterations required to
accommodate an alternate use of the Premises, Project or buildings within the
Project, and (iii) any diminution in the fair market value of the Premises,
Project or buildings within the Project caused by Tenant's or Novellus' use,
storage, or disposal of Hazardous Materials. For purposes of this paragraph 51,
any acts or omissions of Tenant or Novellus, or by employees, agents, assignees,
subtenants (including specifically Novellus), contractors or subcontractors of
Tenant or Novellus or others acting for or on behalf of Tenant or Novellus
(whether or not they are negligent, intentional, willful or unlawful) shall be
strictly attributable to Tenant and Novellus.
C. SURVIVAL. The provisions of this paragraph 51, including without
limitation the rights and obligations in paragraphs 51.A, 51.B, 51.C, 51.D,
51.E, shall survive the expiration or earlier termination of the term of the
Lease.
D. PERMITTED HAZARDOUS SUBSTANCES. Landlord hereby acknowledges that
notwithstanding paragraph 51.A(1)(a) above, Tenant has requested Landlord's
consent to the potential use, storage, generation, treatment and disposal at the
Premises of the Hazardous Materials, a list of which shall be provided to
Landlord prior to Tenant's use of any hazardous substances (the "Permitted
Hazardous Substances") by Novellus Systems, Inc., a California Corporation
("Novellus") in connection with a proposed sublease to Novellus. Tenant's use of
the Permitted Hazardous Substances is subject to Landlord's reasonable consent.
In consideration of, and in reliance upon, the representations and warranties of
Tenant and Novellus set forth in this paragraph 51.D which shall be provided to
Landlord prior to Tenant's use of any hazardous substances, and the additional
covenants of Tenant and Novellus set forth in paragraph 51.E below, Landlord
will not unreasonably withhold its consent to the use (hereinafter defined) of
the Permitted Hazardous Substances by Novellus as a subtenant of Tenant, subject
to the representations, warranties, covenants and terms contained in this
paragraph 51. Tenant and Novellus hereby represent and warrant to Landlord as
follows (which representations and warranties shall survive the expiration or
earlier termination of this lease):
4
<PAGE>
1. Novellus has obtained the following EPA generator number:
- ---------------.
2. Attached as Exhibit B is a true, correct, and complete
description of the uses or processes involving the Permitted Hazardous
Substances (the "Use"), which includes (i) quantities, storage or handling
procedures, (ii) whether any waste Hazardous Materials are generated and (iii)
the disposal procedures required therefor. Novellus has obtained the following
governmental permits or approvals regarding its Use of the Permitted Hazardous
Substances (copies of which have been delivered to Landlord), all of which
permits and approvals are in full force and effect:
A.
-------------------------------------------
B.
-------------------------------------------
C.
-------------------------------------------
D.
-------------------------------------------
Novellus has made the following filings with governmental agencies regarding its
Use of the Permitted Hazardous Substances (copies of which have been delivered
to Landlord):
A.
-------------------------------------------
B.
-------------------------------------------
C.
-------------------------------------------
D.
-------------------------------------------
Except for the foregoing permits and filings, Novellus represents that no
further action is required in connection with Novellus' Use of the Permitted
Hazardous Substances in compliance with applicable laws.
3. Waste Hazardous Material generated as a result of the Use of
the Permitted Hazardous Substances is or will be:
(i) disposed of by the following licensed disposal company:
, at the following site:
- --------------------------------------------- ----------.
(ii) one hundred percent (100%) recycled as
5
<PAGE>
described in Exhibit E.
4. Novellus is not currently the subject of any regulatory
investigation, inquiry, order or proceeding regarding Novellus' use of Hazardous
Materials.
E. Tenant and Novellus agree to the following additional provisions:
(1) COMPLIANCE WITH ENVIRONMENTAL LAWS: Tenant and Novellus
shall at all times and in all respects comply with all Hazardous Materials Laws.
(2) HAZARDOUS MATERIALS HANDLINGS: Novellus shall at its own
expense procure, maintain in effect and comply with all conditions of any and
all permits, licenses and other governmental and regulatory approvals required
for Novellus' use of the Premises. Novellus shall cause any and all Hazardous
Materials removed from the Premises and the Project to be removed and
transported solely by duly licensed haulers to duly licensed facilities for
final disposal of such materials and wastes. Novellus shall in all respects
handle, treat, deal with and manage any and all Hazardous Materials in, on,
under or about the Premises or the Project in total conformity with all
applicable Hazardous Materials Laws and prudent industry practices regarding
management of such Hazardous Materials. All reporting obligations imposed by
Hazardous Materials Laws are strictly the responsibility of Novellus. Novellus
is and shall be deemed to be the "operator" "in charge" of Novellus' "facility"
and the "owner" of all Permitted Hazardous Substances and Hazardous materials
generated or resulting therefrom as such terms are used in the Hazardous
Materials Laws.
(3) ADDITIONAL INSURANCE OR FINANCIAL CAPACITY: If at any time
Landlord in its good faith business judgment determines that Tenant is not
maintaining sufficient insurance or other means of financial capacity to enable
Tenant to fulfill its obligation to Landlord hereunder, whether or not then
accrued, liquidated, conditional or contingent, Tenant shall procure and
thereafter maintain in full force and effect such insurance or other form of
financial assurance, with or from companies or persons and in forms reasonably
acceptable to Landlord, as Landlord may from time to time request. Landlord may
procure such insurance if Tenant fails to meet its obligation hereunder and the
costs thereof shall be passed through to Tenant and payable by Tenant to
Landlord promptly upon demand by Landlord.
(4) ENVIRONMENTAL AUDIT; RIGHT OF ENTRY: Landlord shall have the
right to enter the Premises from time to time upon reasonable notice to inspect
the Premises for compliance with the provisions of this Paragraph 51. If Tenant
is using or has used Hazardous Materials on the Premises, then not more than
once every
6
<PAGE>
two (2) years, Landlord shall have the right to require Tenant, at Tenant's sole
cost and expense, to undertake and submit to Landlord a periodic environmental
audit from an environmental company approved by Landlord, which audit shall
cover Tenant's and Novellus' compliance with this paragraph 51. In addition, if
Landlord has reason to believe that either Tenant or Novellus is not operating
in compliance with the terms of this Paragraph 51, then Landlord may conduct
additional environmental audits and the cost of such audit shall be at Tenant's
expense unless Tenant and Novellus both are found to be in total compliance with
the terms of this Paragraph 51. Also, an environmental audit may be conducted by
Landlord, at Tenant's sole cost and expense, in connection with Tenant's
surrender of the Premises at the expiration or earlier termination of this
lease, if reasonably necessary to determine Tenant's and Novellus' compliance
with the terms of this Paragraph 51. Tenant shall promptly comply with all
requirements of any such audit and cure all matters raised therein at Tenant's
sole cost. Tenant also agrees to comply with Landlord's reasonable request for
additional information including questionnaires, necessary to assure Landlord of
Tenant's compliance with the provisions of this paragraph 51."
4. RESTATEMENT OF THE LEASE TERMS. Except as specifically modified
herein, all of the terms, covenants and conditions of the Lease shall remain in
full force and effect.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Fourth Amendment
as of the date first written above.
LANDLORD: TENANT:
CALIFORNIA SECOND, LTD., LTX CORPORATION,
a Florida limited partnership a Massachusetts corporation
By: McCandless Partnership, By:
a California general partnership, ---------------------------
and Mary McCandless Inter (Signature)
Vivos Trust Agreement dated
February 17, 1982, a General ------------------------------
Partner (Printed Name)
------------------------------
(Title)
------------------------------
(Date)
NOVELLUS ACKNOWLEDGEMENT AND AGREEMENT:
Novellus hereby acknowledges and agrees that the modifications to the Lease as
provided in the foregoing Fourth Amendment to Lease were made primarily to
accommodate the Sublease from Tenant to Novellus and as a condition to
Landlord's agreement to enter into this Fourth Amendment to Lease, and to
consent to the Sublease, Landlord required Novellus to acknowledge and agree to
and be bound to Landlord to perform the provisions of paragraph 4 of this Fourth
Amendment to lease, regarding environmental matters and the indemnity
obligations specified therein, and by its signature below, Novellus accepts and
agrees to all of such provisions.
NOVELLUS SYSTEMS, INC.
a California corporation
By:
---------------------------
(Signature)
- ------------------------------
(Printed Name)
- ------------------------------
(Title)
- ------------------------------
(date)
8
<PAGE>
ASSIGNMENT AND ASSUMPTION OF LEASE
THIS ASSIGNMENT AND ASSUMPTION OF LEASE ("Agreement") is made as of
November 22, 1995, by and among CIRCADIAN, INCORPORATED, a Delaware corporation,
as Assignor ("Assignor"), NOVELLUS SYSTEMS, INC., a California corporation, as
Assignee ("Assignee"), and CALIFORNIA SECOND, LTD., a Florida limited
partnership, as Landlord ("Landlord"), who agree as follows:
RECITALS
This Agreement is made with reference to the following facts and with the
following intentions:
A. Landlord, as Landlord, and Assignor, as Tenant, entered into a written
lease agreement dated as of June 9, 1987, as amended by that certain
First Amendment to Lease dated as of December 1, 1987, that certain
Second Amendment to Lease dated as of August 30, 1988, that certain
Third Amendment to Lease dated as of April 3, 1989, that certain
Fourth Amendment to Lease dated as of July 16, 1990, that certain
Fifth Amendment to Lease dated as of August 15, 1991, and that certain
Sixth Amendment to Lease dated as of January 3, 1994 (collectively,
the "Lease"), whereby Landlord leased to Assignor and Assignor leased
from Landlord certain real premises consisting of approximately 29,424
square feet of space located at 3942 North First Street situated in
the McCandless Business Park, in the City of San Jose, County of Santa
Clara, State of California (the "Premises"), more particularly
described on EXHIBIT A attached hereto and incorporated herein by
reference.
B. Assignor desires to assign all of its right, title, and interest in
the Lease to Assignee and Assignee desires to assume all of Assignor's
rights and obligations under the Lease on and after the Effective Date
(defined below).
C. Landlord shall consent to the proposed Assignment on the terms and
conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
1. EFFECTIVE DATE OF ASSIGNMENT. The parties to this Agreement hereby
acknowledge that this Assignment and Assumption of Lease (the "Assignment") is
conditioned upon and subject to Assignor's finding a new suitable facility for
its business to replace the Premises (the "Replacement Facility"). Subject to
the foregoing condition, the Assignment shall take effect on the date by which
both of the following shall have occurred: (i) Assignor has executed a lease for
the Replacement Facility; and (ii) Assignor has actually delivered possession of
the Premises to Assignee (the
<PAGE>
"Effective Date"). Assignor shall use reasonable efforts to notify Assignee
verbally or in writing of Assignor's intended delivery of possession of the
Premises to Assignee at least three (3) business days in advance of any such
delivery. Assignor shall notify Assignee in writing of the Effective Date and
Assignee shall acknowledge the Effective Date in writing, if requested by
Assignor; provided, however, that any failure by Assignee to acknowledge such
date shall in no way affect the Effective Date. Notwithstanding the foregoing,
if the Effective Date does not occur on or before February 1, 1996, Assignee or
Assignor may terminate this Agreement and this Agreement shall be null and void.
In the event this Assignment is terminated pursuant to this Paragraph 1,
Assignor shall return to Assignee any Assignment Consideration paid by Assignee
to Assignor.
2. ASSIGNMENT OF LEASE. Assignor does hereby grant, transfer, assign and
set over to Assignee, as of the Effective Date, all of Assignor's right, title
and interest in and to the Lease and the Premises.
3. ACCEPTANCE AND ASSUMPTION OF LEASE. Assignee hereby accepts the
foregoing Assignment of the Lease and Assignor's rights thereunder, and Assignee
hereby assumes all of the rights and obligations of Assignor under the Lease
which accrue or are to be performed on or after the Effective Date. Except as
set forth in this Agreement, Assignee hereby expressly assumes and agrees to
perform and fulfill all of the terms and obligations to be performed by the
"Tenant" under the Lease on and after the Effective Date.
4. ASSIGNMENT CONSIDERATION. Upon the execution of this Agreement by all
of the parties hereto, Assignee shall pay to Assignor the sum of Twenty Thousand
Dollars ($20,000) as consideration for the Assignment described herein
("Assignment Consideration"). Notwithstanding anything in the Lease, Landlord
hereby acknowledges that Landlord is not entitled to any portion of the
foregoing Assignment Consideration and Landlord hereby expressly waives any
right Landlord may otherwise have under the Lease to said Assignment
Consideration.
5. MOVING EXPENSES AND PREPAID RENT. Upon the Effective Date, Assignee
shall pay to Assignor as compensation for Assignor's moving expenses, the
additional sum of (i) Twenty Thousand Dollars ($20,000) if the Effective Date
occurs on or before December 15, 1995, or (ii) Ten Thousand Dollars ($10,000),
if the Effective Date occurs after December 15, 1995 ("Moving Expense Amount").
Additionally, Assignee shall reimburse Assignor for any monthly rent, common
area or any other charges under the Lease prepaid by Assignor for any full or
partial month as of the Effective Date. Notwithstanding anything in the Lease,
Landlord hereby acknowledges that Landlord is not entitled to any portion of the
foregoing Moving Expense Amount or reimbursement and Landlord hereby expressly
waives any right Landlord may otherwise have under the Lease to said Moving
Expense Amount and reimbursement.
6. FACILITATION FEE. Upon the Effective Date, Assignee shall pay to
Tarlton Properties, Inc. the sum of Fifteen Thousand Dollars ($15,000) as a
facilitation fee for negotiating this Agreement.
<PAGE>
7. SECURITY DEPOSIT. The parties acknowledge that Landlord now holds the
sum of Seventeen Thousand Six Hundred Fifty Four Dollars and 40/100 ($17,654.40)
as a security deposit (the "Security Deposit") under the Lease. Upon the
Effective Date, Landlord shall pay to Assignor the entire amount of the Security
Deposit, subject to prior receipt of the replacement security deposit from
Assignee as specified in the following sentence. Concurrently upon the Effective
Date, Assignee shall deposit with Landlord the sum of Seventeen Thousand Six
Hundred Fifty Four Dollars and 40/100 ($17,654.40) as a security deposit to be
applied in accordance with the provisions of the Lease.
8. LETTER OF CREDIT. Landlord hereby acknowledges that pursuant to
Paragraph 5 of the Sixth Amendment to Lease between Landlord and Assignor dated
as of January 3, 1994, Assignor deposited with Silicon Valley Bank a declining
balance letter of credit ("Letter of Credit") in the original amount of One
Hundred Thousand Dollars ($100,000) as security for Assignor's performance of
its obligations under the Lease. Upon the Effective Date, Assignor shall so
notify Landlord and Landlord shall immediately return the Letter of Credit to
Assignor with a written statement, reasonably satisfactory to Assignor,
acknowledging that all of Landlord's right and/or interest in, under or to the
Letter of Credit is thereby terminated.
9. LANDLORD REPRESENTATIONS. Landlord represents and warrants, as of
the date set forth above, that: (i) the Lease is in full force and effect; (ii)
to the best of Landlord's knowledge, Assignor is not in default in the payment
or performance of its obligations under the Lease; (iii) to the best of
Landlord's knowledge, Assignor has not committed any breach of the Lease; (iv)
no notice of default has been given to Assignor by Landlord; and (v) the
documents attached hereto as Exhibit A constitute the only agreements between
Landlord and Assignor with respect to the Premises.
10. RELEASE. Except for (i) any indemnity obligations that Landlord and
Assignor have to each other under the Lease for demands, charges, claims,
accounts, expenses (including attorneys' fees and costs), liabilities, damages
or causes of action (collectively, "Claims") resulting from events occurring
prior to the Effective Date that, pursuant to the terms of the Lease, would
otherwise survive the expiration or sooner termination of the Lease, and (ii)
any "Common Area Charges" or refunds that are due and payable by either Landlord
or Assignor under the Lease as of the Effective Date based on the applicable end
of the calendar year reconciliation of such charges, this Assignment shall fully
and finally settle all Claims of any nature by and between Landlord and
Assignor, including, without limitation, both known and unknown Claims that
arise out of or relate in any manner to the Lease and/or the Premises.
In connection with the foregoing release, the Landlord and Assignor
expressly waive the provisions of California Civil Code Section 1542, which
provide:
"A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor."
<PAGE>
11. INDEMNITY: Assignee shall indemnify, defend, protect and hold
Assignor harmless from any Claims arising on or after the Effective Date in
connection with the Lease, the Premises or as a consequence of Assignee's breach
of the obligations on its part to be performed under this Agreement. Except as
otherwise provided in paragraph 13 hereof, Assignor shall indemnify, defend,
protect and hold Assignee harmless from any Claims in connection with the Lease
or the Premises arising at any time during the Lease term prior to the Effective
Date. The foregoing indemnities shall survive the expiration or termination of
the Lease or this Assignment.
12. CONDITION OF THE PREMISES. Landlord agrees that any alterations or
additions existing on the Premises as of the date of this Agreement may remain
on the Premises and Landlord will accept surrender of the alterations and
additions upon the expiration or sooner termination of the Lease. Landlord
hereby releases Assignor from any liability Assignor may have in connection with
the restoration of the Premises or other surrender obligation upon the
expiration or sooner termination of the Lease.
13. ACCEPTANCE OF THE PREMISES. Upon the Effective Date, and except with
respect to any hazardous materials which may be present on or about the Premises
on the Effective Date, Assignee agrees to accept the Premises "AS IS".
14. SURRENDER OF THE PREMISES. Notwithstanding anything in the Lease,
Assignee's obligations with respect to surrender of the Premises upon the
expiration or sooner termination of the Lease shall be fulfilled if Assignee
surrenders possession of the Premises to Landlord in the condition existing as
of the Effective Date, ordinary wear and tear, acts of God, casualties and
condemnation, excepted.
15. MISCELLANEOUS.
A. ATTORNEY'S FEES. If any party to this Agreement commences an
action or legal proceeding against any other party or parties to this Agreement
arising out of or in connection with this Agreement or the Assignment described
herein, the prevailing party or parties shall be entitled to recover from the
losing party or parties reasonable attorneys' fees and costs of suit.
B. SUCCESSORS. This Agreement shall be binding on and inure to the
benefit of the parties and their respective successors and assigns.
C. ENTIRE AGREEMENT. This Agreement contains the entire
understanding among the parties with respect to the matters contained herein.
D. SEVERABILITY. If any one or more of the provisions contained in
this Agreement shall be invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired thereby.
<PAGE>
16. BROKERS. Each party represents that it has not had dealings with any
real estate broker, finder or other person, with respect to this Assignment
except Tarlton Properties, Inc. Each party shall hold harmless the other party
or parties from all damages resulting from any claims that may be asserted
against the other party or parties by any broker, finder or other person with
whom the other party or parties has, or purportedly has, dealt, other than
Tarlton Properties, Inc. Assignee shall pay all commissions or other fees
(including, without limitation, the aforementioned facilitation fee) owed to
Tarlton Properties, Inc. arising from this Agreement and shall hold Assignor and
Landlord harmless from any liability in connection therewith.
17. VOLUNTARY AGREEMENT. The parties have read this Agreement and the
release contained in it, and on the advice of counsel, have fully understood and
freely and voluntarily entered into this Agreement.
18. LANDLORD'S CONSENT. Landlord hereby consents to the Assignment and
the terms and conditions of this Agreement, without waiver of the restriction
concerning further assignment.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
intending it to be effective as of the Effective Date.
ASSIGNOR ASSIGNEE
CIRCADIAN, INCORPORATED, NOVELLUS SYSTEMS, INC.
a Delaware corporation a California
-----------------------
By: /s/ By: /s/ William J. Wall
-------------------------- --------------------------------
Printed Printed
Name: (?) Name: William J. Wall
------------------------ -------------------------------
Title: (?) CEO Title: CFO
----------------------- -------------------------------
Date: 11/22/95 Date: 11/22/95
------------------------ ------------------------------
[signatures continued on next page]
<PAGE>
LANDLORD
CALIFORNIA SECOND, LTD.,
a Florida limited partnership
By: MCCANDLESS PARTNERSHIP,
a California general partnership.
a General Partner
By: /s/ Birk S. McCandless
--------------------------
Printed
Name: Birk S. McCandless
Title: As Trustee under the Birk S.
McCandless and Mary McCandless
Inter Vivos Trust Agreement dated
February 17, 1982, a General Partner
Date: 11/27/95
-------------------------
<PAGE>
LEASE
THIS LEASE is made June 9, 1987 between California Second, Ltd.
("Landlord") and CIRCADIAN, INCORPORATED, a Delaware corporation, ("Tenant").
W I T N E S S E T H :
Landlord leases to Tenant and Tenant leases from Landlord those certain
premises (the "Premises") outlined in red on Exhibit A, including those tenant
improvements constructed by Landlord for Tenant as such is described in Exhibit
C, which Landlord and Tenant hereby agree consist of approximately twenty-nine
thousand, four hundred twenty-four (29,424) square feet in McCandless Business
Park - San Jose (the "Project"). As used herein the term Project shall mean
and include all of the land described and outlined in red on Exhibit B and all
the buildings, improvements, fixtures and equipment now or hereafter situated on
said land.
Improvements for Tenant shall be constructed in accordance with the plans
and specifications, and other terms and conditions, set forth in Exhibit C. Said
work shall be at the expense of Landlord and/or Tenant as set forth in Exhibit C
and shall in each case be performed in a prompt, diligent and workmanlike
manner.
Tenant covenants, as a material part of the consideration of this lease, to
perform and observe each and all of the terms, covenants and conditions set
forth below, and this lease is made upon the condition of such performance and
observance.
1. USE
Tenant shall use the Premises for office, research and
development, and light manufacturing, and other related uses, and shall not use
or permit the Premises to be used for any other purpose.
2. TERM
(a) The term, subject to paragraphs 2(b) and 3, shall commence
on December 1, 1987 and end on September 27, 1989 unless sooner termination as
hereinafter provided. In no circumstances shall the term commence prior to
December 1, 1987.
(b) Possession of the Premises shall not be deemed tendered and
the term shall not commence until the first to occur of the following:
(1) Upon substantial completion of all work to be done by
Landlord pursuant to Exhibit C (exclusive of telephones or other communication
systems and punchlist items) and the receipt of a Certificate of Occupancy from
the proper governmental agency (or the
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<PAGE>
receipt of a final building permit acknowledging completion and permitting
occupancy of the Premises from the City of San Jose); if no such certificate or
permit is required then certification by Landlord's architect or contractor that
the Landlord's construction work has been completed; or
(2) Upon the occupancy of the Premises by an (?) Tenant's
operating personnel, provided however that Tenant, at its sole risk and expense,
may, subject to Landlord's reasonable consent, and without causing commencement
of the term, install prior to commencement telephone, computer terminal wiring,
and equipment and items for storage to the extent permitted by applicable laws
provided same does not interfere with Landlord's construction work. It is agreed
that Landlord shall in no manner or event (excepting the negligence or willful
misconduct of Landlord or its employees or agents) be liable or responsible for
damage to, or caused by, Tenant's equipment prior to commencement. Tenant shall
not use non-union personnel for such installation prior to commencement without
Landlord's prior written approval; or
(3) If Landlord is prevented from or delayed from (?)
completing its work under Exhibit C due to the acts or omissions of Tenant, then
upon the date by which such work would have been completed (?) but for such acts
or omissions by Tenant.
3. POSSESSION
If Landlord for any reason cannot deliver possession of the
Premises to Tenant at the date of commencement set forth in paragraph 2(a), this
lease shall not be void or voidable and Landlord shall not be liable to Tenant
for any loss or damage on account thereof. Except as set forth in Exhibit C,
Tenant shall not be liable for rent until Landlord delivers possession of the
Premises to Tenant, as defined in paragraph (?). If the term commences on a date
other than specified in 2(a) above, the parties shall immediately execute an
amendment to this lease stating the actual date of commencement. Notwithstanding
the above, the period of delay shall not exceed ninety (90) days from December
1, 1987 plus (?) number of days of delay caused by Tenant or by strike or other
causes beyond Landlord's reasonable control. If the period of delay exceeds the
allowable delay, Landlord shall not be liable to Tenant for any loss or damage
on account thereof, but Tenant may, at its option, declare this lease void, and,
if Tenant so elects, all amounts deposited with Landlord shall be returned to
Tenant. If the delay exceeds ninety (90) days and Tenant does not elect to
terminate, and if none of such ninety (90) days of delay has been caused by
Tenant, then Tenant shall receive one (1) additional day free monthly rent for
every day of delay not caused by Tenant, or by strike, or other causes beyond
Landlord's reasonable control, beyond the 90 day period set forth above.
4. MONTHLY RENT
(a) MONTHLY RENT. Tenant shall pay to Landlord as rent for the
premises, in advance and subject to adjustment as provided in paragraph 5, the
sum of nineteen thousand two hundred seventy-two and 72/100 Dollars ($19,272.72)
on or before the first day of the first full calendar month of the term and on
or before the first day of each and every successive calendar
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<PAGE>
month. Rent for any partial month shall be payable in advance and shall be
prorated at the rate of 1/30th of the monthly rent per day.
(b) PLACE OF PAYMENT. All rent and other amounts (?) Landlord
hereunder shall be paid to Landlord, without deduction or offset (?) in lawful
money of the United States of America, at the office of Landlord at 3945 Freedom
Circle, Suite 1000, Santa Clara, CA 95054, or to such other person or place as
Landlord may from time to time designate in writing.
(c) FIRST MONTH'S RENT. Landlord acknowledges receipt from
Tenant, on the execution hereof, of the sum nineteen thousand two hundred
seventy-two and 72/100 ($19,272.72) to be applied against the rent for the first
full month of the term for which rent is due.
(d) SECURITY DEPOSIT. Concurrently with Tenant's execution of
this lease, Tenant shall deliver to Landlord an unconditional and irrevocable
Letter of Credit in the amount of nineteen thousand two hundred seventy-two and
72/100 dollars ($19,272.72) to secure the faithful performance by Tenant of all
of the terms, covenants and conditions of this lease to be kept and performed by
Tenant. The Letter of Credit shall be available by draft at sight, subject only
to receipt by the bank of a notarized statement from Birk S. McCandless or
Steven E. Sund stating that the amount demanded is due and owing to Landlord by
reason of the default of Tenant. The Letter of Credit shall by its terms expire
not less than one year from the date issued, provided that said Letter of Credit
shall be renewed by Tenant for successive periods of not less than one year each
to and including not less than ten (10) days after the termination of this
lease. The bank's written renewal of the Letter of Credit shall in each case be
delivered to Landlord not less than ninety (90) days prior to the expiration
date of the then outstanding Letter of Credit. Tenant's failure to so deliver,
renew (including specifically but not limited to the delivery to Landlord of
such renewal not less than ninety (90) days prior to expiration of the Letter of
Credit) and maintain such Letter of Credit shall be a material breach of this
lease*.
If Tenant fails to comply with any provision of this lease, including
without limitation the payment of rent and other amounts due Landlord after ten
(10) days' written notice to Tenant, Landlord may immediately and without
further notice resort to said Letter of Credit and use or apply all or any part
of same to compensate Landlord for any loss and expense occasioned thereby and
for the payment of any amount due Landlord under the terms of this lease, or if
Tenant's default consists of the failure to renew said Letter of Credit, then to
deposit the full amount thereof (less any amount required otherwise to
compensate Landlord for its loss and expense) as a cash security deposit to be
held by Landlord as if Tenant had deposited the same as provided below.
If any portion of said Letter of Credit is used as specified above,
Tenant shall, within ten (10) days after written demand therefor, restore the
Letter of Credit to its original amount, except that if Tenant is reasonably and
in good faith contesting in a court of law
*, excepting only that Tenant's failure to so renew the Letter of Credit shall
constitute a breach thereof only if it fails to so renew the Letter of Credit
after not less than ten (10) days written notice thereof from Landlord.
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<PAGE>
Landlord's resort to the Letter of Credit, then Tenant shall not be obligated to
restore the Letter of Credit while such action is pending. Tenant's failure to
restore the Letter of Credit as required herein shall be a material breach of
this lease.
Landlord's resort to said Letter of Credit shall in no way or manner
constitute an acceptance of or waiver of such failure by Tenant to comply with
this lease; nor shall resort to said Letter of Credit terminate, or permit
Tenant to terminate, or constitute a forfeiture of or be construed as an
election by Landlord to terminate, this lease; nor shall such resort affect
Landlord's remedies otherwise available under this lease or at law.
Tenant may at any time during the term, deposit with Landlord a cash
deposit of nineteen thousand two hundred seventy-two and 72/100 ($19,272.72) as
a security deposit in lieu of the aforementioned Letter of Credit, in which
event said Letter of Credit shall be promptly returned to Tenant. If Tenant
thereafter defaults with respect to any provision of this Lease including but
not limited to the provisions relating to the payment of rent and other amounts
due Landlord, Landlord may (but shall not be required to) use, apply or retain
all or any part of such security deposit for the payment of any amount which
Landlord may spend by reason of Tenant's default or to compensate Landlord for
any other loss or damage which Landlord may suffer by reason of Tenant's
default. If any portion of said deposit is so used, Tenant shall within ten (10)
days after written demand therefor, deposit in cash with Landlord in the amount
sufficient to restore the security deposit to its original amount; Tenant's
failure to do so shall be a material breach of this Lease. Landlord shall not be
required to keep this security deposit separate from its general funds and
Tenant shall not be entitled to interest on such deposit. At the termination of
this Lease, the security deposit or the unused balance thereof shall be returned
to Tenant after Tenant vacates the Premises.
5. ADJUSTMENT OF MONTHLY RENT
The monthly rent provided for in paragraph 4(a) shall not be adjusted.
If this lease commences on any date other than the first day of a month, then
Landlord shall promptly prepare a statement within a reasonable time following
lease commencement which prorates the initial rent due as set forth in paragraph
4 (a) and states the actual adjustment and termination dates of the lease.
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<PAGE>
6. RESTRICTION ON USE
Tenant shall not do or permit to be done in or about the Premises or
the Project, nor bring or keep or permit to be brought or (?) in or about the
Premises or Project, anything which is prohibited by or will in any way increase
the existing rate of (or otherwise affect) (?) or any other insurance covering
the Project or any part thereof or any of its contents therein (unless in any
such case, Tenant agrees in advance to pay any such increase), or will cause a
cancellation of any insurance covering the Project or any part thereof, or any
of its contents. Tenant shall not do or permit to be done anything in or about
the Premises or Project which will constitute waste or which will unreasonably
obstruct or interfere with the rights of other tenants or occupants of the
Project or injure or unreasonably annoy them, or use or allow the Premises to be
used for any unlawful purpose, nor shall Tenant cause, maintain or permit any
nuisance in or about the Premises or the Project. No loudspeaker or other
device, system or apparatus which can be heard outside the Premises shall be
used in or at the Premises without the prior written consent of Landlord. Tenant
shall not use the Premises for sleeping, washing clothes, cooking (except in the
lunch room) or the preparation, manufacture or mixing of anything that might
emit any unreasonable and objectionable odor, noises or lights into the
adjoining premises or common areas, or Project. Tenant shall not do anything on
the Premises that will cause damage to the Project or the building in which the
Premises are located and the Premises shall not be overloaded. No machinery,
apparatus or other appliance shall be used or operated in or on the Premises
that will so injure, vibrate or shake the Premises so as to damage the building.
Landlord shall be the reasonable judge of whether such odors, noises, lights or
vibrations are such as to violate the provisions of this paragraph. No waste
materials or refuse shall be dumped upon or permitted to remain upon any part of
the Premises or outside of the building proper except in trash containers placed
inside exterior enclosures designated for that purpose by Landlord, or inside of
the building proper where designated; and no toxic or hazardous materials shall
be disposed of through the plumbing or sewage system. No materials, supplies,
equipment,
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<PAGE>
finished products or semifinished products, raw materials or articles of any
nature shall be stored or permitted to remain outside of the building proper.
Only occasional retail sales shall be made on the Premises.
7. COMPLIANCE WITH LAWS
Tenant shall, in connection with its use and occupation of the
Premises, at its sole cost and expense, promptly observe and (?) with (i) all
laws, statutes, ordinances and governmental rules, regulations or requirements
now or hereafter in effect, (ii) with the requirements of any board of fire
underwriters or other similar body now or hereafter constituted and (iii) with
any direction or occupancy certificate issued pursuant to law by any public
authority; provided, however, that no such failure shall be deemed a breach of
these provisions if Tenant, immediately upon notification, commences to remedy
or rectify said failure. (See also paragraph 50).
The judgment of any court of competent jurisdiction or the admission
of Tenant in any action against Tenant, whether Landlord (?) a party thereto or
not, that Tenant has violated any such law, statute, ordinance or governmental
rule, regulation, requirement, direction or provision, shall be conclusive of
that fact as between Landlord and Tenant.
Notwithstanding the above and except as otherwise specifically
provided in Exhibit C, Landlord shall, at its sole cost and expense, make any
additions or changes to the Premises as may be required to bring the Premises
into compliance with laws, statutes, ordinances and governmental rules,
regulations or requirements in effect at the commencement date of this lease.
8. ALTERATIONS
Tenant shall not make or suffer to be made any alteration, addition or
improvement to or of the Premises or any part thereof (collectively referred to
herein as "alterations") without (1) the prior written consent of Landlord,
which consent shall not be unreasonably withheld and shall not be delayed by
more than two (2) weeks (and if Landlord has not responded within two weeks then
Landlord shall be deemed to have consented thereto), and (ii) a valid building
permit issued by the appropriate governmental authority; provided, however, that
if such permit is not required, then it shall be sufficient that the alteration,
addition (?) improvement be in compliance with applicable governmental
regulations. Notwithstanding the foregoing, Tenant may make alterations costing
five thousand and no/100 ($5,000) or less without the prior written consent of
Landlord but shall, in such event, promptly inform Landlord of the nature of the
alteration, the cost thereof and the contractor engaged or prepared to be
engaged to perform such work, and all such work shall be done pursuant to a
valid building permit (or, if no such permit is required then in accordance with
applicable governmental regulations).
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<PAGE>
Any alteration made by Tenant (excluding moveable furniture and trade
fixtures not attached to the Premises) shall at once become a part of the
Premises and belong to Landlord. Without limiting the foregoing, all heating,
lighting, electrical (including all wiring, conduit, outlets, drops, buss ducts,
main and subpanels), air conditioning, partitioning, drapery and carpet
installations made by Tenant regardless of how attached to the Premises,
together with all other alterations that have become an integral part of the
building in which the Premises are a part, shall be and become part of the
Premises and belong to Landlord upon installation and shall not be deemed trade
fixtures, (except as specifically permitted by this paragraph 8) shall remain
upon and be surrendered with the Premises at the termination of the lease.
At any time during the lease term, Tenant may, at its sole cost and
expense and on not less than thirty (30) days' prior notice to Landlord, remove
and keep any alteration originally made by Tenant at its cost and expense,
provided that Tenant shall repair any damage to the Premises caused by such
removal and restore the affected area to the condition existing prior to such
alteration; provided that notwithstanding the foregoing, Tenant may not remove
such alteration, to the extent they constitute Standard Tenant Improvements,
within the last twelve (12) months of the lease term. Upon the expiration or
sooner termination of the term, Landlord may, at its sole option, require
Tenant, at Tenant's sole cost and expense, to promptly both remove any
alteration made by Tenant during the term and Tenant shall repair any damage to
the Premises caused by such removal. Nothing herein shall restrict Tenant's
right to remove its moveable furniture or trade fixtures, providing that any
movable furniture and equipment or trade fixtures remaining on the Premises at
the expiration or other termination of the term shall become the property of
Landlord unless promptly removed by Tenant.
Any alteration (including the removal of past alterations) by Tenant
shall be made by Tenant at its sole risk, cost and expense. Alterations
requiring Landlord's consent (and the removal of past alterations where such
work costs in excess of $5,000) shall be made only after Landlord's written
approval of any contractor or person selected by Tenant for that purpose, which
approval shall not unreasonably be withheld.
If during the term any alteration, addition or change (?) the Premises
is required by law, regulation, ordinance or order of any public authority,
Tenant, at its sole cost and expense, shall promptly make the same. If during
the term any alteration or change to the Common Area (or to the Project or
building in which the Premises is located and it being, in Landlord's judgment,
impractical for the affected tenants to individually make such alterations,
additions or changes) is required by law, regulation, ordinance or order of any
public or quasi-public authority the cost of such alteration or change shall be
a Common Area Change and Tenant shall pay its percentage share of said costs to
Landlord as provided in paragraph 16. (See also paragraph 50).
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<PAGE>
9. REPAIR AND MAINTENANCE
By entry hereunder Tenant accepts the Premises as being in good and
sanitary order, condition and repair (excepting only "punchlist items" provided
however that such acceptance shall not be deemed a waiver with respect to
structural defects, non-compliance with applicable laws or other items not
reasonably ascertainable on walk through inspection). Except as expressly
provided below, Tenant shall at its cost keep and maintain the entire Premises
and every part thereof including, without limitations, the windows, window
frames, plate glass, glazing, truck doors, doors and all door hardware, the
interior walls and partitions, lighting and the electrical and plumbing systems.
Tenant shall also repair and maintain the heating and air conditioning systems
(unless Landlord has elected to keep and maintain the heating and air
conditioning systems as provided below) which shall include, without limitation,
a periodic maintenance agreement with a reputable and licensed heating and air
conditioning service company. If Tenant's use of the heating and air
conditioning systems is limited to normal business hours (8 a.m. to 6 p.m.),
such agreement shall provide for service at least as often as every 60 days; if
Tenant's use of the heating or air conditioning systems extends beyond such
normal business hours, this service shall be as often as may be required by
Landlord; and in any event such service shall meet all warranty enforcement
requirements of such equipment and comply with all manufacturer recommended
maintenance. Landlord may elect, at its option, to keep and maintain the heating
and air conditioning systems of the Premises and in such event, Tenant shall pay
to Landlord upon demand the full cost of such maintenance and of repairs to such
systems. In no case shall Tenant be obligated for repairs and maintenance for
(i) structural elements of the building (ii) defects in construction work of
Landlord, (iii) repairs or maintenance arising from defaults of Landlord under
this Lease, (iv) items which Landlord is obligated to restore pursuant to
paragraph 17.
Subject to the provisions of paragraph 17, Landlord shall keep and
maintain at its cost and expense the roof, structural elements, exterior walls
of the buildings constituting the Project and Common Area in good order and
repair. Landlord agrees to repair or correct, at its cost and expense, all
defects in design, materials and workmanship in the Premises and Project which
materially affect Tenant's use or occupancy thereof, provided such obligation of
Landlord shall not extend to design criteria and/or specifications for computer
rooms or other special improvement areas specifically provided by Tenant. If any
repairs or maintenance is required because of an act or omission of Tenant, or
its agents, employees or invitees, Tenant shall pay to Landlord upon demand the
full costs of such repairs of maintenance.
10. LIENS
Tenant shall keep the Premises and the Project free from any liens
arising out of any work performed, materials furnished or obligations incurred
by Tenant. In the event that Tenant shall not, within ten (10) days following
notice of the imposition of such lien, cause the same to be released of record,
Landlord shall have, in addition
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<PAGE>
to all other remedies provided herein and by law, the right, but no obligation,
to cause the same to be released by such means as it shall deem proper,
including payment of the claim giving rise to such lien, sums paid by Landlord
for such purpose, and all expenses incurred by (?) connection therewith, shall
be payable to Landlord by Tenant on demand with interest at the rate of eighteen
percent (18%) per annum or the maximum rate permitted by law, whichever is less.
Landlord shall have right at all times to post and keep posted on the Premises
any notices permitted or required by law, or which Landlord shall deem proper
for the protection of Landlord, the Premises and the Project and any other
parties having an interest therein, from mechanics' and materialmen's liens and
like liens. Tenant shall give Landlord at least fifteen (15) days' prior notice
of the date of commencement of any construction on the Premises in order to
permit the posting of such notices.
Notwithstanding anything to the contrary contained in this paragraph
10, Tenant shall have the right to contest the correctness or validity of any
lien referenced in this paragraph 10 if, promptly after written demand by
Landlord, Tenant procures and records a lien release (?) bond issued by a
corporation authorized to issue surety bonds in California, or delivers to
Landlord a Letter of Credit or other suitable security in form reasonably
satisfactory to Landlord, in an amount equal to the amount of the claim of lien.
11. INSURANCE
Tenant, at its sole cost and expense, shall keep in force during the
term (i) public liability insurance with limits of at least $2,000,000 per
occurrence for injuries to or death of persons occurring in, on or about the
Premises or the Project and property damage insurance with limits of at least
$2,000,000 per occurrence and (ii) Worker's Compensation insurance as required
by the State of California. All such policies shall be primary and shall provide
that said insurance shall not be cancelled or reduced except upon at least
thirty (30) days' prior written notice to Landlord. Further, Tenant's public
liability insurance shall name Landlord or Additional Insured using ISO Bureau
For G109 or G112001 (or a successor form); shall contain cross-liability
endorsements; and shall be issued by an insurance company admitted to transact
business in the State of California. Landlord agrees to pay on demand up to
$25.00 for the Additional Insured Endorsement.
Tenant shall, prior to the commencement of the term, provide Landlord
with a completed Certificate of Insurance using Acord Form 25, a blank copy of
which is attached to this lease. Tenant agrees to increase the coverages or
otherwise comply with changes in connection with said public liability, property
damage and Worker's Compensation Insurance as Landlord or Landlord's lender may
from time to time require.
Landlord shall obtain and keep in force a policy or policies of
insurance covering loss or damage to the Premises, in the amount of the full
replacement value thereof, providing protection against those perils included
within the classification of "all risk" insurance, with increased cost of
reconstruction and contingent liability (including
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demolition) and flood and/or earthquake insurance if available, plus a policy of
rental income insurance in the amount of 100% of twelve (12) months' rent
(including sums paid as additional rent) and such other insurance as Landlord or
Landlord's lender may from time to time require. The cost of all such insurance
purchased by Landlord, plus any charges deferred payment of premiums and any
deductible paid by Landlord, shall (?) Common Area Charges and Tenant shall pay
its percentage share of such costs as provided in paragraph 16 (provided that if
the loss is not due to an act or omission of Tenant or its agents, employees or
invitees, any such deductible paid by Landlord shall be amortized and included
in Common Area Charges at the rate of 1/120th thereof per month through the
remaining term of this lease, and in such event there shall also be included
Common Area Charges interest at the rate of twelve (12%) on the balance of such
deductible remaining from time to time). If insurance costs are increased due to
Tenant's use of the Premises, then Tenant shall pay to Landlord upon demand the
full cost of such increase not less than ten (10) days before Landlord is
obligated to pay such increased premium (but not less than ten (10) days after
Landlord delivers to Tenant a statement from landlord's insurance carrier
stating the amount of the increase and the reason therefor). Notwithstanding the
foregoing, Tenant shall be obligated to pay any portion of premiums for
earthquake insurance if Landlord sells the Project or Premises unless earthquake
insurance is the (?) customary for buildings in the same general location in the
County of Santa Clara and of substantially similar type, construction and use,
or such insurance is required by purchaser's lender. If insurance costs are
increased due to Tenant's use of the Premises, then Tenant shall pay to Landlord
upon demand the full cost of such increase. Tenant shall be named as an
additional insured in Landlord's insurance policy.
Landlord and Tenant hereby mutually waive any and all rights of
recovery against one another for real or personal property loss or damage
occurring to the Premises, the Project, or any part thereof, or any personal
property therein, from perils insured against under fire and extended insurance
and any other property insurance policies existing for the benefit of the
respective parties and each party shall cause each such insurance policy
obtained by it to provide that the insurance company waives all rights of
recovery by way of subrogation against either party in connection with any loss
or damage covered by such policy. If additional premiums must be paid, Tenant
shall pay such additional premiums necessary to obtain such waver. A copy of the
Waiver of Subrogation in favor of Landlord shall be attached to the Tenant's
completed Acord Form 25. Tenant shall be named as an additional insured on
Landlord's policy and Tenant's rights are subject to a mortgage loss payee
clause that Landlord's lender may require.
Notwithstanding anything hereinabove contained, Tenant shall be
responsible for carrying, and shall pay the cost of, any casual insurance as
Tenant deems appropriate with respect to any Tenant's personal property and
fixtures and any tenant improvements not the property of Landlord.
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12. UTILITIES AND SERVICES
Tenant shall pay for all water, gas, light, heat, (?), electricity,
telephone, trash pickup, sewer charges and all other services supplied to or
consumed on the Premises. In the event that any service is not separately
metered to the Premises, the cost of such utility services shall be a Common
Area Charge and Tenant shall pay its percentage share of such cost to Landlord
as provided in paragraph 16. In addition, the cost of any utility service
supplied to the Common Area shall be a Common Area Charge and Tenant shall pay
its percentage share of such cost to Landlord as provided in paragraph 16.
If Tenant's use of any such utility service is materially in excess of
the average furnished to the other tenants of the Project and such utility
service is not separately metered, then Tenant shall pay to Landlord upon demand
the full cost of such excess, or Landlord may cause such utility service to be
separately metered, in which case Tenant shall pay the full cost of installing
the separate meter.
Landlord shall not be liable for, and Tenant shall not be entitled to,
any abatement or reduction of rent by reason of the failure by any person or
entity to furnish any of the foregoing utility services when such failure is
caused by any cause beyond the reasonable control of Landlord.
13. TAXES AND OTHER CHARGES
All real estate taxes and assessments and other taxes, fees and
charges of every kind or nature levied or assessed against the Project or any
part thereof during the term by any federal, state, county, regional, municipal
or other governmental or quasi-public authority shall be a Common Area Charge
and payable by Tenant as set forth in paragraph 16. To the extent that any taxes
set forth in this paragraph 13 for which Tenant is responsible decrease,
Tenant's proportionate share of such taxes shall be reduced accordingly by means
of reducing Tenant's share of the Common Area charge. By way of illustration and
not limitation, "other taxes, fees and charges" as used herein include any and
all taxes payable by Landlord (other than state and federal personal or
corporate income taxes measured by the net income of Landlord from all sources,
premium taxes or Landlord's franchise, estate, inheritance, successions, or gift
taxes), whether or not now customary or within the contemplation of the parties
hereto, (i) upon, allocable to, or measured by the rent payable hereunder,
including, without limitation, any gross income or excise tax levied by the
local, state or federal government with respect to the receipt of such rent,
(ii) upon or with respect to the possession, leasing, operating, management,
maintenance, alteration, repair, use of occupancy by Tenant of the Premises or
any part thereof, (iii) upon or measured by the value of Tenant's personal
property or leasehold improvements located in the Premises, (iv) upon this
transaction or any document to which Tenant is a party creating or transferring
an interest or estate in the Premises, (v) upon or with respect to parking or
the number of persons employed in or about the Project, and (vi) any tax,
license, franchise free or other imposition upon Landlord which is otherwise
measured by or based in whole or in part upon the Project or any
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portion thereof. If Landlord contests any such tax, fee or charge, the cost and
expense incurred by Landlord thereby shall also be a Common Area Charge and
payable by Tenant as set forth in paragraph 16. In the event the Premises and
any improvements installed therein by Tenant or Landlord are valued by the
assessor disproportionately higher or lower than those (?) of other tenants in
the building or Project or in the event alterations (?) improvements are made to
the Premises, Tenant's percentage share of such taxes, assessments, fees and/or
charges shall be readjusted upward or downward accordingly and Tenant agrees to
pay such readjusted share. Such determination shall be made by Landlord from the
respective valuations assigned in the assessor's work sheet or such other
information was may (?) reasonably available and Landlord's determination
thereof shall be conclusive.
Tenant at its cost shall have the right at any time to seek a
reduction in the assessed valuation of the Premises or the Project or to contest
any real property taxes, assessments, fees or other taxes and charges that are
to be paid by Tenant; provided, however, that any such contest or proceeding
shall be at Tenant's sole cost and expense and provided further that Tenant
shall hold Landlord and the Premises and the Project harmless therefrom.
Landlord shall not be required to join in any proceeding or contest brought by
Tenant unless the provisions of any law require that the proceeding or contest
be brought by or in the name of Landlord or any owner of the Premises. In that
case Landlord shall cooperate and join in the proceeding or contest or permit it
to be brought in Landlord's name as long as Landlord is not required to bear any
cost. If Tenant seeks to reduce or contest any such tax, assessment, fee or
other charge and if requested by Tenant, Landlord agrees to pay such tax
assessment, fee or charge under protest and to otherwise deal with the
appropriate authority in a manner consistent with Tenant's contest or proceeding
and the applicable rules, regulations or procedures of such authority. In the
event Tenant obtains any refund attributable to the Premises, such refund shall
belong to Tenant.
Tenant agrees to pay, before delinquency, any and all taxes levied or
assessed during the term hereof upon Tenant's equipment, furniture, fixtures and
other personal property located in the Premises, including carpeting and other
property installed by Tenant notwithstanding that such carpeting or other
property has become a part of the Premises. All taxes or other charges due under
this paragraph 13 shall be prorated to reflect the portion of any such tax or
charge attributable to the period between the commencement and termination dates
of the lease.
14. ENTRY BY LANDLORD
Landlord reserves, and shall at all reasonable times have, the right
to enter the Premises, (i) to inspect the Premises, (ii) to supply services to
be provided by Landlord hereunder, (iii) to show the Premises to prospective
purchasers or lenders and put 'for sale' signs thereon, (iv) during the last six
months of the term, or during any period when Tenant is in default, to show the
Premises to prospective tenants and to put 'for lease' signs thereon, (v) to
post notices required or allowed by this lease or by law, (vi) to alter, improve
or repair the Premises and
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any portion of the Project, and (vii) to erect scaffolding and other necessary
structures in or through the Premises or the Project where reasonably required
by the character of the work to be performed. Except to the extent Landlord is
negligent, or engages in willful misconduct, the exercise of its right of entry
hereunder, Landlord shall not be liable in any manner for any inconvenience,
disturbance, loss of business, nuisance or other damage arising from Landlord's
entry and acts pursuant to this (?) paragraph and Tenant shall not be entitled
to an abatement or reduction in rent if Landlord exercises any rights reserved
in this paragraph. For (?) each of the foregoing purposes, Landlord shall have
the right to use any and all means which Landlord may deem proper to open said
doors in an emergency in order to obtain entry to the Premises. Any entry by
Landlord to the Premises pursuant to this paragraph shall not under any
circumstances be construed or deemed to be a forcible or unlawful entry into (?)
a detainer of the Premises or an eviction, actual or constructive, of (?) Tenant
from the Premises or any portion thereof. Landlord shall also have the right at
any time to change the name (provided that such name is not the name of one of
Tenant's major competitors) or designation by which (?) Project is commonly
known.
Notwithstanding anything to the contrary contained in this paragraph
14, Landlord may not enter the Premises, except in the case of an emergency,
unless (i) Landlord has given Tenant at least twenty-four (24) hours' prior
notice of its intent to enter and (ii) such inspection is subject to the
reasonable security requirements of Tenant, and (iii) such entry by Landlord
shall not materially and unreasonably interfere with Tenant's use of the
Premises. Landlord shall not materially block or obstruct Tenant's front
entrance, nor erect scaffolding within the Premises unless reasonably required
in order for Landlord to fulfill its obligations under this lease.
15. COMMON AREA
Subject to the terms and conditions of this lease and such rules and
regulations as Landlord may from time to time prescribe, Tenant and Tenant's
employees, invitees and customers shall, in common with other occupants of the
Project in which the Premises are located, (?) and their respective employees,
invitees and customers and others entitled to the use thereof, have the
nonexclusive right to use the access roads, parking areas and facilities
provided and designated by Landlord for the general use and convenience of the
occupants of the Project, which areas and facilities are referred to herein as
"Common Area". This right shall terminate upon the termination of this lease.
Landlord reserves the right from time to time to make changes in the
shape, size, location, amount and extent of the Common Area provided that such
changes do not unreasonably interfere with the conduct of Tenant's business.
Landlord further reserves the right to promulgate such rules and regulations
relating to the use of the Common Area, and any part thereof, as Landlord may
deem appropriate for the best interests of the occupants of the Project. The
rules and regulations shall be binding upon Tenant upon delivery of a copy of
them to Tenant and Tenant shall abide by them and cooperate in their observance.
Such rules and regu-
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<PAGE>
lations may be amended by Landlord from time to time, with or without advance
notice, but shall not unreasonably and materially diminish Tenant's use of the
Premises or the Common Area.
Tenant shall be assigned the use of no less than one hundred seventeen
(117) parking spaces in the Common Area as designated from time to time by
Landlord. Landlord agrees to label at its expense (?) to ten (10) visitors
stalls; and Landlord, at the request and expense of Tenant agrees to label the
remaining (107) parking spaces. It is agreed that Landlord is not responsible
for policing any of such parking spaces. Tenant shall not at any time park or
permit the parking of Tenant's trucks or other vehicles, or the trucks or other
vehicles of others, adjacent to loading areas so as to interfere in any way with
the use of such areas; nor shall Tenant at any time park or permit the parking
of Tenant's vehicles or trucks, or the vehicles or trucks of Tenant's suppliers
or others, in any portion of the Common Area not designated by Landlord for such
use by Tenant. Tenant shall not park or permit any inoperative vehicle or
equipment to be parked on any portion of the Common Area.
Landlord shall operate, manage and maintain the Common Area. The
manner in which the Common Area shall be operated, managed and maintained and
the expenditures for such operation, management and maintenance shall be at the
sole, but reasonable, discretion of Landlord. The cost of such maintenance,
operation and management, including but not limited to landscaping, repair of
paving, parking lots and sidewalks, security services and salaries and employee
benefits (including union benefits) of on-site and accounting personnel engaged
in such maintenance and operations management (but excluding payments on loans
or ground leases, brokerage commission and costs directly related to leasing the
Project, damages caused by other tenants or their employees or agents, the cost
of repair or correction of construction defects, and management fees in excess
of the five percent (5%) referred to in paragraph 16 below) shall be a Common
Area Charge and Tenant shall pay to Landlord its percentage share of such costs
as provided in paragraph 16.
16. COMMON AREA CHARGES
Tenant shall pay to Landlord, as additional rent, an amount equal to
28.7% (29,424 [divided by] 102,528 square feet) of the total Common Area Charges
as defined in this lease. Tenant further agrees that Common Area Charges shall
include an additional 5% of the actual expenditures for the aggregate of all
other Common Area Charges in order to compensate Landlord for accounting and
processing services. Tenant's percentage share of Common Area Charges shall be
paid as follows:
At or prior to the commencement of the term and to the commencement of
each calendar year of the term, Landlord shall deliver to Tenant a written
estimate of total Common Area Charges during the balance of the calendar year in
which the term commences and each succeeding calendar year, respectively. Tenant
shall pay, as additional rent, on the first day of each month during the
calendar year (or portion thereof) covered by such estimate, its percentage
months share of Common Area Charges as shown on such estimate. Within thirty
(30) days of the end of
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each calendar year and of the end of the term, Landlord shall deliver to Tenant
a statement of actual Common Area Charges incurred for the preceding year, or,
in the case of a statement after the end of the term, covering the year in which
the lease terminates. If such statement shows that Tenant has paid less than its
actual percentage then Tenant shall on demand pay to Landlord the amount of such
deficiency. If such statement shows that Tenant has paid more than its
percentage share then Landlord shall, at its option, promptly refund such excess
to Tenant or credit the amount thereof to the rent next becoming due from
Tenant. Landlord reserves the right to revise any estimate of Common Area
Charges if actual or projected Common Area Charges show an increase or decrease
in excess of 10% from any earlier estimate for the same period. In such event,
Landlord shall deliver the revised estimate to Tenant, together with an
explanation of the reasons therefor, and Tenant shall revise its payments
accordingly. Landlord's and Tenant's obligations with respect to adjustments at
the end of the term of this lease shall survive such termination.
Landlord shall allow Tenant reasonable access to Landlord's books and
records respecting Common Area Charges. Tenant shall be entitled to cause a
certified public accountant to perform an audit of the statement of actual
Common Area Charges for the preceding year, and in the event such audit shall
establish that the amount shown on such statement overstates by more than two
percent (2%) the amount Tenant is liable for then Landlord shall promptly
reimburse to Tenant any sums overpaid by Tenant, together with interest on the
overpaid amounts at the rate of ten percent (10%) per annum and the cost of such
audit. In the event such audit shall not establish such overstatement, Tenant
shall pay the entire cost of such audit.
17. DAMAGE BY FIRE; CASUALTY
In the event the Premises are damaged by any casualty which is covered
under an insurance policy required to be maintained pursuant to paragraph 11, or
in the event the Premises are damaged by any casualty not covered under an
insurance policy required to be maintained pursuant to paragraph 11 and the cost
of restoration is less than fifty thousand dollars ($50,000.00), Landlord shall
be entitled to the use of all insurance proceeds and shall repair such damage
and restore the Premises to substantially the condition existing prior to such
damage, and this lease shall continue in full force and effect provided however
in the event the Premises cannot be reasonably and lawfully restored within nine
(9) months of the date of such damage, either party may terminate this Lease
effective upon written notice of termination given to the other party within
thirty (30) days of the date of such damage. Tenant shall on demand pay to
Landlord the amount equal to the deductible under any such insurance, except as
provided in paragraph 11.
In the event the Premises are damaged by any casualty not covered
under an insurance policy required to be maintained pursuant to paragraph 11 and
the cost of restoration is fifty thousand dollars ($50,000.00) or more, Landlord
may, at Landlord's option, either (i) repair such damage, at Landlord's expense,
as soon as reasonably possible in which event this lease shall continue in full
force and effect, or (ii)
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<PAGE>
give written notice to Tenant within thirty (30) days after the date of the
occurrence of such damages of Landlord's intention to cancel and terminate this
lease as of the date of the occurrence of the damages; provided, however, that
if such damage is caused by an act or omission to act of Tenant or its agent,
servants or employees, then Tenant shall repair such damage promptly at its sole
cost and expense. In the event Landlord elects to terminate this lease pursuant
hereto, Tenant shall have the right within ten (10) days after receipt of the
required notice to notify Landlord in writing of Tenant's intention to repair
such damage at Tenant's expense, without reimbursement from Landlord, in which
event the lease shall continue to full force and effect and Tenant shall proceed
to make such repairs as soon as reasonably possible. If Tenant does not give
such notice within the ten (10) day period, this lease shall be cancelled and
terminated as of the date of the occurrence of such damage. Under no
circumstances shall Landlord be required to repair any injury or damage by fire
or other cause, or to make any restoration or replacement of, any of Tenant's
personal property, trade fixtures or property leased from third parties, whether
or not the same is attached to the Premises.
If the Premises are totally destroyed during the term from any cause
(including any destruction required by any authorized public authority), whether
or not covered by the insurance required under paragraph 11, this lease shall
automatically terminate as of the date of such total destruction; provided,
however, that if the Premises can reasonably and lawfully be repaired or
restored within nine (9) months of the date of destruction to substantially the
condition existing prior to such destruction and if the proceeds of the
insurance payable to the Landlord by reason of such destruction is sufficient to
pay the cost of such repair or restoration, then the said insurance proceeds
shall be so applied, Landlord shall promptly repair and restore the Premises and
this lease shall continue, without interruption, in full force and effect. If
the Premises are totally destroyed during the last twelve (12) months of the
term, Landlord may at Landlord's option cancel and terminate this lease as of
the date of occurrence of such damage by giving written notice to Tenant of
Landlord's election to do so within thirty (30) days after the occurrence of
such damage.
If the Premises are partially or totally destroyed or damaged and
Landlord or Tenant repair them pursuant to this lease, the rent payable
hereunder for the period during which such damage and repair continues shall be
abated in proportion to the square footage rendered unusable to Tenant or
Tenant's business operations by reason of such damage or destruction.
18. INDEMNIFICATION
Landlord shall not be liable to Tenant and Tenant hereby waives all
claims against Landlord for any injury to or death of any person or damage to or
destruction of property in or about the Premises or the Project by or from any
cause whatsoever except the negligence or wilful misconduct of Landlord or its
authorized representatives. Except as to injury to persons or damage to property
the principal cause of which is the negligence or wilful misconduct of Landlord
or its authorized representatives, Tenant shall hold Landlord harmless from and
defend Landlord
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against any liability, loss, damage or expense, including attorney fees arising
out of any injury to or death of any person or damage to or destruction of
property occurring in, on or about the Premises from any cause whatsoever.
Tenant shall hold Landlord harmless from and defend Landlord against any
liability, loss, damage, or expense, including attorney fees, arising (i) out of
the failure of Tenant to observe or comply with laws or other requirements as
set forth in paragraph 7, or (ii) by reason of any labor or service performed
for, or materials used or furnished to, Tenant or any contractor engaged by
Tenant with respect to the Premises. The provision of this paragraph shall
survive the expiration of earlier termination of this lease. In no event shall
Tenant's obligations to hold Landlord harmless and indemnify Landlord include
(i) liability, loss, damage or expense arising from defects in Landlord's
construction work or from defaults by Landlord under this Lease and, (ii)
liability, loss, damage or expense arising from the acts or omissions of other
tenants in the property.
19. ASSIGNMENT AND SUBLETTING
Tenant shall not voluntarily assign, encumber or otherwise transfer
its interest in this lease or in the Premises, or sublease all or any part of
the Premises, or allow any other person or entity to occupy or use all or any
part of the Premises, without first obtaining Landlord's written consent, which
consent shall not be unreasonably withheld. Any assignment, encumbrance or
sublease without Landlord's election, shall constitute a default.
If Tenant desires to sublet or assign all or any portion of the
Premises, Tenant shall give Landlord written notice thereof, specifying the
projected commencement date of the proposed sublet or assignment (which date
shall be not less than fifteen (15) days or more than one hundred twenty (120)
days after the date of such notice), the portions of the Premises proposed to be
sublet or assigned and the identity of the proposed assignee or subtenant.
Tenant shall further provide Landlord with such other information concerning the
proposed assignee or subtenant as reasonably requested by Landlord. Except as
set forth below, Landlord shall inform Tenant of Landlord's consent, or lack of
consent, to the proposed sublet or assignment within ten (10) days from the date
of receipt by Landlord of the notice from Tenant and Landlord's failure to
respond within such time shall be deemed to be a consent to such sublet or
assignment, provided that if Landlord has not received such other information
concerning the proposed assignee or subtenant then such period shall be extended
to three (3) days after the receipt of such information. In the case of any
proposed assignment, or in the case of a proposed sublet of all of the Premises
at a time when Tenant has not occupied the Premises or if the proposed sublet is
for the entire Premises fora sublet term ending within the last twelve (12)
months of the term of this lease, Landlord shall have the right, exercisable by
written notice to be delivered to Tenant within thirty (30) days of receipt of
Tenant's notice to terminate this lease effective as of the date specified in
Tenant's notice as the proposed commencement date of the assignment or sublease.
If Landlord does not elect to terminate this lease and if Landlord consents in
writing to the proposed assignment of sublet, Tenant shall be
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free to assign or sublet all or a portion of the Premises subject to the
following conditions: (i) any sublease shall be on the same terms set forth in
the notice given to Landlord; (ii) no sublease shall be valid (?) no subtenant
shall take possession of the sublet premises until an executed counterpart of
such sublease has been delivered to Landlord; (iii) no subtenant shall have a
further right to sublet without Landlord's consent, which consent shall not be
unreasonably withheld; (iv) except as to a sublet for a portion of the Premises
during the first eighteen (18) months of the term, one-half of any sums or other
economic consideration received by Tenant as a result of such assignment or
sublet (except rent or other payments received which are attributable to the
amortization over the term of this lease of the cost of leasehold improvements
constructed for such assignees or subtenant, and brokerage fees) whether
denominated rentals or otherwise, which exceed, in the aggregate, the total sums
which Tenant is obligated to pay Landlord under this lease (prorated to reflect
obligations allocable to that portion of the Premises subject to such sublease),
shall be payable to Landlord as additional rent under this lease without
affecting or reducing any other obligation of Tenant hereunder; and (v) no
sublet or assignment shall release Tenant of Tenant's obligation or alter the
primary liability of Tenant to pay the rent and to perform all other obligations
to be performed by Tenant hereunder.
The acceptance of rent by Landlord from any other person shall not be
deemed to be a waiver by Landlord of any provision hereof. Consent to one
assignment or sublet shall not be deemed consent to any subsequent assignment or
sublet. In the event of default by any assignee of Tenant or any successor of
Tenant in the performance of any of the terms hereof, Landlord may proceed
directly against Tenant without the necessity of exhausting remedies against
such assignee or successor provided that Landlord gives Tenant notice of such
default and five (5) days to cure same. Landlord may consent to subsequent
assignments or sublets or this lease or amendments or modifications to this
lease with assignees of Tenant, without notifying Tenant, or any successor of
Tenant and without obtaining its or their consent thereto and such action shall
not relieve Tenant of liability under this lease.
Notwithstanding the above provisions of this paragraph 19, Tenant may,
without obtaining the consent of Landlord and without Landlord having the right
to terminate this lease as set forth above, assign or sublease the whole or any
part of the Premises to any corporation or other entity which acquires or is
acquired by Circadian or which results from a merger or consolidation with
Circadian or which either controls or is controlled by Circadian or which is
controlled by any of the foregoing, provided that (i) Tenant shall continue to
be fully obligated for the timely performance of all the terms, covenants,
agreements and conditions of this lease and (ii) such assignee or subtenant
agrees in writing to be subject to and governed by all of the terms, covenants,
agreements and conditions of this lease and such agreement by assignee or
subtenant is promptly given to Tenant. Tenant shall give Landlord written notice
of any such assignment or sublease as provided above in this paragraph 19, and
any such assignment or subletting shall be subject to the conditions for other
assignments and sublettings set forth above.
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No interest of Tenant in this lease shall be assignable by operation
of law (including, without limitation, the transfer of this lease by testacy or
intestacy). Each of the following acts shall be considered an involuntary
assignment: (i) if Tenant is or becomes bankrupt or insolvent, makes an
assignment for the benefit of creditors or institutes (or has instituted against
it) a proceeding under the Bankruptcy Act in which Tenant is the bankrupt; or if
Tenant is a partnership or consists of more than one person or entity, if any
partner of the partnership or other person or entity is or becomes bankrupt or
insolvent or makes an assignment for the benefit of creditors; (ii) if a writ of
attachment or execution is levied on this lease; or (iii) if, in any proceeding
or action to which Tenant is a party, a receiver is appointed with authority to
take possession of the Premises. An involuntary assignment shall constitute a
default by Tenant and Landlord shall have the right to elect to terminate this
lease, in which case this lease shall (?) be treated as an asset of Tenant.
Notwithstanding the foregoing, if a writ of attachment or execution is levied on
this lease then Tenant shall have seven (7) days in which to remove same, and if
an involuntary proceeding in bankruptcy is brought against Tenant then Tenant
shall have thirty (30) days to have such proceedings dismissed.
Tenant immediately and irrevocably assigns to Landlord as security for
Tenant's obligations under this lease, all rent from any subletting of all or a
part of the Premises as permitted by this lease, and Landlord, as assignee and
as attorney-in-fact for Tenant, or a receiver of Tenant appointed on Landlord's
application, any collect such rent and apply it toward Tenant's obligations
under this lease; except that, until the occurrence of an act of default by
Tenant, Tenant shall have the right to collect such rent, subject to promptly
forwarding to Landlord any portion thereof to which Landlord is entitled
pursuant to this paragraph 19.
20. DEFAULT
The occurrence of any of the following shall constitute a default
by Tenant: (i) failure to pay any rent or other sum payable hereunder within
ten (10) days of written notice from Landlord of failure to make such payment
when due; (ii) abandonment of the Premises; or (iii) failure to perform any
other term, covenant or condition of this lease (?) the failure to perform is
not cured within thirty (30) days after written notice thereof has been given
to Tenant (provided that if such default cannot reasonably be cured within
thirty (30) days, Tenant shall not be (?) default within the thirty (30) days
period and diligently and in good faith continues to cure the default). The
notice referred to in (iii) above shall specify the alleged default and the
applicable lease provisions and shall demand that Tenant perform the
provisions of this lease within the applicable period of time and no such
notice shall be deemed a forfeiture or termination of this lease unless
Landlord so elects in the notice.
In the event of a default by Tenant, then Landlord, in addition to
any other rights and remedies at law or in equity, shall have the right
either to terminate Tenant's right to possession of the Premises
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and thereby terminate this lease or, from time to time and without terminate
on this lease relet the Premises or any part thereof for the account and in
the name of Tenant for such term and on such terms and conditions as Landlord
in its sole discretion may deem advisable, with the right to make alterations
and repairs to the Premises.
Should Landlord elect to keep this lease in full force and effect,
Landlord shall have the right to enforce all of Landlord's rights and remedies
under this lease, including but not limited to the right to recover and to relet
the Premises. If Landlord relets the Premises, then Tenant shall pay to
Landlord, as soon as ascertained, the costs and expenses incurred by Landlord in
such reletting and shall be applied (i) to the payment of any indebtedness due
hereunder, other than monthly rent, from Tenant to Landlord; (ii) to the payment
of the cost of any repairs necessary to return the Premises to good condition
normal wear and tear excepted, including the cost of alterations and the cost of
storing any of Tenant's property left on the Premises at the time of reletting;
and (iii) to the payment of monthly rent due and unpaid hereunder. The residue,
if any, shall be held by Landlord and applied in payment of future rent or
damages in the event of termination as the same may become due and payable
hereunder and the balance, if any at the end of the term of this lease, shall be
paid by Tenant. Should the monthly rent and Common Area Charges received from
time to time from such reletting during any month be less than that agreed to be
paid during that month by Tenant hereunder, Tenant shall pay such deficiency to
Landlord. Such deficiency shall be calculated and paid monthly. No such
reletting of the Premises by Landlord shall be construed as election on its part
to terminate this lease unless a notice of such intention is given to tenant or
unless the termination hereof is decreed by a court of competent jurisdiction.
Notwithstanding any such reletting without termination, Landlord may at any time
thereafter elect to terminate this lease for such previous breach, provided it
has not been cured.
Should Landlord at any time terminate this lease for any breach, in
addition to any other remedy it may have it shall have the immediate right of
entry and may remove all persons and property from the Premises and, in addition
to all its other rights and remedies, shall be entitled to recover from Tenant
all damages it may incur by reason of such breach, including the cost of
recovering the Premises and including (i) all amounts that would have fallen due
as rent between the time of termination of this lease and the time of the
judgment or other award plus interest on the balance at the rate of twelve
percent (12%) per year, but less the avails of relettings and attornments; (ii)
the worth at the time of the judgment or other award of the amount by which the
unpaid rent for the balance of the term exceeds the amount of such rental loss
that Tenant provides could be reasonably avoided; (iii) any other amount
necessary to compensate Landlord for all the detriment proximately caused by
Tenant's failure to perform its obligations under this lease or which in the
ordinary course of things would be likely to result therefrom. "Worth" as used
in this provision is computed by discounting the total at the discount rate of
the Federal Reserve Bank of San Francisco at the time of the judgment or award
plus one percent (1%). Property removed from the Premises may be stored in a
public or private warehouse or elsewhere at
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the sole cost and expense of Tenant. In the event that Tenant shall not
immediately pay the cost of storage of such property after the same has been
stored for a period of thirty (30) days or more, Landlord may sell any or all
there of at a public or private sale in such manner and at such times and places
at Landlord in its sole discretion may deem proper, without notice to or demand
upon Tenant.
Any proof by Tenant under subparagraphs (2) and (3) or section
1951.2(a) of the California Civil Code of the amount of rental loss that could
be reasonably avoided shall be made in the following manner: Landlord and Tenant
shall each select a licensed real estate broker in the business of renting
property at the same type and use as the Premises in the same geographical
vicinity. Such two real estate brokers shall select a third licensed real estate
broker, and the three licensed real estate brokers so selected shall determine
the amount of the rental loss that could be reasonably avoided for the balance
of the terms after the time of award. The decision of the majority of said
licensed real estate brokers shall be final and binding upon the parties hereto.
21. LANDLORD'S RIGHT TO CURE TENANT'S DEFAULT
Landlord, at any time after Tenant commits a default, can cure the
default at Tenant's cost. If Landlord at any time, by reason of Tenant's
default, pays any sum or does any act that requires the payment of any sum, the
sum paid by Landlord shall be due immediately from Tenant to Landlord at the
time the sum is paid, and if paid at a later date shall bear interest at the
rate of eighteen percent (18%) per annum or the maximum rate permitted by law,
whichever is less, from the date the sum is paid by Landlord until Landlord is
reimbursed by Tenant. This sum, together with interest on it, shall be
additional rent.
22. EMINENT DOMAIN
If all or any part of the Premises shall be taken by any public or
quasi-public authority under the power of eminent domain or conveyance in lieu
thereof, this lease shall terminate as to any portion of the Premises so taken
or conveyed on the date when title vests in the condemnor, and Landlord shall be
entitled to any and all payments, income rent or award (or any interest therein)
which may be paid or made in connection with such taking or conveyance. Tenant
shall have no claim against Landlord or otherwise for the value of any unexpired
term of this lease. Notwithstanding the foregoing, Tenant shall be entitled to,
(i) the value of relocation expenses of Tenant necessitated by such taking, and
(ii) any compensation for deprecation to and loss or removal of equipment and
fixtures, but in each case only to the extent the condemning authority makes a
separate award therefor or specifically identifies a portion of the award as
being therefor. Each party waives the provisions of Section 1265.130 of the
Code of Civil Procedure (which section allows either party to petition the
Superior Court to terminate this lease in the event of a partial taking of the
Premises).
If any action or proceeding is commenced for such taking of the
Premises or any portion thereof or of any other space in the Project, or if
Landlord is advised in writing by any entity or body having
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the right of power of condemnation of its intention to condemn the Premises
or any portion thereof or of any other space in the Project, or if Landlord
is advised in writing by an entity or body having the right (?) power of
condemnation of its intention to condemn the Premises or any portion thereof
or of any other space in the Project, and Landlord shall decide to
discontinue the use and operation of the Project or decide to demolish, alter
or rebuild the Project, then Landlord shall have the right to terminate this
lease by giving Tenant written notice thereof within sixty (60) days of the
date of receipt of said written advice or the commencement of said action or
proceeding. Such termination shall take place on the last day of the calendar
month next following the month in which such notice is given or the date on
which title shall vest in the condemnor, whichever occurs first.
In the event of a partial taking, or conveyance in lieu thereof, of
the Premises and twenty-five percent (25%) or more of the number of square
feet in the Premises are taken, or of the Common Area and the Premises
thereby fails to meet applicable governmental rules and regulations
concerning the minimum number of parking spaces for similar zoned premises in
the City of San Jose or if twenty percent (20%) or more of Tenant's parking
spaces are taken, then Tenant may terminate this lease. Any election by
Tenant to so terminate shall be by written notice given to Landlord within
sixty (60) days from the date of such taking or conveyance and shall be
effective on receipt of such written notice by Landlord.
If a portion of the Premises be taken by power of eminent domain or
conveyance in lieu thereof and neither Landlord nor Tenant shall terminate this
lease then this lease shall continue in full force and effect as to the part of
the Premises not so taken or conveyed and all payments of rental shall be
apportioned as of the date of such taking or conveyance so that thereafter the
amounts to be paid by Tenant shall be in the ratio that the area of the portion
of the Premises not so taken bears to the total area of the Premises prior to
such taking.
23. COVENANT TO SURRENDER
On the last day of the term or on the effective date of any earlier
termination, Tenant shall surrender to Landlord the Premises and all of Tenant's
improvements and alterations in their condition existing as of the commencement
of the term (reasonable wear and tear excepted), with all originally painted
interior walls washed if marked or damaged, interior vinyl covered walls cleaned
and repaired or replaced if marked or damaged, all carpets shampooed and
cleaned, the air conditioning and heating system serviced and repaired by a
reputable and licensed service firm (unless Landlord has elected to maintain
such system pursuant to paragraph 9 above) and all floors cleaned and waxed; all
to the reasonable satisfaction of Landlord. Tenant shall remove all of Tenant's
personal property and trade fixtures, together with improvements or alterations
that Tenant is obligated or has the option to remove pursuant to the provisions
of paragraph 8, from the Premises, and all such property not removed shall be
deemed abandoned. At Tenant's request, Landlord shall inspect the Premises on
the last day of the term and if Tenant has performed its obligation under this
paragraph 23, Landlord agrees to acknowledge same in writing.
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If the premises are not surrendered as required in (?) paragraph,
Tenant shall indemnify Landlord against (i) all expenses incurred by Landlord by
reason of Tenant's failure to surrender the Premises in the manner and condition
required by paragraphs 8 and 23, ((?) loss of rent by reason of Tenant's failure
to so surrender the Premises and consequent delay in the commencement date of
any subsequent lease with another party covering all or a portion of the
Premises, and (iii) losses or damage arising from the cancellation of any
subsequent lease covering the Premises or any portion thereof by reason of
Tenant's failure to so surrender the Premises; provided that Landlord shall use
its reasonable efforts to mitigate these damages. It is agreed between Landlord
and Tenants that the provisions of this paragraph shall survive termination of
this lease.
24. TENANT'S QUITCLAIM
At the expiration or earlier termination of this lease, Tenant shall
execute, acknowledge and deliver to Landlord, within ten (10) days after written
demand from Landlord to Tenant, any quitclaim deed or other document required by
any reputable title company, licensed to operate in the State of California, to
remove the cloud or encumbrance created by this lease from the real property of
which the Premises are a part. This obligation shall survive said expiration or
termination.
25. HOLDING OVER
Any holding over after the expiration or termination of this lease
(with the written consent of Landlord delivered to Tenant) shall be construed to
be a tenancy from month to month at the monthly rent, as adjusted, in effect on
the date of such expiration or termination. All provisions of this lease, except
those pertaining to the terms and any option to extend, shall apply to the month
to month tenancy. This provisions of this paragraph are in addition to, and do
not affect, Landlord's right of re-entry or other rights hereunder or provided
by law.
If Tenant shall retain possession of the Premises or any part thereof
without Landlord's consent following the expiration or sooner termination of
this lease for any reason, then Tenant shall pay to Landlord for each day of
such retention double the amount of the daily rental in effect during the last
month prior to the date of such expiration or termination. Acceptance of rent by
Landlord following expiration or termination shall not constitute a renewal of
this lease, and nothing contained in this paragraph shall waive Landlord's right
of re-entry or any other right. Tenant shall be only a Tenant at sufferance,
whether or not Landlord accepts any rent from Tenant, while Tenant is holding
over without Landlord's written consent.
26. SUBORDINATION
In the event Landlord's title or leasehold interest is now or
hereafter encumbered in order to secure a loan from an institutional lender to
Landlord, Tenant shall, at the request of Landlord or the lender, execute in
writing an agreement subordinating its rights under this lease to the lien of
such encumbrance, or, if so requested, agreeing
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that the lien of lender's encumbrance shall be or remain subject and subordinate
to the rights of Tenant under this lease. Tenant hereby irrevocably appoints
Landlord the attorney in fact of Tenant to execute, deliver and record any such
instrument or instruments for and in the name and on behalf of Tenant.
Notwithstanding any such subordination, Tenant's (?) possession under this lease
shall not be disturbed if Tenant is not in default and so long as Tenant shall
pay all amounts due hereunder and otherwise observe and perform all provisions
of this lease.
If Landlord or such lender requests from Tenant such agreement
subordinating its rights, Landlord shall, if Tenant so requests, deliver to
Tenant a non-disturbance agreement from each and every lender holding a mortgage
or deed of trust encumbering all or any portion of the Premises and which is
then prior and superior to this lease, which non-disturbance agreement shall
provided that such lender agrees that Tenant's possession and quiet enjoyment of
the Premises shall not be disturbed by such lender so long as Tenant performs
all of its obligations under this lease, and which shall otherwise be in form
reasonably satisfactory to Tenant and such lender.
27. CERTIFICATE OF ESTOPPEL
Each party shall, within ten (10) days after request therefor, execute
and deliver to the other party, in recordable form, a certificate stating that
the lease is unmodified and in full force and effect, or in full force and
effect as modified and stating the modifications. The certificate shall also
state the amount of the monthly rent, the date to which monthly rent has been
paid in advance, the amount of the security deposit and/or prepaid monthly rent,
and, if the request is made by Landlord, shall include such other items as
Landlord or Landlord's lender may reasonably request. Failure to deliver such
certificate within such time shall constitute a conclusive acknowledgment by the
party failing to deliver the certificate that the lease is in full force and
effect and has not been modified except as may be represented by the party
requesting the certificate. Any such certificate requested by Landlord may be
conclusively relief upon by any prospective purchaser or encumbrancer of the
Premises or Project. Further, within ten (10) days following written request
made from time to time by Landlord, Tenant shall furnish to Landlord current
financial statements of Tenant, provided, however, that Tenant shall not be
required to deliver such financial statements more often than twice per year.
28. SALE BY LANDLORD
In the event the original Landlord hereunder, or any successor owner
of the Project or Premises, shall sell or convey the Project or Premises, all
liabilities and obligations on the part of the original Landlord, or such
successor owner, under this lease accruing thereafter shall terminate, provided
all such liabilities and obligations shall be assumed and be binding upon the
new owner. Tenant agrees to attorn to such new owner and to look solely to such
new owner for performance of any and all such liabilities and obligations
arising under this lease. Landlord or its successors shall give prompt notice to
Tenant of any such sale or conveyance.
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29. ATTORNMENT TO LENDER OR THIRD PARTY
In the event the interest of Landlord in the land and buildings in
which the Premises are located (whether such interest of Landlord is a fee title
interest or a leasehold interest) is encumbered deed of trust, and such interest
is acquired by a lender or any other third party through judicial foreclosure or
by exercise of a power of (?) at private trustee's foreclosure sale, Tenant
hereby agrees to attorn (?) the purchaser at any such foreclosure to sale and to
recognize such purchaser as the Landlord under this lease, provided such
attornment does not disturb Tenant's leasehold interest.
30. DEFAULT BY LANDLORD
Landlord shall not be in default unless Landlord fails to perform
obligations required of Landlord within a reasonable time, but in no event later
than sixty (60) days after written notice by Tenant to Landlord and to the
holder of any first mortgage or deed of trust covering the Premises specifying
wherein Landlord has failed to perform such obligations; provided, however, that
if the nature of Landlord's obligations is such that more than sixty (60) days
are required for performance, then Landlord shall not be in default if Landlord
commences performance within such thirty (30) day period and thereafter
diligently prosecutes the same to completion.
If Landlord is in default of this lease, and as a consequence Tenant
recovers a money judgment against Landlord, the judgment shall be satisfied
only out of the proceeds of sale received on execution of the judgment and levy
against the right, title and interest of Landlord in the Project of which the
Premises are a part, and out of rent or other income from such real property
receivables by Landlord or out of the consideration received by Landlord from
the sale or other disposition of all or any part of Landlord's right, title and
interest in the Project of which the Premises are a part. Neither Landlord nor
any of the partners comprising the partnership designated as Landlord shall be
personally liable for any deficiency.
31. CONSTRUCTION CHANGES
It is understood that the description of the Premises and the location
of ductwork, plumbing and other facilities therein are subject to such minor
changes as Landlord or Landlord's architect determines to be desirable in the
course of construction of the Premises and/or the improvements constructed or
being constructed hereon, and no such changes or any changes in plans for any
other portions of the Project, shall affect this lease or entitle Tenant to any
reduction of rent hereunder or result in any liability of Landlord to Tenant
unless such changes materially interfere with Tenant's use of the Premises.
32. MEASUREMENT OF PREMISES
Tenant understands and agrees that any reference to square footage of
the Premises is approximate only and includes all interior partitions and
columns, one-half of exterior walls, and one-half
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of the partitions separating the Premises from the rest of the Project and any
outside entry overhang, if applicable. Tenant waives any claim against Landlord
regarding the accuracy of any such measurement and agrees that there shall not
be any adjustment in monthly rent or Common Area Charges or other amounts
payable hereunder by reason of inaccuracies in such measurement.
33. EXHIBITS AND ATTACHMENTS
All exhibits and attachments to this lease are a part hereof.
34. ATTORNEYS FEES
If either party commences an action against the other party arising
out of or in connection with this lease, the prevailing party shall be entitled
to have and recover from the losing party all expenses of litigation, including,
without limitation, travel expenses, attorney fees, expert witness fees, trial
and appellate court costs, and deposition and transcript expenses. If either
party becomes a party to any litigation concerning this lease, the Premises, or
the Project by reason of any act or commission of the other party or its
authorized representatives, the party that causes the other party to become
involved in the litigation shall be liable to that party for all expenses of
litigation, including, without limitation, travel expenses, attorney fees,
expert witness fees, trial and appellate court costs, and deposition and
transcript expenses.
35. SURRENDER
The voluntary or other surrender of this lease or the Premises by
Tenant, or a mutual cancellation of this lease, shall not (?) a merger, and at
the option of Landlord shall either terminate all or any existing subleases or
subtenancies or operate as an assignment to Landlord or all or any such
subleases or subtenancies.
36. WAIVER
No delay or omission in the exercise of any right or remedy of
Landlord on any default by Tenant shall impair such right or remedy or be
construed as a waiver. The receipt and acceptance by Landlord of delinquent rent
or other payments shall not constitute a waiver of any other default and
acceptance of partial payments shall not be construed as a waiver of the balance
of such payment due. No act or conduct of Landlord, including, without
limitation, the acceptance of keys to the Premises, shall constitute an
acceptance of the surrender of the Premises by Tenant before the expiration of
the term. Only a written notice from Landlord to Tenant shall constitute
acceptance of the surrender of the Premises and accomplish a termination of this
lease. Landlord's consent to or approval of any act by Tenant requiring a
Landlord's consent or approval shall not be deemed to waiver or tender
unnecessary Landlord's consent to or approval of any subsequent act by Tenant.
Any waiver by Landlord of any default must be in writing and shall not be a
waiver of any other default concerning the same or any other provision of this
lease.
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37. EASEMENTS; AIRSPACE RIGHTS
Landlord reserves the right to alter the boundaries of the Project and
grant easements and dedicate for public use portions of the Project without
Tenant's consent, provided that no such grant or dedication shall interfere with
Tenant's use of the Premises or otherwise cause Tenant to incur cost or expense.
From time to time, and upon Landlord's demand, Tenant shall execute, acknowledge
and deliver to Landlord, or in accordance with Landlord's instructions, and
any all documents, instruments, maps or plats necessary to effectuate Tenant's
covenants hereunder.
This lease confers no rights either with regard to the subsurface of
the land on which the Premises are located or with regard to airspace above the
ceiling of the Premises. Tenant agrees that no diminution or shutting off of
light or view by a structure which is or may be erected (whether or not by
Landlord) on property adjacent to the building of which the Premises area a part
or to property adjacent thereto, shall in any way affect this lease, or entitle
Tenant to any reduction of rent or result in any liability of Landlord to
Tenant. Notwithstanding the foregoing, Landlord shall not have the right to
materially block or obstruct the main entrance to the Premises.
38. RULES AND REGULATIONS
Landlord shall have the right from time to time to promulgate
reasonable rules and regulations for the safety, care and cleanliness of the
Premises, the Project and the Common Area, or for the preservations of good
order. On delivery of a copy of such rules and regulations to Tenant, Tenant
shall comply with the rules and regulations and a violation of any of them shall
constitute a default by Tenant under this lease. If there is a conflict between
the rules and regulations and any of the provisions of this lease, the
provisions of this lease shall prevail. Landlord shall make all reasonable
efforts to enforce the rules and regulations uniformly against all tenants in
the Project, and no such rules and regulations shall require Tenant to pay
additional rent under this lease. Such rules and regulations may be amended by
Landlord from time to time with or without advance notice.
39. NOTICES
All notices, demands, requests, consents and other communications
which may be given or are required to be given by either party to the other
shall be in writing and shall be sufficiently made and delivered if personally
served or if sent by United States first class mail, postage prepaid. All such
communications from Landlord to Tenant shall be addressed to Tenant at the
Premises. All such communications by Tenant to Landlord shall be sent to
Landlord at its offices at 3945 Freedom Circle, Suite 1000, Santa Clara,
California 95054. Either party may change its address by notifying the other of
such change. Each such communication shall be deemed received on the date of the
personal service or mailing thereof in the manner herein provided, as the case
may be.
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40. NAME
Tenant shall not use the name of the Project for any purpose other
than as the address of the business conducted by Tenant in the Premises without
the prior written consent of Landlord.
41. GOVERNING LAW; SEVERABILITY
This lease shall in all respects be governed by and construed in
accordance with the laws of the State of California. If any provision of this
lease shall be invalid, unenforceable or ineffective for any reason whatsoever,
all other provisions hereof shall be and remain in full force and effect.
42. DEFINITIONS
As used in this lease, the following words and phrases shall have the
following meanings:
AUTHORIZED REPRESENTATIVE: any officer, agent, employee or
independent contractor retained or employed by either party, acting within
authority given him by that party.
ENCUMBRANCE: any deed of trust, mortgage or other written security
device or agreement affecting the Premises or the Project that constitutes
security for the payment of a debt or performance of an obligation, and the note
or obligation secured by such deed of trust, mortgage or other written security
device or agreement.
LENDER: the beneficiary, mortgagee or other holder of an encumbrance,
as defined above.
LIEN: a charge imposed on the Premises by someone other than
Landlord, by which the Premises are made security for the performance of an act.
Most of the liens referred to in this lease are mechanic's liens.
MAINTENANCE: repairs, replacement, repainting and cleaning.
PERSON: one or more human beings, or legal entities or other
artificial persons, including, without limitation, partnerships, corporations,
trusts, estates, associations and any combination of human being and legal
entities.
PROVISION: any term, agreement, covenant, condition, clause,
qualification, restriction, reservation or other stipulation in the lease that
defines or otherwise controls, establishes or limits the performance required or
permitted by either party.
RENT: monthly rent, additional rent, Common Area Charges, and all
other amounts payable by Tenant to Landlord required by this lease or arising by
subsequent actions of the parties made pursuant to this lease.
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Words used in any gender include other genders. If there be more than (?) one
Tenant, the obligations of Tenant hereunder are joint and several. All
provisions whether covenants or conditions, on the part of Tenant shall be
deemed to be both covenants and conditions. The paragraph headings are for
convenience of reference only and shall have no effect upon the construction or
interpretation of any provision hereof.
43. TIME
Time is of the essence of this lease and of each and all of its
provisions.
44. EXAMINATION OF LEASE
Submission of this lease for examination or signature (?)by Tenant
does not constitute a reservation or option for a lease, and this lease is not
effective until its execution and delivery by both Landlord and Tenant.
45. INTEREST ON PAST DUE OBLIGATIONS; LATE CHARGE
Any amount due from Tenant to Landlord hereunder which is not paid
when due shall bear interest at the rate of ten percent (10%) per annum from
when due until paid, unless otherwise specifically provided herein, but the
payment of such interest shall not excuse or cure any default by Tenant under
this lease. In addition, Tenant acknowledges that late payment by Tenant to
Landlord of monthly rent, or of Tenant's monthly Common Area Charge, or of
any other amount due Landlord from Tenant, will cause Landlord to incur costs
not contemplated by this lease, the exact amount of such costs being
extremely difficult and impractical to fix. Such costs include, without
limitation, processing and accounting charges and late charges that may be
imposed on Landlord, e.g., by the terms of any encumbrance and note secured
by any encumbrance covering the Premises. Therefore, if any such payment due
from Tenant is not received by Landlord when due, Tenant shall pay to
Landlord an additional sum of four percent (4%) of the overdue payment as a
late charge. The parties agree that this late charge represents a fair and
reasonable estimate of the costs that Landlord will incur by reason of late
payment by Tenant. Acceptance of any late charge shall not constitute a
waiver of Tenant's default with respect to the overdue amount, nor prevent
Landlord from exercising any of the other rights and remedies available to
Landlord. (?) notice to Tenant of failure to pay shall be required prior to
the imposition of such interest and/or late charge, and any notice period
provided for in paragraph 20 shall not affect the imposition of such interest
and/or late charge. Notwithstanding the foregoing, Landlord agrees to forego
the late charge and interest on past due obligations no more than twice each
lease year, provided that Tenant pays the past-due obligation in full within
(5) days following notice to Tenant of such past-due obligation.
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46. ENTIRE AGREEMENT
This lease, including any exhibits and attachments, constitutes the
entire agreement between Landlord and Tenant relative to the Premises and this
lease and the exhibits and attachments may be altered, amended or revoked only
an instrument in writing signed by both Landlord and Tenant. Landlord and Tenant
agree hereby that all prior contemporaneous oral agreements between and among
themselves or their agents or representatives relative to the leasing of the
Premises are merged in or revoked by this lease.
47. CORPORATE AUTHORITY
Tenant shall deliver to Landlord, prior to or at the execution of this
lease, a copy of the resolution of the Board of Directors of Tenant authorizing
the execution of this lease and naming officers that are authorized to execute
this lease on behalf of Tenant, which copy shall be certified by Tenant's
president or secretary as correct and in full force and effect.
48. RECORDING
Neither Landlord nor Tenant shall record this lease or short form
memorandum hereof without the consent of the other.
49. REAL ESTATE BROKERS
Each Party represents that it has not had dealings with any real
estate broker, finder or other person with respect to this lease in any manner,
except Cornish & Carey. Each party shall hold harmless the other party from all
damages resulting from any claims that may be asserted against the other party
by any broker, finder or other person with whom the other party has or
purportedly has dealt, and relating to this Lease (including but not limited to
any extensions thereof). Landlord shall be solely responsible for paying the
commission to Cornish & Carey.
50. CAPITAL EXPENDITURES
Notwithstanding anything to the contrary in paragraphs (?) and 8,
(i) as to any required capital improvement to the Premises having useful life
of more than one year and which is not required by reason of Tenant's
specific purposes or activities of the Premises, Landlord shall make such
capital improvement and Tenant shall pay to Landlord, as additional rent and
in equal monthly installments over the remaining term of this lease, the
fraction of the cost of such capital improvement equal to the remaining term
of this Lease over the useful life of such capital improvement; (ii) as to
any required capital improvement to the Common Area having a useful life of
more than one year and which is not required by Tenant's specific purposes or
activities of the Premises, the cost thereof shall be included within Common
Area Charges proportionately over the useful life of such capital
improvement: and (iii) the sum of Tenant's payments under subparagraphs (i)
and (ii) above shall not exceed fifteen
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percent (15%) of the monthly rent payable during the concurrent month. Any
determination of useful life, as such term is used in this paragraph 50, shall
be reasonably made by Landlord.
51. OPTION TO EXTEND TERM
Landlord hereby grants to Tenant the option to extend the term under
all the provisions contained in this lease, except for the monthly rent, for one
five year period ("Extended Term") following the expiration of the initial term
set forth in paragraph 2 ("Initial Term"). The monthly rent for the Extended
Term shall be marked rent as determined below, to be increased at the rate of 6%
to 8% (as determined below) over the previous year's monthly rent on each one
year anniversary date during the Extended Term, provided that in no event shall
the monthly rent at the commencement of the Extended Term be less than the
monthly rent in effect at the expiration of the Initial Term. Tenant must give
written notice to Landlord of its intention to exercise this option at least six
(6) months before the expiration of the Initial Term. The parties shall have
forty-five (45) days after Landlord receives the notice of exercise in which to
negotiate and agree on the market rent (and the precise annual adjustment
percentage within the range of 6% to 8%) for the Extended Term. If the parties
are unable to agree on the market rent and such annual adjustment percentage
within this forty-five (45) day negotiating period, the market rent and such
annual adjustment percentage shall be determined in the following manner: (i)
Landlord and Tenant shall each select a licensed real estate broker with not
less than five years' experience in the business of commercial leasing of
property of the same type and use as the Premises and in the same geographical
vicinity, (ii) such two real estate brokers shall select a third similarly
qualified broker, and the three brokers so selected shall determine the market
rent, (iii) the decision of the majority of said brokers shall be final and
binding upon the parties hereto, and (iv) the brokers shall base their
determination of the market rent on the monthly rent (and the annual adjustment
percentage) obtained for property of comparable location, type and use as the
Premises with leases of comparable terms. Each party shall pay the expenses and
charges of the broker appointed by it and the parties shall pay the expenses and
charges of the third broker in equal shares. As soon as the market rent (and the
annual adjustment percentage) is so determined, Landlord and Tenant shall
immediately execute an amendment to this Lease stating the new monthly rent
(i.e., at market rent but not less than the monthly rent in effect at the
expiration of the Initial Term) (?) and such annual adjustment percentage.
Tenant shall not assign or otherwise transfer this option and any attempt to do
so shall render this option null and void; provided that Tenant may assign this
option to any corporation or other entity which acquires or is acquired by
Circadian or which results from a merger or consolidation with Circadian or
which either controls or is controlled by Circadian or which is controlled by
any of the foregoing, if, in any such case, this Lease is concurrently so
assigned. Further, if Tenant is in default at the time of its exercise of this
option or at the last day of the Initial Term, then such exercise shall be
ineffective and the lease shall expire at the end of the Initial Term.
-31-
<PAGE>
52. EXPANSION PROVISION
During the term, Tenant may give Landlord notice of desire to lease
additional or other space, such notice describing the size and location, and
other pertinent information regarding the expansion needs of Tenant. If,
thereafter, space meeting Tenant's needs becomes available in the Project (or in
other Projects owned or managed by Landlord) then Landlord shall promptly notify
Tenant of the availability of such space, and at the request of Tenant made
within five (5) days of the date of such notice of availability enter into
negotiations concerning the lease of such space. If a new lease is negotiated
covering space larger than the space leased under this Lease, Landlord will
agree, at the request of Tenant, to terminate the lease effective as of the date
of such new lease.
Landlord and Tenant shall negotiate the rent and other terms of any
lease of any applicable expansion space in good faith at a rent level, and under
other terms, substantially similar to that leased to other Tenants in the
Project of which the expansion space is a part during the nine (9) month period
prior to Landlord's notice to Tenant that such expansion space is available. If
Tenant and Landlord do not successfully negotiate a lease within thirty (30)
days of commencement of negotiations, Landlord shall not be obligated in any way
to terminate Tenant's lease, nor shall Landlord be liable to Tenant for leasing
the applicable expansion space to a third party whether under the same or more
favorable terms than that offered to the Tenant.
This paragraph 52 shall be of no further force and effect in the event
of a Sale by Landlord as provided in paragraph 28. The successor owner shall not
be obligated to offer any additional space or terminate this lease in any
manner.
IN WITNESS WHERE, Landlord and Tenant have executed and delivered this
lease on the date first above written.
LANDLORD: TENANT:
CALIFORNIA SECOND, LTD. CIRCADIAN, INCORPORATED
a Florida limited partnership a Delaware corporation
By: McCANDLESS PARTNERSHIP, a
California general partnership,
a general partner
By: /s/ Birk S. McCandless By: /s/ D. R. Nathe
------------------------- -------------------------------------
Birk S. McCandless, as (Signature)
Trustee under the Birk S.
McCandless and Mary D. R. Nathe
McCandless Inter Vivos -------------------------------------
Trust Agreement dated (Printed Name)
February 17, 1982,
a general partner V. P. Manufacturing
-------------------------------------
(Title)
7/6/87 June 24, 1987
------------------------- -------------------------------------
(Date) (Date)
-32-
<PAGE>
[MAP]
<PAGE>
NOW LEASING IN NORTH SAN JOSE
McCANDLESS BUSINESS PARK
A 250,000 Square Foot
Office/Research & Development Center
PHASE I PHASE II
[MAP]
A Two-Phased Acre Master Planned Development
Single Story Buildings
<PAGE>
WORK LETTER AGREEMENT
TURNKEY
Circadian
CONSTRUCTION EXHIBIT C
- --------------------------------------------------------------------------------
The Premises shall be improved in accordance with the following:
1. SHELL IMPROVEMENTS:
Tenant acknowledges having reviewed the drawings listed in Exhibit C-1
and the improvements constructed or to be constructed in accordance therewith,
and Tenant hereby approves the same as installed, subject only to such changes
as may subsequently be agreed upon by Landlord and Tenant. Such improvements are
hereafter called "Shell Improvements".
2. TENANT IMPROVEMENTS:
As used herein, "Tenant Improvements" shall include those items and
specifications set forth and described in Exhibits C-2 and C-3, attached
hereto, exclusive of Shell Improvements. Landlord shall construct Tenant
Improvements in accordance with Exhibits C-2 and C-3, attached hereto, and
paragraph 3 below. Landlord and Tenant hereby approve the same.
3. TENANT IMPROVEMENT DESIGN SCHEDULE:
The plans and specifications for the Tenant Improvements and any other
improvements shall be completed in accordance with the following:
(a) Tenant shall approve preliminary floor plan layouts ("Preliminary
Floor Plans") to Landlord by June 30, 1987 showing walls, doors, and other
Tenant Improvements as desired by Tenant. Landlord shall prepare final plans
("City Ready Plans") ready to submit to the City for a building permit.
(b) Between June 30, 1987 and July 10, 1987, Landlord's
representative and Tenant's representative shall meet as needed to review and
complete the final details related to the Preliminary Floor Plans, so that the
resulting July 17, 1987 City Ready Plans are subject only to minor changes.
(c) Concurrently with the preparation of the basic plans referred to
in (a) and (b) above, Landlord's contractor and subcontractors or independent
designers shall prepare design specifications outlining in reasonable detail
electrical, mechanical, and any other requirements not included on the City
Ready Plans set forth above. No later than July 10, 1987, Tenant shall have
-1-
<PAGE>
made the decisions required, and supplied to Landlord the information necessary,
to complete the above specifications and City Ready Plans in enough detail to
bid the work, select subcontractors, and to proceed toward final design of
electrical, mechanical and other necessary plans in conformance therewith.
(d) Tenant's consultant shall provide all other color and material
specifications and finish plan by July 10, 1987.
4. CHANGES BY TENANT:
Tenant may request changes or additions to the Tenant Improvements;
provided, however, that (i) the effectiveness of any such requested change or
addition shall be subject to written approval by an authorized representative of
Landlord, (ii) to obtaining any required governmental permits or other approvals
and (iii) if such approved change order increases the cost of construction, then
Tenant shall pay the additional amount due Landlord within ten (10) days of the
day of commencement of the lease.
5. CHANGES BY AUTHORITY:
Tenant agrees that if any change, deletion or addition to any of the
improvements proposed to be constructed or installed is required by any
governmental authority in connection with obtaining any governmental permit or
approval, or otherwise, then such change, deletion or addition shall promptly be
made at Tenant's expense. Failure to obtain any required governmental approval
or permit for any Tenant Improvements desired by Tenant shall in no way be cause
for Tenant to terminate this lease.
6. DELAYS CAUSED BY TENANT:
If the commencement of the term is delayed due in any material respect
to Tenant's failure to meet the schedule set forth in paragraph 4 above, or to
construction delays because of any changes required by Tenant, or due to any
other failures to Tenant to perform its obligations under this lease, then the
basic rent and common area charges and any other payments specified in the lease
as commencing upon the commencement date of this lease shall nonetheless
commence in full as of the date by which Landlord's work would have been, in
Landlord's reasonable judgment, completed but for such delays or failure to
perform by Tenant.
7. PUNCH LIST:
Within ten (10) business days after commencement of the term, Tenant
shall deliver to Landlord a list of items ("Punch List") that Tenant believes
Landlord should complete or correct in order for the Premises to be acceptable.
Landlord shall commence to complete or correct the items as soon as possible,
except those that it contends are not justified. If Tenant does not deliver the
Punch List to Landlord within the ten (10) day period, Tenant shall
-2-
<PAGE>
be deemed to have accepted the Premises and approved the construction. Nothing
in this paragraph 7 shall delay the commencement of the term or Tenant's
obligation to pay rent or to make other payments due Landlord under the lease.
8. All references in the lease to Exhibit C shall be deemed to also
include Exhibits C-1, C-2 and C-3.
-3-
<PAGE>
PLANS FOR McCANDLESS BUSINESS PARK
CALIFORNIA SECOND, LTD.
<TABLE>
<CAPTION>
ARCHITECT DATE JOB NO. PAGE DESCRIPTION
- --------- ------ ------- ---- -----------
<S> <C> <C> <C> <C>
V.C. Wong & Associates, 3/6/84 830123 A Cover Sheet
Inc.
" 3/6/84 " AS 1 General Specifications, Door
Schedule, Door Hardware
" 3/6/84 " AS 2 Handicapped Requirements,
Legend and Symbols
" 3/6/84 " AS 3 Sitework Details -
Construction Details
" 3/6/84 " AA Master Site Development Plan
Rev: 11/14/83
& 1/27/84
" 3/6/84 " A1 Site Plan - Bldg 4
" 3/6/84 " A2 Site Plan - Bldg 5
" 3/6/84 " A3 Floor Plan - Bldg 4
" 3/6/84 " A4 Partial Floor Plan - Bldg 5
" 3/6/84 " A5 Partial Floor Plan - Bldg 5
" 3/6/84 " A6 Floor Plan - Bldg 5
" 3/6/84 " A7 Roof Plan - Bldg 4
Rev: 3/22/84
" 3/6/84 " A8 Roof Plan - Bldg 5
Rev: 3/22/84
" 3/6/84 " A9 Elevations - Bldg 4
" 3/6/84 " A10 Elevations - Bldg 5
" 3/6/84 " A11 Building Sections - Bldg 4 & 5
" 3/6/84 " A12 Typical Hall Section & Details
Rev: 3/22/84
" 3/6/84 " A13 Soffit Plan - Bldg 4
" 3/6/84 " A14 Soffit Plan - Bldg 5
" 3/6/84 830123 A15 "Title 24" Requirements -
Bldg 4
" 3/6/84 830124 A16 "Title 24" Requirements -
Bldg 5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARCHITECT DATE JOB NO. PAGE DESCRIPTION
- --------- ------ ------- ---- -----------
<S> <C> <C> <C> <C>
V.C. Wong & Associates, 3/6/84 VCW912 S1 General Notes & Details
Inc. Rev: 3/22/84
Kee Wong Engineering,
Inc.
" " 3/6/84 " S2 Details
Rev: 3/22/84
" " 3/6/84 " S3 Roof Notes & Details
Rev: 3/22/84
" " 3/6/84 " S4 Details
" " 3/6/84 " S5 Section - Details
" " 3/6/84 " S6 Section - Details
Rev: 3/22/84
" " 3/6/84 " S7 Details
Rev: 3/22/84
V.C. Wong & Associates, 3/6/84 83825 L1 Site Development Plan &
Inc. Rev: 12/19/84 Notes - Bldg 4
Hoffman Associates 1/19/84 & 2/13/84
" " 3/6/84 " L2 Site Development Plan &
Rev: 12/19/84, 1/24/84, Notes - Bldg 5
1/19/84 & 2/13/84
" " 3/6/84 " L3 Site Development Plan -
Rev: 1/20/84 & Irrigation Legend & Plan
1/24/84 Bldg 4
" " 3/6/84 " L4 Site Development Plan -
Rev: 1/20/84 Irrigation Legend & Plan
Bldg 5
" " 3/6/84 " L5 Plant List & Notes -
Rev: 1/19/84 & Bldg 4
1/24/84
" " 3/6/84 " L6 Plant List & Notes -
Rev: 1/19/84 Bldg 5
" " 3/6/84 " L7 Landscape Details
Rev: 1/19/84
1/24/84, 2/3/84,
2/13/84 & 3/2/84
" " 3/6/84 " L8 Landscape Details
" " 3/6/84 " L9 Landscape Specifications
</TABLE>
The above list of plans includes a portion of those for proposed tenant
improvements as well as those for the building shell. As such, the above
specifications may be superseded to the extent inconsistent with the
attached Exhibit C-2.
<PAGE>
McCANDLESS BUSINESS PARK
STANDARD TENANT IMPROVEMENT SPECIFICATIONS
Circadian
The Tenant Improvements shall include the following items and shall be
constructed in compliance with the following specifications:
6200 FINISH CARPENTRY
Custom-built cabinets at coffee bar and toilet rooms:
- Doors, drawers, and top faced with plastic laminate.
- Door Pulls: Stanley, No. 4484, aluminum satin finish.
- Cabinet Hinges: Stanley, No. 1501-2.
- Catches: Magnetic catches.
- Shelf Standards: Stanley, No. 6733 aluminum standards and No.
6731 brackets in aluminum mill finish.
- Drawer Slides: Knape & Vogt, No. 1260.
7200 INSULATION
- Batt insulation at exterior walls per Title 24 requirements.
- R-11 Batt insulation at demising walls and toilet room walls.
8100 METAL DOOR AND WINDOW FRAMES
- Anodized aluminum, 20 minute fire rated, door frames and
accessories by Eclipse. Color: Dark Bronze.
- Anodized aluminum window frames at sidelites to match door
frames.
<PAGE>
8200 PLASTIC FACED WOOD DOORS
- 3 3/4" thick, solid core, fire rated wood doors.
- Plastic laminate face, color: Rustic Quartered Oak Natural,
W-8-164N by Nevamar. Edges stained to match.
8700 HARDWARE
- "Levon" by Schlage, oil rubbed bronze finish.
8800 GLAZING
- 1/4" diagonal wire glass at sidelites.
- 72" wide x 36" high mirror at toilet rooms.
9250 GYPSUM BOARD
- 5/8" thick fire rated gypsum board and accessories.
- 3 5/8" wide screw type, channel shaped metal studs, typical.
9500 ACOUSTICAL CEILING
- 2' X 4', 1 hour fire rated square edge, acoustical ceiling
panels; Natural Fissured II by Conwed. Color: White.
- "DXL" 1 hour fire rated suspended ceiling grid and accessories by
Donn. Color: White.
9650 RESILIENT FLOORING
- Armstrong, Excellon, 1/8" thick, vinyl composition tile. Color
to be selected.
- 4" rubber carpet and 4" rubber topset base by Burke. Color to be
selected.
9680 CARPET
- "Impact 30" by Philadelphia Carpets; direct glue down. Color and
quality to be same as existing at 3960 N. 1st St.
9900 PAINTING
- Gypsum board walls: taped, textured and painted with one coat
flat latex by Kelly-Moore. Color to be selected.
<PAGE>
9985 PREFINISHED PANELS
- 4' wide x 8' high x 1/8" thick Marlite Brand Panels, vinyl-
covered aluminum moldings and water-resistant adhesive by
Masonite Corporation. Color to be selected.
10160 METAL TOILET COMPARTMENTS
- Headrail braced steel toilet partitions and wall mounted urinal
screen, porcelain enamel finish, by Flush Metal Partitions Corp.
Color to be selected.
10800 TOILET AND BATH ACCESSORIES
- Grab Bars, 36" & 42" long, #837.
- Towel dispenser and waste receptacle, #234.
- Toilet seat cover dispenser, #5831.
- Toilet paper holder, #5224.
- Napkin disposal, #4781 at women's toilet room.
- Napkin/tampon vendor, #401-104, at Women's toilet room only.
- Soap dispenser, #6314.
All toilet room accessories by Bradley or equal.
15300 FIRE PROTECTION SYSTEM
- Complete fire sprinkler system per requirements of local
governing agencies and as specified by fire sprinkler
subcontractor.
- Semi-recessed chrome heads and chrome escutheon plates at
suspended ceiling areas.
15400 PLUMBING
- Complete plumbing system including all piping, fixtures, and
accessories as required to serve toilet rooms and lunchroom as
specified by plumbing subcontractors.
- Water closet: wall-mounted white vitreous china, water-saver
"Afwall" toilet by American-standard; including flush valve
assembly and white solid plastic toilet seat.
<PAGE>
15400 PLUMBING (Con't)
- Urinal (Men's Room Only): White vitreous china, "Jetbrook" urinal
by American-Standard; including flush valve assembly.
- Lavatory: White vitreous china, "Aqualyn" lavatory by American-
Standard; including single handle faucet.
- Drinking Fountain: Haws Model No. HWC7 electric water cooler
stainless steel finish.
15500 HEATING, VENTILATING AND AIR CONDITIONING
- Complete packaged HVAC system including all equipment, ductwork,
distribution, zoning and controls as specified by mechanical
subcontractor.
16000 ELECTRICAL, LIGHTING AND TELEPHONE
- Complete electrical and lighting distribution system including
fixtures, devices and controls as specified by electrical
subcontractor.
- Two electrical duplex outlets, one telephone pull ring and wire
per office, typical.
- Typical light fixtures shall be fluorescent lay-in type fixtures
with energy saving ballasts per Title 24 requirements. Lens:
Prismatic lens, clear acrylic.
WINDOW COVERINGS - To be same color and quality as that existing at
3960 - N. 1st St. DW 6/24/87
<PAGE>
FIRST AMENDMENT TO LEASE
This First Amendment to Lease ("Amendment") is made this 1st day of
DECEMBER, 1987 and amends that certain lease dated June 9, 1987 ("Lease") by and
between CALIFORNIA SECOND, LTD., a Florida limited partnership ("Landlord") and
CIRCADIAN, INCORPORATED, a Delaware corporation ("Tenant").
R E C I T A L S
A. Pursuant to the Lease, Tenant leases from Landlord approximately
twenty-nine thousand, four hundred twenty-four (29,424) square feet of space
located at 3942 North First Street, San Jose, California ("Premises"). The
Premises are outlined in red on Exhibit A.
B. Paragraph 2(a) of the Lease provides that the term of the Lease is
scheduled to commence on December 1, 1987.
C. As of this date, Tenant does not intend to occupy the Premises and is
currently, with assistance from Cornish & Carey Commercial, attempting to locate
a suitable subtenant for the Premises.
D. The Lease requires Landlord to construct, at Landlord's expense, those
certain Tenant Improvements defined in Exhibit C to the Lease.
E. Tenant has requested that Landlord modify the plans and specifications
of the Tenant Improvements in accordance with Exhibit B attached hereto. The
Tenant Improvements as modified by Exhibit B shall be referred to as the
"Modified Tenant Improvements".
F. The cost of completing the Modified Tenant Improvements may be less
than the cost Landlord would have incurred to complete the Tenant Improvements
had Tenant not requested modifications. Any such saving that results from the
modification of the Tenant Improvements will be referred to herein as the
"Tenant Improvement Savings".
G. Landlord and Tenant desire to set forth their
-1-
<PAGE>
agreement regarding the modifications to the Tenant Improvements, the
expenditure of the Tenant Improvement Savings and the agreed commencement date
of the term of the Lease.
NOW, THEREFORE, the parties hereto agree as follows:
1. TERM
The parties hereby acknowledge that notwithstanding the provisions of
paragraph 2(b) of the Lease or any other provision of the Lease, the term of the
Lease shall commence on December 1, 1987 and shall expire on September 27, 1989
(unless extended by Tenant pursuant to Paragraph 51 of the Lease). The parties
further acknowledge that said commencement date shall not be delayed for any
reason and shall not be conditioned upon the completion of the Tenant
Improvements, or Modified Tenant Improvements, or the occupancy of the Premises
by Tenant or any subtenant or assignee of Tenant.
2. MODIFICATION OF TENANT IMPROVEMENTS
Landlord agrees to diligently pursue the completion of the Modified
Tenant Improvements. Within thirty (30) days following the completion of the
Modified Tenant Improvements, Landlord shall deliver to Tenant a statement
showing the Tenant Improvement Savings, if any. The Tenant Improvement Savings
shall be determined based on the change order for such modifications provided by
the general contractor installing the Modified Tenant Improvements.
3. APPLICATION OF TENANT IMPROVEMENT SAVINGS
Within ten (10) days after Tenant's written request for any additional
improvements to the Premises ("Additional Tenant Improvements"), Landlord will
commence to prepare plans and specifications for such improvements; thereafter,
Landlord and Tenant shall meet as necessary to complete plans in sufficient
detail to submit to the City for a building permit. Once a permit is issued for
the Additional Tenant Improvements, Landlord shall commence or cause the
commencement of such improvements and diligently pursue the same to
-2-
<PAGE>
completion. The Tenant Improvement Savings, if any, shall be applied by Landlord
to pay the Total Cost of Additional Tenant Improvements, as defined in Paragraph
4 below. In the event the Total Cost of Additional Tenant Improvements exceeds
the Tenant Improvement Savings, then Tenant shall pay the excess amount; fifty
percent (50%) of such amount (based on Landlord's estimate) to be paid prior to
commencement of construction by Landlord and fifty percent (50%) to be paid when
the Additional Tenant Improvements are fifty percent (50%) completed. Tenant
shall not be entitled to any rebate, credit, payment or other consideration, in
the event the Total Cost of Additional Tenant Improvements is less than the
Tenant Improvement Savings.
4. TOTAL COST OF ADDITIONAL TENANT IMPROVEMENTS
As used herein, the "Total Cost of Additional Tenant Improvements"
shall include (i) the cost of all materials and items installed as part of the
Additional Tenant Improvements; (ii) if requested by Tenant, the cost of
overtime or special expenditures required to obtain and install the Additional
Tenant Improvement; (iii) all costs related to change orders requested by
Tenant; (iv) the cost of changes required or requested by governmental
authority; (v) permit fees and other fees not previously paid by Landlord as
part of the Modified Tenant Improvements; (vi) the cost of consultants,
engineers and architects hired by Landlord; (vii) an amount equal to the actual
cost of supervision, administration and on-site facilities and equipment
necessary to complete the Modified Tenant Improvements; and (viii) an amount
equal to nine percent (9%) of the sum of items (i) through (vii) above as and
for the general contractor's overhead and profit.
5. ESTOPPEL CERTIFICATE
In accordance with paragraph 27 of the Lease, Tenant shall execute and
deliver to Landlord within ten (10) days after request an Estoppel Certificate
substantially in the form of the Estoppel Certificate attached hereto as Exhibit
C.
-3-
<PAGE>
6. SUBLEASE FOR PREMISES
Tenant agrees that it shall comply with the provisions of Paragraph 19
of the Lease regarding assigning the Lease or subletting the Premises. Tenant
agrees that it shall pay any brokerage fees incurred in obtaining a subtenant
for the Premises and shall hold Landlord harmless from all damages resulting
from any claim asserted by any broker connected with obtaining a subtenant for
the Premises.
7. RESTATEMENT OF OTHER LEASE TERMS
All terms, covenants and conditions of the Lease shall remain in full
force and effect except as specifically modified herein.
IN WITNESS WHEREOF, the parties have executed this Amendment on the date
indicated below their signature.
LANDLORD: TENANT:
CALIFORNIA SECOND, LTD. CIRCADIAN, INCORPORATED
a Florida limited partnership a Delaware Corporation
By: McCandless Partnership
a California general partnership,
a general partner
By: /s/ Birk S. McCandless By: /s/ John M. Harland
-------------------------- -----------------------
Birk S. McCandless, as Trustee (Signature)
under the Birk S. McCandless John M. Harland
and Mary McCandless Inter Vivos ------------------------
Trust Agreement dated 2/17/82, (Printed Name)
a general partner Vice President, Finance
12/1/87 ------------------------
------------------------- (Title)
(Date) 12/1/87
------------------------
(Date)
-4-
<PAGE>
NOW LEASING IN NORTH SAN JOSE
McCandless Business Park
A 250,000 Square Foot
Office/Research & Development Center
[MAP]
A Two-Phased 18 Acre Master Planned Development
Single Story Buildings
EXHIBIT A
<PAGE>
EXHIBIT B
MODIFIED TENANT IMPROVEMENTS
CIRCADIAN - II, 3942 N. FIRST STREET
SAN JOSE, CALIFORNIA
MODIFICATIONS/DELETIONS TO
INTERIOR IMPROVEMENT SPECIFICATIONS:
A. Complete the office area between columns six and eight, including toilet
core (with janitor's closet) as designed.
B. In the area encompassing the planned rooms 115 (mail/copy), 116 (machine
shop), 117 (burn-in), 117A/117B (QA lab/machinery room) leave out the
interior walls and do the following:
1. Eliminate the hard ceiling in 117, 117A, 117B and install a complete
T-bar ceiling with drop in light fixtures throughout
2. Reduce the specification of fire sprinkler heads to ordinary
temperature
3. Install HVAC for this area by distributing the previously supplied
cooling from room 116 and 177A/B. Eliminate cooling for the mail room
area (115 off of the office space).
4. Minimal electrical plug outlets as now exist
5. Seal concrete floor
C. Eliminate all VCT tile from the high bay production area
D. Eliminate all process electrical from high bay production area. If conduit
and junction box are still installed leave them in place, but do not pull
any new wiring or connect circuitry. No process electrical in areas
previously designated machine shop/burn-in/QA lab.
E. No chain link fences
F. Compressed air piping to remain as installed (with caps) but no quick
disconnect couplings
<PAGE>
G. Wall finishes in the high bay area are to be left rough tape (no sanding)
and no paint
H. No ceiling paint or duct work paint in the high bay area
J. Leave the existing light fixtures in place in the high bay, to
approximately G.5, make operative, but do not install new light fixtures
1. If restocking charge is significant, except delivery on remaining high
bay light fixtures, and stock pile in the building.
K. Cap off the exhaust duct in the wave solder area 4.5/L, and leave duct in
place, do not install exhaust fan
L. Do not install sink in wave solder area, cap off drain and water supply
M. Complete truck dock, shipping and receiving dock, and roll-up door
installation
<PAGE>
SECOND AMENDMENT TO LEASE
CIRCADIAN PHASE II LEASE
THIS SECOND AMENDMENT TO LEASE ("Amendment") is made this 30th day of
----
August, 1988 and amends that certain lease dated June 9, 1987 as amended by the
- ------
First Amendment to Lease dated December 1, 1987 (the Lease as amended shall
hereinafter be referred to as the "Phase II Lease") by and between CALIFORNIA
SECOND, LTD., a Florida limited partnership ("Landlord") and CIRCADIAN,
INCORPORATED, a Delaware corporation ("Tenant").
R E C I T A L S
A. Pursuant to the Phase II Lease, Tenant leases from Landlord
approximately twenty-nine thousand four hundred twenty-four (29,424) square feet
of space located at 3942 North First Street, San Jose, California ("Premises").
The Premises are outlined in red on Exhibit A.
B. Pursuant to that certain other lease agreement dated July 3, 1984 as
amended by that First Addendum to Lease dated September 20, 1984 and that Second
Addendum to Lease dated February 25, 1985 ("Phase I Lease") Tenant also leases
from Landlord approximately thirty-three thousand nine hundred and eighty-four
(33,984) square feet of space located at 3960 North First Street, San Jose,
California ("First Lease").
C. Landlord has agreed to terminate the Phase I Lease on the terms and
conditions set forth in that certain Lease Termination Agreement executed
concurrently herewith.
D. As consideration for Landlord's agreement to terminate the Phase I
Lease, Landlord and Tenant have agreed to increase the rent payable under the
Phase II Lease and to apply a portion of tenant's security deposit under the
Phase II Lease to the payment of certain expenses incurred by Landlord in
connection with the termination of the Phase I Lease.
-1-
<PAGE>
NOW THEREFORE, the parties hereto agree as follows:
1. INCREASE IN MONTHLY RENT.
Commencing October 1, 1988 the monthly rent payable by Tenant under
the Phase II Lease as provided in paragraph 4(a) of the Phase II Lease shall be
increased from Nineteen Thousand Two Hundred Seventy-Two and 72/100 Dollars
($19,272.72) per month to Forty-Six Thousand Three Hundred Nine and 65/100
($46,309.65) per month.
2. SECURITY DEPOSIT.
Tenant agrees that Landlord may apply Nine Thousand Five Hundred
Sixty-Two and 78/100 Dollars ($9,562,78) of the security deposit being held by
Landlord pursuant to paragraph 4(d) of the Phase II Lease to offset certain
costs incurred by Landlord in connection with terminating the Phase I Lease
and, therefore, the security deposit which will be held by Landlord under the
Phase II Lease shall be reduced from Nineteen Thousand Two Hundred Seventy-Two
and 72/100 Dollars ($19,272.72) to Nine Thousand Seven Hundred Nine and 94/100
Dollars ($9,709.94).
3. RENT CREDIT FOR UNUSED TENANT IMPROVEMENT ALLOWANCE.
Landlord and Tenant agree that Tenant has an outstanding credit of
Twenty-Nine Thousand Five Hundred Nineteen and 00/100 Dollars ($29,519.00)
("T.I. Credit ") which pursuant to the terms of the First Amendment to Lease
dated December 1, 1987 Tenant was entitled to expend on the construction of
additional improvements within the Premises. Landlord agrees that if Tenant does
not request additional improvements to the premises, Landlord will apply the
T.I. Credit, or any remaining portion thereof, against the monthly rent due
under the lease for the last lease month of the term.
4. RESTATEMENT OF OTHER LEASE TERMS.
All terms, covenants and conditions of the Lease shall remain in full
force and effect except as specifically modified herein.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment on the date
indicated below their signatures.
LANDLORD: TENANT:
CALIFORNIA SECOND, LTD. CIRCADIAN, INCORPORATED
a Florida limited partnership a Delaware Corporation
By: McCandless Partnership
a California general partnership,
a general partner
By: /s/ Birk S. McCandless By: /s/ John M. Harland
-------------------------- -----------------------
Birk S. McCandless, as (Signature)
Trustee under Trust John M. Harland
Agreement dated 2/17/84, ------------------------
a general partner (Printed Name)
Vice President, Finance
8/30/88 ------------------------
------------------------- (Title)
(Date) 8/16/88
------------------------
(Date)
<PAGE>
McCandless Business Park
A 250,000 Square Foot
Office/Research & Development Center
[MAP]
EXHIBIT A
<PAGE>
SECOND AMENDMENT TO LEASE
CIRCADIAN PHASE II LEASE
THIS SECOND AMENDMENT TO LEASE ("Amendment") is made this 30th day of
August, 1988 and amends that certain lease dated June 9, 1987 as amended by the
First Amendment to Lease dated December 1, 1987 (the Lease as amended shall
hereinafter be referred to as the "Phase II Lease") by and between CALIFORNIA
SECOND, LTD., a Florida limited partnership ("Landlord") and CIRCADIAN,
INCORPORATED, a Delaware corporation ("Tenant").
R E C I T A L S
A. Pursuant to the Phase II Lease, Tenant leases from Landlord
approximately twenty-nine thousand four hundred twenty-four (29,424) square feet
of space located at 3942 North First Street, San Jose, California ("Premises").
The Premises are outlined in red on Exhibit A.
B. Pursuant to that certain other lease agreement dated July 3, 1984 as
amended by that First Addendum to Lease dated September 20, 1984 and that Second
Addendum to Lease dated February 25, 1985 ("Phase I Lease") Tenant also leases
from Landlord approximately thirty-three thousand nine hundred and eighty-four
(33,984) square feet of space located at 3960 North First Street, San Jose,
California ("First Lease").
C. Landlord has agreed to terminate the Phase I Lease on the terms and
conditions set forth in that certain Lease Termination Agreement executed
concurrently herewith.
D. As consideration for Landlord's agreement to terminate the Phase I
Lease, Landlord and Tenant have agreed to increase the rent payable under the
Phase II Lease and to apply a portion of tenant's security deposit under the
Phase II Lease to the payment of certain expenses incurred by Landlord in
connection with the termination of the Phase I Lease.
-1-
<PAGE>
NOW THEREFORE, the parties hereto agree as follows:
1. INCREASE IN MONTHLY RENT.
Commencing October 1, 1988 the monthly rent payable by Tenant under
the Phase II Lease as provided in paragraph 4(a) of the Phase II Lease shall be
increased from Nineteen Thousand Two Hundred Seventy-Two and 72/100 Dollars
($19,272.72) per month to Forty-Six Thousand Three Hundred Nine and 65/100
($46,309.65) per month.
2. SECURITY DEPOSIT.
Tenant agrees that Landlord may apply Nine Thousand Five Hundred
Sixty-Two and 78/100 Dollars ($9,562,78) of the security deposit being held by
Landlord pursuant to paragraph 4(d) of the Phase II Lease to offset certain
costs incurred by Landlord in connection with terminating the Phase II Lease
and, therefore, the security deposit which will be held by Landlord under the
Phase II Lease shall be reduced from Nineteen Thousand Two Hundred Seventy-Two
and 72/100 Dollars ($19,272.72) TO NINE THOUSAND SEVEN HUNDRED NINE AND 94/100
DOLLARS ($9,709.94).
3. RENT CREDIT FOR UNUSED TENANT IMPROVEMENT ALLOWANCE.
Landlord and Tenant agree that Tenant has an outstanding credit of
Twenty-Nine Thousand Five Hundred Nineteen and 00/100 Dollars ($29,519.00)
("T.I. Credit ") which pursuant to the terms of the First Amendment to Lease
dated December 1, 1987 Tenant was entitled to expend on the construction of
additional improvements within the Premises. LANDLORD AGREES THAT IF TENANT DOES
NOT REQUEST ADDITIONAL IMPROVEMENTS TO THE PREMISES, LANDLORD WILL apply the
T.I. Credit, or any remaining portion thereof, against the monthly rent due
under the lease for the last lease month of the term.
4. RESTATEMENT OF OTHER LEASE TERMS.
All terms, covenants and conditions of the Lease shall remain in full
force and effect except as specifically modified herein.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment on the date
indicated below their signatures.
LANDLORD: TENANT:
CALIFORNIA SECOND, LTD. CIRCADIAN, INCORPORATED
a Florida limited partnership a Delaware Corporation
By: McCandless Partnership
a California general partnership,
a general partner
By: /s/ Birk S. McCandless By: /s/ John M. Harland
-------------------------- -------------------------
Birk S. McCandless, as (Signature)
Trustee under Trust John M. Harland
Agreement dated 2/17/84, -------------------------
a general partner (Printed Name)
Vice President, Finance
8/30/88 -------------------------
------------------------- (Title)
(Date) 8/16/88
-------------------------
(Date)
<PAGE>
McCandless Business Park
A 250,000 Square Foot
Office/Research & Development Center
[MAP]
EXHIBIT A
<PAGE>
December 6, 1995
Mr. Ken Massey
NOVELLUS SYSTEMS, INC.
432 North 44th Street, Suite 420
Phoenix, Arizona 85008
RE: THREE GATEWAY
Dear Ken:
Please find enclosed a fully executed copy of the lease agreement for your
premises in Three Gateway, along with a copy of the construction pricing
estimate from Jokake. Please call me if you have any questions.
Once again, we are pleased to welcome you to the building!
Sincerely,
/s/ Rebecca White
Rebecca White
Property Manager
enc.
<PAGE>
THREE GATEWAY - OFFICE LEASE
SUMMARY OF SELECTED MATTERS
LANDLORD: DMB PROPERTY VENTURES LIMITED PARTNERSHIP
TENANT: NOVELLUS SYSTEMS, INC.
The Premises: Suite 1140
Area of the Premises: 2,824 rsf - 2,521 rsf
The Term: Three (3) Years
Commencement and
Expiration Dates: February 1, 1996
Tenant's
Proportionate Share: 1.3%
Expense Stop: Base Year 1996
Base Rent: $56,480.04 per year, $4,706.67 per month
Tenant's address for pre-occupancy notices:
432 North 44th Street, #420
Phoenix, Arizona 85008
Landlord's address for payment of rent:
410 North 44th Street, Suite 290
Phoenix, Arizona 85008
Tenant
Improvement Allowance: $8.00 per usf
Security Deposit: $4,706.67
Description of Tenant's Business on the Premises:
General Office
Name of Guarantors:
N/A
THIS SUMMARY IS FOR PURPOSES OF CONVENIENCE, AND IS NOT PART OF THE LEASE ITSELF
<PAGE>
TABLE OF CONTENTS
1. TERM AND POSSESSION . . . . . . . . . . . . . . . . . . . . . . . . 1
2. RENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. SECURITY DEPOSIT AND GUARANTIES . . . . . . . . . . . . . . . . . . 2
4. USE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
5. TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
6. PARKING AND COMMON USE AREAS. . . . . . . . . . . . . . . . . . . . 3
7. OPERATING COSTS, REAL PROPERTY TAXES AND UTILITIES. . . . . . . . . 3
8. CONSTRUCTION, DELIVERY, AND CONDITION . . . . . . . . . . . . . . . 4
9. REPAIR AND MAINTENANCE. . . . . . . . . . . . . . . . . . . . . . . 4
10. ALTERATIONS AND PERSONAL PROPERTY . . . . . . . . . . . . . . . . . 4
11. CERTAIN RIGHTS RESERVED BY LANDLORD . . . . . . . . . . . . . . . . 5
12. DAMAGE TO PROPERTY; INJURY TO PERSONS; INSURANCE. . . . . . . . . . 5
13. FIRE AND CASUALTY . . . . . . . . . . . . . . . . . . . . . . . . . 5
14. CONDEMNATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
15. ASSIGNMENT AND SUBLETTING; SALE BY LANDLORD . . . . . . . . . . . . 6
16. ESTOPPEL CERTIFICATE. . . . . . . . . . . . . . . . . . . . . . . . 6
17. LANDLORD'S REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . 6
18. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
19. SUBORDINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
20. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . 7
EXHIBITS
--------
EXHIBIT "A" - Legal Description
EXHIBIT "B" - Premises and Area of Exclusivity
EXHIBIT "C" - Tenant Improvements
EXHIBIT "D" - Building Rules and Regulations
<PAGE>
THREE GATEWAY OFFICE LEASE
THIS LEASE is made this ______ day of November, 1995, by and between DMB
PROPERTY VENTURES LIMITED PARTNERSHIP, a Delaware limited partnership
("LANDLORD"), and NOVELLUS SYSTEMS, INC. a California corporation ("TENANT").
Landlord hereby leases to Tenant and Tenant leases from Landlord for the
term and upon the conditions and agreements set forth in this lease a portion of
the real property described on Exhibit "A", as illustrated by cross-hatching or
otherwise on the plan attached as Exhibit "B", consisting of approximately 2,824
rentable square feet of space (the "PREMISES") known as Suite 1140 in Three
Gateway (the "BUILDING") on the first floor. The address of the Building
is 410 North 44th Street, Phoenix, Arizona 85008.
1. TERM AND POSSESSION
(a) The term of this lease, and Tenant's obligation to pay rent, shall
commence February 1, 1996 (the "COMMENCEMENT DATE") and shall expire on January
30, 1999. Upon request of either party after the term has commenced, Landlord
and Tenant shall jointly execute a memorandum confirming the Commencement Date.
(b) Upon the termination or expiration of this lease or upon the
termination of Tenant's right of possession, whether by lapse of time or
otherwise, Tenant shall at once surrender possession of the Premises to
Landlord and remove all of Tenant's property as provided in Article 10.
(c) Tenant shall have no right to hold over after the expiration of the
term of this lease without Landlord's consent. If, with Landlord's consent,
Tenant holds over after the expiration of this lease, Tenant shall become a
tenant from month to month only, upon all of the terms of this lease except that
the amount of the Base Rent shall be increased to an amount equal to 150% of the
Base Rental Rate in effect immediately prior to the expiration.
(d) RIGHT OF FIRST REFUSAL. Tenant shall have a right of first refusal to
lease any adjacent, vacant space on the eleventh floor except any space that is
subject to renewal by the current tenant, or any space that is subject to
previously granted options, rights of first refusal or offer, or similar rights.
If a qualifying space becomes vacant during Tenant's initial term, Landlord
shall notify Tenant that the space is available. Tenant shall have five (5) days
following receipt of Landlord's notice to notify Landlord of its intention to
lease the space, which notice shall be irrevocable. The terms and conditions
shall be mutually agreed upon between the parties at that time. In the event
Tenant does not exercise its right to lease the space in the time specified
above, Landlord may proceed to lease such space to the general public.
(e) OPTION TO RENEW. Provided that Tenant is not in default under any
provision of this lease, and provided that Tenant is still occupying the
premises, Tenant shall have the option to renew this lease for one (1)
additional term of three (3) years. Tenant shall exercise said option by giving
notice to Landlord at any time not less than six (6) months and not more than
one (1) year prior to the expiration of the initial term (the "Option Exercise
Date"). If Tenant elects to extend the initial term of this lease, such extended
term shall be upon and subject to all of the terms, covenants and conditions of
this lease except that the rental rate, operating expenses, tenant improvements
and any other terms as negotiated between the parties, shall be mutually agreed
upon at that time.
2. RENT
(a) BASE RENT. Tenant shall pay to Landlord during the term of this lease
at the office of Landlord or at such other place as Landlord may designate,
without notice, demand, deduction or set-off, in equal monthly installments in
advance on the first day of each calendar month, Base Annual Rent in the amount
of:
$56,480.04 per year; $4,706.67 per month
In the event the Commencement Date does not occur on the first day of a calendar
month, Tenant shall pay rent on the Commencement Date for the fractional month
on a pro rata basis.
(b) NATURE OF PAYMENTS. All sums required to be paid by Tenant under this
lease, whether or not so designated, are rent.
(c) LATE CHARGES AND INTEREST. Any amount due from Tenant to Landlord
which is not paid when due shall bear interest at three percent in excess of the
prime rate as established from time to time by Bank One or its successor in
interest from the due date until paid, but the payment of such interest shall
not excuse or cure any default by Tenant under this lease. In addition, any rent
or other payment not paid within ten days of its due date shall be subject to
five percent late charge representing the additional costs and burdens of
special handling.
1
<PAGE>
3. SECURITY DEPOSIT AND GUARANTIES
Concurrently with the execution of this lease, Tenant shall: (a) Deliver
to Landlord an unconditional guaranty of the performance of this lease by
Tenant, in form satisfactory to Landlord, executed by N/A; and (b) Deposit with
Landlord the sum of $4,706.67 as security for the full and faithful performance
of this lease. If Tenant defaults with respect to any provision of this lease,
Landlord may apply all or any part of the security deposit for the payment of
any sum in default, or for the payment of any other amount which Landlord may
spend or become obligated to spend by reason of Tenant's default, or to
compensate Landlord for any other loss or damage which Landlord may suffer by
reason of Tenant's default. Application of the deposit shall not constitute a
cure of the default by Tenant to which the application relates. If any portion
of the security deposit is so applied, Tenant shall, within five days after
written demand therefor, deposit cash with Landlord in an amount sufficient to
restore the security deposit to its original amount. Landlord shall not be
required to keep the security deposit separate from its general funds, and
Tenant shall not be entitled to interest on the deposit. If Tenant shall fully
and faithfully perform every provision of this lease to be performed by Tenant,
the security deposit or any balance thereof shall be returned to Tenant (or, at
Landlord's option, to the last assignee of Tenant's interest).
4. USE
(a) Tenant shall continuously use and occupy the Premises for GENERAL
OFFICE and shall use them for no other purpose whatsoever without Landlord's
prior written consent. Tenant shall be open for business during normal business
hours at least five days a week (excluding, at Tenant's option, recognized legal
holidays such as Christmas and New Year's Day). Tenant shall maintain, at all
times, an average density no greater than one person for each two hundred
rentable square feet of the premises.
(b) Tenant shall:
(i) Not use or permit upon the Premises anything that would
invalidate any policies of insurance now or hereafter carried on the Premises or
that will increase the rate of insurance on the Premises or the Building;
(ii) Pay all additional insurance premiums which may be caused by
the use which Tenant shall make of the Premises;
(iii) Not in any manner deface or injure the Premises or overload
any floor of the Premises;
(iv) Not do anything or permit anything to be done upon the Premises
in any way tending to create a nuisance, or tending to disturb any other lessee
in the Building or tending to injure the reputation of the Building, including,
without limitation, the playing of music audible outside the Premises and the
placement of signs in or displayed through any window or door;
(vi) Not use the Premises for lodging or sleeping purposes;
(vii) Not commit or suffer to be committed any waste upon the
Premises;
(viii) Not violate any recorded restriction or covenant affecting
the Building, nor use the Premises for any purpose which would be in violation
of any exclusive rights or use granted to other tenants in the Building.
Landlord shall not grant exclusive rights which would prohibit Tenant from using
the Premises for the purposes stated in Article 4(a) above.
(c) Tenant, at Tenant's expense, shall comply with all present and
future federal, state and local laws, ordinances, order, rules and
regulations (collectively, "LAWS"), and shall procure all permits,
certificates, licenses and other authorizations required by applicable Law
relating to Tenant's business or Tenant's use or occupancy of the Premises or
Tenant's activities on the Premises. Tenant shall make all reports and
filings required by applicable Laws. Tenant shall defend, indemnify and hold
harmless Landlord and Landlord's present and future officers, directors,
employees, partners and agents from and against all claims, demands,
liabilities, fines, penalties, losses, costs and expenses, including but not
limited to costs of compliance, remedial costs, and reasonable attorneys'
fees, arising out of or relating to any failure to Tenant to comply with
applicable Laws. Without limiting the foregoing, Tenant shall comply with all
Laws relating to environmental matters, and shall defend, indemnify and hold
harmless Landlord and Landlord's present and future officers, directors,
employees, partners and agents from and against all claims, demands,
liabilities, fines, penalties, losses, costs and expenses, including but not
limited to costs of compliance, remedial costs, clean-up costs and reasonable
attorneys' fees, arising from or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling, or
the emission, discharge, release or threatened release into the environment,
of any pollutant, contaminant or hazardous or toxic material, substance or
matter from, on or at the Premises or the Building as a result of any act or
omission on the part of Tenant. Tenant's indemnification obligations shall
survive the expiration or termination of this lease.
5. TAXES
(a) Tenant shall pay, prior to delinquency, all taxes assessed against or
levied upon Tenant's fixtures, furnishings, equipment and other personal
property located in or upon the Premises. Tenant shall cause
2
<PAGE>
the fixtures, furnishings, equipment and other personal property to be assessed
and billed separately from the real property of which the Premises form a part.
In the event any or all of Tenant's fixtures, furnishings, equipment and other
personal property shall be assessed and taxed with the real property, Tenant
shall pay to Landlord Tenant's share of the taxes within ten days after delivery
to Tenant by Landlord of a statement in writing setting forth the amount of the
taxes applicable to Tenant's personal property.
(b) Tenant shall, simultaneously with the payment of any sums required to
be paid under this lease as rent, additional rent or otherwise, reimburse
Landlord for any sales, use, rental, transaction privilege or other excise tax
imposed or levied on, or measured by, the amount paid.
6. PARKING AND COMMON USE AREAS
All parking areas, parking structures, access roads, driveways, pedestrian
sidewalks and ramps, landscaped areas, drainage facilities, exterior lighting,
signs, courtyards, corridors, elevators (if any), entryways, public restrooms,
and other areas and improvements provided by Landlord for the general use in
common of tenants, their officers, agents, employees, customers and other
invitees (all of which are referred to as "COMMON FACILITIES") shall at all
times be subject to the exclusive control and management of Landlord, and
Landlord shall have the right from time to time to modify, enlarge or eliminate
common facilities and to establish, modify and enforce reasonable rules and
regulations with respect thereto. Without limiting the foregoing, Landlord may
designate separate or combined parking areas for visitors, tenants and
employees.
Tenant shall be entitled to the use of two (2) covered reserved spaces and
four (4) covered unreserved spaces in the parking garage adjacent to the
building at no cost for the term of this lease. Landlord to determine the
location of said spaces and may re-assign said spaces from time to time, as
Landlord deems necessary.
7. OPERATING COSTS, REAL PROPERTY TAXES AND UTILITIES
(a) Tenant shall pay Tenant's pro rata share of all of the Building's
operating cost, but only to the extent the Building's operating cost exceeds the
actual operating costs incurred in the calendar year 1996 (the "EXPENSE STOP").
The Building's operating cost consists of those costs and expenses directly
associated with managing, operating, maintaining and repairing the office
building containing the Premises and the associated parking facilities, grounds
and common facilities, including all electrical, heating, ventilating, air
conditioning, plumbing and other building systems; exterior and interior water
features; utilities; fire and extended coverage insurance, and rent interruption
insurance; window cleaning; janitorial services; energy management costs; real
property taxes and general and special assessments; assessments and other
amounts legally payable to the property owner's association created under the
restrictive covenants to which the Building is subject; wages, salaries
and employee benefits of persons performing services in connection with the
Building; parking lot and parking structure sweeping, sealing, patching,
restriping, repair and maintenance; public liability and property damage
insurance; supplies, materials, tools, parts, and equipment; equipment rental
charges; bookkeeping, accounting, legal and other professional charges and
expenses; fees for permits and licenses; administrative expenses; taxes other
than real property taxes; service and maintenance contracts; signage; and
landscaping. The Building's operating cost shall not include ground rents, debt
service, depreciation, income taxes, general overhead, tenant improvements,
brokerage commissions, new construction, or replacements outside of normal
maintenance and repair. Any expenditure for an Item with a useful life extending
over several years shall, if necessary to avoid material distortion of operating
costs, be amortized over the useful life of the item and the amortization amount
included in each year's operating cost. Operating Costs, Real Property Taxes and
Utilities shall be further categorized as follows:
Category A: Expenses not within Landlord's control.
Category A expenses include Utility Costs, Insurance Costs and
Governmental Taxes
Category B: Expenses within Landlord's control.
Category B expenses shall include all expenses not specifically
named in Category A above.
Tenant shall pay Operating Costs, Real Property Taxes and Utilities
increases in accordance with this Article 7, however, increases in Category B
expenses shall not be in excess of six percent (6%) per year. On the first day
of each month Tenant shall pay a monthly advance charge on account of Tenant's
pro rata share of the Building's operating cost in excess of the Expense Stop.
The amount of the monthly charge shall be established by Landlord and may be
adjusted from time to time by Landlord to reflect Landlord's estimate of current
and anticipated cost. Within 120 days after the end of each fiscal year as
established for the Building by Landlord, Landlord shall provide to Tenant a
reasonably detailed summary of the actual operating costs showing Tenant's
actual share and the amount by which Tenant has overpaid or underpaid. Any
overpayment shall be credited to Tenant's account. Any deficiency shall be
payable within ten days after receipt of the statement. In the alternative,
Landlord may, at its option during all or part of the Lease term, bill Tenant
for its pro rata share of operating cost in excess of the Expense Stop, in
arrears, based on actual costs as they are incurred, in which case Tenant shall
pay the invoice within ten days after receipt.
(b) Tenant's pro rata share of the Building's operating cost shall be
that proportion that the rentable area of the Premises bears to the total
rentable area of all rentable area in the Building. The operating cost for
the fiscal year in which this lease commences or terminates shall be
apportioned so that Tenant shall not be responsible for costs that relate to
periods prior to or subsequent to the term of this lease except any period
3
<PAGE>
of holding over. Rentable area shall be measured according to BOMA standards as
approved July 31, 1980.
(c) Tenant shall be solely responsible for the cost of any heating,
ventilation or air conditioning provided to the Premises at Tenant's request
outside of normal business hours, measured at an hourly rate reasonably
established by Landlord and billed to Tenant from time to time by Landlord.
Normal business hours for the Building are from 7:00 a.m. to 6:00 p.m. on Monday
through Friday, and 8:00 a.m. to 12:00 p.m. on Saturday, excluding holidays.
8. CONSTRUCTION, DELIVERY, AND CONDITION
(a) If delivery of possession of the Premises to Tenant is delayed beyond
the anticipated Commencement Date because of a delay in the completion of
construction of the Premises by Landlord or because of a failure of an existing
tenant to surrender possession of the Premises to Landlord, then this lease
shall remain in full force and effect, Landlord shall not be liable to Tenant
for any damage occasioned by delay, and the Commencement Date shall be changed
to the date actual delivery of possession to Tenant is effected. Notwithstanding
the foregoing, if delivery of possession is delayed more than 30 days after the
anticipated Commencement Date as set forth in Article 1(a), Tenant, by written
notice to Landlord, may terminate this lease prior to taking possession, and
upon such termination any security deposit shall be refunded and both Landlord
and Tenant shall be released of all further obligation.
(b) Landlord shall construct improvements in the Premises in accordance
with the plans and specifications attached as or identified in Exhibit "C". If
no Exhibit "C" is attached, Tenant accepts the Premises AS IS. Landlord has no
obligation to design or construct Improvements or to make alterations in the
Premises except as specifically set forth in Exhibit "C". Tenant shall pay to
Landlord upon the Delivery Date the amount by which the cost of the work
performed by Landlord exceeds $20,168, and shall pay, in addition, for any
increases in costs resulting from changes in the approved plans and
specifications made at Tenant's request. Any changes in the approved plans and
specifications shall be subject to approval by both Landlord and Tenant. Any
defects in construction performed by Landlord shall automatically be waived
unless specified in a written punchlist delivered to Landlord within ten days
after Tenant takes possession. Landlord shall promptly correct all defects set
forth in the punchlist.
9. REPAIR AND MAINTENANCE
(a) Tenant shall maintain the interior of the Premises in good condition
and repair except that Landlord shall provide normal janitorial service five
nights per week. If Tenant does not perform necessary repairs and maintenance,
Landlord may, but need not, make necessary repairs and replacements, and Tenant
shall pay Landlord the cost upon demand.
(b) Subject to the provisions of Article 7, Landlord shall repair and
maintain the common facilities, all building systems (electrical, heating,
ventilation, air conditioning and plumbing), plate glass, and the roof, exterior
and structural elements of the Building, and shall provide normal janitorial
services. Landlord shall not be responsible to make any repairs or perform any
maintenance unless written notice of the need for such repairs or maintenance is
given by Tenant. Except in the case of a fire or casualty as provided in Article
13, there shall be no abatement of rent and no liability of Landlord by reason
of any entry to the Premises, interruption of services or facilities, temporary
closure of common facilities, or interference with Tenant's business arising
from the making of any repairs or maintenance.
10. ALTERATIONS AND PERSONAL PROPERTY
Tenant shall not make or suffer to be made any alterations, additions or
improvements to the Premises, including signs, without the prior written consent
of Landlord, which shall not unreasonably be withheld. Landlord may condition
its consent upon provision of a payment bond, in amount and form reasonably
satisfactory to Landlord, covering the work to be done by Tenant's contractor.
Any alterations, additions or improvements to the Premises, including signs, but
not including movable furniture and trade fixtures, shall upon installation
become a part of the realty and belong to Landlord. Tenant shall not install any
antenna, satellite dish or other fixture or equipment on the roof or in the
common facilities. In the event Landlord consents to the making of any
alterations, additions or improvements to the Premises by Tenant, they shall be
made by Tenant at Tenant's sole cost and expense and any contractor or person
selected by Tenant to perform the work must first be approved in writing by
Landlord. Tenant shall not permit any mechanic's or materialmen's lien to stand
against the Premises for any labor or materials provided to the Premises by any
contractor or other person hired or retained by Tenant. Tenant shall cause any
such lien to be discharged (by bonding or otherwise) within ten days after
demand by Landlord, and if it is not discharged within ten days, Landlord may
pay or otherwise discharge the lien and immediately recover all amounts so
expended from Tenant as additional rent. Upon the expiration or sooner
termination of the term of this lease or of Tenant's right to possession, Tenant
shall remove all of its movable furniture and trade fixtures, and, if requested
by Landlord, at Tenant's sole cost and expenses, forthwith remove any
alterations, additions or improvements made by Tenant which are designated by
Landlord to be removed. Tenant shall, forthwith at its sole cost and expense,
repair any damage to the Premises caused by such removal and restore the
Premises to a condition reasonably comparable to their condition at the
commencement of the lease.
4
<PAGE>
11. CERTAIN RIGHTS RESERVED BY LANDLORD
Landlord shall have the right:
(i) To change the Building's name or street address;
(ii) To enter the Premises either personally or by designated
representative at all reasonable times for the purpose of examining or
inspecting the same, and showing the same to prospective purchasers or lessees;
(iii) To grant to anyone the exclusive right to conduct any
business or render any service in or to the Building, provided such exclusive
right shall not operate to exclude Tenant from the use expressly permitted under
Article 4.
12. DAMAGE TO PROPERTY; INJURY TO PERSONS; INSURANCE
(a) Tenant shall defend, indemnify and hold Landlord harmless from any and
all claims arising from Tenant's use of the Premises or the conduct of its
business or from any activity, work, or thing done, permitted or suffered by
Tenant in or about the Premises, regardless of fault or negligence which is
imputed to Landlord as the owner of the Building but which involves a condition
of the Premises within the control of tenant, its employees or contractors.
Tenant shall further defend, indemnify and hold Landlord harmless from any and
all claims arising from any breach or default in the performance of this lease
by Tenant, or arising from any act or negligence of Tenant, or of its agents or
employees, and from all costs, attorney's fees, expenses and liabilities
incurred as a result of any such claim. Tenant, as a material part of the
consideration to Landlord, hereby assumes all risk of damage to property or
injury to persons, in, upon, or about the Premises from any cause, and Tenant
hereby waives all claims in respect thereof against Landlord, unless caused by
active negligence of Landlord, its agents or employees. Landlord shall not be
liable for loss of or damage to any property by theft or otherwise, or for any
injury or damage to persons or property resulting from fire, explosion, falling
plaster, steam, gas, electricity, water or rain which may leak from any part of
any building or from the pipes, appliances or plumbing works therein, or from
the roof, street or subsurface, or from any other place resulting from dampness
or any other cause whatsoever. Landlord shall not be liable for interference
with the natural light. Tenant shall give immediate notice to Landlord of any
fire, accident or defect discovered with the Premises or the Building. Tenant
acknowledges that it can protect itself against any or all of the foregoing
risks by procuring appropriate insurance.
(b) Tenant shall maintain fire and extended coverage insurance throughout
the term of this lease in an amount equal to one hundred percent of the
replacement value of Tenant's fixtures, equipment and other personal property
located on the Premises together with such other insurance as may be required by
Landlord's lender or by any government agency. All proceeds of Tenant's policy
of fire and extended coverage insurance shall be payable to Tenant, and all
proceeds of policies of insurance procured by Landlord shall be payable to
Landlord. Tenant hereby waives any right to recovery from Landlord and Landlord
hereby waives any right of recovery from Tenant for any loss or damage
(including consequential loss) resulting from any of the perils insured against
in the standard form fire insurance policy with extended coverage endorsement.
During the term of this lease, the Tenant shall, at Tenant's expense, maintain
general public liability insurance against claims for personal injury, death or
property damage occurring in, upon or about the Premises or in the common areas.
The limitation of liability of such insurance shall be not less than One Million
Dollars in respect to injury or death of one person and to the limits of not
less than One Million Dollars in respect to any one accident and to the limit of
not less than Five Hundred Thousand Dollars in respect to property damage. All
of tenant's policies of liability insurance shall name Landlord as an additional
insured, and all policies of insurance or copies thereof required to be carried
by Tenant under this Article 12 shall be delivered to Landlord prior to the
Commencement Date and thereafter at least thirty days prior to the expiration of
the then current policies. Each policy shall contain an endorsement prohibiting
cancellation or non-renewal without at least 30 days prior notice to Landlord.
13. FIRE AND CASUALTY
If the Premises are wholly or partially destroyed or damaged by fire or
other casualty, Landlord shall restore the Premises with reasonable diligence;
provided, however, that Landlord shall have no obligation to restore
improvements not originally provided by Landlord or to replace any of Tenant's
fixtures, furnishings, equipment or personal property. Tenant shall promptly
replace and restore all of Tenant's fixtures, furnishings and equipment damaged
or destroyed by the casualty. Landlord need not commence repairs until insurance
proceeds are available. Proceeds of insurance payable with respect to a fire or
other casualty shall be received and held by Landlord. In the event the Premises
are destroyed or damaged by any fire or casualty and in Landlord's reasonable
estimation restoration will require more than ninety days, then either Landlord
or Tenant shall have the option to terminate this lease by giving notice to the
other. If a fire or casualty occurs within the last three years of the lease
term (as extended by any renewal or extension options which have been
exercised), or if any portion of the Building other than the Premises is damaged
or destroyed by fire or casualty and restoration is expected to require in
excess of 45 days, then Landlord may by written notice to Tenant terminate this
Lease. In any case, Landlord shall retain all insurance proceeds paid under
Landlord's insurance policies and Tenant shall retain all insurance proceeds
paid under Tenant's insurance policies. If this lease is not terminated as
provided above, this lease shall continue in full force and effect, but rent
shall abate until the restoration is substantially complete. The provisions of
this lease shall govern when this lease shall be
5
<PAGE>
terminable as a result of a fire or casualty, and no other rule or statute on
the subject shall apply.
14. CONDEMNATION
In the event any portion of the Building shall be appropriated or taken
under the power of eminent domain this lease shall terminate and expire as of
the date Tenant is required to vacate the Premises, or, if no portion of the
Premises is taken, as of the date designated in a notice from Landlord
establishing the date of closure of the Building. If any portion of the common
facilities, excluding the Building, is appropriated or taken under the power of
eminent domain, this lease shall not terminate. All awards or compensation for
any taking of any part of the Premises or the Building or common facilities,
whether payable to Landlord or Tenant, shall be the sole property of Landlord.
Notwithstanding anything to the contrary in this Article, Tenant shall be
entitled to receive any portion of an award of compensation relating to damage
to or loss of trade fixtures or other personal property belonging to Tenant, and
Landlord shall be under no obligation to restore or replace Tenant's
furnishings, fixtures, equipment and personal property. For the purposes of this
Article 14, a voluntary sale or conveyance in lieu of condemnation shall be
deemed in appropriation or a taking under the power of eminent domain.
15. ASSIGNMENT AND SUBLETTING; SALE BY LANDLORD
(a) Tenant shall not, either voluntarily or by operation of law, assign,
hypothecate or transfer this lease, or sublet the Premises or any part thereof,
or permit the Premises or any part thereof to be occupied by anyone other than
Tenant or Tenant's employees, without the Landlord's prior written consent,
which shall not be unreasonably withheld provided the proposed assignee or
sublessee is reasonably satisfactory to Landlord as a credit and character and
will occupy the Premises for purposes not inconsistent with Tenant's purposes as
stated in Article 4 or other purposes approved by Landlord. Landlord shall be
under no obligation to give or withhold consent until all information reasonably
required by Landlord with respect to the identity, background, experience and
financial worth of the proposed assignee, transferee, or subtenant has been
provided. No hypothecation, assignment, sublease or other transfer to which
Landlord has consented shall be effective for any purpose until such time as
fully executed documents of such transaction have been provided to Landlord,
and, in the case of an assignment, the assignee has attorned directly to
Landlord, and in the case of a sublease, the sublessee has acknowledged that the
sublease is subject to all of the terms and conditions of this lease. Any
assignment, mortgage, transfer or subletting of this lease which is not in
compliance with the provisions of this Article 15 shall be voidable and shall,
at the option of Landlord, terminate this lease. The consent by Landlord to an
assignment or subletting shall not relieve Tenant from any liability or
obligation, whether or not then accrued. Except as provided in this Article,
this lease shall be binding upon and inure to the benefit of the successors and
assigns of the parties.
(b) In the event of a sale or conveyance by Landlord of the Premises,
Landlord shall be relieved of all future liability upon any of the covenants or
conditions, express or implied, in favor of Tenant, and Tenant shall to look
solely to Landlord's successor in interest. This lease shall not be affected by
any sale, and Tenant shall attorn to the successor in interest. If any security
deposit has been made by Tenant, the successor in interest shall be obligated to
return it in accordance with the terms hereof and Landlord shall be discharged
from any further liability in reference thereto.
16. ESTOPPEL CERTIFICATE
(a) Tenant shall at any time and from time to time upon not less than ten
day's prior written notice from Landlord execute, acknowledge and deliver to
Landlord a statement in writing (i) certifying that this lease is unmodified and
in full force and effect (or if modified, stating the nature of such
modification and certifying that this lease, as so modified, is in full force
and effect) and the dates to which the rental and other charges are paid in
advance, if any; (ii) acknowledging that there are not, to Tenant's knowledge,
any uncured defaults on the part of Landlord hereunder, or specifying such
defaults if they are claimed; and (iii) certifying such other matters relating
to this lease as Landlord may reasonably request. Any such statement may be
relied upon by any prospective purchaser or encumbrancer of all or any portion
of the real property of which the Premises are a part.
(b) Tenant's failure to deliver a statement within the time prescribed
shall constitute a material default by Tenant under this Lease and shall be
conclusive upon Tenant (i) that this lease is in full force and effect, without
modification except as may be represented by Landlord, (ii) that there are no
uncured defaults in Landlord's performance, and (iii) that not more than one
month's rental has been paid in advance.
17. LANDLORD'S REMEDIES
(a) The following shall constitute Events of Default:
(i) Tenant's failure to pay rent or any other amount due under this
lease within five days after notice of nonpayment.
(ii) Tenant's failure to execute, acknowledge and return an estoppel
certificate under Article 16 or a subordination agreement under Article 19,
within ten days after request.
6
<PAGE>
(iii) Tenant's failure to perform any other obligation under this
lease within fifteen days after notice of nonperformance; provided, however,
that if the breach is of such a nature that it cannot be cured within fifteen
days, Tenant shall be deemed to have cured if cure is commenced promptly and
diligently pursued to completion; and provided further, that in the event of a
breach involving an imminent threat to health or safety, Landlord may in its
notice of breach reduce the period for cure to such shorter period as may be
reasonable under the circumstances.
(iv) Tenant vacates, abandons, or otherwise ceases to use the Premises
on a substantial continuing basis except temporary absence excused by reason of
fire, casualty, or other cause wholly beyond Tenant's control.
(b) Upon the occurrence of an Event of Default, Landlord, at any time
thereafter without further notice or demand may exercise any one or more of the
following remedies concurrently or in succession:
(i) Terminate Tenant's right to possession of the Premises by legal
process or otherwise, with or without terminating this lease, and retake
exclusive possession of the Premises.
(ii) From time to time relet all or portions of the Premises, using
reasonable efforts to mitigate Landlord's damages. In connection with this
reletting, Landlord may relet for a period extending beyond the term of this
lease and may make alterations or improvements to the Premises without releasing
Tenant of any liability. Upon a reletting of all or substantially all of the
Premises, Landlord shall be entitled to recover all of its then prospective
damages for the balance of the lease term measured by the difference between
amounts payable under this lease and the anticipated net proceeds of reletting.
In no event shall Tenant be entitled to receive any amount representing the
excess of avails of reletting over amounts payable hereunder.
(iii) From time to time recover accrued and unpaid rent and
damages arising from Tenant's breach of the Lease, regardless of whether the
Lease has been terminated, together with applicable late charges and interest at
the rate of 18% per annum or the highest lawful rate, whichever is less.
(iv) Enforce the statutory Landlord's lien on Tenant's property.
(v) Recover all attorneys' fees and other costs and expenses incurred
by Landlord in connection with enforcing this lease, recovering possession,
reletting the Premises or collecting amounts owed.
(vi) Perform the obligation on Tenant's behalf and recover from
Tenant, upon demand, the entire amount expended by Landlord plus 20% for special
handling, supervision, and overhead.
(vii) Pursue other remedies available at law or in equity.
(c) Upon a termination of Tenant's right to possession, whether or not
this lease is terminated, subtenancies and other rights of persons claiming
under or through Tenant: (i) shall be terminated or (ii) Tenant's interest shall
be assigned to Landlord. Landlord may separately elect termination or assignment
with respect to each such subtenancy or other matter.
18. NOTICES
All notices to be given by one party to the other under this lease shall be
in writing, mailed or delivered to each at the address set forth at the end of
this lease or at a changed address if notice of the change is given to the other
party in writing. In the case of notice to Tenant after Tenant takes possession
of the Premises, notice shall be sufficient if mailed or delivered to the
address of the Premises.
Mailed notices shall be sent by United States certified or registered mail,
postage prepaid. Such notices shall be deemed to have been given upon posting in
the United States mail. Actual notice shall be no substitute for written notice
under any provision of this lease.
19. SUBORDINATION
Landlord expressly reserves the right at any time to place liens and
encumbrances on and against the Premises and the Building, superior in lien and
effect to this lease and the estate created hereby, and Tenant shall attorn to
the purchaser of the Building under any trustee's sheriff's or foreclosure sale.
The subordination of this Lease shall be self-operative without the necessity of
a written instrument. Tenant shall nevertheless execute within ten days after
request a subordination and attornment agreement on the form customarily used by
the holder of the lien or encumbrance with subordinates this Lease to the lien
or encumbrance, which provides that the holder will recognize Tenant's rights
under this Lease, notwithstanding any foreclosure of the lien or encumbrance,
and which requires Tenant to attorn to the purchaser as provided above.
20. GENERAL PROVISIONS
(a) This lease and the obligations of Tenant shall not be affected or
impaired because Landlord is unable to fulfill any of its obligations or is
delayed in doing so if such inability or delay is caused by reason of any
strike, lockout, civil commotion, war-like operations, invasion, rebellion,
hostilities, military or usurped
7
<PAGE>
power, sabotage, governmental regulations or controls, inability to obtain any
material, service or financing, Act of Act or other cause beyond the control of
the Landlord.
(b) Tenant and its officers, agents, employees, and customers shall comply
with the rules and regulations established by Landlord and with such
modifications and additions as Landlord may hereafter make for the Building;
provided, however, that rules and regulations shall not materially abrogate any
right or privilege expressly granted to Tenant. Any violation of the rules and
regulations shall constitute a breach of this lease.
(c) The article captions contained in this lease are for convenience only
and shall not be considered in the construction or interpretation of any
provision.
(d) This lease contains all of the agreements of the parties hereto with
respect to any matter covered or mentioned in this lease, and no prior agreement
or understanding pertaining to any matter shall be effective for any purpose. No
provision of this lease may be amended or added to except by an agreement in
writing signed by the parties hereto to their respective successors in interest.
(e) Submission of this instrument for examination shall not bind Landlord
in any manner, and no lease or obligations of Landlord shall arise until this
instrument is signed and delivered by Landlord and Tenant.
(f) No rights to light or air over any property, whether belonging to
Landlord or any other persons, are granted to Tenant by this lease.
(g) No waiver by Landlord of any provision of this lease or any breach by
Tenant hereunder shall be deemed to be a waiver of any other provision hereof,
or of any subsequent breach by Tenant of the same or any other provision.
Landlord's consent to or approval of any act by Tenant requiring Landlord's
consent or approval shall not be deemed to render unnecessary the obtaining of
Landlord's consent to or approval of any subsequent act of Tenant, whether or
not similar to the act so consented to or approved. No act or thing done by
Landlord or Landlord's agent during the term of this lease shall be deemed an
acceptance of a surrender of the Premises, and no agreement to accept a
surrender shall be valid unless in writing and signed by Landlord. No employee
of Landlord or of Landlord's agents shall have any power to accept the keys to
the Premises prior to the termination of this lease, and the delivery of the
keys to any employee shall not operate as a termination of the lease or a
surrender of the Premises.
(h) FITNESS CENTER. For the term of this Lease, Landlord will grant
Tenant three (3) complimentary memberships to Club 44, located in the service
level of the Building, to three (3) designated employees of Tenant, subject to
the following:
1. Tenant's employees must abide by and obey any and all rules and
regulations pertaining to use of the facility. Failure to abide by said
rules and regulations will result in loss of membership privileges for the
individual concerned, at the sole discretion of the Fitness Center Director
or Assistant Director.
2. At its sole and absolute discretion, Landlord may, at any time
and without recourse, compensation, or liability, close the fitness center
and cease operations.
3. Tenant will provide the Fitness Center Director with written
notification of the names of the complimentary members, and said
memberships are not transferable without thirty (30) days' written notice.
(i) Time is of the essence of this lease.
LANDLORD: ADDRESS:
DMB PROPERTY VENTURES LIMITED 4201 N. 24th Street, Suite 12D
PARTNERSHIP, a Delaware limited Phoenix, Arizona 95016
partnership Phone: 244-0500
Fax: 244-0569
By: DMB G.P., an Arizona corporation
By: /s/ James C. Hoselton
------------------------------
James C. Hoselton
Its: Vice President
TENANT: ADDRESS:
NOVELLUS SYSTEMS, INC., a California 3970 North 1st Street
corporation
San Jose, California 95134
Phone: (408) 943-3413
By: /s/ Peter Hanley Fax: (408) 943-3401
-------------------------------
Peter Hanley
Its: Executive Vice President
8
<PAGE>
EXHIBIT "A"
DESCRIPTION OF REAL PROPERTY
Lot 5, PHOENIX GATEWAY AMENDED, according to Book 322 of Maps,
Page 18, records of Maricopa County, Arizona.
<PAGE>
EXHIBIT "B"
PREMISES
[MAP]
10
<PAGE>
EXHIBIT "C"
TENANT IMPROVEMENTS
(To be mutually agreed upon between Landlord and Tenant. Landlord requires
approved plans and specifications no later than December 1, 1995, in order
to deliver the Premises on February 1, 1996.rules and regulations shall
constitute a breach of this lease.
11
<PAGE>
THIRD AMENDMENT TO LEASE
THIS THIRD AMENDMENT TO LEASE (hereinafter "Amendment") is made this 3rd
day of April, 1989 by and between CALIFORNIA SECOND, LTD., a Florida limited
partnership ("Landlord") and CIRCADIAN, INCORPORATED, a Delaware corporation
("Tenant").
R E C I T A L S
A. Tenant currently leases from Landlord approximately twenty-nine
thousand four hundred twenty-four (29,424) square feet of space located at 3942
North First Street, San Jose, California pursuant to that certain lease dated
June 9, 1987, as amended by that certain First Amendment to Lease dated December
1, 1987, and as amended by that certain Second Amendment to Lease dated August
30, 1988 (the lease as amended shall hereinafter be referred to as the
"Lease").
B. The Lease provides for a termination date of September 27, 1989.
C. Tenant desires to extend the term of the Lease on the terms and
conditions set forth herein.
D. Landlord agrees to so extend the term in consideration of Tenant's
agreement to the terms and conditions set forth below:
NOW, THEREFORE, the parties hereto agree to amend the Lease as follows:
1. TERM.
The term of the Lease is hereby extended for one (1) year commencing
September 28, 1989 and ending September 27, 1990 ("Extended Term").
2. MONTHLY RENT.
Beginning with the first lease month of the Extended Term the monthly
rent as set forth in paragraph
-1-
<PAGE>
4(a) of the Lease, as increased by the Second Amendment to Lease, shall be
decreased from Forty-Six Thousand Three Hundred Nine and 65/100 Dollars
($46,309.65) per month to Twenty Thousand Five Hundred Ninety-Six and 80/100
Dollars ($20,596.80) per month.
3. COMMON AREA CHARGES.
Subject to adjustments as provided in paragraph 16 of the Lease and as
otherwise adjusted prior to the date hereof, Tenant shall continue to pay to
Landlord its percentage share of Common Area Charges, as defined in said
paragraph 16 of the Lease, during the Extended Term.
4. FIRST MONTH'S RENT FOR EXTENDED TERM.
Upon Tenant's execution of this Amendment Tenant shall deposit with
Landlord the sum of Ten Thousand Two Hundred Ninety-Eight and 40/100 Dollars
($10,298.40) which amount shall be applied to offset the monthly rent for the
first full month of the Extended Term.
5. OPTION TO EXTEND.
Tenant's option to extend the term of the Lease, as set forth in
paragraph 51 of the Lease, is hereby deleted and of no further force or effect.
6. RESTATEMENT OF OTHER LEASE TERMS.
All terms, covenants and conditions of the Lease shall remain in full
force and effect during the Extended Term except as specifically modified
herein.
IN WITNESS WHEREOF, the parties hereto execute this
-2-
<PAGE>
Amendment on the date set forth below their signature.
Landlord: Tenant:
CALIFORNIA SECOND, LTD., CIRCADIAN, INCORPORATED
a Florida limited partnership a Delaware corporation
By: McCandless Partnership, a
California general partnership
By: /s/ Birk S. McCandless By: /s/ James A. Langley
--------------------------- ---------------------------
Birk S. McCandless, as (Signature)
Trustee under Trust JAMES A. LANGLEY
Agreement dated February --------------------------------
17, 1982, a general (Printed Name)
partner VP, Finance
--------------------------------
(Title)
4/3/89 3/2/89
----------------------- --------------------------------
(Date) (Date)
-3-
<PAGE>
MCCANDLESS MANAGEMENT
CORPORATION
3945 Freedom Circle, Suite 1000
Santa Clara, CA 95054 September 19, 1990
(408) 980-6500
Fax: (408) 727-5235
Mr. Peter Chang
Circadian, Inc.
3942 N. First Street
San Jose, California 95134
RE: Commencement and Termination Letter
Dear Mr. Chang:
The purpose of this letter is to confirm the commencement and termination dates
of the Fourth Amendment to Lease dated July 16, 1990, for premises located at
3942 North First Street, San Jose, California.
The commencement and termination dates are hereby confirmed as September 28,
1990, and September 27, 1991, respectively.
Basic rent in the amount of $16,183.20 and direct expenses of $3,236.64,
totalling $19,419.84, shall be due on the first of each month beginning October
1, 1990. Thereafter, the direct expenses shall be adjusted in accordance with
the Fourth Amendment to Lease.
However, the Basic Rent and Direct Expenses due for September 1990 is
$23,392.08, which was prorated in accordance with the decrease effective date,
as follows:
September 1990
--------------
9/1 - 27 $20,596.80/30 x 27 days $18,537.12
9/28 - 30 $16,183.20/30 x 3 days 1,618.32
Direct Expenses 3,236.64
----------
Total Due $23,392.08
Should you require any assistance respecting the building or your occupancy,
please feel free to contact me or my assistant, Barbara Eibach. We can help you
with any issue related to administration of your Lease as well as with any
building or grounds maintenance issues.
<PAGE>
Mr. Peter Chang
September 19, 1990
Page Two
Please sign your acknowledgment below and return all three copies to our office.
One fully executed original will be returned to you for your files.
Sincerely,
McCANDLESS MANAGEMENT CORPORATION
/s/ Dale Green
Dale Green
Senior Asset Manager
DG/bee
Landlord: Tenant:
- --------- -------
CALIFORNIA SECOND, LTD., a CIRCADIAN, INC., a
Florida limited partnership Delaware corporation
BY: McCandless Partnership,
a California general
partnership, a General
Partner
BY: /s/ Birk S. McCandless BY: /s/ Peter H. Chang
-------------------------- -----------------------
Birk S. McCandless, as
Trustee under the Birk
S. McCandless and Mary
McCandless Inter Vivos
Trust Agreement dated
February 17, 1982, a
General Partner
10/12/90 10/9/90
------------------------- -------------------------
(Date) (Date)
<PAGE>
FOURTH AMENDMENT TO LEASE
THIS FOURTH AMENDMENT TO LEASE (hereinafter "Amendment") is made this 16th
day of July, 1990 by and between CALIFORNIA SECOND, LTD., a Florida limited
partnership ("Landlord") and CIRCADIAN, INCORPORATED, a Delaware corporation
("Tenant").
R E C I T A L S
A. Tenant currently leases from Landlord approximately twenty-nine
thousand four hundred twenty-four (29,424) square feet of space located at 3942
North First Street, San Jose, California pursuant to that certain lease dated
June 9, 1987, as amended by that certain First Amendment to Lease dated December
1, 1987, that certain Second Amendment to Lease dated August 30, 1988 and that
certain Third Amendment to Lease dated April 3, 1989 (the lease as amended
hereinafter be referred to as the "Lease").
B. The Lease provides for a termination date of September 27, 1990.
C. Tenant desires to extend the term of the Lease on the terms and
conditions set forth herein.
D. Landlord agrees to extend the term in consideration of Tenant's
agreement to the terms and conditions set forth below:
NOW, THEREFORE, the parties hereto agree to amend the Lease as follows:
1. TERM. The term of the Lease is hereby extended for one (1) year
commencing September 28, 1990 and ending September 27, 1991 ("Second Extended
Term").
2. MONTHLY RENT. The monthly rent as set forth in paragraph 4(a) of the
Lease shall be Sixteen Thousand One Hundred Eighty-Three and 20/100 ($16,183.20)
per month during the Second Extended Term.
1
<PAGE>
3. COMMON AREA CHARGES. Subject to adjustments as provided in paragraph
16 of the Lease and as otherwise adjusted prior to the date hereof, Tenant shall
continue to pay to Landlord its percentage share of Common Area Charges during
the Second Extended Term.
4. RESTATEMENT OF OTHER LEASE TERMS. All terms, covenants and conditions
of the Lease shall remain in full force and effect except as specifically
modified herein.
IN WITNESS WHEREOF, the parties hereto execute this Amendment on the date
set forth below their signature.
Landlord: Tenant:
- -------- ------
CALIFORNIA SECOND, LTD., CIRCADIAN, INCORPORATED,
a Florida limited partnership a Delaware corporation
By: McCandless Partnership, a
California general partnership,
a General Partner
By: /s/ Birk S. McCandless By: /s/ Peter H. Chang
----------------------------- --------------------------
Birk S. McCandless, as (Signature)
Trustee under the Birk S.
McCandless and Mary PETER H. CHANG
McCandless Inter Vivos -----------------------------
Trust Agreement dated (Printed Name)
February 17, 1982, a
General Partner President & C.E.O.
-----------------------------
(Title)
7/20/90 7/16/90
------------------------- -----------------------------
(Date) (Date)
2
<PAGE>
FIFTH AMENDMENT TO LEASE
THIS FIFTH AMENDMENT TO LEASE (hereinafter "Amendment") is made this 15th
day of August, 1991 by and between CALIFORNIA SECOND, LTD., a Florida limited
partnership ("Landlord") and CIRCADIAN, INC., a Delaware corporation ("Tenant").
R E C I T A L S
A. Tenant currently leases from Landlord approximately twenty-nine
thousand four hundred twenty-four (29,424) square feet of space located at 3942
North First Street, San Jose, California ("Premises") pursuant to that certain
lease dated June 9, 1987 ("Original Lease"), as amended by that certain First
Amendment to Lease dated December 1, 1987, Second Amendment to Lease dated
August 30, 1988, Third Amendment to Lease dated April 3, 1989 and Fourth
Amendment to Lease dated July 16, 1990 (the Original Lease as amended shall
hereinafter be referred to as the "Lease").
B. The Lease provides for a termination date of September 27, 1991.
C. Tenant desires to extend the term of the Lease on the terms and
conditions set forth herein.
D. Landlord agrees to extend the term in consideration of Tenant's
agreement to the terms and conditions set forth below.
NOW, THEREFORE, the parties hereto agree to amend the Lease as follows:
1. TERM. The term of the Lease is hereby extended from and after
September 28, 1991 through and including December 31, 1993. The period
commencing on September 28, 1991 and ending on December 31, 1993 is referred to
herein as the "Third Extended Term".
1
<PAGE>
2. MONTHLY RENT. The monthly rent as provided in paragraph 4(a) of the
Original Lease shall be adjusted and payable during the Third Extended Term as
follows:
September 28, 1991 through
December 31, 1991 $16,183.20 per month
January 1, 1992 through
December 31, 1992 $17,065.92 per month
January 1, 1993 through
December 31, 1993 $18,242.88 per month
3. COMMON AREA CHARGES. Subject to adjustments as provided in paragraph
16 of the Original Lease and as otherwise adjusted prior to the date hereof,
Tenant shall continue to pay to Landlord its percentage share of Common Area
Charges during the Third Extended Term.
4. IMPROVEMENTS. Within thirty (30) days after commencement of the Third
Extended Term, Landlord shall, at Landlord's sole cost and expense, shampoo all
carpeting located within the Premises and install a dishwasher in the kitchen
located within the Premises. Except as provided in this paragraph, Landlord
shall have no obligation to alter or improve the Premises.
5. RESTATEMENT OF OTHER LEASE TERMS. Except as specifically modified
herein, all terms, covenants and conditions of the Lease shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties hereto execute this Amendment
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on the date set forth below their signature.
Landlord: Tenant:
- -------- ------
CALIFORNIA SECOND, LTD., CIRCADIAN, INC.,
a Florida limited partnership a Delaware corporation
By: McCandless Partnership,
a California general partnership,
a General Partner
By: /s/ Birk S. McCandless By: /s/ David L. Robertson
----------------------------- --------------------------
Birk S. McCandless, as (Signature)
Trustee under the Birk S.
McCandless and Mary David L. Robertson
McCandless Inter Vivos ----------------------------
Trust Agreement dated (Printed Name)
February 17, 1982, a
General Partner VP of Finance
----------------------------
(Title)
8/15/91
-------------------------------- ----------------------------
(Date) (Date)
3
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SIXTH AMENDMENT TO LEASE
THIS SIXTH AMENDMENT TO LEASE (hereinafter "Amendment") is made this 3rd
day of January, 1994 by and between CALIFORNIA SECOND, LTD., a Florida limited
partnership ("Landlord") and CIRCADIAN, INC., a Delaware corporation ("Tenant").
R E C I T A L S
A. Tenant currently leases from Landlord approximately twenty-nine
thousand four hundred twenty-four (29,424) square feet of space located at 3942
North First Street, San Jose, California ("Premises") pursuant to that certain
lease dated June 9, 1987 ("Original Lease"), as amended by that certain First
Amendment to Lease dated December 1, 1987, Second Amendment to Lease dated
August 30, 1988, Third Amendment to Lease dated April 3, 1989, Fourth Amendment
to Lease dated July 16, 1990 and Fifth Amendment to Lease dated August 15, 1991.
The Original Lease as amended shall hereinafter be referred to as the "Lease".
B. The Lease provides for a termination date of December 31, 1993.
C. Tenant desires to extend the term of the Lease on the terms and
conditions set forth herein.
D. Landlord agrees to extend the term in consideration of Tenant's
agreement to the terms and conditions set forth below.
NOW, THEREFORE, the parties hereto agree to amend the Lease as follows:
1. TERM. The term of the Lease is hereby extended from and after January
1, 1994 through and including December 31, 1998. The period commencing on
January 1, 1994 and ending on December 31, 1998 is referred to herein as the
"Fourth Extended Term".
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2. MONTHLY RENT.
(a) The monthly rent provided for in paragraph 4(a) of the Original Lease
shall be adjusted and payable during the Fourth Extended Term as follows:
January 1, 1994 through
December 31, 1994 $10,800.00 per month
January 1, 1995 through
December 31, 1995 $14,400.00 per month
January 1, 1996 through
December 31, 1996 $17,654.40 per month
January 1, 1997 through
December 31, 1998 Basic rent to be increased
according to paragraph 2(b) below.
(b) The basic rent provided for in paragraph 2(a) for the period
commencing January 1, 1997 through December 31, 1998 shall be adjusted on
January 1, 1997 as follows:
The Consumer Price Index for All Urban Consumers (base year 1967 = 100) for
San Francisco-Oakland-San Jose, Metropolitan Area published by the United States
Department of Labor, Bureau of Labor Statistics ("Index"), which is published
for the date nearest the January 1, 1997 ("Extension Index"), shall be compared
with the Index published for the date immediately preceding January 1, 1994
("Beginning Index"). On January 1, 1997, the monthly basic rent payable during
the following two year period shall be set by multiplying the basic rent of
Seventeen Thousand Six Hundred Fifty-Four and 40/100 Dollars ($17,654.40) per
month by a fraction, the numerator of which is the Extension Index and the
denominator of which is the Beginning Index; provided, however, that in no event
shall the increase in basic rent (using $17,654.40 per month as the basic rent
amount to be compounded) be less than three percent (3%) per annum compounded
from January 1, 1994 or greater than seven percent (7%) per annum compounded
from January 1, 1994.
As soon as the basic rent for such period is set, Landlord shall given
Tenant notice of the amount. In no case shall the basic rent be less than the
basic rent for the preceding period. Upon adjustment of the basic rent as
provided in this Amendment, the parties shall immediately execute an amendment
to the Lease stating
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the new basic rent. If the Index is changed so that the base year differs from
that used as of the month immediately preceding the month in which the term
commences, the Index shall be converted in accordance with the conversion factor
published by the United States Department of Labor, Bureau of Labor Statistics.
If the Index is discontinued or revised during the term, such other government
index or computation with which it is replaced shall be used in order to obtain
substantially the same result as would be obtained if the Index had not been
discontinued or revised.
3. COMMON AREA CHARGES. Subject to adjustments as provided in paragraph
16 of the Original Lease and as otherwise adjusted prior to the date hereof,
Tenant shall continue to pay to Landlord its percentage share of Common Area
Charges during the Fourth Extended Term.
4. IMPROVEMENTS. Improvements to the Premises shall be constructed and
installed in accordance with the plans and specifications, and other terms and
conditions, set forth in Exhibit A to this Agreement, the contents of which is
incorporated herein and made a part hereof by this reference. The improvements
shall be constructed and installed at the expense of Landlord and/or Tenant as
set forth in Exhibit A to this Amendment and in each case shall be performed in
a diligent and workmanlike manner.
5. SECURITY DEPOSIT.
(a) Concurrently with Tenant's execution of this Amendment, Tenant
shall deliver to Landlord an unconditional and irrevocable Letter of Credit in
the amount of One Hundred Thousand and 00/100 Dollars ($100,000.00) to secure
the faithful performance by Tenant of all of the terms, covenants and conditions
of this Amendment to be kept and performed by Tenant. Notwithstanding the actual
amount of the Letter of Credit, the maximum amount which Landlord may demand
shall not exceed an amount equal to One Hundred Thousand and 00/100 Dollars
($100,000.00) less the sum of Two Thousand Seven Hundred Seventy-Seven and
77/100 Dollars ($2,777.77) per month during the first three (3) years of the
Fourth Extended Term. The Letter of Credit (to the extent limited by the
preceding sentence) shall be available by draft at sight, subject only to
receipt by the bank of a notarized statement from Birk S. McCandless or Steven
E. Sund stating that the amount demanded is due and owing to Landlord. The
Letter of Credit shall by its terms expire not less than one year from the date
issued, provided that unless Tenant deposits with Landlord a cash security
deposit of like amount, said Letter of Credit shall be renewed by Tenant for
successive periods of not less than one year each to and including
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December 31, 1996 in the amounts specified below for each of the first three (3)
years of the Fourth Extended Term as follows:
January 1, 1994 through
December 31, 1994 $100,000.00
January 1, 1995 through
December 31, 1995 $66,667.00
January 1, 1996 through
December 1, 1996 $33,334.00
January 1, 1997 through
End of Fourth Extended Term Not required
The bank's written renewal of the Letter of Credit shall in each case be
delivered to Landlord not less than ninety (90) days prior to the expiration
date of the then outstanding Letter of Credit. Tenant's failure to so deliver,
renew (including, but not limited to, the delivery to Landlord of such renewal
not less than ninety (90) days prior to expiration of the Letter of Credit) and
maintain such Letter of Credit shall be a material breach of this Amendment.
If Tenant defaults in the performance of any provision of this Amendment to
be performed by Tenant, including without limitation the payment of rent and
other amounts due Landlord, and such default is not cured within the cure period
set forth in the Lease, Landlord may immediately and without further notice
resort to said Letter of Credit and use or apply all or any part of same to
compensate Landlord for any loss or expense occasioned thereby and for the
payment of any amount due Landlord under the terms of this Amendment. If any
portion of said Letter of Credit is so used as specified above, Tenant shall,
within ten (10) days after written demand therefor, restore the Letter of Credit
to its original amount, and Tenant's failure to do so shall be a material breach
of this Amendment and the Lease.
Landlord's resort to said Letter of Credit shall in no way or manner
constitute an acceptance of or waiver of such default by Tenant; nor shall
resort to said Letter of Credit terminate, or permit Tenant to terminate, or
constitute a forfeiture of, or be construed as an election by Landlord to
terminate, the Lease; nor shall such resort affect Landlord's remedies otherwise
available under the Lease or at law.
(b) In addition, concurrently with Tenant's execution of this Amendment,
Tenant shall deposit with Landlord the sum of
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Seventeen Thousand Six Hundred Fifty-Four and 40/100 Dollars ($17,654.40),
which sum shall be held by Landlord as Tenant's security deposit pursuant to
paragraph 4(d) of the Original Lease. Tenant hereby acknowledges that any
amounts previously deposited with Landlord as a security deposit pursuant to
the Lease have previously been applied by Landlord to Tenant's prior
obligations under the Lease and that the entire amount of the security
deposit held by Landlord as a security deposit, upon receipt of the above
amount, is Seventeen Thousand Six Hundred Fifty-Four and 40/100 Dollars
($17,654.40). Landlord hereby acknowledges that Tenant has performed all of
its obligations (including, but not limited to the payment of the settlement
payment) under that certain Settlement Agreement and Agreement for Mutual
Release Between Landlord and Tenant dated September 9, 1992.
6. INSURANCE. Landlord's obligation to obtain and keep in force certain
insurance policies, as specified in paragraph 11 of the Original Lease, is
hereby modified to provide that Landlord may, but shall not be obligated to,
obtain flood and/or earthquake insurance. Landlord shall have no liability to
Tenant if Landlord elects not to obtain flood and/or earthquake insurance. The
cost of such insurance shall be a Common Area Charge as provided in paragraph
11.
7. ALTERATIONS. Paragraph 8 of the Lease is hereby modified to provide
that with respect to any alteration which Tenant is required by Landlord to
remove at the end of the lease term, in addition to removing the alteration and
repairing any damage to the Premises caused by such removal and complying with
the surrender provisions in paragraph 23 of the Original Lease, Tenant shall
also be obligated to restore the Premises to their condition as it existed prior
to Tenant making such alteration. Landlord acknowledges that none of the
improvements existing in the Premises as of the date hereof, and none of the
improvements to be constructed by Landlord pursuant to the Work Letter Agreement
attached hereto and incorporated herein are required to be removed by Tenant at
the end of the Lease term.
8. ENVIRONMENTAL MATTERS
A. TENANT's COVENANTS REGARDING HAZARDOUS MATERIALS.
(1) HAZARDOUS MATERIALS HANDLING. Tenant, its agents, invitees,
employees, contractors, sublessees, assigns and/or successors shall not use,
store, dispose, release or otherwise cause to be present Hazardous Materials (as
defined
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below) on or about the Premises or Project other than those Hazardous
Materials in the amounts set forth on Exhibit B attached hereto and
incorporated herein, and other than reasonable amounts of customary office
products and cleaners. As used herein "Hazardous Materials" shall mean any
petroleum or petroleum by-products, flammable explosives, asbestos, urea
formaldehyde, radioactive materials or waste and any "hazardous substance",
"hazardous waste", haxardous materials", "toxic substance" or "toxic waste"
as those terms are defined under the provisions of the California Health and
Safety Code and/or the provisions of the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. Section 9601 et seq.), as
amended by the Superfund Amendments and Reauthorization Act of 1986 (42
U.S.C. Section 9601 et seq.), or any other hazardous or toxic substance,
material or waste which is or becomes regulated by any local governmental
authority, the State of California or any agency thereof, or the United
States Government or any agency thereof.
(2) NOTICES. Tenant shall immediately notify Landlord in writing of:
(i) any enforcement, cleanup, removal or other governmental or regulatory action
instituted, completed or threatened pursuant to any law, regulation or ordinance
relating to the industrial hygiene, environmental protection or the use,
analysis, generation, manufacture, storage, presence, disposal or transportation
of any Hazardous Materials (collectively "Hazardous Materials Laws"); (ii) any
claim made or threatened by any person against Tenant, the Premises, Project or
buildings within the Project relating to damage, contribution, cost recovery,
compensation, loss or injury resulting from or claimed to result from any
Hazardous Materials; and (iii) any reports made to any environmental agency
arising out of or in connection with any Hazardous Materials in, on or removed
from the Premises, Project or buildings within the Project, including any
complaints, notices, warnings, reports or asserted violations in connection
therewith. Tenant shall also supply to Landlord as promptly as possible, and in
any event within five (5) business days after Tenant first receives or sends the
same, with copies of all claims, reports, complaints, notices, warnings or
asserted violations relating in any way to the Premises, Project or buildings
within the Project or Tenant's use thereof. Tenant shall promptly deliver to
Landlord copies of hazardous waste manifests reflecting in the legal and proper
disposal of all Hazardous Materials removed from the Premises.
B. INDEMNIFICATION OF LANDLORD. Tenant shall indemnify, defend (by
counsel acceptable to Landlord), protect, and hold Landlord, and each of
Landlord's partners, employees, agents, attorneys, successors and assigns, free
and harmless from and against any and all claims, liabilities, penalties,
forfeitures, losses or expenses (including attorneys' fees) for death of or
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injury to any person or damage to any property whatsoever (including water
tables and atmosphere), arising from or caused in whole or in part, directly or
indirectly, by (i) the presence in, on, under or about the Premises, Project or
buildings within the Project or discharge in or from the Premises, Project or
buildings within the Project of any Hazardous Materials arising from or caused
by Tenant's use, analysis, storage, transportation, disposal, release,
threatened release, discharge or generation of Hazardous Materials to, in, on,
under, about or from the Premises, Project or buildings within the Project, or
(ii) Tenant's failure to comply with any Hazardous Materials Laws whether
knowingly, unknowingly, intentionally or unintentionally. Tenant's obligations
hereunder shall include, without limitation, and whether foreseeable or
unforeseeable, all costs of any required or necessary repair, cleanup or
detoxification or decontamination of the Premises, Project or buildings within
the Project, and the preparation and implementation of any closure, remedial
action or other required plans in connection therewith. In addition, Tenant
shall reimburse Landlord for (i) losses in or reductions to rental income
resulting from Tenant's use, storage or disposal of Hazardous Materials, (ii)
all costs of refitting or other alterations to the Premises, Project or
buildings within the Project required as a result of Tenant's use, storage, or
disposal of Hazardous Materials including, without limitation, alterations
required to accommodate an alternate use of the Premises, Project or buildings
within the Project, and (iii) any diminution in the fair market value of the
Premises, Project or buildings within the Project caused by Tenant's use,
storage, or disposal of Hazardous Materials. For purposes of this paragraph 8,
any acts or omissions of Tenant, or by employees, agents, assignees, contractors
or subcontractors of Tenant or others acting for or on behalf of Tenant (whether
or not they are negligent, intentional, willful or unlawful) shall be strictly
attributable to Tenant.
Landlord shall indemnify, defend, (with counsel reasonably acceptable to
Tenant), protect, and hold Tenant, its employees, agents, attorneys,
stockholders, officers, directors, successors and assigns free and harmless from
and against any and all claims, liabilities, penalties, forfeitures, losses or
expenses (including attorneys' fees) for the death of or injury to any person or
damage to any property whatsoever (including water tables and atmosphere)
directly arising out of or in connection with Landlord's use, analysis, storage,
transportation, disposal, release, threatened release, discharge or generation
of Hazardous Materials in, on, under or about the Premises or Project, or the
violation by Landlord of any Hazardous Materials Law relating to any such
Hazardous Material.
C. SURVIVAL. The provisions of this paragraph 8 shall survive the
expiration or earlier termination of the term of the
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Lease.
9. REAL ESTATE BROKERS. Each party represents and warrants to the other
party that it has not had dealings in any manner with any real estate broker,
finder or other person with respect to the Premises and the negotiation and
execution of this Amendment except Tarlton Properties. Except as to commissions
and fees to be paid as provided in this paragraph, each party shall indemnify
and hold harmless the other party from all damage, loss, liability and expense
(including attorneys' fees and related costs) arising out of or resulting from
any claims for commissions or fees that may or have been asserted against the
other party by any broker, finder or other person with whom Tenant or Landlord
has or purportedly has dealt with in connection with the Premises and the
negotiation and execution of this Amendment. Landlord shall pay to Tarlton
Properties a commission equal to fifty percent (50%) of Landlord's standard
commission in connection with this transaction. Landlord and Tenant agree that
Landlord shall not be obligated to pay any broker leasing omissions, consulting
fees, finder fees or any other fees or commissions arising out of or relating to
any extended term beyond the Fourth Extended Term or to any expansion or
relocation of the Premises at any time.
10. LANDLORD'S ADDRESS.
Landlord's address for notice purposes, as provided in paragraph 39 of
the Lease, is hereby changed to:
3945 Freedom Circle, Suite 640
Santa Clara, California 95054
11. USE. The use provision set forth in paragraph 1 of the Lease is
hereby modified to allow Tenant to also use the Premises for the operating of an
Asthma Therapy Management Center and a dispensing mail order pharmacy; subject
to Tenant's compliance with all laws related thereto, including zoning
ordinances, and such uses shall not be permitted if such uses would violate any
governmental or quasi-governmental law, ordinance, rule or regulation. Landlord
makes no representation or warranty regarding the legality or permissibility of
such uses. In addition, any increases in insurance costs on the Project which
are due to Tenant's use of the Premises shall be paid entirely by Tenant.
12. RESTATEMENT OF OTHER LEASE TERMS. Except as specifically modified
herein, all terms, covenants and conditions of the Lease shall remain in full
force and effect.
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IN WITNESS WHEREOF, the parties hereto execute this Amendment
on the date set forth below their signature.
Landlord: Tenant:
- -------- ------
CALIFORNIA SECOND, LTD., CIRCADIAN, INC.,
a Florida limited partnership a Delaware corporation
By: McCandless Partnership,
a California general partnership,
a General Partner
By: /s/ Birk S. McCandless By: /s/ Arthur A. Bertolero
----------------------------- --------------------------
Birk S. McCandless, as (Signature)
Trustee under the Birk S.
McCandless and Mary Arthur A. Bertolero
McCandless Inter Vivos -------------------------------
Trust Agreement dated (Printed Name)
February 17, 1982, a
General Partner President
-------------------------------
(Title)
1/7/94
-------------------------------- -------------------------------
(Date) (Date)
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WORK LETTER AGREEMENT
EXISTING SPACE - ALLOWANCE
CONSTRUCTION Exhibit A
- -------------------------------------------------------------------------------
THIS WORK LETTER AGREEMENT (hereinafter "Exhibit A") is attached to and
forms a part of that certain Sixth Amendment to Lease ("Amendment") amending
that certain lease ("Lease") by and between CALIFORNIA SECOND, LTD., a Florida
limited partnership ("Landlord"), and CIRCADIAN, INC., a Delaware corporation
("Tenant"), pursuant to which Landlord leases to Tenant those certain premises
located at 3942 North First Street, San Jose, California and consisting of
approximately twenty nine thousand four hundred twenty-four (29,424) square feet
("Premises"). All capitalized terms used herein shall have the meaning ascribed
to them in the Amendment to which this Exhibit A is made a part thereof unless
otherwise defined below. The Premises shall be improved in accordance with the
following:
1. EXISTING IMPROVEMENTS:
Tenant accepts the Premises in its existing condition and the
improvements constructed therewith, and Tenant hereby approves the same as
installed, subject only to such changes as may subsequently be agreed upon by
Landlord and Tenant. Such improvements are hereafter called "Existing
Improvements".
2. TENANT IMPROVEMENTS:
As used herein, "Tenant Improvements" shall include those items and
specifications shown on the Final Construction Drawings prepared in accordance
with paragraph 3 below, including those specifications (as appropriate) set
forth and described in Exhibit A-1, attached hereto, exclusive of Existing
Improvements. Landlord shall construct Tenant Improvements in accordance with
the Fional Construction Drawings, Exhibit A-1 and the provisions of this Exhibit
A. Unless otherwise specifically agreed to by Landlord in writing, the
installation, wiring, maintenance and removal of furniture partition systems,
telephone and other communication systems, data cabling, alarm and/or security
systems and any other systems not specifically set forth in the Final
Construction Drawings or Exhibit A-1, and all cost and expense associated
therewith, shall be the sole responsibility of Tenant. In connection with the
construction and installation of the Tenant Improvements, Landlord or Landlord's
general contractor shall have no obligation to move any of Tenant's property
located in or about the Premises including, but not limited to, furniture,
inventory
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and trade fixtures, at the time of such construction and installation. If at the
time of construction and installation of the Tenant Improvements Tenant has
property located in or about the Premises that unreasonably inhibits or prevents
the construction and installation of the Tenant Improvements, Tenant shall
within one (1) business day after receipt of notification therefore from
Landlord or Landlord's general contractor, at Tenant's sole cost and expense,
move such property to another location within the Premises, or upon receipt of
Landlord's prior approval, to another location within the Project designated by
Landlord in Landlord's sole discretion; Tenant's failure to move such property
within one (1) business day after receipt of notification therefore from
Landlord or Landlord's general contractor shall be deemed a Tenant caused delay
subject to the provisions of paragraph 8 of this Exhibit A. If at the time of
construction and installation of the Tenant Improvements Tenant has property
located in or about the portion of the Premises where the construction is
occurring from time to time, Landlord and Landlord's general contractor shall
incur no liability to Tenant or any other party in the event such property is
damaged, destroyed or stolen during the construction and installation of the
Tenant Improvements.
3. TENANT IMPROVEMENT DESIGN SCHEDULE:
The plans and specifications for the Tenant Improvements shall be
completed in accordance with the following:
(a) Tenant shall approve preliminary floor plan layouts
("Preliminary Floor Plans") prepared by Landlord by December 20, 1993. The
Preliminary Floor Plans shall show all walls, doors, and other Tenant
Improvements desired by Tenant in sufficient detail for Landlord's architect
to prepare architectural construction drawings and related documents
("Architectural Construction Documents").
(b) Between December 15 and December 20, Landlord's architect and
Tenant's representative shall meet as needed to review and complete the final
details related to the Preliminary Floor Plans, so that on December 20, 1993 the
Architectural Construction Documents are subject only to minor changes.
(c) No later than December 20, 1993, Tenant shall have made the
decisions required and supplied to Landlord the information requested by
Landlord and necessary for Landlord's architect to complete the Architectural
Construction Documents in enough detail for Landlord's general contractor to bid
the work, select subcontractors and to proceed toward the design of electrical,
mechanical and any other requirements not included on the Architectural
Construction Documents. Upon Landlord's general contractor's selection of
subcontractors, Landlord's general
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contractor and subcontractors shall prepare design specifications outlining in
reasonable detail electrical, mechanical and any other requirements not included
on the Architectural Construction Documents ("Electrical and Mechanical
Drawings").
(d) Upon completion of the Architectural Construction Documents,
Tenant shall have one (1) day to approve the same or notify Landlord of any
final changes which are required, subject to changes, deletions or additions as
provided in paragraphs 6 and 7 of this Exhibit A.
(e) Upon completion of the Electrical and Mechanical Drawings,
Landlord or Landlord's general contractor shall submit the Architectural
Construction Documents and Electrical and Mechanical Drawings (collectively the
"City Ready Plans") to the City to obtain a building permit.
(f) Tenant shall have decided upon carpet selection and all other
color and material specifications by November 19, 1993.
(g) As used herein, "Final Construction Drawings" shall include the
City Ready Plans, as approved by the City, and any subsequent additions,
deletions or changes to the Tenant Improvements permitted or required pursuant
to paragraphs 6 and 7 of this Exhibit A.
4. TENANT IMPROVEMENT COST ESTIMATES:
Within fourteen (14) days of completion of the Electrical and
Mechanical Drawings, Landlord shall prepare and deliver to Tenant an improvement
cost budget ("Improvement Cost Budget") setting forth the Total Cost of Tenant's
Improvements (as defined in paragraph 5(b) below). Within three (3) days after
Tenant's receipt of the Improvement Cost Budget, Tenant shall, in writing,
approve or disapprove the Improvement Cost Budget. If Tenant does not deliver to
Landlord its written approval or disapproval within the three (3) day period,
Tenant will be deemed to have approved the Improvement Cost Budget. If Tenant
disapproves the Improvement Cost Budget, Landlord and Tenant shall, within three
(3) days of Tenant's disapproval, attempt to agree on mutually acceptable
modifications to the Improvement Cost Budget. If Tenant disapproves of the
Improvement Cost Budget and Landlord and Tenant are unable, within the three (3)
day period, to agree on mutually acceptable changes to the Improvement Cost
Budget, or if Tenant approves of the Improvement Cost Budget but does not
deliver to Landlord, within three (3) days of its approval, signed copies of the
Improvement Cost Budget and Architectural Construction Documents, then Landlord
may terminate the Amendment upon written notice to Tenant. Upon Tenant's written
approval of the Improvement Cost Budget (or in the event Tenant is deemed to
have approved the Improvement Cost Budget as provided hereinabove), the
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Total Cost of Tenant's Improvements set forth therein shall be deemed a fixed
price for the Tenant Improvements (said fixed price shall be referred to herein
as the "Tenant Improvement Fixed Cost"). The Tenant Improvement Fixed Cost shall
be subject to adjustment for increases in costs resulting from changes to the
Tenant Improvements requested or required pursuant to paragraphs 6 and 7 of this
Exhibit A. Landlord shall not be obligated to commence construction of the
Tenant Improvements until the following has occurred: the Architectural
Construction Documents and Tenant Improvement Fixed Cost have been agreed to by
Landlord and Tenant; Tenant has indicated its approval of the Architectural
Construction Documents and Improvement Cost Budget by signing copies thereof;
and Landlord has executed a written authorization to proceed with construction
with Landlord's general contractor based on the agreed Architectural
Construction Documents and Tenant Improvement Fixed Cost.
5. TENANT IMPROVEMENT ALLOWANCE:
(a) Landlord agrees to grant to Tenant a Tenant Improvement Allowance
("Allowance") of $88,272.00 ($3.00/SF x 29,424 SF) to be applied toward the
"Total Cost of Tenant's Improvements" (as defined below) to be installed in
accordance with this Exhibit A.
(b) As used herein, "Total Cost of Tenant's Improvements" shall
include: (i) the cost of Tenant Improvements and increases therein pursuant
to paragraphs 6 and 7 below, if any, and all demolition costs incurred in
connection with preparing the Premises the installation of the Tenant
Improvements; (ii) the cost of overtime or special expenditures, provided
such overtime or special expenditures are approved in advance by Tenant in
writing (which Tenant shall approve or disapprove within one (1) day of
receipt of Landlord's notice regarding same); (iii) all costs related to
change orders; (iv) all costs related to changes required or requested by
governmental authority; (v) permit fees and other fees not previously paid by
Landlord as part of shell costs; (vi) the cost of consultants and engineers;
(vii) an amount equal to the actual cost of supervision, administration and
on-site facilities and equipment necessary to perform the work; (viii) an
amount equal to 9% of the sum of items (i) through (vii) above as and for the
general contractor's overhead and profit; and (ix) the cost of architects
hired by Landlord.
(c) In the event that the Tenant Improvement Fixed Cost exceeds the
Allowance (the amount by which the Tenant Improvement Fixed Cost exceeds the
Allowance shall be referred to herein as the "Excess Cost"), Tenant shall pay
twenty-five percent (25%) of such Excess Cost to Landlord within five (5) days
of Tenant's approval of the Improvement Cost Budget, twenty-five percent (25%)
thereof within five (5) days of when Landlord notifies Tenant that the
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Tenant Improvements are twenty-five percent (25%) complete, another twenty-five
percent (25%) when Landlord notifies Tenant that the Tenant Improvements are
fifty percent (50%) complete, another fifteen percent (15%) when Landlord
notifies Tenant that the Tenant Improvements are seventy-five percent (75%)
complete and the final ten percent (10%) when the Tenant Improvements have been
completed. Tenant's failure to make any payment of the Excess Cost when due, or
to make any payment with respect to change orders as set forth in paragraph 6 of
this Exhibit A, shall be deemed a default under the Lease and the amount so
delinquent shall be deemed additional rent and Landlord may exercise all rights
and remedies set forth in the Lease; and in addition, Landlord may delay
construction until such payment is made and such delay shall be deemed a Tenant
caused delay subject to the provisions of paragraph 8 of this Exhibit A.
(d) In the event Tenant causes delays, or requests changes which
cause delays in construction of more than ninety (90) calendar days, then
Landlord shall not be obligated to grant to Tenant the Allowance, or any balance
remaining unused therein. In such case, Tenant shall be responsible for all
additional costs resulting therefrom, including any increase in labor and
materials costs. Tenant shall be entitled to no rent reduction or credit at any
time in the event that the Allowance or any portion thereof remains unused for
any reason whatsoever.
6. CHANGES BY TENANT:
Tenant may request changes, deletions or additions to the Tenant
Improvements; provided, however, that the effectiveness of any such requested
change, deletion or addition shall be subject to written approval by an
authorized representative of Landlord and to obtaining any required governmental
permits or other approvals. If any such change, deletion or addition increases
the Tenant Improvement Fixed Cost above the Allowance, Tenant shall immediately
pay to Landlord the full amount of such increase in excess of the Allowance. n
no event shall work on any change, deletion or addition requested pursuant to
this paragraph 6 commence prior to (i) Landlord and Tenant approving, in
writing, such change, deletion or addition, and (ii) Landlord's receipt from
Tenant of payment of the full amount of the increase of the Tenant Improvement
Fixed Cost in excess of the Allowance.
7. CHANGES BY AUTHORITY:
Tenant agrees that if any change, deletion or addition to any of the
improvements proposed to be constructed or installed is required by any
governmental authority in connection with obtaining any governmental permit or
approval, or otherwise, then such change, deletion or addition shall promptly be
made and the Tenant Improvement Fixed Cost shall be adjusted to reflect any
increase in cost resulting from such required change. To the extent any
5
<PAGE>
cost resulting from such required change. To the extent any change, deletion or
addition required by any governmental authority in connection with obtaining any
governmental permit or approval increases the Tenant Improvement Fixed Cost
above the Allowance, Tenant shall pay to Landlord such increase above the
Allowance in accordance with the provisions of paragraph 5(c) of this Exhibit A.
The Tenant Improvements shall be constructed in accordance with all laws.
8. DELAYS CAUSED BY TENANT:
Any delays due to construction delays related to any changes required
by Tenant, or due to any other failures by Tenant to perform its obligations
under this Exhibit A or otherwise under the Lease or the Amendment, shall be
deemed Tenant caused delays for purposes of this Agreement.
9. PUNCH LIST:
Within ten (10) business days after the Effective Date, Tenant shall
deliver to Landlord a list of items ("Punch List") that Tenant believes Landlord
should complete or correct in order for the Premises to be acceptable. Landlord
shall commence to complete or correct the items as soon as possible, except
those items that Landlord in its reasonable discretion contends are not
justified. If Tenant does not deliver the Punch List to Landlord within the ten
(10) day period, Tenant shall be deemed to have accepted the Premises and
approved the construction (provided that such acceptance shall not be deemed a
waiver with respect to structural defects, non-compliance with laws or other
items not reasonably ascertainable on walkthrough inspection). Nothing in this
paragraph 9 shall delay the Effective Date or Tenant's obligation to pay rent or
to make other payments due Landlord under the Lease or the Amendment.
10. ACCESS TO PREMISES:
Tenant shall permit Landlord and Landlord's contractor access to the
Premises during normal business hours for construction of the Tenant
Improvements. Tenant acknowledges that some disruption of its business
operations is inevitable and that such disruption shall not be a basis for
denying Landlord's contractor access to the Premises or otherwise interfering
with construction of the Tenant Improvements. Landlord and its contractors shall
use reasonable efforts to minimize disruption to Tenant's business. In the event
Tenant elects to have construction of the Tenant Improvements, or any portion
thereof, performed at times other than during normal business hours, Landlord
shall provide Tenant with an estimate of overtime charges before commencement of
such work. Tenant shall be responsible for all actual overtime charges and shall
pay to Landlord as additional
6
<PAGE>
rent within ten (10) days of completion of construction of the Tenant
Improvements all such actual overtime charges.
11. ATTACHMENTS:
All reference in the Amendment to Exhibit A shall be deemed to also
include Exhibit A-1.
7
<PAGE>
EXHIBIT A
SUBORDINATION, NONDISTURBANCE AND
ATTORNMENT AGREEMENT
THIS AGREEMENT made this 28th day of February, 1995 by and among THE
TRAVELERS INSURANCE COMPANY, a Connecticut corporation, with an office at 2121
N. California Blvd., Walnut Creek, California 94596-8161 (the "Mortgagee"), and
Circadian, Inc., a Delaware corporation, with an address at 3942 North First
Street, San Jose, California 95134 (the "Tenant"), and California Second, Ltd.,
a Florida Limited Partnership, whose address is c/o McCandless Management
Company, 3945 Freedom Circle, Suite 640, Santa Clara, California 95054 (the
"Borrower").
WITNESSETH:
WHEREAS, the Mortgagee is the holder of an Amended and Restated Deed of
Trust and Security Agreement with Assignment of Rents and Leases and Fixtures
Filing from Borrower dated as of November 1, 1994 (the "Mortgage") covering
certain improved real property located in the County of Santa Clara, State of
California, and described on Exhibit A attached hereto, and recorded on December
1, 1994, as Serial No. 12736117, Santa Clara County Records (the real property
covered by the Mortgage as described in Exhibit A is hereafter referred to as
the "Mortgaged Property"); and
WHEREAS, by virtue of that certain lease ("Lease") dated June 9, 1987, as
amended by that certain First Amendment to Lease dated December 1, 1987, Second
Amendment to Lease dated August 30, 1980, Third Amendment to Lease dated April
3, 1989, Fourth Amendment to Lease dated July 16, 1990, Fifth Amendment to Lease
dated August 15, 1991, and Sixth Amendment to Lease dated January 3, 1994
(collectively, the "Lease"), between the Borrower, as Landlord therein, and the
Tenant, as Tenant therein, the Tenant has leased from the Borrower approximately
29,424 rentable square feet of space located in an office building at 3942 North
First Street, San Jose, California (the "Premises"), which Premises are a
portion of the Mortgaged Property;
WHEREAS, the Tenant desires to be assured of continued occupancy of the
Premises under the terms of the Lease and subject to the terms of the Mortgage;
NOW, THEREFORE, in consideration of the sum of One Dollar ($1.00) by each
party in hand paid to the other, receipt of which is hereby acknowledged, and in
consideration of the premises and the mutual covenants and agreements
hereinafter contained, the parties hereto, intending to be legally bound hereby,
hereby agree as follows:
<PAGE>
1. The Tenant hereby agrees:
(a) subject to this Agreement, the Lease and the Tenant's leasehold
estate and any and all estates, options, liens and charges therein contained or
created thereby are, and shall be and remain, subject and subordinate in all
respects to the lien and effects of the Mortgage and to all of the terms,
conditions and provisions thereof, to all advances made or to be made
thereunder, and to any renewals, extensions, modifications, consolidations or
replacements thereof, with the same force and effect as if the Mortgage had been
executed, delivered and duly recorded at the above-mentioned Recorder, prior to
the execution and delivery of the Lease;
(b) from time to time, upon request by the Mortgagee, it shall
forthwith provide the Mortgagee within ten days of such request with an estoppel
certificate certifying that no defaults, claims, offsets or events, or
situations which, with the passage of time, could become a default or the basis
for a claim or offset against the Borrower by the Tenant, exist under the Lease
or, if the same exist, certifying and describing such items as are in existence;
(c) it will forward to the Mortgagee copies of any notice, claim or
demand given or made by the Tenant to or on the Borrower, in all cases
concurrently with forwarding same to the Borrower, such copies to be provided to
the Mortgagee by the same method of mailing as the statement, notice, claim or
demand was made or given to or on the Borrower;
(d) without the prior written consent of the Mortgagee (i) no rent or
other sums due under the Lease shall be paid more than thirty (30) days in
advance of the due date therefor established by the Lease, except the security
deposit, if any, (ii) no modifications shall be made in the provisions of the
Lease nor shall the term be extended or renewed, except as provided therein,
(iii) the Lease shall not be terminated by the Tenant except as provided therein
nor shall the Tenant tender or accept a surrender of the Lease except incident
to a termination provided for in said Lease, and (iv) it shall only subject the
Premises demised by the Lease or assign the Tenant's interest in the Lease in
accordance with the provisions of said Lease;
(e) in the event of any act or omission by the Borrower which would
given the Tenant the right to terminate the Lease or to claim a partial or total
eviction, reduce rents or to credit or offset any amounts against future rents,
the Tenant will not exercise such right (i) until it shall have given written
notice of such act or omission to the Mortgagee, and (ii) until a reasonable
time for remedying such act or omission shall have elapsed following such giving
of notice, Mortgagee's time to commence and diligently pursue cure thereof not
to exceed
2
<PAGE>
the later of 30 days after (A) Tenant's notice to Mortgagee as provided in this
subparagraph and (B) the lapse of the applicable cure period under the Lease;
and if it so elects, the Mortgagee shall have the right to cure any default by
the Borrower under the Lease, including, if necessary to cure such defaults,
access to the premises demised by the Lease in accordance with the terms of the
Lease;
(f) notices required to be given to the Mortgagee under this
Agreement will be given to any successor-in-interest of the Mortgagee under the
Mortgage provided that, prior to the event for which notice is required to be
given to the Mortgagee, such successor-in-interest of the Mortgagee shall have
given written notice to the Tenant of its acquisition of the Mortgagee's
interest therein, and designated the address to which such notice is to be
directed;
(g) if the holder of the Mortgage (as now or hereafter
constituted), or anyone claiming from or through any such holder, shall enter
into and lawfully become possessed of the Mortgaged Property or the Premises,
or shall succeed to the rights of the Borrower under the Lease, or shall
succeed to the rights of the Borrower under the Lease, either through
foreclosure of said Mortgage or otherwise howsoever, (i) the Tenant shall
attorn to, and recognize, such holder or anyone claiming from or through such
holder as its landlord under the Lease for the unexpired balance of the term
of the Lease and any extension or renewal thereof, subject to all of the
terms and conditions of the Lease, and (ii) the Tenant shall make all
payments payable by the Tenant under the Lease directly to the holder of the
Mortgage upon such holder's written instructions to the Tenant; and if, by
operation of law, or otherwise, the institution of any action or other
proceedings by the Mortgagee under the Mortgage or the entry into and taking
possession of the Premises shall result in the cancellation or termination of
the Lease or the Tenant's obligations thereunder, the Tenant shall, upon
request, execute and deliver a new lease of the Premises pursuant to the
Lease, containing the same terms and conditions as the Lease, except that the
term and any extension thereof shall be the unexpired term and unexpired
extended term or terms of the Lease as of the date of execution and delivery
of said new lease;
(h) it has no right or option, whether under the Lease or otherwise,
to purchase any portion of the Mortgaged Property or any interest therein, and
to the extent that Tenant has or hereafter acquires any such right or option,
the same is hereby subordinated to the Mortgage;
(i) the Mortgagee shall have no responsibility, liability or
obligation to cure any defaults by the Borrower under the Lease, nor be subject
to claims, defenses or offsets under the Lease or against the Borrower possessed
by the Tenant
3
<PAGE>
and which arose or existed prior to actual foreclosure of the Mortgage or
recording of a deed in lieu of foreclosure or entry under and taking
possession of the Mortgaged Property by the Mortgagee. If the Mortgagee
forecloses the Mortgage or takes title to the Mortgaged Property pursuant to
a deed in lieu of foreclosure or enters upon and takes actual possession of
the Mortgaged Property, the Mortgagee or any other purchaser at such
foreclosure sale shall do so free and clear of all such prior defaults,
claims, or offsets and shall not be liable or responsible to the Tenant for
any act or omission of any prior landlord (including the Borrower), or be
responsible or liable for any deposit or security which was delivered by the
Tenant to any prior landlord (including the Borrower) but which was not
subsequently delivered to the Mortgagee, or be obligated or liable to the
Tenant with respect to the construction and completion of any improvements in
the Premises for the Tenant's use, enjoyment or occupancy, or be bound by any
restriction on competition beyond the Premises contained in the Lease, or be
subject to any claims, defenses or offsets which the Tenant might have
against any prior landlord (including the Borrower); and
(j) the institution of any action or other proceedings by the
Mortgagee under the Mortgage in order to realize upon the Borrower's interest in
the Mortgaged Property shall not by operation of law, or otherwise, result in
the cancellation or termination of the Lease or the Tenant's obligations
thereunder.
2. The Mortgagee hereby agrees:
(a) so long as the Tenant is not in default (beyond all applicable
periods given the Tenant under the Lease to cure such default) and shall pay the
rents and additional rents thereunder, and shall fully comply with and perform
all the terms, covenants, conditions and provisions of the Lease on the part of
the Tenant thereunder to be complied with and performed, (i) the Tenant's
possession and occupancy of the Premises and the Tenant's rights and privileges
under the Lease, or any extension or renewal thereof which may be effected in
accordance with the terms of the Lease, shall not be disturbed by the Mortgagee
or any successor-in-interest to the Mortgagee; (ii) the Mortgagee shall not join
the Tenant as party to any action or proceeding brought as a result of a default
under the Mortgage for the purposes of terminating the Tenant's interest and
estate under the Lease, subject to paragraph 1(g) above and subject further to
the condition that the Mortgagee shall not be bound by any rent or other payment
which the Tenant might have paid more than thirty (30) days in advance of the
time stipulated for payment
4
<PAGE>
under the Lease or by any amendment or modification of the Lease made without
its written consent; and
(b) in the event that the interest of the Borrower shall vest in the
Mortgagee by reason of foreclosure or any other procedures brought by it, or in
any other manner, the Mortgagee and its successors-in-interest agree to be bound
by all of the undischarged obligations of Landlord under the Lease occurring
after such foreclosure or other action.
3. The Tenant hereby represents and warrants that:
(a) the Lease is in full force and effect;
(b) to the Tenant's actual knowledge, neither the Landlord nor the
Tenant is in default in the performance of or compliance with any provision of
the Lease;
(c) the Tenant has not received any notice of default or termination
of the Lease;
(d) the Lease is a complete statement of the agreement of the parties
thereto with respect to the leasing of the Premises; and
(e) the Tenant has accepted possession of the Premises and is the
sole owner of the leasehold estate created thereby.
4. The Borrower hereby irrevocably authorizes and directs the Tenant and
the Tenant hereby agrees, upon receipt from the Mortgagee of written notice to
do so, to pay all rents and other monies payable by the Tenant under the Lease
to or at the direction of the Mortgagee. The Borrower irrevocably releases the
Tenant of any liability to the Borrower for all payments so made, and the
Borrower agrees to defend, indemnify and hold the Tenant harmless from and
against any and all claims, demands, losses, or liabilities asserted by,
through, or under the Borrower for any and all payments so made. The Tenant
agrees that upon receipt of such notice it will pay all monies then due and
becoming due from the Tenant under the Lease to or at the direction of the
Mortgagee, notwithstanding any provision of the Lease to the contrary. Such
payments shall continue until the Mortgagee directs the Tenant otherwise in
writing. The Tenant agrees that neither the Mortgagee's demanding or receiving
any such payments, nor the Mortgagee's exercising any other right, remedy
privilege, power or immunity granted by the Lease or this Agreement will operate
to impose any liability upon the Mortgagee for performance of any obligation of
the Mortgagee under the Lease unless and until the Mortgagee elects otherwise in
writing or unless the Mortgagee takes possession of the Premises and assumes the
functions of a landlord.
5
<PAGE>
5. Any notice, demand or consent hereunder shall be in writing and may be
given or mailed by mailing the same by registered or certified mail, return
receipt requested, addressed, or intended for the Mortgagee, to the Mortgagee at
the address set forth on the first part of this Agreement, and if intended for
the Tenant, addressed to the Tenant at the address also set forth on the first
page of this Agreement with a copy to the Premises, and if intended for the
Borrower, addressed to the Borrower at the address also set forth on the first
page of this Agreement. Either party may designate a new address by notice in
writing to the other party. Any notice given in accordance herewith shall be
effective upon deposit in the United States mails in accordance herewith.
6. This Agreement shall be binding upon and inure to the benefit of the
successors and assigns of each of the parties hereto. The term "Mortgagee" shall
include the respective holders from time to time of the Mortgage (as now or
hereafter constituted), the term "Borrower" shall be synonymous with the term
"Landlord" during the term of the Mortgage and the terms "Landlord" and "Tenant"
shall include the holder from time to time of the lessor's interest, and the
holder from time to time of the lessee's interest, respectively, in the Lease.
7. Any claim by the Tenant against the Mortgagee under the Lease or this
Agreement shall be satisfied solely out of the interest of the Mortgagee in the
Mortgaged Property and the Tenant shall not seek recovery against or out of any
other assets of the Mortgagee.
This Agreement shall be governed by, and construed under the laws of the
State of California.
IN WITNESS WHEREOF, the parties hereto have caused the execution hereof as
a sealed instrument as of the day and year first above written.
TENANT:
CIRCADIAN, INC., a Delaware
corporation
By: /s/ Margie Kankrlik
--------------------------
Its: Secretary
-------------------------
[SIGNATURES CONTINUED ON NEXT PAGE]
6
<PAGE>
MORTGAGEE:
THE TRAVELERS INSURANCE
COMPANY, a Connecticut corporation
By: /s/ Lona G. Andrey
------------------------
Its: Assistant Secretary
-----------------------
LANDLORD/BORROWER:
CALIFORNIA SECOND LTD., A Florida
limited partnership
By: /s/ Birk S. McCandless
---------------------------
Birk S. McCandless, As Trustee
of the Birk S. McCandless and
Mary McCandless Inter Vivos
Trust dated February 17, 1982,
General Partner
7
<PAGE>
ACKNOWLEDGMENT OF INSTRUMENTS
STATE OF CALIFORNIA )
) SS.
COUNTY OF SANTA CLARA )
On March 29, 1995 before me, the undersigned notary public in and for
said state, personally appeared Margie Kankrlik, personally known to me (or
proved to me on the basis of satisfactory evidence) to be the person whose
name is subscribed to the within instrument and acknowledged to me that she
executed the same in her authorized capacity, and that by her 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.
Signature /s/ Naomi B. Kuhn
---------------------
(Seal)
Naomi B. Kuhn
Comm. #986138
Notary Public - California
SANTA CLARA COUNTY
My Comm. Expires APR 9, 1997
8
<PAGE>
ACKNOWLEDGMENT OF INSTRUMENTS
STATE OF CALIFORNIA )
) SS.
COUNTY OF SANTA CLARA )
On April 4, 1995 before me, the undersigned notary public in and for
said state, personally appeared Birk S. McCandless, personally known to me
(or proved to me on the basis of satisfactory evidence) to be 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.
Signature /s/ Carol J. Pluff
---------------------
(Seal)
Carol J. Pluff
Comm. #1039493
Notary Public - California
SANTA CLARA COUNTY
My Comm. Expires SEP 26, 1998
9
<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
State of California
---------------
County of Contra Costa
--------------
On 4/18/95 before me, Marimil Paikos, Notary Public personally appeared Lona
S. Andrey, personally known to me to be the person whose name is subscribed
to the within instrument and acknowledged to me that she executed the same in
her authorized capacity, and that her signature on the instrument the person,
or the entity upon behalf of which the person acted, executed the instrument.
MARIMIL PAIKOS
COMM. #990315
Notary Public - California
CONTRA COSTA COUNTY
My Comm. Expires APR 4, 1997 WITNESS my hand and official seal.
/s/ Marimil Paikos
--------------------------------
SIGNATURE OF NOTARY
OPTIONAL
Though the data below is not required by law, it may prove valuable to persons
relying on the document and could prevent fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
/ / INDIVIDUAL
/ / CORPORATE OFFICER
----------------------------------
- -------------------------------- TITLE OR TYPE OF DOCUMENT
TITLE(S)
/ / PARTNER(S) / / LIMITED
/ / GENERAL ----------------------------------
NUMBER OF PAGES
/ / ATTORNEY-IN-FACT
/ / TRUSTEE(S)
/ / GUARDIAN/CONSERVATOR
/ / OTHER:______________________ _________________________________
____________________________ DATE OF DOCUMENT
____________________________
SIGNER IS REPRESENTING:
NAME OF PERSON(S) OR ENTITY(IES)
__________________________________
________________________________ SIGNER(S) OTHER THAN NAMED ABOVE
________________________________
- -Copyright-1993 NATIONAL NOTARY ASSOCIATION 8236 Remmer Ave., P.O. Box 7184
Canoga Park CA 91309-7184
<PAGE>
EXHIBIT A
SUBORDINATION, NONDISTURBANCE AND
ATTORNMENT AGREEMENT
The Mortgaged Property
The Mortgaged Property consists of the real property described in the five
page legal description attached hereto.
Address of Premises: 3390-3970 North First Street, San Jose,
California
Permanent Real Estate
Taxpayer Identification
Number: 59-207-6927
11
<PAGE>
LEGAL DESCRIPTION
REAL PROPERTY in the City of San Jose, County of Santa Clara, State of
California, described as follows:
PARCEL ONE:
Pcl. 1 as shown on that certain Parcel Map filed in the office of the Recorder
of the County of Santa Clara, State of California on August 18, 1983 in Book 516
of Maps, page(s) 34 and 35, Santa Clara County Records.
PARCEL TWO:
A non-exclusive easement for ingress and egress over PCL. 2, as said parcel is
shown on the Parcel Map recorded in Book 516 of Maps, at pages 34 and 35, Santa
Clara County Records, and being more particularly described as follows:
Strip 1
A strip of land 26.00 feet wide extending entirely across said PCL. 2 and lying
13.00 feet on each side of a line described as follows:
Beginning at the most Easterly corner of said PCL. 2, said corner being on
the Southwesterly line of Rose Orchard Way; thence along said Southwesterly
line N. 59 DEG 57' 13" W., 38.00 feet to the true point of beginning of said
strip of land; thence S. 30 DEG 02' 47" W., 28.14 feet; thence S. 37 DEG 32'
59" W., 423.45 feet to the Southwesterly line of said PCL. 2.
Strip 2
A strip of land 26.00 feet wide extending entirely across said PCL. 2 and lying
13.00 feet on each side of a line described as follows:
Beginning at the most Northerly corner of said PCL. 2, said corner being on
the Southwesterly line of Rose Orchard Way; thence along said Southwesterly
line S. 59 DEG 57' 13" E., 388.93 feet to the true point of beginning of said
strip of land; thence S. 30 DEG 02' 47" W., 33.86 feet; thence S. 37 DEG 32'
48" W., 335.99 feet to the Southwesterly line of said PCL. 2.
(LEGAL DESCRIPTION CONTINUED NEXT PAGE)
EXHIBIT A
Page 1 of 5
<PAGE>
LEGAL DESCRIPTION: (Continued)
PARCEL TWO: (Continued)
Strip 3
A strip of land 26.00 feet wide extending Southwesterly from the Southwesterly
line of said Rose Orchard Way to the Northwesterly line of the above described
and designated Strip 2 and lying 13.00 feet on each side of a line described as
follows:
Beginning at the most Northerly corner of said PCL. 2, said corner being on
the Southwesterly line of Rose Orchard Way; thence along said Southwesterly
line S. 59 DEG 57" 13' E, 30.78 feet to the true point of beginning of said
strip of land; thence S. 30 DEG 02' 47" W., 26.86 feet; thence S. 37 DEG 32'
48" W., 262.18 feet; thence S. 52 DEG 27' 12" E. 343.00 feet to the
Northwesterly line of the above described and designated Strip 2.
PARCEL THREE:
A non-exclusive easement for Landscaping, Lighting and Irrigation Facilities
over PCL. 2, as said parcel is shown on the Parcel Map recorded in Book 516 of
Maps, at pages 34 and 35, Santa Clara County Records, and being more
particularly described as follows:
A strip of land 10.00 feet wide extending Southeasterly from the
Northwesterly line of said PCL. 1 and PCL. 2 and lying 5.00 feet on each side
of a line that begins at the most Northerly corner of said PCL. 1 and runs
thence along the Northeasterly line of said PCL. 1, S. 52 DEG 27" 12' E.
375.00 feet.
Excepting Therefrom that portion lying within the bounds of Parcel One mentioned
hereinabove.
PARCEL FOUR:
PCL. 2 as shown on that certain Parcel Map filed in the office of the Recorder
of the County of Santa Clara, State of California on August 18, 1983 in Book 516
of Maps, page(s) 34 and 35, Santa Clara County Records.
PARCEL FIVE:
A non-exclusive easement for ingress and egress over PCL. 1, as said parcel is
shown on the Parcel Map recorded in Book 516 of Maps, at pages 34 and 35, Santa
Clara County Records, and being more particularly described as follows:
(LEGAL DESCRIPTION CONTINUED NEXT PAGE)
EXHIBIT A
Page 2 of 5
<PAGE>
LEGAL DESCRIPTION: (Continued)
PARCEL FIVE: (Continued)
Strip 1
A strip of land 26.00 feet wide extending entirely across said PCL. 1 and lying
13.00 feet on each side of a line as follows:
Beginning at the Southerly corner of said PCL. 1, said corner being on the
Northeasterly line of North First Street; thence along said Northeasterly
line N. 52 DEG 27" 12' W., 34.00 feet to the true point of beginning of said
strip of land; thence N. 37 DEG 32' 59" E., 540.00 feet to the Northeasterly
line of said PCL. 1.
Strip 2
A strip of land 40.00 feet wide extending entirely across said PCL. 1 and lying
contiguous to and Southeasterly of a line described as follows:
Beginning at the most Southerly corner of said PCL. 1, said corner being on
the Northeasterly line of North First Street; thence along said Northeasterly
line N. 52 DEG 27" 12' W., 429.25 feet to the true point of beginning of said
strip of land; thence N. 37 DEG 32' 48" E., 600.00 feet to the Northeasterly
line of said PCL. 1; the Northerly terminus of said 40 foot wide strip of
land being the Northeasterly line of said PCL. 1.
Strip 3
A strip of land 26.00 feet wide, extending Northeasterly from the Southwesterly
line of said PCL. 1 to the Northwesterly line of the above described and
designated Strip 2 and lying 13.00 feet on each side of a line described as
follows:
Beginning at the Westerly corner of said PCL. 1, said corner being on the
Northeasterly line of North First Street; thence along said Northeasterly
line S. 52 DEG 27' 12" E., 34.00 feet to the true point of beginning of said
strip of land; thence N. 37 DEG 32' 48" E. 566.00 feet; thence S. 52 DEG 27'
12" E, 355.25 feet to said Northwesterly line of said Strip 2.
Strip 4
A strip of land 13.00 feet wide lying contiguous to and Northwesterly of the
Northwesterly line of the above described and designated Strip 2 and extending
Southwesterly from the Northeasterly line of said PCL. 1 approximately 21.00
feet to the Northeasterly line of the above described and designated Strip 3.
PARCEL SIX:
The right from time to time to construct, install, maintain, replace, remove,
and use storm drain sewers, together with a right of way therefor, over a
portion of PCL. 1 as said parcel is shown on the Parcel Map recorded in Book 516
of Maps, at pages 34 and 35, Santa Clara County Records, being more particularly
described as follows:
(LEGAL DESCRIPTION CONTINUED NEXT PAGE)
EXHIBIT A
Page 3 of 5
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LEGAL DESCRIPTION: (Continued)
PARCEL SIX: (Continued)
Strip 1
A strip of land 10.00 feet wide extending entirely across said PCL. 1 and lying
5.00 feet on each side of a line described as follows:
Beginning at the most Westerly corner of said PCL. 1 said corner being on the
Northeasterly line of North First Street; thence along said Northeasterly
line S. 52 DEG 27' 12" E. 402.75 feet to the true point of beginning of said
strip of land; thence along the centerline of a existing storm drain line the
following courses: thence N. 37 DEG 32' 48" E., 28.00 feet to a point herein
designated Point A; thence N. 52 DEG 27' 12" W., 278.00 feet; thence N. 00
DEG 51' 00" E., 198.30 feet; thence N. 37 DEG 32' 33" E., 279.75 feet; thence
S. 51 DEG 19' 51" E., 89.02 feet; thence N. 50 DEG 06' 47" E., 133.18 feet;
thence N. 37 DEG 32' 48" E., 5.00 feet to the Northeasterly line of said PCL.
1.
Strip 2
A strip of land 10 feet wide extending Northeasterly from the Northeasterly
line of the above described and designated Strip 1 and lying 5.00 feet on
each side of a line which begins at said Point A; thence along the centerline
of an existing storm drain line the following courses: thence N. 26 DEG 55'
37" E., 154.65 feet; thence N. 32 DEG 55' 53" E., 96.31 feet; thence N. 43
DEG 21' 28" E., 113.58 feet; thence N. 54 DEG 44' 21" E., 105.72 feet to a
point herein designated as Point B; thence S. 41 DEG 57' 14" E., 65.85 feet;
thence N. 37 DEG 32' 48" E., 62.00 feet to the Northeasterly line of said
PCL. 2.
Strip 3
A strip of land 5.00 feet wide lying contiguous to and Southwesterly of the
Northeasterly line of said PCL. 1 and extending Southeasterly from the
Southeasterly line of the above described and designated Strip 2 approximately
225 feet.
Strip 4
A strip of land 10.00 feet wide extending Northeasterly from the
Northeasterly line of the above described and designated Strip 2 to the
Northeasterly line of said PCL. 1 and lying 5.00 feet on each side of a line
that begins at said Point B; thence along the centerline of an existing storm
drain line N. 37 DEG 32' 48" E.; 50.00 feet to the Northeasterly line of said
PCL. 1.
PARCEL SEVEN:
The right from time to time to construct, install, inspect, maintain,
replace, remove and use any and all Public Service Facilities necessary or
useful, together with a right of way therefor, over a portion of PCL 1. as
said parcel is shown on the Parcel Map recorded in Book 516 of Maps, at pages
34 and 35, Santa Clara County Records, being more particularly described as
follows:
(LEGAL DESCRIPTION CONTINUED NEXT PAGE)
EXHIBIT A
Page 4 of 5
<PAGE>
LEGAL DESCRIPTION: (Continued)
PARCEL SEVEN: (Continued)
Strip 5
A strip of land 15.00 feet wide extending entirely across said PCL. 1 and lying
7.50 feet on each side of a line described as follows:
Beginning at the most Southerly corner of said PCL. 1, said corner being on
the Northeasterly line of North First Street; thence along said Northeasterly
line N. 52 DEG 27' 12" W., 60.50 feet to the true point of beginning of said
strip of land; thence N. 37 DEG 32' 59" E., 394.80 feet to a point herein
designated Point C; thence N. 37 DEG 32' 59" E., 105.20 feet; thence N. 7 DEG
27' 01" W., 56.57 feet to the Northeasterly line of said PCL. 1.
Strip 6
A strip of land 15.00 feet wide extending Northerly from the Northerly line
of the above described and designated Strip 5 to the Northeasterly line of
said PCL. 1 and lying 7.5 feet on each side of a line that begins at said
Point C; thence N. 30 DEG 01' 00" E., 59.5 feet; thence N. 8 DEG 41' 00" E.,
98.44 feet to the Northeasterly line of said PCL. 1.
Strip 7
A strip of land 15.00 feet wide extending entirely across said PCL. 1 and lying
7.5 feet and each side of a line described as follows:
Beginning at the most Westerly corner of said PCL. 1 said corner being on the
Northeasterly line of North First Street; thence along said Northeasterly
line S. 52 DEG 27' 12" E., 30.00 feet to the true point of beginning of said
strip of land; thence N. 37 DEG 32' 33" E., 600.00 feet to the Northeasterly
line of said PCL 1.
Strip 8
That area located within those portions of PCL. 1, of the Parcel Map mentioned
hereinabove, lying within the easements designated as "P.S.E.", as shown on said
Parcel Map.
PARCEL EIGHT:
A non-exclusive easement for Landscaping, Lighting and Irrigation Facilities
over PCL. 1, as said parcel is shown on the Parcel Map recorded in Book 516 of
Maps, at pages 34 and 35, Santa Clara County Records, and being more
particularly described as follows:
A strip of land 10.00 feet wide extending Southeasterly from the Northwesterly
line of said PCL. 1 and PCL. 2 and lying 5.00 feet on each side of a line that
begins at the most Northerly corner of said PCL. 1 and runs thence along the
Northeasterly line of said PCL. 1, S. 52 DEG 27' 12" E. 375.00 feet.
Excepting Therefrom that portion lying within the bounds of Parcel Four
mentioned hereinabove.
EXHIBIT A
Page 5 of 5
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LEASE AGREEMENT
1. PARTIES. This Lease, dated for reference purposes only, January 11, 1996,
is made by and between SOUTH BAY/FORTRAN, a California limited partnership,
("Landlord"), and NOVELLUS SYSTEMS, INC., a California corporation
("Tenant").
2. PREMISES. Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord, upon the terms and conditions hereinafter set forth, those
certain premises (the "Premises") presently known, as of the date of this
Lease, as 4415 Fortran Court, situated in the City of San Jose, County of
Santa Clara, State of California, described as follows: for purposes of
this Lease, the rentable square footage area of the Building shall be
deemed to be approximately thirty-eight thousand two hundred eighty-four
(38,284) square feet (the "Building"), as shown cross-hatched on the site
plan (the "Site Plan") attached hereto as EXHIBIT "A". The Building is
located on a larger parcel (the "Parcel") containing other buildings (the
"Buildings") as shown on the Site Plan, which Parcel is described in
EXHIBIT "B" attached hereto. In the event Landlord subdivides the Parcel in
the future into two (2) or more legal parcels, the term "Parcel" shall
thereafter refer to the legal parcel on which the Premises are located.
Landlord shall deliver the premises in good condition and repair, including
the roof, heating, ventilation and air conditioning (HVAC) equipment and
structural integrity of the building and in compliance with all
governmental codes, ordinances and statues, including those applicable
under the Americans of Disabilities Act (ADA). Landlord shall not be
required to make any alterations, additions or improvements to the Premises
and the Premises shall be leased to Tenant in an "as-is" condition, except
for those improvements as defined as "Landlord's Improvements" in EXHIBIT
"C" attached hereto and made a part hereof. THE EXACT SQUARE FOOTAGE SHALL
BE DETERMINED UPON FINAL APPROVAL OF THE FINAL TENANT IMPROVEMENT PLANS,
WHICH TENANT DESIRES TO CONSTRUCT AT ITS SOLE COST, PURSUANT TO EXHIBIT "D"
ATTACHED HERETO.
3. TERM. The term of this Lease ("Lease Term") shall be for two (2) years,
commencing upon the earlier of i) RECEIPT OF A CERTIFICATE OF OCCUPANCY OR
FINAL BUILDING PERMIT, upon completion of tenant improvements, as outlined
in EXHIBITS "C" AND "D" attached hereto, or, ii) April 15, 1996, (the
"Commencement Date") and ending two (2) years thereafter, unless sooner
terminated pursuant to any provision hereof. Notwithstanding said scheduled
Commencement Date, if for any reason Landlord cannot deliver possession of
the Premises to Tenant on said date, Landlord shall not be subject to any
liability therefor, nor shall such failure affect the validity of this
Lease or the obligations of Tenant hereunder, but in such case Tenant shall
not be obligated to pay rent until possession of the Premises is tendered
to Tenant and the commencement and termination dates of this Lease shall be
revised to conform to the date of Landlord's delivery of possession. In the
event Landlord shall permit Tenant to occupy the Premises prior to the
Commencement Date, such occupancy shall be subject to all the provisions of
this Lease, including the obligation to pay the Monthly Installment of
rent, and Common Area Charges.
4. RENT.
A. TIME OF PAYMENT. Tenant shall pay to Landlord as rent for the Premises
the sum specified in Paragraph 4.B below (the "Monthly Installment")
each month in advance on the first day of each calendar month, without
deduction or offset, prior notice or demand, commencing on the
Commencement Date and continuing through the term of this Lease,
together with such additional rents as are payable by Tenant to
Landlord under the terms of this Lease. The Monthly Installment for
any period during the lease Term which period is less than one (1)
full month shall be a prorata portion of the Monthly Installment based
upon a thirty (30) day month.
B. MONTHLY INSTALLMENT. The Monthly Instalment of rent payable each month
during the term shall be Twenty Thousand Six Hundred Seventy-Three and
36/100ths Dollars ($20,673.36) per month.
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C. LATE CHARGE. Tenant acknowledges that late payment by Tenant to
Landlord of rent and other sums due hereunder will cause Landlord to
incur costs not contemplated by this Lease, the exact amount of which
will be extremely difficult to ascertain. Such costs includes, but are
not limited to, processing and accounting charges, and late charges
which may be imposed on Landlord by the terms of any mortgage or deed
of trust covering the Premises. Accordingly, if any installment of
rent or any other sum due from Tenant shall not be received by
Landlord within ten (10) days after such amount shall be due, Tenant
shall pay to Landlord, as additional rent, a late charge equal to six
percent (6%) of such overdue amount. The parties hereby agree that
such late charge represents a fair and reasonable estimate of the
costs Landlord will incur by reason of late payment by Tenant.
Acceptance of such late charge by Landlord shall in no event
constitute a waiver of Tenant's default with respect to such overdue
amount, nor prevent Landlord from exercising any of its other rights
and remedies granted hereunder.
D. ADDITIONAL RENT. All taxes, insurance premiums, Common Area Charges,
late charges, costs and expenses which Tenant is required to pay
hereunder, together with all interest and penalties that may accrue
thereon in the event of Tenant's failure to pay such amounts, and all
reasonable damages, costs and attorneys' fees and expenses which
Landlord may incur by reason of any default of Tenant or failure on
Tenant's part to comply with the terms of this Lease, shall be deemed
to be additional rent ("Additional Rent") and shall be paid in
addition to the Monthly Installment of rent, and, in the event of
nonpayment of the Monthly Installment of rent.
E. PLACE OF PAYMENT. Rent shall be payable in lawful money of the United
States of America to Landlord at 511 Division Street, Campbell CA, or
to such other person(s) or at such other place(s) as Landlord may
designate in writing.
F. ADVANCE PAYMENT. Concurrently with the execution of this Lease, Tenant
shall pay the Landlord the sum of Twenty Thousand Six Hundred Seventy-
three and 36/100ths Dollars ($20,673.36) to be applied to the Monthly Instalment
of rent first accruing under this Lease.
5. SECURITY DEPOSIT. Tenant shall deposit the sum of Twenty Thousand Six
Hundred Seventy-three and 36/100ths Dollars ($20,673.36) (the "Security
Deposit") upon execution of this Lease, to secure the faithful performance
by Tenant of each term, covenant and condition of this Lease. If Tenant
shall at any time fail to make any payment or fail to keep or perform any
term, covenant or condition on its part to be made or performed or kept
under this Lease, Landlord may, but shall not be obligated to and without
waiving or releasing Tenant from any obligation under this Lease, use,
apply or retain the whole or any part of the Security Deposit (A) to the
extent of any sum due to Landlord; (B) to make any required payment on
Tenant's behalf; or (C) to compensate Landlord for any loss, damages,
attorneys' fees or expense sustained by Landlord due to Tenant's default.
In such event, Tenant shall, within five BUSINESS (5) days of written
demand by Landlord, remit to Landlord sufficient funds to restore the
Security Deposit to its original sum. No interest shall accrue on the
Security Deposit. Landlord shall not be required to keep the Security
Deposit separate from its general funds. Should Tenant comply with all the
terms, covenants, and conditions of this Lease and at the end of the term
of this Lease leave the Premises in the condition required by this Lease,
then said Security Deposit, less any sums owing to Landlord, shall be
returned to Tenant within thirty (30) days after the termination of this
Lease and vacancy of the Premises by Tenant.
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<PAGE>
6. USE OF PREMISES. Tenant shall use the Premises only in conformance with
applicable governmental laws, regulations, rules and ordinances for the
purpose of office, research & development, light manufacturing,
distribution and warehousing of products for the electronics industry, and
for no other purpose. Tenant shall indemnify, protect, defend, and hold
Landlord harmless against any loss, expense, damage, attorneys' fees or
liability arising out of the failure of Tenant to comply with any
applicable law. Tenant shall not commit or suffer to be committed, any
waste upon the Premises, or any nuisance, or other acts or things which may
disturb the quiet enjoyment of any other tenant in the buildings adjacent
to the Premises, or allow any sale by auction upon the Premises, or allow
the Premises to be used for any unlawful purpose, or place any loads upon
the floor, walls or ceiling which endanger the structure, or place any
harmful liquids in the drainage system of the Building. No waste materials
or refuse shall be dumped upon or permitted to remain upon any part of the
Premises outside of the Building proper, except in trash containers placed
inside exterior enclosures designated for that purpose by Landlord. No
materials, supplies, equipment, finished products or semi-finished
products, raw materials or articles of any nature shall be stored upon or
permitted to remain on any portion of the Premises outside of the Building
proper. Tenant shall strictly comply with the provisions of Paragraph 39
below.
7. TAXES AND ASSESSMENTS.
A. TENANT'S PROPERTY. Tenant shall pay before delinquency any and all
taxes and assessment, license fees and public charges levied, assessed
or imposed upon or against Tenant's fixtures, equipment, furnishings,
furniture, appliances and personal property installed or located on or
within the Premises. Tenant shall cause said fixtures, equipment,
furnishings, furniture, appliances and personal property to be
assessed and billed separately from the real property of Landlord. If
any of Tenant's said personal property shall be assessed with
Landlord's real property, Tenant shall pay Landlord the taxes
attributable to Tenant within ten (10) days after receipt of a written
statement from Landlord setting forth the taxes applicable to Tenant's
property.
B. PROPERTY TAXES. Tenant shall pay, as additional rent, its Pro Rata
Share (as defined below) of all Property Taxes levied or assessed with
respect to the land comprising the Parcel and with respect to all
buildings and improvements located on the Parcel which become due or
accrue during the term of this Lease. Tenant shall pay such Property
Taxes to Landlord within twenty (20) days after receipt of billing.
Provided that Landlord bills Tenant at least thirty (30) days prior to
the delinquency date of such Property Taxes, Tenant shall pay such
Property Taxes to Landlord at least ten (10) days prior to the
delinquency date, and if Tenant fails to do so, Tenant shall reimburse
Landlord, on demand, for all interest, late fees and penalties that
the taxing authority charges Landlord. In the event Landlord's
mortgagee requires an impound for Property Taxes, then on the first
day of each month during the Lease Term, Tenant shall pay Landlord one
twelfth (1/12) of its annual share of such Property Taxes. IF PAYMENT
IS MADE ON A MONTHLY BASIS, LANDLORD SHALL ANNUALLY RECONCILE SAID
PAYMENTS VERSUS THE ACTUAL PROPERTY TAX BILL FOR THE PERIOD IN
QUESTION AND EITHER REIMBURSE TENANT FOR ANY OVERPAYMENTS OR BILL
TENANT FOR ANY PAYMENTS LESS THAN THE ACTUAL BILL. Tenant's liability
hereunder shall be prorated to reflect the Commencement and
termination dates of this Lease. Tenant's share of the Property Taxes
shall be determined by Landlord from the respective valuation assigned
in the Assessor's worksheet or such other information as may be
reasonably available. Landlord's reasonable determination thereof, in
good faith, shall be conclusive.
As used in this Lease, the term "Tenant's Pro Rata Share" shall mean a
fraction, expressed as a percentage, the numerator of which is the
number of square feet of floor space contained in the Premises (38,284
SQUARE FEET) and the denominator of which is the number of square feet
of floor space contained in all of the Buildings located on the Parcel
(295,529 SQUARE FEET). As of the Commencement Date, Tenant's Pro Rata
Share is twelve and ninety-five hundredths percent (12.95%).
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<PAGE>
For the purpose of this Lease, "Property Taxes" means and includes all
taxes, assessments (including, but not limited to, assessments for
public improvements or benefits), taxes based on vehicles, utilizing
parking areas, taxes based or measured by the rent paid, payable or
received under this Lease, taxes on the value, use, or occupancy of
the Premises, the Buildings and/or the Parcel, Environmental
Surcharges, and all other governmental impositions and charges of
every kind and nature whatsoever, whether or not customary or within
the contemplation of the parties hereto and regardless of whether the
same shall be extraordinary or ordinary, general or special,
unforeseen or foreseen, or similar or dissimilar to any of the
foregoing which, at any time during the Lease Term, shall be
applicable to the Premises, the Buildings and/or the Parcel or
assessed, levied or imposed upon the Premises, the Buildings and/or
the Parcel, or become due and payable and a lien or charge upon the
Premises, the Buildings and/or the Parcel, or any part thereof, under
or by virtue of any present or future laws, statutes, ordinances,
regulations or other requirements of any governmental authority
whatsoever. The term "Environmental Surcharges" shall mean and include
any and all expenses, taxes, charges or penalties imposed by the
Federal Department of Energy, the Federal Environmental protection
Agency, the Federal Clean Air Act, or any regulations promulgated
thereunder or any other local, state or federal governmental agency or
entity now or hereafter vested with the power to impose taxes,
assessments, or other types of surcharges as a means of controlling or
abating environmental pollution or the use of energy. The term
"Property Taxes" shall not include any federal, state or local net
income, estate, or inheritance tax imposed on Landlord, OR PENALTIES
AND INTEREST INCURRED BY LANDLORD'S LATE PAYMENT, UNLESS PENALTY OR
INTEREST IS SPECIFICALLY DUE TO TENANT'S LATE PAYMENT OF PROPERTY
TAXES.
C. OTHER TAXES: Tenant shall, as additional rent, pay or reimburse
Landlord for any tax based upon, allocable to, or measured by the area
of the Premises or the Buildings or the Parcel; or by the rent paid,
payable or received under this Lease; any tax upon or with respect to
the possession, leasing, operation, any tax upon or with respect to
the possession, leasing, operation, management, maintenance,
alteration, repair, use or occupancy of the Premises or any portion
thereof; any privilege tax, excise tax, business and occupation tax,
gross receipts tax, sales and/or use tax, water tax, sewer tax,
employee tax, occupational license tax imposed upon Landlord or Tenant
with respect to the Premises; any tax upon this transaction or any
document to which Tenant is a party creating or transferring an
interest or an estate in the Premises.
8. INSURANCE.
A. INDEMNITY. EXCEPT FOR LANDLORD'S BREACH UNDER THIS LEASE, GROSS
NEGLIGENCE, OR WILLFUL MISCONDUCT, Tenant agrees to indemnify, protect
and defend Landlord against and hold Landlord harmless from any and
all claims, causes of action, judgements, obligations or liabilities,
and all reasonable expenses incurred in investigating or resisting the
same (including reasonable attorneys' fees), on account of, or arising
out of, AND TO THE EXTENT RELATING TO TENANT'S operation, maintenance,
use or occupancy of the Premises and all areas appurtenant thereto.
This Lease is made on the express understanding that Landlord shall
not be liable for, or suffer loss by reason of, injury to person or
property, form whatever cause (except for active negligence or willful
misconduct of Landlord), which in any way may be connected with the
operation, use or occupancy of the Premises specifically including,
without limitation, any liability for injury to the person or property
of Tenant, its agents, officers, employees, licensees and invitees.
B. LIABILITY INSURANCE. Tenant shall, at Tenant's expense, obtain and
keep in force during the term of this Lease a policy of comprehensive
public liability insurance insuring Landlord and Tenant against claims
and liabilities arising out of the operation, use, or occupancy of the
Premises and all areas appurtenant thereto, including parking areas.
Such insurance shall be in an amount of not less than Three Million
Dollars ($3,000,000.00) for bodily injury or death as a result of any
one occurrence and Five Hundred Thousand Dollars
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($500,000.00) for damage to property as a result of any one
occurrence. The insurance shall be with companies approved by
Landlord, with approval Landlord agrees not to withhold unreasonably.
Tenant shall deliver to landlord, prior to possession, and at least
thirty (30) days prior to the expiration thereof, a certificate of
insurance evidencing the existence of the policy required hereunder
and such certificate shall certify that the policy (1) names Landlord
as an additional insured, (2) shall not be canceled or altered without
thirty (30) days prior written notice to Landlord, (3) insures
performance of the indemnity set forth in Paragraph 8.A above, (4) the
coverage is primary and any coverage by Landlord is in excess thereto
and (5) contains a cross-liability endorsement. Landlord may maintain
a policy or policies of comprehensive general liability insurance
insuring Landlord (and such others as are designated by Landlord),
against liability for personal injury, bodily injury, death and damage
to property occurring or resulting from an occurrence in, on or about
the Premises or the Common Area, with such limits of coverage as
Landlord may from time to time determine are reasonably necessary for
its protection. The cost of any such liability insurance maintained by
Landlord shall be a Common Area Charge and Tenant shall pay, as
additional rent, its share of such cost to Landlord as provided in
Paragraph 12 below.
C. PROPERTY INSURANCE. Landlord shall obtain and keep in force during the
term of this Lease a policy or policies of insurance covering loss or
damage to the Premises and the Buildings, in the amount of the full
replacement value thereof, providing protection against those perils
included within the classification of "all risk" insurance, plus a
policy of rental income insurance in the amount of one hundred percent
(100%) of twelve (12) months rent (including, without limitation, sums
payable as Additional Rent), plus, at Landlord's option, flood
insurance and earthquake insurance, and any other coverages which may
be required from time to time by Landlord's mortgagee. Tenant shall
have no interest in nor any right to the proceeds of any insurance
procured by Landlord on the Premises. Tenant shall, within twenty (20)
days after receipt of billing, pay to Landlord as additional rent, the
full cost of such insurance procured and maintained by Landlord.
Tenant acknowledges that such insurance procured by Landlord shall
contain a deductible which reduces Tenant's cost for such insurance
and, in the event of loss or damage, Tenant shall be required to pay
to Landlord the amount of such deductible.
D. TENANT'S INSURANCE. Release of Landlord. Tenant acknowledges that the
insurance to be maintained by Landlord on the Premises pursuant to
Subparagraph C above will not insure any of Tenant's property.
Accordingly, Tenant, at Tenant's own expense, shall maintain in full
force and effect on all of its fixtures, equipment, leasehold
improvements and personal property in the Premises, a policy of "All
Risk" coverage insurance to the extent of at least ninety percent
(90%) of their insurable value. Tenant hereby releases Landlord, and
its partners, officers, agents employees and servants from any and all
claims, demands, losses, expenses or injuries to the Premises or to
the furnishings, fixtures, equipment, inventory or other personal
property of Tenant in, about, or upon the Premises, which are caused
by perils, events or happenings where the same are covered by the
insurance required by this Lease or which are the subject of insurance
carried by Tenant and in force at the time of such loss.
E. MUTUAL WAIVER OF SUBROGATION. TENANT AND LANDLORD HEREBY MUTUALLY
WAIVE THEIR RESPECTIVE RIGHTS OF RECOVERY AGAINST EACH OTHER OF ANY
LOSS OF OR DAMAGE TO THE PROPERTY OF EITHER PARTY, TO THE EXTENT SUCH
LOSS OR DAMAGE IS INSURED BY ANY INSURANCE POLICY REQUIRED TO BE
MAINTAINED BY THIS LEASE OR OTHERWISE IN FORCE AT THE TIME OF SUCH
LOSS OR DAMAGE. EACH PARTY SHALL OBTAIN ANY SPECIAL ENDORSEMENTS, IF
REQUIRED BY THE INSURER, WHEREBY THE INSURER WAIVES ITS RIGHT OF
SUBROGATION AGAINST THE OTHER PARTY HERETO. THE PROVISIONS OF THIS
SUBPARAGRAPH 8.3 SHALL NOT APPLY IN THOSE INSTANCES IN WHICH THE
WAIVER OF SUBROGATION WOULD CAUSE EITHER PARTY'S INSURANCE COVERAGE TO
BE VOIDED OR OTHERWISE MADE UNCOLLECTIBLE.
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9. UTILITIES. Tenant shall pay for all water, gas, light, heat, power,
electricity, telephone, trash pickup, sewer charges and all other services
supplied to or consumed on the Premises, and all taxes and surcharges
thereon. In addition, the cost of any utility services supplied to the Common
Area or not separately metered to the Premises shall be a Common Area Charge
and Tenant shall pay its share of such costs to Landlord as provided in
Paragraph 12 below.
10. REPAIRS AND MAINTENANCE.
A. LANDLORD'S REPAIRS. Subject to provisions of Paragraph 16,
Landlord shall keep and maintain the exterior roof, structural
elements and exterior walls of the Building in good order and
repair. Landlord shall not, however, be required to maintain,
repair or replace the interior surface of exterior walls, nor
shall Landlord be required to maintain, repair or replace
windows, doors, skylights or plate glass. Landlord shall have no
obligation to make repairs under this Subparagraph until a
reasonable time after receipt of written notice from Tenant of
the need for such repairs. Tenant shall reimburse Landlord, as
additional rent, within THIRTY (30) days after receipt of
billing, for the cost of such repairs and maintenance which are
the obligation of Landlord hereunder, provided however, that
Tenant shall not be required to reimburse Landlord for the cost
of maintenance and repairs of the structural elements of the
Building unless such maintenance or repair is required because of
the negligence or willful misconduct of Tenant or its employees,
agents or invitees. As used herein, the term "structural elements
of the building" shall mean and be limited to the foundation,
footings, floor slab (bit not flooring), structural walls, and
roof structure (INCLUDING ROOFING OR ROOF MEMBRANE ONLY TO BE
INCLUDED DURING THE FIRST TWO (2) YEARS OF THE LEASE TERM, UNLESS
TENANT MAKES ANY PENETRATIONS TO THE ROOFING OR ROOF MEMBRANE AT
ANY TIME DURING THEIR TENANCY, IN WHICH CASE TENANT SHALL BE
SOLELY RESPONSIBLE FOR REPAIRS AND MAINTENANCE OF THE ROOFING
AND ROOF MEMBRANE.) UPON EXPIRATION OF THE FIRST TWO (2) YEARS OF
THE LEASE TERM, TENANT SHALL BECOME RESPONSIBLE FOR REPAIRS AND
MAINTENANCE BIT NOT REPLACEMENT OF THE ROOFING OR ROOF
MEMBRANE.
B. TENANT'S REPAIRS. Except as expressly provided in Subparagraph
A above, Tenant shall, at its sole cost, keep and maintain the
entire Premises and every part thereof, including without
limitation, the windows, window frames, plate glass, glazing,
skylights, truck doors, doors and all door hardware, the walls
and partitions, and the electrical, plumbing, lighting,
heating, ventilating and air conditioning systems and equipment
in good order, condition and repair. The term "repair" shall
include replacement, restorations and/or renewals when necessary
as well as painting. THE TERM "REPAIR" SHALL NOT INCLUDE
REPLACEMENT OF HEATING, VENTILATING AND AIR CONDITIONING
("HVAC") EQUIPMENT DURING THE FIRST TWO (2) YEARS OF THE LEASE
TERM ONLY EXCEPT ON HVAC EQUIPMENT INSTALLED BY TENANT AS PART
OF THE FINAL TENANT IMPROVEMENT PLANS PURSUANT TO EXHIBIT "D" AND
UNLESS SUCH REPLACEMENT IS DUE TO TENANT'S ABOVE "STANDARD USE",
TENANT'S MISUSE, OR TENANT'S FAILURE TO MAINTAIN THE HVAC
EQUIPMENT, AS REQUIRED BELOW. THE TERM "STANDARD USE" SHALL BE
DEFINED AS OPERATION BASED ON A NORMAL BUSINESS DAY'S HOURS, NOT
TO EXCEED TEN (10) HOURS. ANY OPERATION THAT EXCEEDS THE
"STANDARD USE" HOURS SHALL BE DEEMED TO BE "ABOVE STANDARD USE".
Tenant's obligation shall extend to all alterations, additions
and improvements to the Premises, and all fixtures and
appurtenances therein and thereto. Tenant shall, at all times
during the Lease Term, have in effect a service contract for the
maintenance of the heating, ventilating and air conditioning
("HVAC") equipment with an HVAC service contract shall provide
for periodic inspection and servicing at least once every three
(3) months during the term hereof, and Tenant shall provide
Landlord with a copy of such contract and all periodic service
reports.
Should Tenant fail to make repairs required of Tenant hereunder
forthwith upon FIFTEEN (15) DAYS WRITTEN notice from Landlord
or should Tenant fail thereafter to diligently complete the
repairs, Landlord, in addition to all other remedies available
hereunder or by law and without waiving any alternative
remedies, may make the same, and in that event,
<PAGE>
Tenant shall reimburse Landlord as additional rent for the cost
of such maintenance or repairs within five (5) days of written
demand by Landlord
Landlord shall have no maintenance or repair obligation
whatsoever with respect to the Premises except as expressly
provided in Paragraphs 10.A and 11. Tenant hereby expressly
waives the provisions of Subsection 1 of Section 1932 and
Section 1941 and 1942 of the Civil Code of California and all
rights to make repairs at the expense of Landlord as provided
in Section 1942 of said Civil Code. There shall be no
allowance to Tenant for diminution of rental value, and no
liability on the part of Landlord (EXCEPT FOR LANDLORD'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT) by reason of inconvenience,
annoyance or injury to business arising from the making of or
the failure to make, any repairs, alternations, decorations,
additions or improvements in or to any portion of the Premises
or the Building or Common Area (or any or the areas used in
connection with the operation thereof, or in or to any
fixtures, appurtenances or equipment), or by reason of the
negligence of Tenant or any other tenant or occupant of the
Parcel. In no event shall Landlord be responsible for any
consequential damages arising or alleged to have arisen from any
of the foregoing matters. Tenant hereby agrees that Landlord
shall not be liable for injury to Tenant's business or any loss
of income therefrom or for damage to the goods, wares,
merchandise or other property of Tenant, Tenant's employees,
invitees, customers, or any other person in or about the
Premises, the Building, or the Common Area, nor shall Landlord
be liable for injury to the person of Tenant, Tenant's
employees, agents or contractors whether such damage or injury
is caused by or results from fire, steam, electricity gas,
water or rain, or from the breakage, leakage, obstruction or
other defects of pipes, sprinklers, wires, appliances,
plumbing, air conditioning or lighting fixtures, or from any
other cause, whether the said damage or injury results from any
other cause, whether the said damage or injury results from
conditions arising upon the Premises or upon other portion of
the Building, or from other sources or places and regardless of
whether the cause of such damage or injury or the means of
repairing the same is inaccessible to Tenant. Landlord shall
not be liable for any damages arising from any act or neglect of
any other tenant, if any, of the Building or the Parcel.
11. COMMON AREA. Subject to the terms and conditions of this Lease and
such rules and regulations as Landlord may from time to time
REASONABLY prescribe, Tenant and Tenant's employees, invitees and
customers shall, in common with other occupants of the Parcel, and
their respective employees, invitees and customers, and others
entitled to the use thereof, have the nonexclusive right to use the
access roads, parking areas and facilities provided and designated
by Landlord for the general use and convenience of the occupants of
the Parcel, which areas and facilities are referred to herein as
"Common Area. This right shall terminate upon the termination of
this Lease. Landlord reserves the right from time to time to make
changes in the shape, size, location, amount and extent of the
Common Area. Landlord further reserves the right to promulgate such
reasonable rules and regulations relating to the use of the Common
Area, and any part or parts thereof, as Landlord may deem
appropriate for the best interest of the occupants of the Parcel.
The rules and regulations shall be binding upon Tenant upon delivery
of a copy of them to Tenant, and Tenant shall abide by them and
cooperate in their observance. Such rules and regulations may be
amended by Landlord from time to time, with or without advance
notice, and all amendments shall be effective upon delivery of a
copy of them to Tenant. Tenant shall have the non-exclusive use of
no more than one hundred fifty-three (153) of the parking spaces in
the Common Area as designated from time to time by Landlord. Tenant
shall not at any time park or permit the parking of Tenant's trucks
or other vehicles, or the trucks or other vehicles of others,
adjacent to loading areas so as to interfere in any way with the use
of such areas, nor shall Tenant at any time park or permit the
parking of Tenant's vehicles or trucks, or the vehicles or trucks of
Tenant's suppliers or others in any portion of the Common Area not
designated by Landlord for such use by Tenant. Tenant shall not
abandon any inoperative vehicles or equipment on any portion of the
Common Area. Tenant shall make no alterations, improvements or
additions to the Common Area.
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Landlord shall operate, manage, insure, maintain and repair the Common
Area in good order, condition and repair. The manner in which the
Common Area shall be maintained and the expenditures for such
maintenance shall be at the COMMERCIALLY REASONABLE discretion of
Landlord. The cost of such repair, maintenance, operation, insurance
and management, including without limitation, maintenance and repair
of landscaping, irrigation systems, paving, sidewalks, fences, and
lighting, shall be a Common Area Charge and Tenant shall pay to
Landlord its share of such costs as provided in Paragraph 12 below.
12. COMMON AREA CHARGES. Tenant shall pay to Landlord, as additional
rent, upon demand but not more often than once each calendar month,
an amount equal to its Pro Rata Share of the Common Area Charges as
defined in Paragraphs 8.C, 9, 11 of this Lease. Tenant acknowledges
and agrees that the Common Area Charges shall include an additional
five percent (5%) of the actual expenditures in order to compensate
Landlord for accounting, management and processing services.
NOTWITHSTANDING ANYTHING CONTAINED THE LEASE, NO EXPENSES INCURRED
FOR THE FOLLOWING SHALL BE INCLUDED IN OPERATING EXPENSES: (i)
REPAIRS OR OTHER WORK OCCASIONED BY FIRE, WINDSTORM OR OTHER
CASUALTY OF A NATURE COVERED BY INSURANCE REQUIRED TO BE CARRIED BY
LANDLORD PURSUANT TO THE TERMS OF THIS LEASE OR ANY PRESENT OR
FUTURE GROUND LEASE OR DEED OF TRUST COVERING THE PROJECT (EXCEPT
FOR THE COST OF CASH REPAIRS OR OTHER WORK THAT RELATES TO THE
DEDUCTIBLE PORTION OF THE INSURANCE POLICY COVERING SUCH CASUALTY)
OR BY THE EXERCISE OF THE RIGHT OF EMINENT DOMAIN; (ii) LEASING
COMMISSIONS, ACCOUNTANTS' OR ATTORNEYS' FEES, COSTS AND
DISBURSEMENTS AND OTHER EXPENSES INCURRED IN CONNECTION WITH THE
NEGOTIATIONS OR DISPUTES WITH THE TENANTS OR OTHER OCCUPANTS OR
PROSPECTIVE TENANTS OR OTHER OCCUPANTS, OR ASSOCIATED WITH THE
ENFORCEMENT OF ANY LEASES OR DEFENSE OF LANDLORD'S TITLE TO OR
INTEREST IN THE PROJECT OR ANY PART THEREOF; (iii) COSTS (INCLUDING
PERMIT, LICENSE AND INSPECTION FEES) INCURRED IN RENOVATING OR
OTHERWISE IMPROVING OR DECORATING, PAINTING, OR REDECORATING SPACE
FOR TENANTS CONSESSIONAIRIES OR OTHER OCCUPANTS OR VACANT RENTABLE
SPACE; (iv) THE COSTS OF ANY SERVICES SOLD OR PROVIDED TENANTS OR
OTHER OCCUPANTS FOR WHICH LANDLORD IS ENTITLED TO BE REIMBURSED BY
SUCH TENANTS OR OTHER OCCUPANTS AS AN ADDITIONAL CHARGE OR RENTAL
OVER AND ABOVE THE BASIC RENT AND ESCALATIONS PAYABLE UNDER THE
LEASE WITH SUCH TENANT OR OTHER OCCUPANT; (v) EXCEPT TO THE EXTENT
EXPRESSLY PROVIDED ABOVE, COSTS INCURRED BY LANDLORD FOR ANY
ALTERATION, ADDITION OR EQUIPMENT THAT IS CONSIDERED A CAPITAL
IMPROVEMENT OR REPLACEMENT UNDER GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES; (vi) DEPRECIATION AND AMORTIZATION; (vii) EXCEPT TO THE
EXTENT EXPRESSLY PROVIDED ABOVE, COSTS OF A CAPITAL NATURE,
INCLUDING, BUT NOT LIMITED TO CAPITAL IMPROVEMENTS, CAPITAL REPAIRS,
CAPITAL EQUIPMENT, AND CAPITAL TOOLS, ALL AS DETERMINED IN
ACCORDANCE WITH GENERALLY ACCEPTED ACCOUNTING PRINCIPLES; (viii)
EXPENSES IN CONNECTION WITH SERVICES OR OTHER BENEFITS OF A TYPE
THAT IS NOT PROVIDED TENANT IN REASONABLE PROPORTION TO THE SPACE
LEASED BY TENANT BUT THAT IS PROVIDED TO ANOTHER TENANT OR OCCUPANT;
(ix) COSTS INCURRED DUE TO VIOLATION BY LANDLORD OR ANY OTHER TENANT
OF THE TERMS AND CONDITIONS OF ANY LEASE; (x) INTEREST ON DEBT OR
AMORTIZATION PAYMENTS ON ANY MORTGAGES OR DEEDS OF TRUST OR ANY OTHER
BORROWINGS; (xi) LANDLORD'S GENERAL CORPORATE OVERHEAD AND GENERAL
ADMINISTRATIVE EXPENSES; (xii) ALL ITEMS AND SERVICES FOR WHICH
TENANT OR ANY OTHER TENANT SEPARATELY REIMBURSES LANDLORD OR PAYS
THIRD PERSONS; (xiv) ADVERTISING AND PROMOTIONAL EXPENDITURES; (xv)
PROPERTY MANAGEMENT FEES EXCEEDING THREE PERCENT(3%) OF GROSS
REVENUE; AND (xvi) ANY OTHER EXPENSE THAT UNDER GENERALLY ACCEPTED
ACCOUNTING PRINCIPALS AND PRACTICES WOULD NOT BE CONSIDERED A
MAINTENANCE OR OPERATING EXPENSE.
TENANT MAY AUDIT THE LANDLORD'S ACCOUNTING RECORDS REGARDING
OPERATING EXPENSES AND TAXES AND UPON TEN (10) DAYS' ADVANCE WRITTEN
NOTICE. IF TENANT DISCOVERS AN OVERSTATEMENT OF OPERATING EXPENSES
OR TAXES, LANDLORD SHALL PROMPTLY REFUND ANY AMOUNTS OWED TO TENANT.
IF
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TENANT DISCOVERS AN OVERSTATEMENT OF OPERATING EXPENSES AND TAXES
WHICH EXCEEDS ONE HUNDRED TEN PERCENT (110%) OF THE ACTUAL OPERATING
EXPENSES AND TAXES, LANDLORD SHALL REIMBURSE TENANT FOR ALL
REASONABLE COSTS AND EXPENSES OF TENANT'S AUDIT.
13. ALTERATIONS. Tenant shall not make, or suffer to be made, any
alterations, improvements or additions in, on, about or to the
Premises or any part thereof, without the prior written consent of
Landlord, WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD, and
without a valid building permit issued by the appropriate
governmental authority. As a condition to giving such consent,
Landlord may require that Tenant agree to remove any such
alterations, improvements or additions at the termination of this
Lease and to restore the Premises to their prior condition. Unless
Landlord requires that Tenant remove any such alterations,
improvement or addition, and alteration, addition or improvement to
the Premises, except moveable furniture and trade fixtures not
affixed to the Premises, shall become the property of Landlord upon
termination of the Lease and shall remain upon and be surrendered
with the Premises at the termination of this Lease. Without limiting
the generality of the foregoing, all heating, lighting, electrical
(including all wiring, conduit, outlets, drops, buss ducts, main and
subpanels), air conditioning, partitioning, drapery, and carpet
installations made by Tenant regardless of how affixed to the
Premises, together with all other additions, alterations and
improvements that have become an integral part of the Building,
shall be and become the property of the Landlord upon termination of
the Lease, and shall not be deemed trade fixtures, and shall remain
upon and be surrendered with the Premises at the termination of this
Lease.
IT IS HEREBY ACKNOWLEDGED BY LANDLORD THAT TENANT DESIRES TO
CONSTRUCT CERTAIN IMPROVEMENTS AS OUTLINED IN THE FINAL TENANT
IMPROVEMENT PLANS PURSUANT TO EXHIBIT "D" ATTACHED HERETO AND MADE A
PART HEREOF. LANDLORD SHALL DETERMINE UPON FINAL APPROVAL OF THE
FINAL TENANT IMPROVEMENT PLAN THOSE IMPROVEMENTS EXISTING PRIOR TO
CONSTRUCTION OF THE FINAL TENANT IMPROVEMENT PLANS WHICH LANDLORD
SHALL REQUIRE TENANT TO RETURN TO ITS ORIGINAL CONDITION UPON
EXPIRATION OR EARLIER TERMINATION OF THIS LEASE. LANDLORD SHALL MORE
CLOSELY DEFINE THOSE IMPROVEMENTS TO BE RETURNED TO ORIGINAL
CONDITION BY TENANT IN A PLAN ATTACHED HERETO AS EXHIBIT "E".
If, during the term hereof, any alteration, addition or change of
any sort to all or any portion of the Premises is required by law,
regulation, ordinance or order of any public agency, Tenant shall
promptly make the same at its sole cost and expense. If during the
term hereof, any alteration, addition, or change to the Common Area
is required by law, regulation, ordinance or order of any public
agency, AND IS REQUIRED DUE TO TENANT'S SPECIFIC USE OR OCCUPANCY OF
THE PREMISES, Landlord shall make the same and the cost of such
alteration, or change shall be a Common Area Charge and Tenant shall
pay its share of said cost to Landlord as provided in Paragraph 12
above.
14. ACCEPTANCE OF THE PREMISES. By entry and taking possession of the
Premises pursuant to this Lease, Tenant accepts the Premises as
being in good and sanitary order, condition and repair and accepts
the Premises in their condition existing as of the date of such
entry, and Tenant further accepts the tenant improvements to be
constructed by Landlord, if any, as being completed in accordance
with the plans and specifications for such improvements, except for
punch list items. Tenant acknowledges that neither the Landlord nor
Landlord's agents has made any representation or warranty as to the
suitability of the Premises to the conduct of Tenant's business. Any
agreements, warranties or representations not expressly contained
herein shall in no way bind either Landlord or Tenant, and Landlord
and Tenant expressly waive all claims for damages by reason of any
statement, representation, warranty, promise or agreement, if any,
not contained in this Lease. This Lease constitutes the entire
understanding between the parties hereto and no addition to, or
modification of, any term or provision of this Lease shall be
effective until set forth in a writing signed by both Landlord and
Tenant.
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15. DEFAULT.
A. EVENTS OF DEFAULT. A breach of this Lease shall exist if any
of the following events (hereinafter referred to as "Event of
Default") shall occur:
1. Default in the payment when due of any installment
of rent or other payment required to be made by Tenant
hereunder, where such default shall not have been
cured within three (3) days after written notice of
such default is given to Tenant;
2. Tenant's failure to perform any other term,
covenant or condition contained in this Lease where
such failure shall have continued for THIRTY (30)
DAYS after written notice of such failure is given
to Tenant; UNLESS THE NATURE OF DEFAULT IS SUCH
THAT IT CANNOT BE CURED WITHIN THIRTY (30) DAYS, IN
WHICH CASE TENANT SHALL NOT BE IN DEFAULT PROVIDED
TENANT COMMENCES SAID CURE WITHIN THIRTY (30) DAYS
FROM WRITTEN NOTICE AND DILIGENTLY PURSUES SAID
CURE.
3. Tenant's vacating (WITHOUT WRITTEN NOTICE TO
LANDLORD) or abandonment of the Premises;
4. Tenant's assignment of its assets for the benefit
of its creditors:
5. The sequestration of, attachment of, or execution
on, any substantial part of the property of Tenant
or on any property essential to the conduct of
Tenant's business shall have occurred and Tenant
shall have failed to obtain a return or release of
such property within thirty (30) days thereafter,
or prior to sale pursuant to such sequestration,
attachment or levy, whichever is earlier;
6. Tenant or any guarantor of Tenant's obligations
hereunder shall commence any case proceeding or
other action seeking reorganization, arrangement,
adjustment, liquidation, dissolution or composition
of it or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of
debtors, or seek appointment of a receiver,
trustee, custodian, or other similar official for
it or for all or any substantial part of its
property;
7. Tenant or any such guarantor shall take any
corporate action to authorize any of the actions
set forth in Clause 6 above; or
8. Any case, proceeding or other action against Tenant
or any guarantor of Tenant's obligations hereunder
shall be commenced seeking to have an order for
relief entered against it as debtor, or seeking
reorganization, arrangement, adjustment,
liquidation, dissolution or composition of it or
its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors, or
seeking appointment of a receiver, trustee,
custodian or other similar official for it or for
all or any substantial part of its property, and
such case, proceeding or other action (i) results
in the entry of an order for relief against it which
is not fully stayed within seven (7) business days
after the entry thereof or (ii) remains undismissed
for a period of forty-five (45) days.
B. REMEDIES. Upon any Event of Default, Landlord shall have the
following remedies, in addition to all other rights and
remedies provided by law, to which Landlord may resort
cumulatively, or in the alternative:
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1. RECOVERY OF RENT. Landlord shall be entitled to keep this Lease in
full force and effect (whether or not Tenant shall have abandoned the
Premises) and to enforce all of its rights and remedies under this
Lease, including the right to recover rent and other sums as they
become due, plus interest at the Permitted Rate (as defined in
Paragraph 33 below) from the due date of each installment of rent
or other sum until paid.
2. TERMINATION. Landlord may terminate this Lease by giving Tenant
written notice of termination. On the giving of the notice all of
Tenant's rights in the Premises and the Building and Parcel shall
terminate. Upon the giving of the notice of termination, Tenant shall
surrender and vacate the Premises in the condition required by
Paragraph 34, and Landlord may re-enter and take possession of the
Premises and all the remaining improvements or property and eject
Tenant or any of Tenant's subtenants, assignees or other person or
persons claiming any right under or through Tenant or eject some and
not others or eject none. This Lease may also be terminated by a
judgement specifically providing for termination. Any termination
under this paragraph shall not release Tenant from the payment of any
sum then due Landlord or from any claim for damages or rent previously
accrued or then accruing against Tenant. In no event shall any one or
more of the following actions by Landlord constitute a termination of
this Lease:
a. maintenance and preservation of the Premises;
b. efforts to relet the Premises;
c. appointment of a receiver in order to protect Landlord's interest
hereunder;
d. consent to any subletting of the Premises or assignment of this
Lease by Tenant, whether pursuant to provisions hereof concerning
subletting and assignment or otherwise; or
e. any other action by Landlord or Landlord's agents intended to
mitigate the adverse effects from any breach of this Lease by
Tenant.
3. DAMAGES. In the event this Lease is terminated pursuant to
Subparagraph 15.B.2 above, or otherwise, Landlord shall be entitled to
damages in the following sums:
a. the worth at the time of award of the unpaid rent which has been
earned at the time of termination; plus
b. the worth at the time of award of the amount by which the unpaid
rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that Tenant
proves could have been reasonably avoided; plus
c. the worth at the time of award of the amount by which the unpaid
rent for the balance of the term after the time of award exceeds
the amount of such rental loss that Tenant proves could be
reasonably avoided; and
d. any other amount necessary to compensate Landlord for all
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,
without limitation, the following: (i) expenses for cleaning,
repairing or restoring the Premises; (ii) expenses for altering,
remodeling or otherwise improving the Premises for the
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purpose of reletting, including installation of leasehold
improvements (whether such installation be funded by a reduction
of rent, direct payment or allowance to the succeeding lessee, or
otherwise); (iii) real estate broker's fees, advertising costs
and other expenses of reletting the Premises; (iv) costs of
carrying the Premises such as taxes and insurance premiums
thereon, utilities and security precautions; (v) expenses in
retaking possession of the Premises; (vi) attorneys' fees and
court costs; and (vii) any unamortized real estate brokerage
commission paid in connection with this Lease.
e. The "worth at the time of award" of the amounts referred to in
Subparagraphs (a) and (b) of this Paragraph, is computed by
allowing interest at the Permitted Rate. The "worth at the time
of award" of the amounts referred to in Subparagraph (c) of this
Paragraph is computed by discounting such amount at the discount
rate of the Federal Reserve Board of San Francisco at the time of
award plus one percent (1%). The term "rent" as used in this
Paragraph shall include all sums required to be paid by Tenant to
Landlord pursuant to the terms of this Lease.
16. DESTRUCTION. In the event that any portion of the Premises are destroyed or
damaged by an uninsured peril, Landlord or Tenant may, upon written notice
to the other, given within thirty (30) days after the occurrence of such
damage or destruction, elect to terminate this Lease; provided, however,
that either party may, within thirty (30) days after receipt of such
notice, elect to make any required repairs and/or restoration at such
party's sole cost and expense, in which event this Lease shall remain in
full force and effect, and the party having made such election to restore
or repair shall thereafter diligently proceed with such repairs and/or
restoration.
In the event the Premises are damaged or destroyed from any insured peril
to the extent of fifty percent (50%) or more of the then replacement cost
of the Premises, Landlord may, upon written notice to Tenant, given within
thirty (30) days after the occurrence of such damage or destruction, elect
to terminate this Lease. If Landlord does not give such notice in writing
within such period, Landlord shall be deemed to have elected to rebuild or
restore the Premises, in which event Landlord shall, at its expense,
promptly rebuild or restore the Premises to their condition prior to the
damage or destruction and Tenant shall pay to Landlord upon commencement of
reconstruction the amount of any deductible from the insurance policy.
In the event the Premises are damaged or destroyed from any insured peril
to the extent of less than fifty percent (50%) of the then replacement
cost of the Premises, Landlord shall, at Landlord's expense, promptly
rebuild or restore the Premises to their condition prior to the damage or
destruction and Tenant shall pay to Landlord upon commencement of
reconstruction the amount of any deductible from the insurance policy.
In the event that, pursuant to the foregoing provisions, Landlord is to
rebuild or restore the Premises, Landlord shall, within thirty (30) days
after the occurrence of such damage or destruction, provide Tenant with
written notice of the time required for such repair or restoration. If such
period is longer than NINETY (90) days from the issuance of a building
permit, WHICH TIME FOR RECEIPT OF A BUILDING PERMIT SHALL NOT EXCEED TWENTY
(20) DAYS, Tenant may, within thirty (30) days after receipt of Landlord's
notice, elect to terminate the Lease by giving written notice to Landlord
of such election, whereupon the Lease shall immediately terminate. IF
LANDLORD UNDERTAKES SUCH REPAIRS AND IS NOT COMPLETED WITHIN ONE HUNDRED
TWENTY (120) DAYS, TENANT HAS THE RIGHT TO TERMINATE THE LEASE, UPON
WRITTEN NOTICE TO LANDLORD. The period of time for Landlord to complete the
repair or restoration shall be extended for delays caused by the fault or
neglect of Tenant or because of acts of God, acts of publication, labor
disputes, strikes, fires, freight embargoes, rainy or stormy weather,
inability to obtain materials, supplies or fuels, acts of
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contractors or subcontractors, or delay of contractors or subcontractors
due to such causes, or other contingencies beyond the control of Landlord.
Landlord's obligation to repair or restore the Premises shall not include
restoration of Tenant's trade fixtures, equipment, merchandise, or any
improvements, alterations or additions made by Tenant to the Premises.
Unless this Lease is terminated pursuant to the foregoing provisions, this
Lease shall remain in full force and effect; provided, however, that during
any period of repairs or restoration, rent and all other amounts to be paid
by Tenant on account of the Premises and this Lease shall be abated in
proportion to the area of the Premises rendered not reasonably suitable for
the conduct of Tenant's business thereon. Tenant hereby expressly waives
the provisions of Section 1932, Subdivision 2 and Section 1933, Subdivision
4 of the California Civil Code.
17. CONDEMNATION
A. DEFINITION OF TERMS. For the purposes of this Lease, the term (1)
"Taking" means a taking of the Premises or damage to the Premises
related to the exercise of the power of eminent domain and includes a
voluntary conveyance, in lieu of court proceedings, to any agency,
authority, public utility, person or corporate entity empowered to
condemn property; (2)"Total Taking" means the taking of the entire
Premises or so much of the Premises as to prevent or substantially
impair the use thereof by Tenant for the uses herein specified;
provided, however, in no event shall a Taking of less than ten percent
(10%) of the Premises be deemed a Total Taking; (3)"Partial Taking"
means the taking of only a portion of the Premises which does not
constitute a Total Taking; (4)"Date of Taking" means the date upon
which the title to the Premises, or a portion thereof, passes to and
vests in the condemnor or the effective date of any order for
possession if issued prior to the date title vests in the condemnor;
and (5)"Award" means the amount of any award made, consideration paid,
or damages ordered as a result of a Taking.
B. RIGHTS. The parties agree that in the event of a Taking all rights
between them or in and to an Award shall be as set forth herein and
Tenant shall have no right to any Award except as set forth herein.
C. TOTAL TAKING. In the event of a Total Taking during the term hereof
(1) the rights of Tenant under the Lease and the leasehold estate of
Tenant in and to the Premises shall cease and terminate as of the Date
of Taking; (2) Landlord shall refund to Tenant any prepaid rent; (3)
Tenant shall pay Landlord any rent or charges due Landlord under the
Lease, each prorated as of the Date of Taking; (4) Tenant shall
receive from Landlord those portions of the Award attributable to
trade fixtures of Tenant and for moving expenses of Tenant; and (5)
the remainder of the Award shall be paid to and be the property of
Landlord.
D. PARTIAL TAKING. In the event of a Partial Taking during the term
hereof (1) the rights of Tenant under the Lease and leasehold estate
of Tenant in and to the portion of the Premises taken shall cease and
terminate as of the Date of Taking; (2) from and after the Date of
Taking the Monthly Installment of rent immediately prior to the Taking
by a fraction, the numerator of which is the number of square feet
contained in the Premises after the Taking and the denominator of
which is the number of square feet contained in the Premises prior to
the Taking; (3)Tenant shall receive from the Award the portions of the
Award attributable to trade fixtures of Tenant; and (4) the remainder
of the Award shall be paid to and be the property of Landlord.
18. MECHANICS' LIEN. Tenant shall (A) pay for all labor and services performed
for, materials used by or furnished to, Tenant or any contractor employed
by Tenant with respect to the Premises; (B) indemnify, defend, protect and
hold Landlord and the Premises harmless and free from any liens,
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claims, liabilities, demands, encumbrances, or judgements created or
suffered by reason of any labor or services performed for, materials used
by or furnished to, Tenant or any contractor employed by Tenant with
respect to the Premises; (C) give notice to Landlord in writing five (5)
days prior to employing any laborer or contractor to perform services
related to, or receiving materials for use upon the Premises; and (D)
permit Landlord to post a notice of nonresponsibility in accordance with
the statutory requirements of California Civil Code Section 3094 or any
amendment thereof. It the event Tenant is required to post an improvement
bond with a public agency in connection with the above, Tenant agrees to
include Landlord as an additional obligee.
19. INSPECTION OF THE PREMISES. Tenant shall permit Landlord and its agents to
enter the Premises at any reasonable time, UPON REASONABLE NOTICE, for the
purpose of inspecting the same, performing Landlord's maintenance and
repair responsibilities, posting a notice of non-responsibility for
alterations, additions or repairs and at any time within ninety (90) days
prior to expiration of this Lease, to place upon the Premises, ordinary
"For Lease" or "For Sale" signs.
20. COMPLIANCE WITH LAWS. Tenant shall, at its own cost, comply with all of the
requirements of all municipal, county, state and federal authorities now in
force, or which may hereafter be in force, pertaining to TENANT'S SPECIFIC
use and occupancy of the Premises, and shall faithfully observe all
municipal, county, state and federal law, statutes or ordinances now in
force or which may hereafter be in force. The judgement of any court of
competent jurisdiction or the admission of Tenant in any action or
proceeding against Tenant, whether Landlord be a party thereto or not, that
Tenant has violated any such ordinance or statute in the use and occupancy
of the Premises shall be conclusive of the fact that such violation by
Tenant has occurred.
21. SUBORDINATION. The following provisions shall govern the relationship of
this Lease to any underlying lease, mortgage or deed of trust which now or
hereafter affects the Premises, the Building and/or the Parcel, or
Landlord's interest or estate therein (the "Project") and any renewal,
modification, consolidation, replacement, or extension thereof (a "Security
Instrument").
A. PRIORITY. This Lease is subject and subordinate to Security
Instruments existing as of the Commencement Date. However, if any
Lender so requires, this Lease shall become prior and superior to any
such Security Instrument.
B. SUBSEQUENT SECURITY INSTRUMENTS. At Landlord's election, this Lease
shall become subject and subordinate to any Security Instrument
created after the Commencement Date. Notwithstanding such
subordination, THE HOLDER OF SUCH SECURITY INSTRUMENT SHALL AGREE IN
WRITING, AS A CONDITION OF SUCH SUBORDINATION, THAT TENANT'S RIGHT TO
QUIET POSSESSION OF THE PREMISES SHALL NOT BE DISTURBED SO LONG AS
TENANT IS NOT IN DEFAULT AND PERFORMS ALL OF ITS OBLIGATIONS UNDER
THIS LEASE, UNLESS THIS LEASE IS OTHERWISE TERMINATED PURSUANT TO ITS
TERMS.
C. DOCUMENTS. PROVIDED THAT THE CONDITION TO SUBORDINATION SPECIFIED IN
PARAGRAPH 21.B IS SATISFIED, Tenant shall execute any document or
instrument required by Landlord or any Lender to make this Lease
either prior or subordinate to a Security Instrument, which may
include such other matters as the Lender customarily requires in
connection with such agreements, including provisions that the Lender
not be liable for (1) the return of the Security Deposit unless the
Lender receives it from Landlord, and (2) any defaults on the part of
Landlord occurring prior to the time that the Lender takes possession
of the Project in connection with the enforcement of its Security
Instrument. Tenant's failure to execute any such document or
instrument within ten (10) days after written demand therefor shall
constitute a default by Tenant.
D. TENANT'S ATTORNMENT. Tenant shall attorn (1) to any purchaser of the
Premises at any foreclosure sale or private sale conducted pursuant to
any Security Instrument
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encumbering the Project; (2) to grantee or transferee designated in
any deed given in lieu of foreclosure; or (3) to the lessor under any
underlying ground lease should such ground lease be terminated.
E. LENDER. The term "Lender" shall mean (1) any beneficiary, mortgagee,
secured party, or other holder of any deed of trust, mortgage, or
other written security device or agreement affecting the Project; and
(2) any lessor under any underlying lease under which Landlord holds
its interest in the Project.
22. HOLDING OVER. This Lease shall terminate without further notice at the
expiration of the Lease Term. Any holding over by Tenant after expiration
shall not constitute a renewal or extension or give Tenant any rights in or
to the Premises except as expressly provided in this Lease. Any holding
over after the expiration with the consent of Landlord shall be construed
to be a tenancy from month to month, at ONE HUNDRED TWENTY-FIVE PERCENT
(125%) of the monthly rent for the last month of the Lease Term, and shall
otherwise be on the terms and conditions herein specified insofar as
applicable.
23. NOTICES. Any notice required or desired to be given under this Lease shall
be in writing with copies directed as indicated below and shall be
personally served or given by mail OR OVERNIGHT DELIVERY. Any notice given
by mail shall be deemed to have been given when forty-eight (48) hours
have elapsed from the time such notice was deposited in the United States
mails, certified and postage prepaid, addressed to the party to be served
with a copy as indicated herein at the last address given by that party
to the other party under the provisions of this Paragraph. At this date of
execution of this Lease, the address of Landlord is:
511 Division Street
Campbell CA 95008
and the address of Tenant is:
81 Vista Montana
San Jose, California 95134
24. ATTORNEY'S FEES. In the event either party shall bring any action or legal
proceeding for damages for any alleged breach of any provision of this
Lease, to recover rent or possession of the Premises, to terminate this
Lease, or to enforce, protect or establish any term or covenant of this
Lease or right or remedy of either party, the prevailing party shall be
entitled to recover as a part of such action or proceeding, reasonable
attorneys' fees and court costs, including attorneys' fees and costs for
appeal, as may be fixed by the court or jury. The term "prevailing party"
shall mean the party who received substantially the relief requested,
whether by settlement, dismissal, summary judgement, judgement, or
otherwise.
25. NONASSIGNMENT.
A. LANDLORD'S CONSENT REQUIRED. Tenant's interest in this Lease is not
assignable, by operation of law or otherwise, nor shall Tenant have
the right to sublet the Premises, transfer any interest of Tenant
therein or permit any use of the Premises by another party, without
the prior written consent of Landlord to such assignment, subletting,
transfer or use, which consent Landlord agrees not to withhold
unreasonably subject to the provisions of Subparagraph B below. A
consent to one assignment, subletting, occupancy or use by another
party shall not be deemed to be a consent to any subsequent
assignment, subletting, occupancy or use by another party. Any
assignment or subletting without such consent shall be void and shall,
at the option of Landlord, terminate this Lease.
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Landlord's waiver or consent to any assignment or
subletting hereunder shall not relieve Tenant from any
obligation under this lease unless the consent shall so
provide.
B. TRANSFEREE INFORMATION REQUIRED. If Tenant desires to
assign its interest in this Lease or sublet the
Premises, or transfer any interest of Tenant therein,
or permit the use of the Premises by another party
(hereinafter collectively referred to as a "Transfer"),
Tenant shall give Landlord at least thirty (30) days
prior written notice of the proposed Transfer and of
the terms of such proposed Transfer, including, but
not limited to, the name and legal composition of the
proposed transferee, a financial statement of the
proposed transferee, the nature of the proposed
transferee's business to be carried on in the Premises,
the payment to be made or other consideration to be
given to Tenant on account of the Transfer, and such
other pertinent information as may be requested by
Landlord, all in sufficient detail to enable Landlord
to evaluated the proposed Transfer and the prospective
transferee. It is the intent of the parties hereto that
this Lease shall confer upon Tenant only the right to use
and occupy the Premises, and to exercise such other rights
as are conferred upon Tenant by this Lease. The parties
agree that this Lease is not intended to have a bonus value
nor to serve as a vehicle whereby Tenant may profit by a
future Transfer of this Lease or the right to use or
occupy the Premises as a result of any favorable terms
contained herein, or future changes in the market for
leased space. It is the intent of the parties that any
such bonus value that may attach to this Lease shall be
and remain the exclusive property of Landlord.
Accordingly, in the event Tenant seeks to Transfer its
interest in this Lease or the Premises, Landlord shall
have the following options, which may be exercised at
its sole choice without limiting Landlord in the
exercise of any other right or remedy which Landlord
may have by reason of such proposed Transfer:
(1) Landlord may elect to terminate this Lease
effective as of the proposed effective date of the
proposed Transfer and release Tenant from any
further liability hereunder accruing after such
termination date by giving Tenant written notice
of such termination within twenty (20) days after
receipt by Landlord of Tenant's notice of intent
to transfer as provided above. If Landlord makes
such election to terminate this Lease, Tenant
shall surrender the Premises, in accordance with
Paragraph 34, on or before the effective
termination date; or
(2) Landlord may consent to the proposed Transfer on
the condition that Tenant agrees to pay to
Landlord, as additional rent, any and all rents or
other consideration (including key money) received
by Tenant from the transferee by reason of such
Transfer in excess of the rent payable by Tenant
to Landlord under this Lease (less any brokerage
commissions or advertising expenses incurred by
Tenant in connection with the Transfer, INCLUDING
TENANT IMPROVEMENT COSTS). Tenant expressly
agrees that the foregoing is a reasonable
condition for obtaining Landlord's consent to any
Transfer; or
(3) Landlord may reasonably withhold its consent to
the proposed Transfer.
26. SUCCESSORS. The covenants and agreements contained in this
Lease shall be binding on the parties hereto and on their
respective heirs, successors and assigns (to the extent the
Lease is assignable).
27. MORTGAGEE PROTECTION. In the event of any default on the
part of Landlord, Tenant will give notice by registered or
certified mail to any beneficiary of a deed of trust or
mortgagee of a mortgage encumbering the Premises, whose
address shall have been furnished to Tenant, and shall offer
such beneficiary or mortgagee a reasonable opportunity to
cure the default, including time to obtain possession of the
Premises by power of sale or judicial foreclosure, if such
should prove necessary to effect a cure.
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28. LANDLORD LOAN OR SALE. Tenant agrees promptly following
request by Landlord to (A) execute and deliver to Landlord
any documents, including estoppel certificates presented to
Tenant by Landlord, (i) certifying that this Lease is
unmodified and in full force and effect and the date to
which the rent and other charges are paid in advance, if
any, and (ii) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord
hereunder, and (iii) evidencing the status of the Lease as
may be required either by a lender making a loan to Landlord
to be secured by a deed of trust or mortgage covering the
Premises or a purchaser of the Premises from Landlord and
(B) to deliver to Landlord the financial statement of TENANT
IN FORM AND CONTENT GENERALLY PREPARED BY TENANT, including
a balance sheet and profit and loss statement, for the last
completed fiscal year all prepared in accordance with
generally accepted accounting principles consistently
applied. Tenant's failure to deliver an estoppel
certificate within ten (10) days following such request
shall be an Event of Default under this Lease, PROVIDED
TENANT DOES NOT DELIVER SAID ESTOPPEL CERTIFICATE WITHIN
FIVE (5) DAYS AFTER WRITTEN NOTICE OF DELINQUENCY.
29. SURRENDER OF LEASE NOT MERGER. The voluntary or other
surrender of this Lease by Tenant, or a mutual cancellation
thereof, shall not work a merger and shall, at the option of
Landlord, terminate all or any existing subleases or
subtenants, or operate as an assignment to Landlord of any
or all such sublease or subtenants.
30. WAIVER. The waiver by Landlord or Tenant of any breach of any
term, covenant or condition herein contained shall not be deemed
to be a waiver of any preceding or succeeding breach of the same
or any other covenant or condition herein contained.
31. GENERAL.
A. CAPTIONS. The captions and paragraph headings used in
this Lease are for the purposes of convenience only.
They shall not be construed to limit or extend the
meaning of any part of this Lease, or be used to
interpret specific sections. The word (s) enclosed in
quotation marks shall be construed as defined terms for
purposes of this Lease. As used in this Lease, the
masculine, feminine and neuter and the singular or
plural number shall each be deemed to include the other
whenever the context so requires.
B. DEFINITION OF LANDLORD. The term "Landlord" as used in
this Lease, so far as the covenants or obligations on
the part of Landlord are concerned, shall be limited to
mean and include only the owner at the time in question
of the fee title of the Premises, and in the event of
any transfer or transfers of the title of such fee, the
Landlord herein named (and in case of any subsequent
transfers or conveyances, the then grantor) shall after
the date of such transfer or conveyance be
automatically freed and relieved of all liability with
respect to performance of any covenants or obligations
on the part of Landlord contained in this Lease,
thereafter to be performed; provided that any funds in
the hands of Landlord or the then grantor at the time
of such transfer, in which Tenant has an interest,
shall be turned over to the grantee. It is intended
that the covenants and obligations contained in this
Lease on the part of Landlord shall, subject as
aforesaid, be binding upon each Landlord, its heirs,
personal representatives, successors and assigns only
during its respective period of ownership.
C. TIME OF ESSENCE. Time is of the essence for the
performance of each term, covenant and condition of
this Lease.
D. SEVERABILITY. In case any one or more of the
provisions contained herein, except for the payment of
rent, shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not
affect any other provision of this Lease, but this
Lease shall be construed as if such invalid, illegal or
unenforceable
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provision had not been contained herein. This Lease shall
be construed and enforced in accordance with the laws of the
State of California.
E. JOINT AND SEVERAL LIABILITY. If Tenant is more than
one person or entity, each such person or entity shall
be jointly and severally liable for the obligations of
Tenant hereunder.
F. LAW. The term "law" shall mean any judicial decision,
status, constitution, ordinance, resolution,
regulation, rule, administrative order, or other
requirement of any government agency or authority
having jurisdiction over the parties to this Lease or
the Premises or both, in effect at the Commencement
Date of this Lease or any time during the Lease Term,
including, without limitation, any regulation, order,
or policy of any quasi-official entity or body (e.g.,
board of fire examiners, public utility or special
district).
G. AGENT. AS USED HEREIN THE TERM "AGENT" SHALL MEAN,
WITH RESPECT TO EITHER LANDLORD OR TENANT, ITS
RESPECTIVE AGENTS, EMPLOYEES, CONTRACTORS (AND THEIR
SUBCONTRACTORS), AND INVITEES (AND IN THE CASE OF
TENANT, ITS SUBTENANTS).
H. WAIVER OF JURY TRIAL
LANDLORD AND TENANT HEREBY WAIVE THEIR RESPECTIVE RIGHT
TO TRIAL BY JURY OF ANY CAUSE OF ACTION, CLAIM,
COUNTERCALIM OR CROSS-COMPLAINT IN ANY ACTION
PROCEEDING AND/OR HEARING BROUGHT BY EITHER LANDLORD
AGAINST TENANT OR TENANT AGAINST LANDLORD ON ANY MATTER
WHATSOEVER ARISING OUT OF, OR IN ANY WAY CONNECTED
WITH, THIS LEASE, THE RELATIONSHIP OF LANDLORD AND
TENANT, TENANT'S USE OR OCCUPANCY OF THE PREMISES OR
ANY CLAIM OF INJURY OR DAMAGE, OR THE ENFORCEMENT OF
ANY REMEDY UNDER ANY LAW, STATUTE, OR REGULATION,
EMERGENCY OR OTHERWISE, NOW OR HEREAFTER IN EFFECT.
INITIALS: /s/
------------(LANDLORD)
/s/
------------(TENANT)
32. SIGN. Tenant shall not place or permit to be placed any
sign or decoration on the land or the exterior of the
Building without the prior written consent of Landlord,
WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD. Tenant,
upon written notice by Landlord, shall immediately remove any
sign or decoration that has placed or permitted to be placed on
the land or the exterior of the Building without the prior
written consent of Landlord, and if Tenant fails to so remove
such sign or decoration within five (5) days after Landlord's
written notice, Landlord may enter upon the Premises and remove
said sign or decoration and Tenant agrees to pay Landlord, as
additional rent upon demand, the COMMERCIALLY REASONABLE
cost of such removal. At the termination of this Lease,
Tenant shall remove any sign which it has placed on the
Parcel or Building and shall repair any damage caused by the
installation or removal of such sign.
33. INTEREST ON PAST DUE OBLIGATIONS. Any Monthly Installment
of rent or any other sum due form Tenant under this Lease
which is received by Landlord after the date the same is due
shall bear interest from said due date until paid, at an
annual rate equal to the lesser of (the "Permitted Rate"):
(1) twelve percent (12%); or (2) five percent (5%) plus the
rate established by the Federal Reserve Bank of San
Francisco, as of the Twenty-fifth (25th) day of the month
immediately preceding the due date, on advances to member
banks under Section 13 and 13 (a) of the Federal Reserve
Act, as now in effect or hereafter from time to time
amended. Payment of such interest shall not excuse or cure
any default by Tenant. In addition, Tenant shall pay all
costs and attorneys' fees incurred by Landlord in collection
of such amounts.
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34. SURRENDER OF THE PREMISES. On the last day of the term
hereof, or on the sooner termination of this Lease, Tenant
shall surrender the Premises to Landlord in their condition
existing as of the Commencement Date of this Lease, EXCEPT
AS PROVIDED IN PARAGRAPH 13 ABOVE AND EXHIBIT "E" ATTACHED
HERETO, ordinary wear and tear excepted, with all originally
painted interior walls washed and other interior walls
cleaned, and repaired or replaced, all carpets shampooed and
cleaned, the air conditioning and heating equipment serviced
and repaired by a reputable and licensed service firm, all
floors cleaned and waxed, all to the reasonable satisfaction
of Landlord. Tenant shall remove all of Tenant's personal
property and trade fixtures from the Premises, and all
property not so removed shall be deemed abandoned by Tenant.
Tenant, at its sole cost, shall repair any damage to the
Premises caused by the removal of Tenant's personal
property, machinery and equipment, which repair shall
include, without limitation, the patching and filling of
holes and repair of structural damage. If the Premises are
not so surrendered at termination of this Lease, Tenant
shall indemnify, defend, protect and hold Landlord harmless
from and against loss or liability resulting from delay by
Tenant in so surrendering the Premises including without
limitation, any claims made by any succeeding tenant or
losses to Landlord due to lost opportunities to lease to
succeeding tenants.
35. AUTHORITY. The undersigned parties hereby warrant that they
have proper authority and are empowered to execute this
Lease on behalf of Landlord and Tenant, respectively.
36. PUBLIC RECORD. This Lease is made subject to all matters of
public record affecting title to the property of which the
Premises are a part. Tenant shall abide by and comply with
all private conditions, covenants and restrictions
("CC&R's") of public record now (TO LANDLORD'S KNOWLEDGE
THERE ARE NO CURRENT CC&R's OF PUBLIC RECORD) or hereafter
affecting the Premises and any amendment thereof, A COPY OF
WHICH LANDLORD SHALL PROVIDE TO TENANT. All assessments and
charges which are imposed, levied or assessed against the
Parcel and Buildings pursuant to the above-described
covenants, conditions and restrictions shall be a Common
Area Charge and Tenant shall pay its share of such
assessments and charges to Landlord as provided in Paragraph
12 above.
37. BROKERS. Each party represents and warrants to the other
that there are no brokerage commissions or fees payable in
connection with this Lease, except to the Commercial
Property Services Company ("CPS") and, with the exception of
CPS, each party hereby agrees to indemnify and hold the
other harmless from and against any brokerage commissions or
fee, obligation, claim or damage (including reasonable
attorneys' fees) paid or incurred by the other party as a
result of a breach of this Paragraph 37. This indemnity
shall survive the expiration or sooner termination of this Lease.
38. LIMITATION ON LANDLORD'S LIABILITY. Tenant, for itself and
its successors and assigns (to the extent this Lease is
assignable), hereby agrees that in the event of any actual,
or alleged, breach or default by Landlord under this lease
that:
(A) Tenant's sole and exclusive remedy against Landlord
shall be as against Landlord's interest in the
Building;
B) No partner or officer of any partner of Landlord shall
be sued or named as a party in a suit or action (except
as may be necessary to secure jurisdiction of the
partnership);
C) No service of process shall be made against any partner
of Landlord (except as may be necessary to secure
jurisdiction of the partnership);
D) No partner of Landlord shall be required to answer or
otherwise plead to any service of process;
E) No Judgment will be taken against any partner of
Landlord;
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F) Any judgment taken against any partner of Landlord
maybe vacated and set aside at any time nunc pro tunc;
G) No writ of execution will ever be levied against the
assets of any partner of Landlord;
H) The covenants and agreements of Tenant set forth in
this Section 38 shall be enforceable by Landlord and
any partner of Landlord.
39. HAZARDOUS MATERIAL.
A. DEFINITIONS. AS USED HEREIN, THE TERM "HAZARDOUS
MATERIAL" SHALL MEAN ANY SUBSTANCE: (i) THE PRESENCE OF
WHICH REQUIRES INVESTIGATION OR REMEDIATION UNDER ANY
FEDERAL, STATE OR LOCAL STATUTES, REGULATION,
ORDINANCE, ORDER, ACTION, POLICY OR COMMON LAW; (ii)
WHICH IS OR BECOMES DEFINED "HAZARDOUS WASTE,"
"HAZARDOUS SUBSTANCE," POLLUTANT OR CONTAMINANT UNDER
ANY FEDERAL, STATE OR LOCAL STATUTE, REGULATION, RULE
OR ORDINANCE OR AMENDMENTS THERETO INCLUDING, WITHOUT
LIMITATION, THE COMPREHENSIVE ENVIRONMENTAL RESPONSE,
COMPENSATION AND LIABILITY ACT (42 U.S.C. SECTION 9601
ET SEQ.) AND/OR THE RESOURCE CONSERVATION AND RECOVERY
ACT (42 U.S.C. SECTION 6901 ET SEQ.); (iii) WHICH IS
TOXIC, EXPLOSIVE, CORROSIVE, FLAMMABLE, INFECTIOUS,
RADIOACTIVE, CARCINOGENIC, MUTAGENIC, OR OTHERWISE
HAZARDOUS AND IS OR BECOMES REGULATED BY ANY
GOVERNMENTAL AUTHORITY, AGENCY, DEPARTMENT, COMMISSION,
BOARD, AGENCY, OR INSTRUMENTALITY OF THE UNITED STATES,
THE STATE OF CALIFORNIA OR ANY POLITICAL SUBDIVISION
THEREOF; (iv) THE PRESENCE OF WHICH ON THE PREMISES
CAUSES OR THREATENS TO CAUSE A NUISANCE UPON THE
PREMISES OR TO ADJACENT PROPERTIES OR POSES OR
THREATENS TO POSE A HAZARD TO THE HEALTH OR SAFETY OF
PERSONS ON OR ABOUT THE PREMISES; (v) THE PRESENCE OF
WHICH ON ADJACENT PROPERTIES COULD CONSTITUTE A TRESPASS
TO LANDLORD OR TENANT; (vi) WITHOUT LIMITATION WHICH
CONTAINS GASOLINE, DIESEL FUEL, OR OTHER PETROLEUM
HYDROCARBONS; (vii) WITHOUT LIMITATION WHICH CONTAINS
POLYCHLORINATED BIPHENYLS (PCBs), ASBESTOS OR UREA
FORMALDEHYDE FOAM INSULATION; OR (viii) WITHOUT
LIMITATION RADON GAS.
B. LANDLORD'S INDEMNITY. LANDLORD SHALL INDEMNIFY,
DEFEND, PROTECT AND HOLD TENANT HARMLESS FROM AND
AGAINST ALL LIABILITIES, CLAIMS, PENALTIES, FINES,
RESPONSE COSTS AND OTHER EXPENSES (INCLUDING, BUT
LIMITED TO, REASONABLE ATTORNEYS' FEES AND CONSULTANTS'
FEES AND COSTS) ARISING OUT OF, RESULTING FROM, OR
CAUSED BY ANY HAZARDOUS MATERIAL USED, GENERATED
DISCHARGED, TRANSPORTED TO OR FROM, STORED OR DISPOSED
OF BY LANDLORD OR ITS AGENTS IN, ON, UNDER, OVER, THROUGH
OR ABOUT THE PREMISES AND/OR THE SURROUNDING REAL
PROPERTY.
C. PERMITTED USE. SUBJECT TO THE COMPLIANCE BY TENANT
WITH THE PROVISIONS OF SUBPARAGRAPHS D, E, F, G, I, J
AND K BELOW, TENANT SHALL BE PERMITTED TO USE AND STORE
ON THE PREMISES THOSE HAZARDOUS MATERIALS LISTED IN
EXHIBIT "F" ATTACHED HERETO IN THE QUANTITIES ATTACHED
SET FORTH IN EXHIBIT "F".
D. HAZARDOUS MATERIAL MANAGEMENT PLAN. PRIOR TO TENANT
USING, HANDLING, TRANSPORTING OR STORING ANY HAZARDOUS
MATERIAL AT OR ABOUT THE PREMISES (INCLUDING, WITHOUT
LIMITATION, THOSE LISTED IN EXHIBIT "F"), TENANT SHALL
SUBMIT TO LANDLORD A HAZARDOUS MATERIALS MANAGEMENT
PLAN ("HMMP") FOR LANDLORD'S REVIEW AND APPROVAL, WHICH
APPROVAL SHALL NOT BE UNREASONABLY WITHHELD. THE HMMP
SHALL DESCRIBE: (i) THE QUANTITIES OF EACH MATERIAL TO
BE USED, (ii) THE PURPOSE FOR WHICH EACH MATERIAL IS TO
BE USED, (iii) THE METHOD OF STORAGE OF EACH MATERIAL,
(iv) THE METHOD OF TRANSPORTING EACH MATERIAL TO AND
FROM THE PREMISES AND WITHIN THE PREMISES, (v) THE
METHODS TENANT WILL EMPLOY TO MONITOR THE USE OF THE
MATERIAL AND TO DETECT ANY LEAKS OR POTENTIAL HAZARDS,
AND (vi) ANY OTHER INFORMATION ANY DEPARTMENT OF ANY
GOVERNMENTAL ENTITY (CITY, STATE OR FEDERAL) REQUIRES
PRIOR TO THE ISSUANCE OF ANY REQUIRED PERMIT FOR THE
PREMISES OR DURING TENANT'S OCCUPANCY OF THE PREMISES.
LANDLORD MAY, BUT SHALL HAVE NO OBLIGATION TO
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REVIEW AND APPROVE THE FOREGOING INFORMATION AND HMO, AND SUCH
REVIEW AND APPROVAL OR FAILURE TO REVIEW AND APPROVE SHALL NOT
ACT AS AN ESTOPPEL OR OTHERWISE WAIVE LANDLORD'S RIGHTS UNDER
THIS LEASE OR RELIEVE TENANT OF ITS OBLIGATIONS UNDER THIS LEASE.
IF LANDLORD DETERMINES IN GOOD FAITH BY INSPECTION OF THE
PREMISES OR REVIEW OF THE HMMP THAT METHODS IN USE OR DESCRIBED
BY TENANT ARE NOT ADEQUATE IN LANDLORD'S GOOD FAITH JUDGEMENT TO
PREVENT OR ELIMINATE THE EXISTENCE OF ENVIRONMENTAL HAZARDS, THEN
TENANT SHALL NOT USE, HANDLE, TRANSPORT, OR STORE SUCH HAZARDOUS
MATERIALS AT OR ABOUT THE PREMISES UNLESS AND UNTIL SUCH METHODS
ARE APPROVED BY THE LANDLORD IN GOOD FAITH AND ADDED TO AN
APPROVED HMMP. ONCE APPROVED BY LANDLORD, TENANT SHALL STRICTLY
COMPLY WITH THE HMMP AND SHALL NOT CHANGE ITS USE, OPERATIONS OR
PROCEDURES WITH RESPECT TO HAZARDOUS MATERIALS WITHOUT SUBMITTING
AN AMENDED HMMP FOR LANDLORD'S REVIEW AND APPROVAL AS PROVIDED
ABOVE.
E. USE RESTRICTIONS. EXCEPT AS SPECIFICALLY ALLOWED IN SUBPARAGRAPH
C ABOVE, TENANT SHALL NOT CAUSE OR PERMIT ANY HAZARDOUS MATERIAL
TO BE USED, STORED, GENERATED, DISCHARGED, TRANSPORTED TO OR
FROM, OR DISPOSED OF IN OR ABOUT THE PREMISES, OR ANY OTHER LAND
OR IMPROVEMENT IN THE VICINITY OF THE PREMISES. WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, TENANT, AT ITS SOLE COST, SHALL
COMPLY WITH ALL LAWS RELATING TO THE STORAGE, USE, GENERATION,
TRANSPORT, DISCHARGE AND DISPOSAL BY TENANT OR ITS AGENTS OF ANY
HAZARDOUS MATERIAL. IF THE PRESENCE OF ANY HAZARDOUS MATERIAL ON
THE PREMISES CAUSED OR PERMITTED BY TENANT OR ITS AGENTS RESULTS
IN CONTAMINATION OF THE PREMISES OR ANY SOIL, AIR, GROUND OR
SURFACE WATERS UNDER, THROUGH, OVER, ON, IN OR ABOUT THE
PREMISES, TENANT AT ITS EXPENSE, SHALL PROMPTLY TAKE ALL ACTIONS
NECESSARY TO RETURN THE PREMISES AND/OR THE SURROUNDING REAL
PROPERTY TO THE CONDITION EXISTING PRIOR TO THE APPEARANCE OF
SUCH HAZARDOUS MATERIAL.
F. TENANT INDEMNITY. TENANT SHALL DEFEND, PROTECT, HOLD HARMLESS AND
INDEMNIFY LANDLORD AND ITS AGENTS AND LENDERS WITH RESPECT TO ALL
ACTIONS, CLAIMS, LOSSES (INCLUDING, DIMINUTION IN VALUE OF THE
PREMISES),FINES, PENALTIES, FEES,(INCLUDING, BUT NOT LIMITED TO,
REASONABLE ATTORNEYS' AND CONSULTANTS' FEES AND COSTS) COSTS,
DAMAGES, LIABILITIES, REMEDIATION COSTS, INVESTIGATIONS COSTS,
RESPONSE AND OTHER EXPENSES ARISING OUT OF, RESULTING FROM, OR
CAUSED BY ANY HAZARDOUS MATERIAL USED, GENERATED DISCHARGED,
TRANSPORTED TO OR FROM, STORED, OR DISPOSED OF BY TENANT OR ITS
AGENTS IN, ON, UNDER, OVER, THROUGH OR ABOUT THE PREMISES AND/OR
THE SURROUNDING REAL PROPERTY. TENANT SHALL NOT SUFFER ANY LIEN
TO BE RECORDED AGAINST THE PREMISES AS A CONSEQUENCE FOR THE
DISPOSAL OF ANY HAZARDOUS MATERIAL ON THE PREMISES BY THE TENANT
OR ITS AGENTS, INCLUDING ANY SO CALLED STATE, FEDERAL OR LOCAL
"SUPER FUND" LIEN RELATED TO THE "CLEAN UP" OF ANY HAZARDOUS
MATERIAL IN, OVER, ON, UNDER THROUGH, OR ABOUT THE PREMISES.
G. COMPLIANCE. TENANT SHALL IMMEDIATELY NOTIFY LANDLORD OF ANY
INQUIRY, TEST, INVESTIGATION, ENFORCEMENT PROCEEDING BY OR
AGAINST TENANT OR THE PREMISES CONCERNING ANY HAZARDOUS MATERIAL.
ANY REMEDIATION PLAN PREPARED BY OR ON BEHALF OF TENANT MUST BE
SUBMITTED TO LANDLORD PRIOR TO CONDUCTING ANY WORK PURSUANT TO
SUCH PLAN AND PRIOR TO SUBMITTAL TO ANY APPLICABLE GOVERNMENT
AUTHORITY AND SHALL BE SUBJECT TO LANDLORD'S CONSENT. TENANT
ACKNOWLEDGES THAT LANDLORD, AS THE OWNER OF THE PROPERTY, AT
ITS ELECTION, SHALL HAVE THE SOLE RIGHT TO NEGOTIATE, DEFEND,
APPROVE AND APPEAL ANY ACTION TAKEN OR ORDER ISSUED WITH REGARD TO ANY
HAZARDOUS MATERIAL BY ANY APPLICABLE GOVERNMENT AUTHORITY.
H. ASSIGNMENT AND SUBLETTING. IT SHALL NOT BE UNREASONABLE FOR
LANDLORD TO WITHHOLD ITS CONSENT TO ANY PROPOSED ASSIGNMENT OR
SUBLETTING IF (i) THE PROPOSED ASSIGNEE'S OR SUBTENANT'S
ANTICIPATED USE OF THE PREMISES INVOLVES THE STORAGE, GENERATION,
DISCHARGE,
21
<PAGE>
TRANSPORT, USE OR DISPOSAL OF ANY HAZARDOUS MATERIAL NOT
PERMITTED UNDER SUBPARAGRAPH C ABOVE; (ii) IF THE PROPOSED
ASSIGNEE OR SUBTENANT HAS BEEN REQUIRED BY ANY PRIOR
LANDLORD, LENDER, OR GOVERNMENT AUTHORITY TO "CLEAN UP" OR
REMEDIATE ANY HAZARDOUS MATERIAL AND HAS FAILED TO PROMPTLY
DO SO; (iii) IF THE PROPOSED ASSIGNEE OR SUBTENANT IS
SUBJECT TO INVESTIGATION OR ENFORCEMENT ORDER OR PROCEEDING
BY ANY GOVERNMENTAL AUTHORITY IN CONNECTION WITH THE USE,
GENERATION, DISCHARGE, TRANSPORT, DISPOSAL OR STORAGE OF ANY
MATERIAL AMOUNT OF HAZARDOUS MATERIAL; PROVIDED THAT (ii)
AND (iii) WILL NOT APPLY IN THE CASE OF A FORTUNE 500
COMPANY.
I. SURRENDER. UPON THE EXPIRATION OR EARLIER TERMINATION OF THE
LEASE, TENANT, AT ITS SOLE COST, SHALL REMOVE ALL HAZARDOUS
MATERIALS FROM THE PREMISES THAT TENANT OR ITS AGENTS INTRODUCED
TO THE PREMISES. IF TENANT FAILS TO SO SURRENDER THE PREMISES,
TENANT SHALL INDEMNIFY, PROTECT, DEFEND AND HOLD LANDLORD
HARMLESS FROM AND AGAINST ALL DAMAGES RESULTING FROM TENANT'S
FAILURE TO SURRENDER THE PREMISES AS REQUIRED BY THIS PARAGRAPH,
INCLUDING, WITHOUT LIMITATION, ANY ACTIONS, CLAIMS, LOSSES,
LIABILITIES, FEES (INCLUDING, BUT NOT LIMITED TO, REASONABLE
ATTORNEY'S FEES AND CONSULTANTS' FEES AND COSTS),FINES, COSTS,
PENALTIES, OR DAMAGES IN CONNECTION WITH THE CONDITION OF THE
PREMISES INCLUDING, WITHOUT LIMITATION, DAMAGES OCCASIONED BY THE
INABILITY TO RELET THE PREMISES OR A REDUCTION IN THE FAIR MARKET
AND/OR RENTAL VALUE OF THE PREMISES BY REASON OF THE EXISTENCE OF
ANY HAZARDOUS MATERIALS IN, ON OVER, UNDER, THROUGH OR AROUND THE
PREMISES.
J. RIGHT TO APPOINT CONSULTANT. LANDLORD SHALL HAVE THE RIGHT TO
APPOINT A CONSULTANT TO CONDUCT AN INVESTIGATION TO DETERMINE
WHETHER ANY HAZARDOUS MATERIAL IS BEING USED, GENERATED,
DISCHARGED, TRANSPORTED TO OR FROM, STORED OR DISPOSED OF IN, ON,
OVER, THROUGH, OR ABOUT THE PREMISES, IN AN APPROPRIATE AND
LAWFUL MANNER. IF TENANT HAS VIOLATED ANY LAW OR COVENANT IN THIS
LEASE REGARDING THE USE, STORAGE OR DISPOSAL OF HAZARDOUS
MATERIALS ON OR ABOUT THE PREMISES, TENANT SHALL REIMBURSE
LANDLORD FOR THE COST OF SUCH INVESTIGATION. TENANT, AT ITS
EXPENSE, SHALL COMPLY WITH ALL REASONABLE RECOMMENDATIONS OF THE
CONSULTANT REQUIRED TO CONFORM TENANT'S USE, STORAGE OR DISPOSAL
OF HAZARDOUS MATERIALS TO THE REQUIREMENTS OF APPLICABLE LAW OR
TO FULFILL THE OBLIGATIONS OF TENANT HEREUNDER.
K. HOLDING OVER. IF ANY ACTION OF ANY KIND IS REQUIRED TO BE TAKEN
BY ANY GOVERNMENTAL AUTHORITY TO CLEAN-UP, REMOVE, REMEDIATE OR
MONITOR HAZARDOUS MATERIAL (THE PRESENCE OF WHICH IS THE RESULT
OF THE ACTS OR OMISSIONS OF TENANT OR ITS AGENTS) AND SUCH ACTION
IS NOT COMPLETED PRIOR TO THE EXPIRATION OR EARLIER TERMINATION
OF THE LEASE, TENANT SHALL BE DEEMED TO HAVE IMPERMISSIBLY HELD
OVER UNTIL SUCH TIME AS SUCH REQUIRED ACTION IS COMPLETED, AND
LANDLORD SHALL BE ENTITLED TO ALL DAMAGES DIRECTLY OR INDIRECTLY
INCURRED IN CONNECTION WITH SUCH HOLDING OVER, INCLUDING WITHOUT
LIMITATIONS, DAMAGES OCCASIONED BY THE INABILITY TO RE-LET THE
PREMISES OR A REDUCTION OF THE FAIR MARKET AND/OR RENTAL VALUE OF
THE PREMISES.
L. EXISTING ENVIRONMENTAL REPORTS. TENANT HEREBY ACKNOWLEDGES
THAT IT HAS RECEIVED, READ AND REVIEWED THE REPORTS AND TEST
RESULTS DESCRIBED IN EXHIBIT "G" ATTACHED HERETO AND MADE A
PART HEREOF (THE "EXISTING ENVIRONMENTAL REPORTS").
M. PROVISIONS SURVIVE REPORTS. THE PROVISIONS OF THIS
PARAGRAPH 39 SHALL SURVIVE THE EXPIRATION OR TERMINATION OF
THIS LEASE.
22
<PAGE>
N. CONTROLLING PROVISIONS. THE PROVISIONS OF THIS PARAGRAPH 39 ARE
INTENDED TO GOVERN THE RIGHTS AND LIABILITIES OF THE LANDLORD AND
TENANT HEREUNDER RESPECTING HAZARDOUS MATERIALS TO THE EXCLUSION OF
ANY OTHER PROVISIONS IN THIS LEASE THAT MIGHT OTHERWISE BE DEEMED
APPLICABLE. THE PROVISIONS OF THIS PARAGRAPH 39 SHALL BE
CONTROLLING WITH REPECT TO ANY PROVISIONS IN THIS LEASE THAT ARE
INCONSISTENT WITH THIS PARAGRAPH 39.
40. OPTION TO EXTEND.
Tenant shall be granted on (1) option to extend the term of this lease
through and including October 29, 1998. Such extension to be on the
same terms and conditions as the initial term, including the Base
Monthly Rent. It shall be a precedent to the exercise of this option
that Tenant shall not be in default under this Lease, BEYOND ANY
APPLICABLE CURE PERIOD, at the time of the exercise of the option.
Tenant shall exercise said option only by written notice delivered to
exercise of the option. Tenant shall exercise said option only by
written notice delivered to Landlord at least ONE HUNDRED TWENTY (120)
days prior to the expiration of the original term of this lease.
41. RIGHTS OF FIRST REFUSAL.
A. In the event this Lease is in full force and effect and provided
Tenant is not in default under the terms and conditions of the Lease,
BEYOND ANY APPLICABLE CURE PERIOD, Landlord hereby grants Tenant the
Right of First Refusal (First Right), second to AG Associates' Option
to Expand, the premises as defined herein. Said First Right shall be
secondary to AG Associates Option to Expand, as defined in their lease
dated July 21, 1995.
B. Furthermore, Tenant shall have the Right of First Refusal ("Second
Right") to lease any space designated in Exhibit A, as "site plan",
Landlord shall notify Tenant in writing of the terms for which
Landlord is willing to lease the subject premises.
C. The foregoing rights shall be contingent upon Tenant's responding
to Landlord in writing of Tenant's intent to exercise said right(s) of
first refusal within TWO (2) BUSINESS DAYS of notification to Tenant
by Landlord of an impending offer on said subject premises. Tenant
shall have two (2) BUSINESS DAYS to accept the terms and conditions as
written by Landlord and to agree in writing to lease the subject
premises. If Landlord has not received a written response to lease
the subject premises from Tenant within TWO (2) BUSINESS DAYS of
Tenant's receipt of an offer from Landlord, then it shall be deemed
that Tenant is waiving its right to lease the subject space, and
Landlord will be free to lease to the original offering party, on the
same terms and conditions as were originally offered to Tenant.
23
<PAGE>
D. Neither Right of First Refusal, as outlined above, shall apply to
extensions of leases for space with Tenants who are in occupancy of
buildings designated in the Exhibit A site plan as of the commencement
date of this Lease (the "Existing Leases"). As of the date of this
Lease, the tenants under Existing Leases are: Reply Corporation and AG
Associates, Inc. Only AG Associates ha sa right to lease 4415 Fortran
Court, which is superior to the Rights of First Refusal granted to
Tenant herein.
IN WITNESS WHEREOF, the parties have executed this Agreement on the dates set
forth below.
TENANT: LANDLORD:
Novellus Systems, Inc., a California South Bay/Fortran, a California
corporation limited partnership
By: /s/ Unintelligible By: /s/ Unintelligible
------------------------------ ------------------------------
Title: Treasurer Title: General Partner
--------------------------- ---------------------------
Dated: 1/31/96 Dated: 1/31/96
--------------------------- ---------------------------
24
<PAGE>
San Jose Technology Park
Office/R&D/Manufacturing Space,
[MAP]
[LOGO]
<PAGE>
EXHIBIT "B"
LEGAL DESCRIPTION:
All that real property situate in the City of San Jose, County of Santa Clara,
State of California, described as follows:
Beginning at the Southwesterly corner of that certain 31.74 acre tract of land
described in the deed from The First National Bank of San Jose, a corporation,
to F. W. Zanker and Curtner Zanker, dated May 5, 1939, recorded May, 8, 1939 in
Book 934 Official Records, page 16, Santa Clara County Records, in the Northerly
line Alviso-Milpitas Road, thence from said point of beginning N. 89 deg. 35' E.
630.30 feet to the Southeasterly corner thereof; thence along the Easterly line
of said 31.74 acre tract for the three following courses and distances: N. 1
deg. 13' E. 768.90 feet, N. 0 deg. 57' E. 597.96 feet and N. 0 deg. 31' E.
149.97 feet to the Southeasterly corner of that certain 9.316 acre tract of land
described in the deed from F. W. Zanker, et al, to B. S. Brazil, a single man,
dated October 25, 1943, recorded November 16, 1943 in Book 1176 Official
Records, page 21, Santa Clara County Records; thence S. 89 deg. 35' W. along the
Southerly line of said 9.316 acre tract 651.78 feet to the Southwesterly corner
thereof in the Westerly line of said 31.74 acre tract; thence S. 0 deg. 08' W.
along said last mentioned line 1512.88 feet to the point of beginning.
Excepting therefrom that portion thereof conveyed to the City of San Jose, a
municipal corporation, recorded September 2, 1985 in Book J828, page 1719,
Official Records, described as follows:
Beginning at the Southeasterly corner of that certain 31.74 acre tract of land
described in the deed from the First National Bank of San Jose, a corporation,
to F. W. Zanker and Curtner Zanker, dated May 5, 1939, recorded May 8, 1939 in
Book 934 Official Records, page 16, Santa Clara County Records, said point being
on the Northerly line of Alviso-Milpitas Road, thence leaving said point of
beginning along the Easterly line of said 31.74 acre parcel N. 1 deg. 13' E.
30.00 feet to the true point of beginning of the parcel herein being described;
thence leaving said true point of beginning and said Easterly line along the
following courses and distances; From a tangent bearing of N. 88 deg. 47' 00"
W. along a curve to the right with a radius of 50.00 feet, through a central
angle of 126 deg. 52' 12" for an arc length of 110.71 feet to a point on reverse
curvature; from a tangent bearing of N. 38 deg. 05' 12" E. along a curve to the
left with a radius of 50.00 feet, through a central angle of 36 deg. 52' 12" for
an arc length of 32.18 feet; N. 1 deg. 13' 00" E. 361.13 feet; N. 0 deg. 57' 00"
E. 597.93 feet; N. 0 deg. 31' 52" E. 18.69 feet; along a tangent curve to the
left with a radius of 40.00 feet, through a central angle of 90 deg. 56' 58" for
an arc length of 63.50 feet to a point on a line parallel with and distant 90.00
feet Southerly, measured at right angles from the Southerly line of that certain
9.316 acre parcel of land described in the deed from F. W. Zanker, et al, to B.
S. Brazil, recorded November 16, 1943 in Book 1176 of Official Records, at page
21, Santa Clara County Records; thence along said parallel line, S. 89 deg. 34'
54" W. 579.99 feet to a point on the Westerly line of said 31.74 acre parcel of
land; thence leaving said parallel line along said Westerly line, No. 0 deg. 06'
10" E. 90.00 feet to the Southwesterly corner of the hereinabove described 9.316
acre parcel; thence leaving said Westerly line along the Southerly line of said
9.316 acre parcel, N. 89 deg. 34' 54" E. 651.24 feet to the Southeasterly corner
thereof, said corner lying in said Easterly line of the hereinabove
<PAGE>
EXHIBIT "B"
described 31.74 acre parcel; thence along said Easterly line the following
course and distances: S. 0 deg. 31' 52" W. 149.98 feet; S. 0 deg. 57; 00" W.
598.11 feet and S. 1 deg. 13' 00" W. 598.11 feet and S. 1 deg. 13' 00" W. 471.20
feet to the true point of beginning.
ALSO EXCEPTING THEREFROM all that portion conveyed to the State of California by
Grant Deed recorded August 31, 1994 in Book N 579, Page 2028, Official Records,
described as follows:
Being a portion of that certain parcel of land described in the Deed from Ray H.
Collishaw and Earlyn R. Collishaw, husband and wife, to William L. Marocco, a
single man, recorded May 4, 1982 in Book G 762 of Official Records at Page 218,
Santa Clara County Records.
Beginning at the southeast corner of said parcel conveyed to Marocco; thence
from said Point of Beginning, along the southerly line of said parcel conveyed
to Marocco N. 89 deg. 01' 16" W. 626.45 feet to the southwest corner of said
parcel conveyed to Marocco; thence along the westerly line of said parcel
conveyed to Marocco N. 1 deg. 13' 13" E. 227.77 feet; thence leaving said
westerly line, from a tangent bearing of S. 67 deg. 46' 42" E., along a curve to
the right with a radius of 275.00 feet, through a central angle of 18 deg. 08'
37" for an arc length of 87.08 feet; thence S. 49 deg. 38' 05" E., 103.64 feet;
thence along a tangent curve to the left with a radius of 275.00 feet, through a
central angle of 34 deg. 57' 21" for an arc length of 167.78 feet; thence S. 84
deg. 35' 26" E. 318.98 feet to a point in the easterly line of said parcel
conveyed to Marocco ng said easterly line S. 2 deg. 20' 03" W.,
31.97 feet to the Point of Beginning.
ARB No. 15-30-9 & 9.1
<PAGE>
EXHIBIT "C"
IMPROVEMENTS
Prior to the commencement of the lease, Landlord shall be make the following
improvements to the Premises ("Landlord's Improvements"):
A) Replace ceiling insulation in rear manufacturing area;
B) Replace areas of carpet that are worn and irreparably soiled;
C) Repaint interior walls, as necessary; and,
D) Repair any broken glass, cracks in tile floor of manufacturing area and
make additional cosmetic repairs as reasonably necessary, to be agreed upon
by Landlord in advance.
Tenant shall be allowed to construct certain interior improvements (the
"Improvements") in the Premises prior to the commencement of the Term of this
Lease in accordance with the terms of Paragraph 13 of the Lease and in
accordance with the plans which shall be approved by Landlord prior to
commencement of construction and shall become an exhibit to the Lease
hereto ("Approved Plans"). Landlord shall determine and notify Tenant prior to
approval and commencement of construction of the Approved Plans, which
Improvements Landlord will require Tenant to remove or return to original
condition upon expiration or earlier termination of the Lease.
<PAGE>
EXHIBIT D
FINAL TENANT IMPROVEMENT PLANS
(To Be Provided)
<PAGE>
EXHIBIT E
PLAN SHOWING IMPROVEMENTS TO BE RETURNED TO
ORIGINAL CONDITION UPON LEASE EXPIRATION
(To Be Provided)
<PAGE>
EXHIBIT F
HAZARDOUS MATERIALS MANAGEMENT PLAN
(To Be Provided by Tenant)
<PAGE>
EXHIBIT "G"
1. ATT report dated July 9, 1992: Preliminary (Phase I) Environmental Site
Assessment Update for the Property at 4405 - 4445 Fortran Court, San Jose,
California. (Project No. 929368).
2, SECOR International Incorporated report dated July 10, 1995: Phase I
Environmental Site Assessment Report - 4405, 4415, 4425, 4435 and 4445
Fortran Drive, San Jose, CA (Job No. 70076-001-01).
<PAGE>
[BLAIR PARK LETTERHEAD]
Addendum to a Lease Agreement
between
East Williston Road Associates ("Landlord") and
NOVELLUS, SYSTEMS, INC. ("Tenant")
Dated: August 10, 1995
1. DESCRIPTION OF LEASED PREMISES.
South Half, Second Floor
Suite #12, Building 6, One Blair Park, Williston, Vermont.
2,580 Square Feet Net, 3,000 Square Feet Gross
2. LEASE TERM.
10/01/95 through 09/30/98 inclusive.
3. RENT.
(a) From the commencement date through 09/30/98: $3,000.00 per month
($12.00 per square foot per year);
(b) From through : $ per month ($ per square
foot per year);
(c) From through : $ per month ($ per square
foot per year);
4. BASE YEAR FOR COMMON EXPENSES: 1996
5. TENANT'S PROPORTIONATE SHARE OF INCREASED COMMON EXPENSES:
16.7%
6. TENANT'S USE OF LEASED PREMISES:
Office
7. AMOUNT OF TENANT'S SECURITY DEPOSIT.
Existing Deposit of $833.00.
<PAGE>
8. NAME AND ADDRESS FOR NOTICES TO TENANT.
Novellus Systems, Inc.
81 Vista Montana
San Jose, CA 95134-1510
9. MISCELLANEOUS.
Landlord will complete interior Fit-up as per attached plan.
All other terms and conditions remain as previously stated in the original
lease dated May 1, 1990.
10. TENANT'S OPTION TO RENEW.
Provided the Tenant has fully and faithfully performed and discharged all of its
obligations under this lease and is not then default under any of the terms or
conditions of this Lease and all rent required to be paid by Tenant has been
paid in full, the Tenant shall have the option to renew this Lease for two (2)
additional terms of three (3) years each, on the same terms and conditions
herein set forth, except with respect to rights of renewal theretofore exercised
and except as hereinafter set forth with respect to rent. Such option shall be
exercised, if at all, by written notice from the Tenant to the Landlord not
later than six (6) months prior to the expiration of the term of this Lease as
then constituted. The rent payable during such renewal term shall be equal to
the then-existing fair market rental value of the Premises at the time of such
renewal, as mutually agreed upon by the Landlord and the Tenant, but in no event
less than the rent in effect immediately prior to the effective date of such
renewal.
IN PRESENCE OF: EAST WILLISTON ROAD ASSOCIATES
("Landlord")
/s/ Jeanne Mazza By:
- ----------------------------------- -------------------------------------
NOVEllUS SYSTEMS, INC.
("Tenant")
/s/ Thomas R Fog
- ----------------------------------- ----------------------------------------
<PAGE>
[FLOOR PLAN CHART]
<PAGE>
[CORBALLY, GARTLAND AND RAPPLEYEA LETTERHEAD]
August 4, 1995
Mr. John Root
Novellus Systems Inc.
81 Vista Montana
San Jose, CA 95134
RE: Lease - 25 Corporate Park Drive, Route 52, Town of East Fishkill, New
York
East Fishkill Corporate Park Investments with Novellus Systems Inc.
Dear Mr. Root:
Enclosed find two copies of the lease in the above matter. Please sign
both copies and return them to me.
Very truly yours,
CORBALLY, GARTLAND & RAPPLEYEA
/S/ Daniel F. Curtin
Daniel F. Curtin
DFC:sb
encs.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LEASE
dated August 14, 1995
---
between
EAST FISHKILL CORPORATE PARK INVESTMENTS
as Landlord
and
NOVELLUS SYSTEMS INC.
as Tenant
Affecting premises commonly known as 25 Corporate Park Drive, Route 52, in the
Town of East Fishkill, New York.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CORBALLY.GARTLAND AND RAPPLEYEA - ATTORNEYS AND COUNSELORS AT LAW
35 MARKET STREET - POUGHKEEPSIE, NEW YORK 12601 - (914)454-1110
<PAGE>
LEASE
LEASE, dated August __, 1995, between EAST FISHKILL CORPORATE PARK
INVESTMENTS., a partnership, having an address at 1400 Route 52 Suite 3,
Hopewell Junction, New York 12533 ("Landlord"), and NOVELLUS SYSTEMS INC.,
having an address of 81 Vista Montana, San Jose, CA 95134, ("Tenant").
1. THE DEMISED PREMISES AND LEASE TERM
In consideration of the Rent hereinafter reserved and the terms,
covenants and conditions set forth in this Lease to be observed and performed by
Tenant, Landlord hereby demises and leases to Tenant, and Tenant hereby rents
and takes from Landlord, the following property (collectively hereinafter
referred to as the "Demised Premises"): Approximately 3016 square feet of
the building located on 25 Corporate Park Drive, Route 52, Town of East
Fishkill, New York as shown on the annexed diagram, together with parking in
common with other users of the building. TO HAVE AND TO HOLD the Demised
Premises unto Tenant, and the permitted successors and assigns of Tenant, upon
and subject to all of the terms, covenants and conditions herein contained, for
a term (the "Lease Term") of 38 Mos. commencing on or about November 1, 1995
and expiring on Dec. 30, 1998, unless the Lease Term shall sooner terminate
pursuant to any of the conditional limitations or other provisions of this
Lease. The commencement date shall be within forty-five (45) days of the
delivery of executed Lease by the Tenant to the landlord setting forth their
renovation requirements.
2. RENT
Tenant covenants to pay to Landlord as Fixed Rent during the Lease
Term $36,342.00 per annum.
The Fixed Rent shall be payable in advance in equal monthly
installments of $3,028.50 on the first day of each calendar month. If the Lease
Term does not commence on the first day of a month, the Fixed Rent for the month
in which the Lease Term commences shall be appropriately apportioned. Each date
on which Fixed Rent is payable hereunder is hereinafter referred to as a "Rent
Payment Date".
3. NO COUNTERCLAIM OR ABATEMENT
All Rent shall be absolutely net to Landlord so that this Lease shall
yield to Landlord the full amount of the installments
1
CORBALLY, GARTLAND AND RAPPLEYEA - ATTORNEYS AND COUNSELORS AT LAW
35 MARKET STREET - POUGHKEEPSIE, NEW YORK 12601 - (914)454-1110
<PAGE>
thereof throughout the Lease Term without deduction. All Rent shall be paid to
Landlord without notice, demand, counterclaim, setoff, deduction or defense, and
nothing shall suspend, defer, diminish, abate or reduce any Rent, except as
otherwise specifically provided in this Lease.
4. USE OF DEMISED PREMISES
Tenant covenants that the Demised Premises shall be used solely for
office purposes and for no other purposes, unless approved in writing by
Landlord.
Tenant shall not do or permit any act or thing which is contrary to
any Legal Requirements or Insurance Requirements, or which might impair the
value or usefulness of the Demised Premises or any part thereof.
Tenant shall not do or suffer any waste, damage, disfigurement or
injury to the Demised Premises.
5. CONDITION OF DEMISED PREMISES
Prior to the commencement of the Lease Term, Landlord shall perform
the work and make installments in the Demised Premises as set forth in Exhibit A
hereto.
6. MAINTENANCE AND REPAIR
Tenant, at all times during the Lease Term and at Tenant's expense,
shall keep the Demised Premises, and all Improvements now or hereafter located
thereon, in a good and clean order and condition and in such condition as may be
required by all Legal Requirements and Insurance Requirements. Landlord
shall be responsible for maintaining the HVAC, electrical and plumbing systems.
7. ALTERATIONS AND ADDITIONS
Tenant shall not be entitled to make any alterations of or additions
to the Demised Premises without the prior written consent of Landlord in each
instance, which consent will not be unreasonably withheld.
The title to all additions, repairs and replacements to any
Improvements made during the Lease Term and any renewal thereof, forthwith shall
vest in Landlord, and said Improvements, additions, repairs and replacements
shall be and become the sole and absolute property of Landlord, without any
obligation of payment by Landlord therefor.
2
CORBALLY, GARTLAND AND RAPPLEYEA - ATTORNEYS AND COUNSELORS AT LAW
35 MARKET STREET - POUGHKEEPSIE, NEW YORK 12601 - (914) 454-1110
<PAGE>
8. COMPLIANCE WITH REQUIREMENTS
Tenant, at all times during the Lease Term and at Tenant's expense,
promptly and diligently shall: comply with all Legal Requirements and Insurance
Requirements, whether or not compliance therewith shall require structural
changes in the Improvements or interfere with the use and enjoyment of the
Demised Premises or any part thereof; and procure, maintain and comply with all
permits, licenses, franchises and other authorizations required for any use of
the Demised Premises or any part thereof then being made, including without
limitation all permits, licenses, and franchises which Tenant is required to
obtain for the proper erection, installation, operation or maintenance of the
Improvements or Tenant's Equipment or any part thereof.
9. LIENS
Tenant shall not directly or indirectly create or permit to be created
or to remain, and shall discharge, any mortgage, lien, security interest,
encumbrance or charge on, pledge of or conditional sale or other retention
agreement with respect to the Demised Premises or any part thereof, Tenant's
interest therein, or any Fixed Rent or other Rent payable under this Lease,
other than: the Occupancy Leases; liens for Impositions not yet payable, or
payable without the addition of any fine, penalty, interest or cost for
nonpayment, or being contested as permitted in Article 11 hereof; and the liens
of mechanics, materialmen, suppliers or vendors, or right thereto, incurred in
the ordinary course of business for sums which under the terms of the related
contract are not at the time due, provided that adequate provision for the
payment thereof shall have been made and provisions of the following paragraph
are complied with.
10. UTILITY SERVICES
Landlord shall pay charges for public or private utility
services at any time rendered to or in connection with the entire
Premises or any part thereof; including heat, air conditioning,
electric, trash removal and water and sewer services.
11. INSURANCE
Tenant, at all times during the Lease Term and at Tenant's expense,
shall provide and maintain in full force and effect with insurers approved by
Landlord: (a) public liability protecting Landlord against any and all liability
occasioned by negligence, occurrence, accident or disaster in or about the
3
<PAGE>
Demised Premises or any part thereof, (b) lessor shall be responsible for its
own fire insurance.
12. INDEMNIFICATION BY TENANT
Tenant shall, except for the wilful acts or omission of lessor,
indemnify and hold Landlord harmless from and against all liabilities,
obligations, claims, damages, fines, penalties, interest, causes of action,
costs and expenses, including attorneys' fees (but excluding any income or
excess profits or franchise taxes of Landlord determined on the basis of general
income or revenue or any interest or penalties in respect thereof), imposed upon
or incurred by or asserted against Landlord or the Demised Premises by reason of
the occurrence or existence of any of the following: occupancy of the Demised
Premises or any interest therein, or receipt of any rent or other sum therefrom;
any accident, injury to or death of persons (including workers) or loss of or
damage to property occurring, or claimed to have occurred, on or about the
Demised Premises or any part thereof, or any Improvements now or hereafter
erected thereon, or the adjoining sidewalks, curbs, vaults or vault spaces, if
any, streets or ways, or appurtenances thereto; any use or condition of the
Demised Premises or any part thereof, or any Improvements now or hereafter erect
thereon, or the adjoining sidewalks, curbs, vaults and vault spaces, if any,
streets or ways, or appurtenances thereto; any failure on the part of Tenant
promptly and fully to comply with or perform any of the terms, covenants or
conditions of this Lease; or performance of any labor or services or the
furnishing of any materials or other property in respect of the Demised Premises
or any part thereof. In the case any suit, action or proceeding is brought
against Landlord or filed against the Demised Premises or any part thereof by
reason of any such occurrence except for the wilful acts or omission of lessor,
Tenant, upon Landlord's request and at Tenant's expense, shall resist and defend
such suit, action or proceeding, or cause the same to be resisted and defended
by counsel designated by Tenant and approved by Landlord. The obligations of
Tenant under this Article 14 shall survive the expiration or termination of the
Lease Term.
13. DAMAGE TO OR DESTRUCTION OF THE DEMISED PREMISES
If there is any material damage to or destruction.of the
Demised Premises or any part thereof, Tenant promptly shall give written notice
thereof to Landlord, generally describing the nature and extent of such damage
or destruction.
Landlord shall have the option of either repairing the premises or
terminating the lease.
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14. TAKING OF THE DEMISED PREMISES
If there is a Taking of the fee of the entire Demised Premises, other
than for a temporary use, this Lease shall terminate as of the date of such
Taking.
15. QUIET ENJOYMENT
Landlord covenants that so long as Tenant is not in default hereunder
in the payment of any Rent or compliance with or the performance of any of the
terms, covenants or conditions of this Lease on Tenant's part to be complied
with or performed, Tenant shall not be hindered or molested by Landlord in
Tenant's enjoyment of the Demised Premises.
16. RIGHT TO CURE TENANT'S DEFAULT
If Tenant fails to make any payment or to comply with or perform any
term, covenant or condition of this Lease to be complied with or performed by
Tenant, Landlord may, but shall be under no obligation to, after thirty days'
notice to Tenant (or upon shorter notice, or without notice, if necessary to
meet an emergency situation or time limitation of a Legal Requirement), make
such payment or perform or cause to be performed such work, labor, services,
acts or things, and take such other steps as Landlord may deem advisable, to
comply with any such term, covenant or condition which is in default.
17. EVENTS OF DEFAULT AND TERMINATION
If any one or more of the following ("Events of Default") shall occur:
(a) if Tenant shall fail to pay any Fixed Rent when as the same becomes
due and payable, and such rent remains unpaid ten days after notice
in writing from Landlord; or
(b) if Tenant shall fail to comply with or perform any other term,
covenant or condition hereof, and such failure shall continue for more
than thirty days after notice thereof from Landlord, and Tenant within
said period, subject to Unavoidable Delays, shall not commence with due
diligence and dispatch the curing of such default, or, having so commenced,
thereafter shall fail or neglect to prosecute or complete with due
diligence and dispatch the curing of such default for reasons other than
Unavoidable Delays; or
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(c) if Tenant shall make a general assignment for the benefit of
creditors, or shall admit in writing Tenant's inability to pay Tenant's
debts as they become due, or shall file a petition in bankruptcy, or shall
be adjudicated a bankrupt or insolvent, or shall file a petition seeking
any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation, or shall file an answer admitting, or shall fail to contest,
the material allegations of a petition filed against Tenant in any such
proceeding, or shall seek or consent to or acquiesce in the appointment of
any trustee, receiver or liquidator of Tenant or any material part of
Tenant's properties;
then, and in any such Event of Default, regardless of the pendency of any
proceeding which has or might have the effect of preventing Tenant from
complying with the terms, covenants or conditions of this Lease, Landlord, at
any time thereafter may give a written termination notice to Tenant, and on the
date specified in such notice this Lease shall terminate and the Lease Term
shall expire and terminate by limitation, and all rights of Tenant under this
Lease shall cease, unless before such date (i) all arrears of Rent (with
interest at the rate of twelve percent per annum) and all costs and expenses,
including reasonable attorneys' fees, incurred by or on behalf of Landlord
hereunder, shall have been paid by Tenant, and (ii) all other defaults at the
time existing under this Lease shall have been fully remedied to the
satisfaction of Landlord. Tenant shall reimburse Landlord for all costs and
expenses, including reasonable attorneys' fees, incurred by or on behalf of
Landlord occasioned by or in connection with any default by Tenant under this
Lease.
18. RELETTING
At any time or from time to time after the repossession of the Demised
Premises or any part thereof, whether or not the Lease Term shall have been
terminated pursuant to Article 17, Landlord may (but shall be under no
obligation to) relet the Demised Premises or any part thereof for the account of
Tenant, for such term or terms (which may be greater than or less than the
period which would otherwise have constituted the balance of the Lease Term) and
on such conditions (which may include concessions or free rent) and for such
uses as Landlord, in Landlord's absolute discretion, may determine, and may
collect and receive the rents therefrom. Landlord shall not be responsible or
liable for any failure to relet the Demised Premises or any part thereof or for
any failure to collect any rent due upon any such reletting.
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19. ASSIGNMENT OF SUBRENTS
Tenant hereby irrevocably assigns to Landlord all rents due or to
become due from any assignee of Tenant's interest hereunder and any sublessee or
any tenant or occupant of the Demised Premises or any part thereof, together
with the right to collect and receive such rents, provided that, so long as
Tenant is not in default under this Lease, Tenant shall have the right to
collect such rents for Tenant's own use and purposes. Upon any default by
Tenant under this Lease, Landlord shall have absolute title to such rents and
the absolute right to collect the same. Landlord shall apply to the Rent due
under this Lease the net amount (after deducting all costs and expenses incident
to the collection thereof and the operation and maintenance, including repairs,
of the Demised Premises) of any rents so collected and received by Landlord.
20. SECURITY DEPOSIT
Tenant has not deposited with Landlord any security.
21. SURVIVAL OF TENANT'S OBLIGATIONS AND DAMAGES
No expiration or termination of the Lease Term pursuant to this Lease,
by operation of law or otherwise (except as expressly provided herein), and no
repossession of the Demised Premises or any part thereof pursuant to this Lease
or otherwise, shall relieve Tenant of Tenant's obligations or liabilities
hereunder, all of which shall survive such expiration, termination or
repossession.
22. INJUNCTION
Landlord, in addition to all other rights, powers and remedies and
notwithstanding the concurrent pendency of summary or other dispossess
proceedings, at Landlord's option, shall have the right at all times during the
Lease Term to restrain by injunction any violation or attempted violation by
Tenant of any of the terms, covenants or conditions of this Lease, and to
enforce by injunction any of such terms, covenants or conditions.
23. WAIVERS
No failure by Landlord or Tenant to insist upon the strict
performance of and compliance with any term, covenant or condition hereof
or to exercise or enforce any right, power or
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remedy consequent upon a breach thereof, and no submission by Tenant or
acceptance by Landlord of full or partial Rent during the continuance of any
such breach, shall constitute a waiver of any such breach or of any such term,
covenant or condition. No waiver of any breach of any term, covenant or
condition of this Lease shall affect or alter this Lease, which shall continue
in full force and effect, or the respective rights, powers or remedies of
Landlord or Tenant with respect to any other then existing or subsequent breach.
24. LANDLORD'S REMEDIES CUMULATIVE
All of the rights, powers and remedies of Landlord provided for in
this Lease or now or hereafter existing at law or in equity, or by statute or
otherwise, shall be deemed to be separate, distinct, cumulative and concurrent.
25. ASSIGNMENT, SUBLETTING AND MORTGAGES
Tenant expressly covenants that Tenant shall not voluntarily or
involuntarily assign, encumber, mortgage or otherwise transfer this Lease, or
sublet the Demised Premises or any part thereof, or suffer or permit the Demised
Premises or any part thereof to be used or occupied by others, by operation of
law or otherwise, without the prior written consent of Landlord in each
instance, not to be unreasonably withheld. Absent such consent, any act or
instrument purporting to do any of the foregoing shall be null and void.
26. SUBORDINATION AND ATTORNMENT
This Lease, and all rights of Tenant hereunder, are and shall be
subject and subordinate in all respects to all mortgages which may now or
hereafter affect the Demised Premises, whether or not such mortgages shall also
cover other lands or buildings, to each and every advance made or hereafter to
be made under such mortgages and to all renewals, modifications, replacements,
spreaders, consolidations and extensions of such mortgages, providing mortgagee
agrees not to disturb lessee's right to occupy. In the event of any sale of the
Demised Premises in a foreclosure of any such mortgage or the exercise by the
holder of any such mortgages of any other remedies provided for by law or in
such mortgage, Tenant, upon written request of the holder of the mortgage or the
purchaser at such foreclosure or any person succeeding to the interest of the
holder of the mortgage, shall attorn to such holder, purchaser or successor in
interest, as the case may be, without change in the terms, covenants or
conditions of this Lease. If such a request is made, this Lease shall not be
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deemed to be terminated by any foreclosure proceedings or other remedies for the
enforcement of the mortgage by such holder, purchaser or successor in interest.
The provisions of this Article 30 shall be self-operative and no further
instrument of subordination and/or attornment shall be required. In
confirmation of such subordination and/or attornment, Tenant promptly shall
execute and deliver at Tenant's expense any instrument that Landlord or the
holder of any such mortgage may reasonably request to evidence such
subordination and/or attornment.
27. ENTRY BY LANDLORD
Landlord and the authorized representatives of Landlord shall have the
right to enter the Demised Premises at all reasonable times for the purpose of
inspecting the same or for the purpose of doing any work permitted to be done by
Landlord under this Lease, and to take all such actions thereon as may be
necessary or appropriate for any other purpose, as long as such entry does not
interfere with lessee's occupancy and business use.
28. CONVEYANCE BY LANDLORD
If the original or any successor Landlord shall convey or otherwise
dispose of the Land and Improvements, Landlord shall thereupon be released from
all obligations and liabilities of Landlord under this Lease (except those
accruing prior to such conveyance or other disposition), and such obligations
and liabilities shall be binding solely on the then owner of the Land and
Improvements.
29. NO MERGER OF TITLE
There shall be no merger of the leasehold estate created by this Lease
with the fee estate in the Demised Premises by reason of the fact that the same
person may own or hold (a) the leasehold estate created by this Lease or any
interest therein, and (b) the fee estate in the Demised Premises or any interest
in such fee estate. No such merger shall occur unless and until all persons
having any interest in the leasehold estate created by this Lease, and in the
fee estate in the Demised Premises, shall join in a written instrument effecting
such merger and shall duly record the same.
30. ACCEPTANCE OF SURRENDER
No modification, termination or surrender of this Lease
or surrender of the Demised Premises or any part thereof or of any
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interest therein by Tenant shall be valid or effective unless agreed to and
accepted in writing by Landlord and no act by any representative or agent of
Landlord, other than such a written agreement and acceptance, shall constitute
an acceptance thereof.
31. END OF LEASE TERM
Upon the expiration or termination of the Lease Term, unless otherwise
agreed between the parties hereto, Tenant shall quit, surrender and deliver to
Landlord the Demised Premises with the Improvements thereon in good order and
condition, ordinary wear and tear excepted, and shall remove all Tenant's
Equipment therefrom.
32. BROKERAGE
Landlord and Tenant each represents and warrants to the
other that such party has not dealt with any broker or finder in
connection with the Demised Premises or this Lease other than Serls
Real Estate. Brokerage shall be paid by Landlord.
33. NOTICES
All notices, demands, elections and other communications desired or
required to be delivered or given under this Lease shall be in writing.
34. MISCELLANEOUS
All rights, powers and remedies provided herein may be exercised only
to the extent that the exercise thereof does not violate any applicable law, and
are intended to be limited to the extent necessary so that they will not render
this Lease invalid, unenforceable or not entitled to be recorded under any
applicable law.
Landlord and Tenant agree not to record this Lease.
The headings in this Lease are for purposes of reference only and
shall not limit or define the meaning hereof.
This Lease may be changed or modified only by an instrument in writing
signed by the party against which enforcement of such change or modification is
sought.
This Lease shall be binding upon and inure to the benefit
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of and be enforceable by the respective successors and assigns of the parties
hereto.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease on
the date first above written.
EAST FISHKILL CORPORATE PARK
INVESTMENTS
ATTEST:
BY /s/ Frank Buyakowski
-------------------------------------
Frank Buyakowski partner
By /s/ Margaret Elizabeth
--------------------------------
Secretary NOVELLUS SYSTEMS INC.
ATTEST:
By /s/ John P Root
-------------------------------------
By
--------------------------------
Secretary
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EXHIBIT A
Landlord shall modify the existing building (Exhibit I) pursuant to a plan
(Exhibit II) which Exhibit II reflects the demised premises.
Landlord shall provide for demolition of the existing space including the
walls, raised floor computer room, and carpeting. Novellus retains option to
choose color/print. Landlord shall construct or rearrange interior walls,
electrical and HVAC fixtures, patch and paint. The Landlord will also be
responsible for purchasing and installing new ceiling tiles, commercial grade
28 oz. level loop nylon carpeting, and 1/8 inch commercial tile.
The Tenant shall be responsible for any telephone, computer or security
systems installation.
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[FLOOR PLAN CHART]
Exhibit I
<PAGE>
[FLOOR PLAN CHART]
Exhibit II
<PAGE>
LEASE AGREEMENT
BETWEEN
OTR, AN OHIO GENERAL PARTNERSHIP
on behalf of Landlord
AND
NOVELLUS SYSTEMS, INC.
on behalf of Tenant
DATED MAY 26, 1996
<PAGE>
TABLE OF CONTENTS
1. PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. TERM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
3. RENTAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(a) BASE RENTAL . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(b) ADDITIONAL RENTAL . . . . . . . . . . . . . . . . . . . . . . . 2
(i) OPERATING EXPENSES. . . . . . . . . . . . . . . . . . 2
(ii) REAL ESTATE TAXES . . . . . . . . . . . . . . . . . . 2
(c) PAYMENT OF PROPORTIONATE SHARE . . . . . . . . . . . . . . . . 3
(d) DISPUTE OF OPERATING EXPENSES. . . . . . . . . . . . . . . . . 3
(e) ADJUSTMENTS TO OPERATING EXPENSES. . . . . . . . . . . . . . . 4
(f) NO DECREASE IN BASE RENTAL . . . . . . . . . . . . . . . . . . 4
(g) OTHER CHARGES. . . . . . . . . . . . . . . . . . . . . . . . . 4
(h) PLACE OF PAYMENT . . . . . . . . . . . . . . . . . . . . . . . 4
4. CONSTRUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
(a) IMPROVEMENTS TO BE CONSTRUCTED . . . . . . . . . . . . . . . . 4
(b) WORK PRIOR TO COMMENCEMENT DATE. . . . . . . . . . . . . . . . 4
(c) AVAILABILITY OF PREMISES PRIOR TO COMMENCEMENT DATE. . . . . . 5
(d) SUBSTANTIAL COMPLETION . . . . . . . . . . . . . . . . . . . . 5
(e) CONDITION OF PREMISES. . . . . . . . . . . . . . . . . . . . . 5
(f) OVERLOAD . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
5. USE OF PREMISES . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(a) USE . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(b) ADVERTISEMENT. . . . . . . . . . . . . . . . . . . . . . . . . 5
(c) SOLICITATION . . . . . . . . . . . . . . . . . . . . . . . . . 5
(d) CARE . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(e) NOISE; ODORS . . . . . . . . . . . . . . . . . . . . . . . . . 6
6. ALTERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
(a) PROHIBITION. . . . . . . . . . . . . . . . . . . . . . . . . . 6
(b) INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . 6
(c) COMPLIANCE AND SUPERVISION OF ALTERATIONS. . . . . . . . . . . 6
(d) LANDLORD'S PROPERTY. . . . . . . . . . . . . . . . . . . . . . 7
(e) WIRING . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
7. MECHANICS' LIENS. . . . . . . . . . . . . . . . . . . . . . . . . . . 7
8. MAINTENANCE AND REPAIR. . . . . . . . . . . . . . . . . . . . . . . . 7
(a) TENANT'S MAINTENANCE . . . . . . . . . . . . . . . . . . . . . 7
(b) LANDLORD'S MAINTENANCE . . . . . . . . . . . . . . . . . . . . 8
(c) INSPECTION . . . . . . . . . . . . . . . . . . . . . . . . . . 8
9. COMMON AREAS . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(a) GRANT . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(b) PARKING . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
(c) RIGHT TO CHANGE COMMON AREAS . . . . . . . . . . . . . . . . . 8
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(10) BUILDING SERVICES . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(a) ELECTRIC . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(b) WATER . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(c) AIR-CONDITIONING AND HEAT. . . . . . . . . . . . . . . . . . . 9
(d) JANITOR SERVICE. . . . . . . . . . . . . . . . . . . . . . . . 9
(e) ELEVATOR SERVICE . . . . . . . . . . . . . . . . . . . . . . . 10
(f) INTERRUPTION OF SERVICES . . . . . . . . . . . . . . . . . . . 10
(g) ENERGY CURTAILMENT . . . . . . . . . . . . . . . . . . . . . . 10
(h) NORMAL BUSINESS HOURS. . . . . . . . . . . . . . . . . . . . . 10
(I) HOLIDAYS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
11. ESTOPPEL CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . 10
12. INDEMNIFICATION; WAIVER OF CLAIMS . . . . . . . . . . . . . . . . . . 10
13. INSURANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(a) TENANT'S INSURANCE . . . . . . . . . . . . . . . . . . . . . . 11
(b) LANDLORD AS ADDITIONAL INSURED . . . . . . . . . . . . . . . . 12
(c) LANDLORD'S INSURANCE . . . . . . . . . . . . . . . . . . . . . 12
(d) INCREASE IN PREMIUMS . . . . . . . . . . . . . . . . . . . . . 12
14. WAIVER OF SUBROGATION . . . . . . . . . . . . . . . . . . . . . . . . 12
15. HOLDING OVER . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
16. ASSIGNMENT AND SUBLEASE . . . . . . . . . . . . . . . . . . . . . . . 13
(a) PROHIBITION. . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) OPTION TO CANCEL . . . . . . . . . . . . . . . . . . . . . . . 13
(c) RIGHT TO COLLECT RENTS DIRECTLY. . . . . . . . . . . . . . . . 13
(d) EXCESS RENT. . . . . . . . . . . . . . . . . . . . . . . . . . 13
17 QUIET ENJOYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
18. COMPLIANCE WITH LAWS AND WITH RULES AND REGULATIONS . . . . . . . . . 13
(a) LAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(b) RULES AND REGULATIONS. . . . . . . . . . . . . . . . . . . . . 14
19. FIRE AND CASUALTY . . . . . . . . . . . . . . . . . . . . . . . . . . 14
20. EMINENT DOMAIN . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
21. DEFAULT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
22. WAIVER OF DEFAULT OR REMEDY. . . . . . . . . . . . . . . . . . . . . .17
23. LANDLORD'S LIEN. . . . . . . . . . . . . . . . . . . . . . . . . . . .17
24. UNIFORM COMMERCIAL CODE. . . . . . . . . . . . . . . . . . . . . . . .17
25. FORCE MAJEURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
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26. SUBORDINATION OF LEASE . . . . . . . . . . . . . . . . . . . . . . . .17
27. NOTICES AND CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . .18
28. SECURITY DEPOSIT . . . . . . . . . . . . . . . . . . . . . . . . . . .18
29. MISCELLANEOUS TAXES. . . . . . . . . . . . . . . . . . . . . . . . . .18
30. SUBSTITUTE PREMISES. . . . . . . . . . . . . . . . . . . . . . . . . .19
31. BROKERAGE COMMISSION . . . . . . . . . . . . . . . . . . . . . . . . .20
32. HAZARDOUS DEVICES AND CONTAMINANTS . . . . . . . . . . . . . . . . . .20
(a) PROHIBITION . . . . . . . . . . . . . . . . . . . . . . . . . .20
(b) INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . .20
(c) DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . .21
33. EXCULPATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
34. SIGNS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
35. LOCKS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
36. EMPLOYMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
37. PLUMBING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
38. CERTAIN RIGHTS RESERVED TO LANDLORD. . . . . . . . . . . . . . . . . .21
39. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .22
40. RELATIONSHIP OF PARTIES. . . . . . . . . . . . . . . . . . . . . . . .22
41. GENDER AND NUMBER. . . . . . . . . . . . . . . . . . . . . . . . . . .22
42. TOPIC HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
43. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
44. ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . .23
45. RECORDING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
46. GOVERNING LAW; INVALIDITY OF ANY PROVISIONS. . . . . . . . . . . . . .23
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LEASE AGREEMENT
THIS LEASE AGREEMENT ("Lease"), dated APRIL 25, 1995, is between OTR, an
Ohio general partnership ("Landlord") acting as the duly authorized nominee of
the BOARD OF THE STATE TEACHERS RETIREMENT SYSTEM OF OHIO ("STRBO"), and
Novellus Systems, Inc., ("Tenant").
1. PREMISES. In consideration of the rents, terms, provisions and
covenants of this Lease, Landlord hereby leases unto Tenant and Tenant hereby
rents and accepts from Landlord those certain premises containing approximately
6,916 net rentable square feet, consisting of 5,861 net usable square feet,
located on the NINTH (9TH) FLOOR (the "Premises"). The Premises are outlined on
the floor plan attached hereto as Exhibit A and incorporated herein by
reference. The Premises are contained in that certain building located at 1701
Directors Boulevard, Austin, Texas 78744 (the "Building"), which Building
contains 153,474 net rentable square feet of space. The land on which the
Building is situated, together with all improvements located thereon
(collectively, the "Property"), is more particularly described on Exhibit B,
attached hereto and incorporated herein by reference.
2. TERM.
(a) 54 Months as listed below. Subject to Paragraph 3 of
Exhibit G.
(b) For purposes of this Lease, the following terms shall have
the following meanings:
(i) "Commencement Date" shall mean the date upon which
the Premises are substantially completed (as hereinafter defined).
Promptly upon determination of the Commencement Date, Landlord and
Tenant shall execute a memorandum, setting forth the Commencement
Date and the expiration date of this Lease, in form and substance
substantially similar to that attached hereto as Exhibit C and
incorporated by reference.
(ii) "Lease Year" shall mean each twelve (12) month
period commencing on the first day of the first full month after the
Commencement Date and each anniversary thereafter during the Term
(as hereinafter defined) of this Lease; provided, however, that if
the Commencement Date is the first day of the month, the first Lease
Year shall commence on the Commencement Date. The first Lease Year
shall commence on the Commencement Date and end on the last day of
the last month of the first Lease Year regardless of whether the
first Lease Year is longer than twelve (12) months.
(iii) "Term" shall mean the initial term of this Lease and
any renewals or extensions thereof.
3. RENTAL.
(a) BASE RENTAL. Tenant shall pay to Landlord, as base rental
(the "Base Rental") during the Term of this Lease the following amounts:
<TABLE>
<CAPTION>
Cost Per Square Foot, Net Rentable Monthly Annual
Dates NRA Per Annum Area Base Rental Base Rental
----- --------------------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
06/01/95-11/30/95 $13.25 Per Sq. Ft. 6,916 $7,636.42 $91,637.00
12/01/95-03/31/96 $14.25 Per Sq. Ft. 6,916 $8,212.75 $98,553.00
04/01/96-11/30/96 $14.25 Per Sq. Ft. 7,978 $9,473.88 $113,686.50*
12/01/96-11/30/97 $14.85 Per Sq. Ft. 7,978 $9,872.78 $118,473.30
12/01/97-11/30/98 $15.20 Per Sq. Ft. 7,978 $10,105.47 $121,265.60
12/01/98-11/30/99 $15.55 Per Sq. Ft. 7,978 $10,338.16 $124,057.90
</TABLE>
*On 04/01/96 Tenant shall begin paying on the 1,062 net rentable square feet,
900 net usable square feet Expansion Space as indicated on Exhibit A.
<PAGE>
Each such monthly installments shall be due and payable in advance, on or
before the first day of each and every month during the Term, without
notice, demand or set-off; provided, however, that the first month's rent
shall be due and payable upon execution of this Lease.
(b) ADDITIONAL RENTAL. If Operating Expenses in any calendar year
exceed the sum of SIX DOLLARS & 25/100 ($6.25) per square foot NRA ("Base
Operating Expense Amount") (such excess amount being hereinafter referred
to as the "Operating Expense Pass-through Amount"), Tenant shall pay to
Landlord, as Additional Rental (hereinafter defined), Tenant's
Proportionate Share (as hereinafter defined) of the Operating Expense
Pass-through Amount as set forth below. If this Lease commences or
terminates on a date other than January 1, the annual Operating Expenses
and the Base Operating Expense Amount shall be prorated by multiplying
one-twelfth (1/12) of the annual Operating Expenses and one-twelfth (1/12)
of the Base Operating Expense Amount each by the number of full or partial
months between the Commencement Date and December 31 of the year of
commencement or between January 1 of the year of termination and the
termination date, as the case may be. As used in this Lease,
"Proportionate Share" shall mean a percentage factor, determined by
dividing the net rentable square footage contained in the Premises by the
net rentable square footage contained in the Building, or (5.2%) percent;
provided, however, that if THE BUILDING IS NOT FULLY OCCUPIED, TENANT'S
PROPORTIONATE SHARE OF THE OPERATING EXPENSE PASS-THROUGH AMOUNT FOR ANY
OPERATING EXPENSES THAT VARY WITH THE OCCUPANCY OF THE BUILDING which for
purposes of this paragraph shall be cleaning expenses, management fees,
maintenance costs and utilities, shall mean a percentage factor determined
by dividing the net rentable square footage contained in the Premises by
the average net rentable square footage occupied by tenants in the Building
during a calendar year.
(i) OPERATING EXPENSES. "Operating Expenses" shall include
those expenses paid by or on behalf of Landlord in respect of the
management, operation, service and maintenance of the Property,
including the Premises in accordance with generally accepted
principles of office building management as applied to the operation
and maintenance of office buildings similar to the type and nature of
the Property and in the general market area as the Property.
Operating Expenses shall include, but not be limited to, (A) Real
Estate Taxes (as hereinafter defined); (B) premium costs for
liability, boiler, extended coverage, casualty and other insurance
covering the Property to be maintained by Landlord and required by the
terms of this Lease; (C) electricity, gas, water and other utility
charges for the Property; (D) repair and maintenance of HVAC systems,
elevators, irrigation systems and other mechanical systems; (E) repair
and maintenance of the Common Areas (as hereinafter defined) and the
Building structure and roof; (F) trash removal and snow removal;
(G) janitorial service; (H) wages, salaries and fees of operating,
auditing, accounting, maintenance and management personnel in
connection with the Property; (I) all payroll charges for such
personnel, such as unemployment and social security taxes, workers'
compensation, health, accident and group insurance, and other so-
called fringe benefits; (J) rental charges for office space chargeable
to the operation and management of the Property; (K) license permits
and inspection fees; (L) supplies and materials used in the operation
and management of the Property; (M) furnishings and equipment not
treated by Landlord as capital expenditures of the Property; (N)
depreciation and the cost of any labor saving devices that may, from
time to time, be placed in operation as a part of Landlord's
maintenance program; (O) personal property taxes on property used in
the operation, maintenance, service and management of the Property;
(P) the cost, as reasonably amortized by Landlord, with interest at
the rate of ten percent (10%) per annum of the unamortized amount, of
any capital improvement made after completion of initial construction
of the Building which reduces Operating Expenses, but in an amount not
to exceed such reduction for the relevant year; (Q) management fees
relating to the Property; (R) the cost of any installation or
improvement required by reason of any law, ordinance or regulation,
which requirement did not exist on the date of the Lease and is
generally applicable to similar office buildings; and (S) all other
expenses necessary for the operation and management of the Property,
but excluding capital improvements except to the extent specifically
described in this paragraph.
(ii) REAL ESTATE TAXES. "Real Estate Taxes" shall include all
taxes, including state equalization factor, if any, and assessments,
special or otherwise, exclusive of penalties or discounts levied upon
or with respect to the Property, including the Premises, imposed by
any federal, state or local governmental agency, and including any
use, occupancy, excise, sales or other like taxes (other than general
income taxes
2
<PAGE>
on rent or other income from the Building computed in the case of a
graduated tax, as if Landlord's rent and other income from the
Building was Landlord's sole taxable income).
Real Estate Taxes also shall include the expense of contesting
the amount or validity of any such taxes, charges or assessments, such
expense to be applicable to the period of the item contested. Real
Estate Taxes shall not, however, include income, franchise, capital
stock, estate or inheritance taxes unless Landlord reasonably
determines that such taxes are in lieu of real estate taxes,
assessments, rental, occupancy and other like excise taxes. For
purposes of this Lease, Real Estate Taxes for any calendar year shall
be those taxes the last timely payment date for which occurs within
such calendar year. In case of special taxes or assessments payable
in installments, only the amount of the installment(s) the last timely
payment date for which occurs on or after the first day and on or
before the last day of such year shall be included in Real Estate
Taxes for that year.
Landlord shall retain the sole right to participate in any
proceedings to establish or contest the amount of Real Estate Taxes.
If a complaint against valuation, protest of tax rates or other action
increases or decreases the Real Estate Taxes for any calendar year,
resulting in an increase or decrease in rent hereunder, the Real
Estate Taxes for the affected calendar year shall be recalculated
accordingly and the resulting increased rent plus the expenses
incurred in connection with such contest, or decreased rent, less the
expenses incurred in connection with such contest, shall be paid
simultaneously with or applied as a credit against, as the case may
be, the rent next becoming due.
(c) PAYMENT OF PROPORTIONATE SHARE. To provide for current payments
of Operating Expenses, Tenant shall pay Tenant's Proportionate Share of the
Operating Expense Pass-through Amount, as estimated by Landlord from time
to time, in twelve (12) monthly installments, commencing on the first day
of the month following the month in which Landlord notifies Tenant of the
amount of its estimated Proportionate Share. Landlord and Tenant intend to
estimate the amount of Operating Expenses for each year and then to
reconcile such estimated expenses in the following year based on actual
Operating Expenses for such year paid by Landlord. If Tenant's
Proportionate Share of the actual Operating Expense Pass-through Amount
shall be greater than or less than the aggregate of all installments so
paid on account to Landlord for such twelve (12) month period, then within
thirty (30) days of Tenant's receipt of Landlord's statement of reconciled
Operating Expenses, Tenant shall pay to Landlord the amount of such
underpayment, or Landlord shall credit Tenant for the amount of such
overpayment against the next maturing installment(s) of rent, as the case
may be. The obligation of Tenant with respect to the payment of Tenant's
Proportionate Share of the Operating Expense Pass-through Amount shall
survive the termination of this Lease. Any payment, refund, or credit made
pursuant to this subparagraph 3(c) shall be made without prejudice to any
right of Tenant to dispute the statement as hereinafter provided, or of
Landlord to correct any item(s) as billed pursuant to the provisions
hereof. Landlord's failure to give such statement shall not constitute a
waiver by Landlord of its right to recover rent that is due and payable
pursuant to this subparagraph 3(c).
(d) DISPUTE OF OPERATING EXPENSES. If Tenant questions in writing
any such notice of reconciled Operating Expenses (or revised notice
thereof), and if the question is not amicably settled between Landlord and
Tenant within thirty (30) days after said notice of reconciled Operating
Expenses (or revised adjusted) has been given, Landlord shall, during the
sixty (60) days next following the expiration of such thirty (30) day
period, employ an independent certified public accountant to audit
Operating Expenses. The determination of such account shall be final,
conclusive and binding upon Landlord and Tenant. Tenant understands that
the actual itemization of, and the amount of individual items constituting,
Operating Expenses is confidential; and while Landlord shall keep and make
available to such accountant all records in reasonable detail, and shall
permit such accountant to examine and audit such of Landlord's records as
may reasonably be required to verify such reconciled Operating Expenses, at
reasonable times during business hours, Landlord shall not be required to
(and the accountant shall not be permitted to) disclose to any person, firm
or corporation, including to Tenant, any such details (it being the intent
of the parties that such accountant shall merely certify to Landlord and to
Tenant the correct amount of adjusted additional Operating Expenses for the
calendar year). Any change in the reconciled Operating Expenses required
by such accountant's determination shall be made within thirty (30) days
after such determination has been rendered. The expenses involved in such
determination shall be borne by Tenant and deemed to be Additional Rental
under this
3
<PAGE>
Lease, unless the results of such audit determine that the difference
between the Operating Expenses as determined by the audit and the Operating
Expenses as determined by Landlord is greater than five percent (5%) of the
Operating Expenses as determined by Landlord, in which case such expenses
shall be borne by the Landlord. If Tenant does not, in writing, question
the reconciled Operating Expenses within thirty (30) days after such notice
has been given, Tenant shall be deemed to have approved and accepted such
reconciled Operating Expenses.
(e) ADJUSTMENTS TO OPERATING EXPENSES. If a clerical error occurs or
Landlord or Landlord's accountants discover new facts, which error or
discovery causes Operating Expenses for any period to increase or decrease,
upon notice by Landlord to Tenant of the adjusted additional Operating
Expenses for such calendar year, the adjusted additional Operating Expenses
shall apply and any deficiency or overpayment of Tenant's Proportionate
Share of the Operating Expense Pass-through Amount, as the case may be,
shall be paid by Tenant or taken as a credit by Tenant according to the
provisions set forth above. This provision shall survive the termination
of the Lease.
(f) NO DECREASE IN BASE RENTAL. If the actual Operating Expenses is
less than the Base Operating Expense Amount, the annual Base Rental as set
forth in subparagraph 3(a) hereof shall not be reduced.
(g) OTHER CHARGES. All costs, expenses and other sums that Tenant
assumes or agrees to pay to Landlord pursuant to this Lease ("Other
Charges") shall be deemed rental and, in the event of nonpayment thereof,
Landlord shall have all the rights and remedies herein provided for in case
of nonpayment of Base Rental. If a monthly installment of rent is not
received on or before the fifth (5th) day of the month in which it is due,
other remedies for nonpayment of rent notwithstanding, Tenant shall pay to
Landlord, a late charge of five percent (5%) of such installment as rent
for the purpose of defraying Landlord's administration expenses incident to
the handling of such overdue payment, and such past due rent shall bear
interest at a rate of interest equal to the prime rate as announced from
time to time by Bank One, Columbus, N.A., plus three percent (3%) per annum
(the "Default Rate"), for each day from the first day of the month through
the date such monthly installment of rent is received by Landlord. For
purposes of this Lease, "rent" shall mean Base Rental, Additional Rental,
and Other Charges.
(h) PLACE OF PAYMENT. Tenant shall pay all rent and other charges
due under this Lease without demand, deduction or set off to Landlord at
C/O TRAMMELL CROW COMPANY, 1701 DIRECTORS BOULEVARD, SUITE 350, AUSTIN,
TEXAS 78744 or at such other place as Landlord may designate from time to
time hereafter by written notice to Tenant.
4. CONSTRUCTION.
(a) IMPROVEMENTS TO BE CONSTRUCTED. Landlord, at its own cost and
expense, shall perform the work and make the installations in the Premises
that are designated as Landlord's Work in Exhibit D, attached hereto and
incorporated herein by reference. Landlord, at Tenant's cost and expense,
shall perform the work and make the installations in the Premises that are
designated as Tenant's Work in Exhibit D. Except as expressly set forth in
Exhibit D, Landlord has made no promise to alter, remodel or improve the
Premises, the Building or the Property.
(b) WORK PRIOR TO COMMENCEMENT DATE. All work, including Tenant's
Work, in the Premises shall be substantially completed prior to June 1,
1995 (the "Estimated Completion Date") and the Premises shall be in good
and tenantable condition in all respects for occupancy by Tenant for its
purposes and uses so long as Tenant shall have approved the plans and
specifications for construction and remodeling of the Premises on or before
April 15, 1995. Tenant may make changes in said plans and specifications
on or before April 15, 1995; provided, however, that in such event Landlord
shall be given a reasonable extension of time to complete Landlord's Work
after the Estimated Completion Date. Any extension of time and
modifications to plans and specifications shall be in writing, dated and
signed by both parties. (If Tenant does not timely submit to Landlord
approved plans and specifications, the Commencement Date shall be the
Estimated Completion Date and the rental shall commence from that date
notwithstanding the fact that the Premises are not substantially
completed.) The Estimated Completion Date
4
<PAGE>
shall be postponed in the event of (I) the unavailability of materials and
equipment that have been specified and requested by Tenant or (ii) delays
caused by acts of God, strikes and other events beyond the reasonable
control of Landlord, and neither circumstance shall give rise to liability
of Landlord.
(c) AVAILABILITY OF PREMISES PRIOR TO COMMENCEMENT DATE. If
Landlord, at Tenant's request, makes the Premises available to Tenant
before the Commencement Date to decorate, furnish, and equip the Premises,
Tenant shall not interfere with the completion of Landlord's Work.
Tenant's use of the Premises for such work shall not create a
landlord-tenant relationship between the parties, or constitute occupancy
of the Premises within the meaning of the next sentence, but the provisions
of Paragraphs 12 and 13 of this Lease shall apply.
(d) SUBSTANTIAL COMPLETION. As used herein, the work in the Premises
shall be "substantially completed" when the work has been completed in
accordance with the plans and specifications subject to the completion of
punch list items and a certificate of occupancy has been issued.
(e) CONDITION OF PREMISES. Except as otherwise agreed to in writing,
Tenant's taking possession of the Premises shall be conclusive evidence
against Tenant that the Premises were in good order and satisfactory
condition when Tenant took possession. Landlord has made no representation
respecting the condition of the Premises, the Building or the Property,
except for latent defects except as is expressly set forth in Exhibit D.
At the termination of this Lease, by lapse of time or otherwise, Tenant
shall remove all Tenant's property, including but not limited to, trade
fixtures, from the Premises, and shall return the Premises broom-clean and
in as good a condition as when the Tenant took possession or as same may
thereafter have been put by Landlord, except for ordinary wear, loss by
fire or other casualty, and repairs that Landlord is required to make under
this Lease. If Tenant fails to remove any or all of its property upon
termination of this Lease, such property shall be deemed to be abandoned
and shall become the property of Landlord.
(f) OVERLOAD. To coordinate orderly move-ins and move-outs, no
furniture, freight or equipment of any kind exceeding three hundred (300)
pounds shall be brought into the Building without prior notice to Landlord
and Landlord shall designate the time and manner of moving of the same.
Landlord shall have the right to prescribe the weight, size and position of
all safes and other heavy equipment brought into the Building and also the
times and manner of moving the same in and out of the Building. Safes or
other heavy objects shall, if considered necessary by Landlord, stand on
supports of such thickness as is necessary to properly distribute the
weight. Landlord will not be responsible for loss of or damage to any such
safe or property from any cause, and all damage done to the Building by
moving or maintaining any such safe or other property shall be repaired at
Tenant's expense.
5. USE OF THE PREMISES.
(a) USE. Tenant shall use the Premises for the conduct of GENERAL
OFFICE USE and for no other purpose whatsoever. Tenant shall not, without
the prior written consent of Landlord, exhibit, sell or offer for sale on
the Premises or in the Building any article or thing, except those articles
and things essentially connected with Tenant's stated use of the Premises.
(b) ADVERTISEMENT. Tenant shall not advertise the business,
profession or activities of Tenant conducted in the Building in any manner
which violates the letter or spirit of any code of ethics adopted by any
recognized association or organization pertaining to such business of
Tenant, and shall never use any picture or likeness of the Building in any
circulars, notices, advertisements or correspondence without Landlord's
prior written consent.
(c) SOLICITATION. Tenant shall not disturb, solicit, or canvass any
occupant of the Building and shall cooperate with Landlord to prevent same.
(d) CARE. Tenant shall use and occupy the Premises so that no other
occupant of any adjoining premises will be unreasonably disturbed and shall
create no nuisance in, upon or about the Premises. Subject to
5
<PAGE>
the provisions of Paragraph 8(b), Tenant shall take good care of the
Premises, the fixtures and appurtenances thereto, and all alterations,
additions and improvements thereto. Tenant will not make or permit to be
made any use of the Premises or any part thereof, and will not bring into
or keep anything in the Premises or any part thereof that (i) violates any
of the covenants, agreements, terms, provisions and conditions of this
Lease; (ii) directly or indirectly is forbidden by public law, ordinance or
regulation of any government or public authority (including zoning
ordinances); (iii) is dangerous to life, limb or property; (iv) increases
the risk to Landlord or any other tenant or invalidate or increase the
premium cost of any policy of insurance carried on the Building or covering
its operation; or (v) in the reasonable judgment of Landlord, in any way
impairs or tends to impair the character, reputation or appearance of the
Property as a first-class office building, or impairs or interferes with
any of the services performed by Landlord for the Property.
(e) NOISE; ODORS. Tenant shall not use, keep or permit to be used or
kept any foul or noxious gas or substance in the Premises; permit or suffer
the Premises to be occupied or used in a manner offensive or objectionable
to Landlord or other occupants of the building by reason of noise, odors
and/or vibrations; interfere in any way with other tenants or those having
business therein; or bring in or keep any animals or birds in the Premises.
Tenant shall not use the Premises for housing accommodations or lodging or
sleeping purposes, or do any cooking therein, or use any illumination other
than electric light.
6. ALTERATIONS.
(a) PROHIBITION. Tenant shall not make any alterations, additions or
improvements (collectively, the "Alterations") in or to the Premises, or in
or to the Building without the express prior written consent of Landlord;
provided, however, that Landlord shall not be unreasonable in withholding
consent to nonstructural Alterations. Before commencing any work in
connection with the Alterations, Tenant shall furnish to Landlord for its
approval the following: (i) detailed plans and specifications therefor,
(ii) names and addresses of each of the contractors and subcontractors,
(iii) copies of all contracts, subcontracts and necessary permits, (iv) a
payment and performance bond, or other indemnification, in form and amount
satisfactory to Landlord, protecting Landlord against any and all claims,
costs, damages, liabilities and expenses that may arise in connection with
the Alterations, (v) such documentation as is necessary to comply fully
with the mechanics' lien law of the state in which the Premises is located,
and (vi) certificates of insurance, in form and amount satisfactory to
Landlord, from all contractors and subcontractors who will perform labor or
furnish materials, insuring Landlord against any and all liability for
personal injury, including workers' compensation claims and for property
damage that may arise out of or be in any manner connected with the
Alterations.
(b) INDEMNIFICATION. In addition to the indemnity set forth in
Paragraph 12 of this Lease, Tenant hereby specifically agrees to indemnify
and hold harmless Landlord from and against any and all liabilities, costs
and expenses of every kind and description, including attorneys' fees, that
may arise out of or in any manner be connected with any Alterations made by
Tenant. Tenant shall pay the cost of all such Alterations and all costs
associated with decorating the Premises that may be occasioned thereby.
Upon completion of any such Alterations, Tenant shall furnish Landlord with
(i) receipted bills covering all labor and materials used, together with
such documentation as is necessary to comply fully with the mechanics' lien
law of the state in which the Premises are located; (ii) a true and correct
copy of the certificate of occupancy, if one is issued; and (iii) a
certificate of Tenant's architect or engineer stating that such Alterations
were made in substantial accordance with the plans and specifications.
Notice is hereby given that Landlord shall not be liable for any labor or
materials furnished or to be furnished to Tenant upon credit, and that no
mechanic's or other lien for such labor or materials shall attach to or
affect the reversion or other estate or interest of Landlord in and to the
Premises.
(c) COMPLIANCE AND SUPERVISION OF ALTERATIONS. All Alterations made
by Tenant hereunder shall be installed in a good and workmanlike manner,
using only materials of the same or higher quality as those installed in
the Building. All Alterations shall comply with all requirements of
Landlord's insurance carriers and with all laws, rules, ordinances and
regulations of any lawful authority. Tenant shall permit Landlord to
supervise construction operations in connection with any such Alterations,
if Landlord requests the right to do so (but Landlord shall have no
obligation to make such requests, or having done so, to supervise
construction). Landlord's
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<PAGE>
supervision of construction shall be done solely for the benefit of
Landlord and shall not alter Tenant's liability and responsibility under
this Paragraph 6.
(d) LANDLORD'S PROPERTY. All Alterations, whether temporary or
permanent, including hardware, non-trade fixtures and wall and floor
coverings, whether placed in or upon the Premises by Landlord or Tenant,
shall become Landlord's property and shall remain with the Premises at the
termination of this Lease, whether by lapse of time or otherwise, without
compensation, allowance or credit to Tenant; provided, however, that
notwithstanding the foregoing, Landlord may request that any or all of said
Alterations in or upon the Premises made by Tenant be removed by Tenant at
the termination of this Lease. If Landlord requests such removal or if
Tenant removes its trade fixtures, Tenant shall remove the same prior to
the end of the Term and shall repair all damage to the Premises, the
Building or the Property caused by such removal. Tenant shall not,
however, be required to remove pipes and wires concealed in floors, walls
or ceilings, provided that Tenant properly cuts and caps the same, and
seals them off in a safe, lawful and workmanlike manner, in accordance with
Landlord's reasonable requirements and all applicable building codes. If
Tenant does not remove any Alterations when requested by Landlord to do so,
Landlord may remove the same and repair all damage caused thereby, and
Tenant shall pay to Landlord the cost of such removal and repair
immediately upon demand therefor by Landlord, plus fifteen percent (15%)
of the cost of such removal to reimburse Landlord for its administrative
expense. Tenant's obligation to observe or perform this covenant shall
survive the expiration or termination of this Lease.
(e) WIRING. Landlord will direct electricians as to where and how
telephone and computer wires are to be introduced. No boring or cutting
for wires shall be allowed without Landlord's consent. The location of
telephones, call boxes and other office equipment affixed to the Premises
shall be subject to Landlord's approval.
7. MECHANICS' LIENS.
(a) If, because of any act or omission of Tenant, any mechanic's lien
or other lien, charge or order for the payment of money shall be filed
against any portion of the Premises, Tenant, at its own cost and expense,
shall cause the same to be discharged of record or bonded against within
ten (10) days of the filing thereof unless Tenant shall contest the
validity of such lien by appropriate legal proceedings diligently conducted
in good faith and without expense to Landlord; and Tenant shall indemnify
and save harmless Landlord against and from all costs, liabilities, suits,
penalties, claims and demands, including attorneys' fees, on account
thereof.
(b) If Tenant shall fail to cause such liens to be discharged of
record or bonded against within the aforesaid ten (10) day period or shall
fail to satisfy such liens within ten (10) days after any judgment in favor
of such lien-holders from which no further appeal might be taken, then
Landlord shall have the right to cause the same to be discharged. All
amounts paid by Landlord to cause such liens to be discharged, plus
interest on such amounts at the Default Rate shall constitute Other Charges
payable by Tenant to Landlord.
8. MAINTENANCE AND REPAIR.
(a) TENANT'S MAINTENANCE. Tenant, at its sole cost and expense,
shall maintain and repair during the Term of this Lease the Premises and
every part thereof and any and all appurtenances thereto, including but not
limited to, the doors and interior walls of the Premises; special light
fixtures; kitchen fixtures; auxiliary heating, ventilation, or
air-conditioning equipment; private bathroom fixtures and any other type of
special equipment, together with related plumbing or electrical services;
and rugs, carpeting, wall coverings, and drapes within the Premises,
whether installed by Tenant or by Landlord on behalf of Tenant, and whether
or not such items will become Landlord's property upon expiration or
termination of this Lease. Notwithstanding the provisions hereof, in the
event that repairs required to be made by Tenant become immediately
necessary to avoid possible injury or damage to persons or property,
Landlord may, but shall not be obligated to, make repairs to such items at
Tenant's expense, which shall constitute Other Charges payable by Tenant
to Landlord. Within ten (10) days after Landlord renders a bill for the
cost of said repairs, Tenant shall reimburse Landlord.
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<PAGE>
(b) LANDLORD'S MAINTENANCE. Subject to Paragraph 8(a) above,
Landlord shall keep repair and maintain the Building (including the roof
and structural members, the Common Areas, mechanical and electrical
equipment, the exterior and architectural finish, and all items except
those excepted elsewhere in this Lease) of which the Premises are a part,
and the lawn, shrubs and other landscaping on the Property, all in good and
tenantable condition during the Term of this Lease. Landlord shall, in
addition, supply reasonable snow removal for the walkways and parking areas
of the Property during Normal Business Hours (as hereinafter defined).
Tenant shall notify Landlord immediately when any repair to be made by
Landlord is necessary. If any portion of the Building or the Premises is
damaged through the fault or negligence of Tenant, its agents, employees,
invitees or customers, then Tenant shall promptly and properly repair the
same at no cost to Landlord; provided, however, that Landlord may, at its
option, make such repairs and Tenant shall, on demand, pay the cost
thereof, together with interest at the Default Rate to Landlord as Other
Charges. Tenant shall immediately give Landlord written notice of any
defect or need for repairs, after which notice Landlord shall have
reasonable opportunity to repair same or cure such defect. For the
purposes of making any repairs or performing any maintenance, Landlord may
block, close or change any entrances, doors, corridors, elevators, or other
facilities in the Building or in the Premises, and may close, block or
change sidewalks, driveways or parking areas of the Property, so long as
Tenant at all times has reasonable access to the Premises for Tenant
intended use. Landlord shall not be liable to Tenant, except as
expressly provided in this Lease, for any damage or inconvenience and
Tenant shall not be entitled to any abatement of rent by reason of any
repairs, alterations or additions made by Landlord under this Lease.
(c) INSPECTION. Tenant shall permit Landlord, its agents, employees
and contractors, at any time in the event of an emergency, and otherwise at
reasonable times, to take any and all measures, including inspections,
repairs, alterations, additions and improvements to the Premises or to the
Building, as may be necessary or desirable to safeguard, protect or
preserve the Premises, the Building or Landlord's interests; to operate or
improve the Building; to comply on behalf of Tenant with all laws, orders
and requirements of government or other authority (if Tenant fails to do
so); to examine the Premises to verify Tenant's compliance with all of the
terms, covenants, obligations and conditions of this Lease; or to exercise
any rights with respect to the Premises that Landlord may exercise in the
event of default by Tenant.
9. COMMON AREAS.
(a) GRANT. During the Term of this Lease, Landlord grants to Tenant,
its employees, customers and invitees, a nonexclusive license to use, in
common with all others to whom Landlord has granted or may hereafter grant
a license to use, the common areas of the Property, including but not
limited to, the sidewalks, lobbies, halls, passages, exits, entrances,
elevators, stairways, restrooms, parking areas (except as provided for in
subparagraph (b) below), driveways and landscaped areas (collectively, the
"Common Areas") subject to reasonable rules and regulations respecting the
Common Areas as Landlord may from time to time promulgate. The Common
Areas shall not be obstructed by Tenant or used for any purpose other than
for ingress to and egress from the Premises. The Common Areas are not for
the use of the general public and Landlord shall in all cases retain the
right to control and prevent access thereto by all persons whose presence,
in the judgment of Landlord, shall be prejudicial to the safety, character,
reputation and interests of the Building and its tenants; provided that
nothing herein contained shall be construed to prevent such access to
persons with whom Tenant normally deals in the ordinary course of Tenant's
business unless such persons are engaged in illegal activities. Neither
Tenant nor its employees, customers or invitees shall go upon the roof or
mechanical floors or into mechanical areas of the Building.
(b) PARKING. Parking will be provided in the surface parking area of
the Property, and subject to the limitations below, in the underground
parking area of the Building, if any. Landlord shall have the right to
designate aboveground parking areas for the use of the Building, and Tenant
and its employees shall not park in parking areas not so designated,
specifically including entrances. Upon written notice from Landlord,
Tenant shall furnish to Landlord, within five (5) days after receipt of
such notice, the state automobile license numbers assigned to the
automobiles of Tenant and its employees. Landlord shall not be liable for
any vehicle of Tenant or its employees that the Landlord shall have towed
from the Premises when illegally parked. Landlord shall have no liability
to Tenant for any damages or claims arising from the use of the parking
area or roadways by Tenant, other tenants, or their customers invitees or
employees. Tenant shall be allotted TWENTY (20) covered spaces within the
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garage, beginning October 1, 1995, but prior to this date only eight (8)
covered spaces within the garage shall be available, which at Landlords
discretion shall be either on the first level of the garage or reserved on
the second level. Tenant shall be allowed fan additional TWELVE (12)
spaces in the surface lots associated with the building. Landlord is not
responsible for the policing or enforcement of the exclusivity of these
underground spaces. Tenant, its sole cost and expense, shall be issued key
cards, not in excess of the number of spaces allotted to Tenant, which
cards will allow Tenant entry into the underground parking area. If any
of the key cards issued to Tenant are lost, Landlord shall charge Tenant
the sum of Fifty Dollars ($50.00) for each replacement card issued.
(c) RIGHT TO CHANGE COMMON AREAS. Landlord may do and perform such
acts in and to the Common Areas as, Landlord, in its good business
judgment, shall determine to be advisable. Landlord hereby reserves the
right to make alterations, additions, deletions or changes in the Common
Area, including, but not limited to, changes in its size and configuration.
10. BUILDING SERVICES.
(a) ELECTRIC. Landlord shall provide electric power to the Premises.
Electric power furnished by Landlord is intended to be that consumed in
normal office use during Normal Business Hours for lighting, heating,
ventilating, air conditioning and operating all office equipment. Landlord
reserves the right, if Tenant's consumption of electricity exceeds that
required for normal office use during Normal Business Hours, to include a
charge for such electricity as rent. Such charge shall be based upon the
average cost per unit of electricity for the Building applied to the excess
use as determined by an independent engineer selected by Landlord, or at
Landlord's option, to be determined by a submeter to be furnished and
installed at Tenant's expense. If Tenant refuses to pay upon demand of
Landlord such excess charges, such refusal shall constitute a breach of the
obligation to pay rent under this Lease and shall entitle Landlord to the
rights granted in this Lease for such breach. Tenant shall use strict care
and caution to ensure that all electricity is carefully shut off to prevent
waste or damage.
(b) WATER. Landlord shall provide water for drinking, lavatory and
toilet purposes from the regular Building supply (at the prevailing
temperature) through fixtures installed by Landlord (or by Tenant with
Landlord's prior written consent); provided that Tenant shall reimburse
Landlord, at rates fixed by Landlord, for water used by Tenant for
supplementary air-conditioning or refrigerating installed by or for Tenant
and for any other water used by Tenant (except for public drinking water
and public lavatory use).
(c) AIR-CONDITIONING AND HEAT. Landlord shall provide air
conditioning and heat to the Premises for comfortable occupancy during
Normal Business Hours, subject at all times, however, to restrictions
placed upon Landlord by any duly constituted governmental agency and/or by
any utility supplier. Tenant shall cooperate fully with Landlord to assure
the effective operation of the Building's air-conditioning and heating
systems, including the closing of venetian blinds and drapes, and if
windows are operable, to keep them closed when the air-conditioning or
heating system is in use. Tenant shall not use any apparatus or device
in, upon or about the Premises that in any way may increase the amount
of such services usually furnished or supplied to tenants in the Building,
and Tenant shall not connect any apparatus or device with the conduits
or pipes, or other means by which such services are supplied for the
purpose of using additional or unusual amounts of such services, without
the prior written consent of Landlord. If Tenant uses such services under
this provision to excess, Landlord reserves the right to charge Tenant for
such services, as rent. If Tenant refuses to make payment upon demand of
Landlord, such excess charge shall constitute a breach of the obligation to
pay rent under this Lease and shall entitle Landlord to the rights granted
in this Lease for such breach.
(d) JANITOR SERVICE. Landlord shall provide janitor service in and
about the Premises and the Building at the end of each Monday, Tuesday,
Wednesday and Thursday, and at Landlord's option, at the end of either
Sunday or Friday, except for Holidays (as hereinafter defined). Tenant
shall not provide any janitor service without Landlord's prior written
consent. If Landlord consents to janitor service provided by Tenant, the
same shall be subject to Landlord's rules and regulations and to Landlord's
supervision, but at Tenant's sole cost and expense (without reduction in
Base Rent or Additional Rental). Landlord shall further provide carpet
cleaning in the Common Areas and window cleaning at such times as Landlord,
in its sole opinion, considers that such cleaning
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is necessary. Each Tenant shall cooperate with any janitor service in
keeping the Premises neat and clean. Landlord shall be in no way
responsible to Tenant, its agents, employees or invitees, for any loss of
property within the Premises or for any damage to property thereon, from
any cause.
(e) ELEVATOR SERVICE. If the Building contains elevators, Landlord
shall provide passenger elevator during Normal Business Hours.
(f) INTERRUPTION OF SERVICES. Tenant hereby acknowledges that any
one or more of the utilities or building services specified in this
Paragraph 10 may be interrupted or diminished temporarily by Landlord or
other persons until certain repairs, alterations or other improvements to
the Premises or other parts of the Property can be made or by any event or
cause which is beyond Landlord's reasonable control, including, without
limitation, any ration or curtailment of utility services; that Landlord
does not represent, warrant or guarantee to Tenant the continuous
availability of such utilities or building services; and that any such
interruption shall not be deemed or construed to be an interference with
Tenant's right of possession, occupancy or use of the Premises, shall not
render Landlord liable to Tenant for damages or entitle Tenant to any
reduction of Base Rental, and shall not relieve Tenant from its
obligation to pay Base Rental and to perform its other obligations under
this Lease.
(g) ENERGY CURTAILMENT. Landlord and Tenant specifically acknowledge
that energy shortages in the region in which the Property is located may
from time to time necessitate reduced or curtailed energy consumption on
the Property. Tenant shall comply with all such rules and regulations as
may be promulgated from time to time by any governmental authority with
respect to energy consumption, and during such period of time as such
governmental authority may so require, Tenant shall reduce or curtail
operations in the Premises as shall be directed by Landlord or such
governmental authority. Compliance with such rules and regulations and/or
such reduction or curtailment of operation shall not constitute a breach
of Landlord's covenant of quiet enjoyment or otherwise invalidate or affect
this Lease, and Tenant shall not be entitled to any diminution or abatement
in Base Rental during the periods of reduction or curtailment of
operations.
(h) NORMAL BUSINESS HOURS. For purposes of this Lease, "Normal
Business Hours" shall mean 8:00 a.m. to 6:00 p.m., Monday through Friday,
and 8:00 a.m. to 1:00 p.m. on Saturday and not including Sundays and
Holidays.
(i) HOLIDAYS. For purposes of this Lease, Holidays shall mean New
Year's Day, Memorial Day, Fourth of July, Labor Day, Thanksgiving and
Christmas.
11. ESTOPPEL CERTIFICATES. Within ten (10) days after written request by
Landlord, Tenant shall execute, acknowledge and deliver to Landlord or to
Landlord's mortgagee, a prospective purchase of the Property or any part
thereof, an estoppel certificate, in form and substance substantially similar to
that attached as Exhibit E and incorporated herein by reference. Tenant shall
make such modifications to such estoppel certificate as may be necessary to make
such certificate true and accurate, it being intended that any such statement
delivered pursuant to this Paragraph 11 may be relied upon by any such
mortgagee, prospective mortgagee, prospective purchaser, or land lessor of the
Property. If Tenant fails to provide such estoppel certificate with ten (10)
days after Landlord's request, Tenant shall be deemed to have approved the
contents of any such certificate submitted to Tenant by Landlord and by Landlord
is hereby authorized to so certify.
12. INDEMNIFICATION; WAIVER OF CLAIMS.
(a) Tenants shall protect, indemnify and hold harmless Landlord, its
agents, servants, employees, officers, directors and partners forever
against and from (i) any penalty, damages, charges or costs imposed or
resulting from any violation of any law, order or ordinance of any
governmental agency, or by the use and occupancy of the Premises by Tenant,
whether occasioned by the neglect of Tenant or those holding under Tenant;
(ii) all claims, losses, costs, damages and expenses, including attorneys'
fees, arising out of or from any accident or other occurrence on or about
the Premises or the Property causing injury to any person or property,
except caused by the negligent or intentional act or omission of Landlord
or its servants, agents or employees; (iii) all
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claims, losses, costs, damages and expenses, including attorneys' fees,
arising out of any failure of Tenant in any respect to comply with or
perform all the requirements and provisions of this Lease or arising out
of any use of the Premises or the Property by Tenant or any one claiming
by, through or under Tenant.
(b) Landlord shall not be liable for, and Tenant hereby waives all
claims against Landlord, (i) for any and all damages or loss to fixtures,
equipment or other property of Tenant and its servants, agents, employees,
contractors, suppliers, invitees, patrons and guests, in, upon or about the
Premises or the Property, or (ii) for injury or death to any person,
occurring in, upon or about the Premises or the Property, resulting from
any cause whatever (except caused by the negligent or intentional act or
omission of Landlord or its servants, agents or employees), including, but
not limited to, water, snow, frost, ice, explosion, failing plaster, fire
or gas, smoke or other fumes, nor by reason of the leaking, breaking,
backing up or other malfunction of any lines, wires, pipes, tanks, boilers,
lifts or any other appurtenances, regardless by whom installed or
maintained (Tenant hereby expressly assuming all responsibility for the
safety and security of the person and property of Tenant, and its servants,
agents, employees, contractors, suppliers, invitees, patrons and guests,
while in, upon or about the Premises). The occurrence of any event
described in this Paragraph 12 shall not constitute a breach of Landlord's
covenant of quiet enjoyment set forth in Paragraph 17.
(c) Landlord shall protect, indemnify, and hold harmless Tenant, its
agents, servants, employees, officers, directors and partners forever
against and from (i) any penalty, damages, charges or costs imposed or
resulting from any violation of any law, order or ordinance of any
governmental agency, or by the use and occupancy of the Property by
Landlord, whether occasioned by the neglect of Landlord or those holding
under Landlord; (ii) all claims, losses, costs, damages and expenses,
including attorney's fees, arising out of or from any accident or other
occurrence on or about the Property causing injury to any person or
property, except caused by the negligent or intentional act or omission of
Tenant or its servants, agents or employees; (iii) all claims, losses,
costs, damages and expenses, including attorneys' fees, arising out of any
failure of Landlord in any respect to comply with or perform all the
requirements ad provisions of this lease or arising out of any use of the
Property by Landlord or any one claiming by, through or under Landlord.
(d) Tenant shall not be liable for, and Landlord hereby waives all
claims against Tenant, (i) for any and all damages or loss to fixtures,
equipment or other property of Landlord and its servants, agents,
employees, contractors, suppliers, invitees, patrons and guests, in, upon
or about the Property, or (ii) for injury or death to any person, occurring
in, upon or about the Property, resulting from any cause whatever (except
caused by the negligent or intentional act or omission of Tenant or its
servants, agents or employees), including, but not limited to, water, snow,
frost, ice, explosion, falling plaster, fire or gas, smoke or other fumes,
nor by reason of the leaking, breaking, backing up or other malfunction of
any lines, wires, pipes, tanks, boilers, lifts or any other appurtenances,
regardless of whom installed or maintained (Landlord hereby expressly
assuming all responsibility for the safety and security of the persons and
property of Landlord, and its servants, agents, employees, contractors,
suppliers, invitees, patrons and guests, while in, upon or about the
Property).
13. INSURANCE.
(a) TENANT'S INSURANCE. Tenant, at its sole cost and expense, shall
carry during the entire Term of this lease, the following types of
insurance:
(i) Commercial general liability insurance against injuries to
persons occurring in, upon or about the Premises, with minimum
coverage of Five Million Dollars ($5,000,000.00) per occurrence and
Five Million Dollars ($5,000,000.00) aggregate coverage per one (1)
accident or disaster, and One Million Dollars ($1,000,000.00) for
property damage;
(ii) Fire, extended coverage, vandalism and malicious mischief,
and sprinkler damage and all-risk insurance coverage on all personal
property, trade fixtures, floor coverings, wall coverings,
furnishings, furniture, and contents for their full insurable value on
a replacement cost basis;
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(iii) Business interruption insurance, against loss or damage
resulting from the same risks as are covered by the insurance
mentioned in subparagraph (i) above in an amount equal to the
aggregate of one (1) year's requirement of (A) Base Rental, (B) the
amount payable by Tenant for Additional Rental as provided in
subparagraph 3(b), and (C) insurance premiums necessary to comply with
this Paragraph 13; and
(iv) Workers' Compensation or other insurance, if and to the
extent required by law and in form and amounts required by law.
(b) LANDLORD AS ADDITIONAL INSURED. All such insurance required to
be maintained by Tenant shall name Landlord as an additional insured and
shall be written with a company or companies reasonably satisfactory to
Landlord, having a policyholder rating of at least "A" and be assigned a
financial size category of at least "Class XIV" as rated in the most recent
edition of "Best's Key Rating Guide" for insurance companies, and
authorized to engage in the business of insurance in the state in which the
Premises are located. Tenant shall deliver to Landlord copies of such
policies and customary insurance certificates evidencing such paid-up
insurance. Such insurance shall further provide that the same may not be
canceled, terminated or modified unless the insurer gives Landlord and
Landlord's mortgagee(s) at least sixty (60) days' prior written notice
thereof.
(c) LANDLORD'S INSURANCE. Landlord shall maintain in force, at all
times during the Term of this Lease, a policy or policies of fire insurance
to the extent of at least eighty percent (80%) of the insurable value of
the Building.
(d) INCREASE IN PREMIUMS. If insurance premiums payable by Landlord
or any other tenant are increased as a result of any breach of Tenant's
obligations under this Lease or as a result of Tenant's use and occupancy
of the Premises, Tenant shall pay to Landlord an amount equal to any
increase in such insurance premiums.
14. WAIVER OF SUBROGATION. Neither Landlord nor Tenant shall be liable to
the other for any business interruption or any loss or damage to property or in
any manner growing out of or connected with Tenant's use and occupation of the
Premises, the Building or the Property or the condition thereof, or of the
adjoining property, whether or not caused by the negligence or other fault of
Landlord or Tenant or of their respective agents, employees, subtenants,
licensees or assignees; provided, however, that this release shall apply only to
the extent that such business interruption or loss or damage is covered by
insurance, regardless of whether such insurance is payable to or protects
Landlord or Tenant or both. Nothing in this Paragraph 14 shall be construed to
impose any other or greater liability upon either Landlord or Tenant than would
have existed in the absence hereof. Because this Paragraph 14 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 Lease agrees
immediately to give to each insurance company that has issued to its policies of
fire and extended coverage insurance, written notice of the terms of the mutual
waivers contained in this paragraph, and to have the insurance policies properly
endorsed, if necessary, to prevent the invalidation of the insurance coverages
because of the mutual waivers contained in this Paragraph 14.
15. HOLDING OVER. If Tenant retains possession of the Premises or any
part thereof after the termination of this Lease, Tenant shall, from that day
forward, be a tenant from month to month and Tenant shall pay Landlord rent at
two (2) times the monthly rate in effect immediately prior to the termination of
this Lease for the time the Tenant remains in possession. No acceptance of rent
by, or other act or statement whatsoever on the part of the Landlord or its
agent or employee, in the absence of a writing signed by the Landlord, shall be
construed as an extension of or as a consent for further occupancy. Tenant
shall indemnify Landlord for all damages, consequential as well as direct,
sustained by reason of Tenant's retention of possession. The provisions of this
Paragraph 15 do not exclude pursuit of Landlord's right of re-entry or any other
right hereunder.
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16. ASSIGNMENT AND SUBLEASE.
(a) PROHIBITION. Tenant shall not assign, convey, mortgage, pledge,
encumber or otherwise transfer this Lease or any interest therein, sublet
the Premises or any part thereof, or permit the use or occupancy of the
Premises or any part thereof by anyone other than Tenant, without receiving
Landlord's prior written consent, which consent shall not be unreasonably
withheld or delayed. Any purported transfer, encumbrance, pledge,
mortgage, assignment or subletting not in compliance herewith shall be void
and of no force or effect. In the event of any assignment, subletting,
transfer or occupancy by someone other than Tenant, whether or not
expressly or impliedly approved by Landlord, Tenant shall, nevertheless, at
all times, remain fully responsible and jointly and severally liable for
the payment of the rent and for compliance with all other obligations
imposed upon Tenant under the terms, provisions and covenants of this
Lease. Any assignment or sublease shall contain a provision whereby the
assignee or subtenant agrees to comply with and be bound by all of the
terms, covenants, conditions, provisions and agreements of this Lease to
the extent applicable, and Tenant shall deliver to Landlord, promptly
after execution, an executed copy of each assignment or sublease and an
agreement of compliance by each assignee or subtenant. Any sublease shall
also contain a provision that in the event of default by Tenant hereunder
and a termination of this Lease by Landlord, such subtenant shall, at
Landlord's option, attorn to Landlord as if Landlord were the lessor under
the sublease.
(b) OPTION TO CANCEL. Upon receipt of Tenant's written request for
Landlord's consent to subletting, assignment, transfer or occupancy by
someone other than Tenant, Landlord shall have the option to cancel this
Lease as of the date the requested subletting, assignment, transfer or
occupancy by someone other than Tenant is to be effective. Landlord shall
exercise its option to cancel this Lease by written notice to Tenant within
thirty (30) days after Landlord receives Tenant's request for Landlord's
consent.
(c) RIGHT TO COLLECT RENTS DIRECTLY. Upon the occurrence of an
"event of default" as set forth in Paragraph 21 hereof, if all or any part
of the Premises is then assigned, sublet, transferred or occupied by
someone other than Tenant, then, in addition to any other remedies provided
in this Lease or provided by law, Landlord, at its option, may collect
directly from the assignee, subtenant, transferee or occupant all rent
becoming due to Tenant by reason of the assignment, sublease, transfer or
occupancy. Any collection directly by Landlord from the assignee or
subtenant shall not be construed to constitute a novation or a release of
Tenant from the further performance of its obligations under this Lease.
(d) EXCESS RENT. If Tenant assigns this lease or sublets all or a
portion of the Premises for an amount in excess of the Base Rental,
additional rental and other charges (or the pro rata share of all such
rental in the case of a sublease of a portion of the Premises), the Tenant
shall pay to Landlord, as rent, one hundred percent (100%) of such excess
received by Tenant.
17. QUIET ENJOYMENT. If Tenant shall pay the rents and other sums due to
be paid by Tenant hereunder as and when the same become due and payable, and if
Tenant shall keep, observe and perform, Tenant shall, at all times during the
Term herein granted, peacefully and quietly have and enjoy possession of the
Premises without any encumbrance or hindrance by, from or through Landlord,
except for regulations imposed by any governmental or quasi-governmental agency
on the occupancy of Tenant or the conduct of Tenant's business operations.
18. COMPLIANCE WITH LAWS AND WITH RULES AND REGULATIONS.
(a) LAWS. Tenant, at its sole cost and expense, shall procure any
permits and licences required for the transaction of Tenant's business in
the Premises. Tenant, at its sole cost and expense, shall promptly observe
and comply with all present and future laws, ordinances, requirements,
orders, directives, rules and regulations of all state, federal, municipal
and other agencies or bodies having jurisdiction relating to the use,
condition and occupancy of the Premises, the Building and the Property at
any time in force, applicable to the Premises or to
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Tenant's use thereof, except that Tenant shall not be under any obligation
to comply with any law, ordinance, rule or regulation requiring any
structural alteration of the Premises, unless such alteration is required
because of a condition that has been created by, or at the instance of,
Tenant, or is required by reason of a breach of any of Tenant's covenants
and agreements under this Lease. Landlord shall not be required to repair
any injury or damage by fire or other cause, or to make any repairs or
replacements of any panels, decoration, office fixtures, railing, ceiling,
floor covering, partitions, or any other property installed in the Premises
by Tenant.
(b) RULES AND REGULATIONS. Tenant shall comply with all rules and
regulations for the Building, which current rules and regulations are
attached hereto as Exhibit F and with such reasonable modifications thereof
and additions thereto as Landlord may make hereafter, from time to time.
Notwithstanding anything contained in this Lease, Landlord shall not be
responsible nor liable to Tenant, it agents, representatives, employees,
invitees or licensees, for the nonobservance by any other tenant of any
rules and regulations.
19. FIRE AND CASUALTY.
(a) If the Premises or the Building or any substantial part of either
is damaged or destroyed by fire or other casualty, cause or condition
whatsoever, and such damage or destruction cannot be repaired within one
hundred twenty days (120) days, Landlord or Tenant may terminate this
Lease, by written notice to the other party given within thirty (30) days
after such damage. If the Premises are damaged or destroyed or access
thereto or use thereof is affected by the damage, then Landlord's or Tenant
termination shall be effective as of the date of such damage; otherwise
said termination shall be effective thirty (30) days after such notice.
(b) If the Common Areas in the Building are damaged or destroyed by
fire or other casualty, cause or condition whatsoever, to such an extent as
to substantially interfere with Tenant's use of the Premises or if the
Premises or a substantial part thereof are made untenantable, and such
damage or destruction cannot be repaired within one hundred twenty (120)
days, then Tenant may terminate this Lease by giving written notice to
Landlord within thirty (30) days after such damage, said termination to be
effective as of the date of such damage.
(c) Unless this Lease is terminated as herein above provided,
Landlord shall proceed with due diligence to restore, repair and replace
the Premises and the Building to the same condition as they were in as of
the Commencement Date. Provided such damage or destruction was not caused
or contributed to by an intentional act or negligence of Tenant, its
agents, employees, invitees or those for whom Tenant is responsible, from
and after the date of such damage to date of completion of said repairs,
replacements and restorations, a just proportion of the rent shall abate
according to the extent the full use and enjoyment of the Premises are
rendered impossible by reason of such damage. Landlord shall be under no
duty to restore any alterations, improvements or additions made by Tenant.
In all cases, due allowance shall be given to Landlord for any reasonable
delays caused by adjustment of insurance loss, strikes, labor difficulties
or any cause beyond Landlord's control.
20. EMINENT DOMAIN
(a) If all the Premises or a substantial part thereof shall be taken
for any public or quasi-public use under any statute or by rights of
eminent domain or by private purchase in lieu thereof, this Lease shall
terminate as of the date of vesting of title. Landlord shall be entitled
to receive the entire award paid for such taking or condemnation, Tenant
hereby assigning to Landlord all Tenant's rights, title and interest
therein, if any. Nothing contained herein shall be deemed to give Landlord
any interest in or to require Tenant to assign to Landlord any award made
to Tenant for the taking of personal property or fixtures belonging to
Tenant, for the interruption of or damage to Tenant's business or for
Tenant's moving expenses but only if such award shall be in addition to the
award for the Property and the Building (or portion thereof) containing the
Premises.
(b) If fifty percent (50%) or more of the Building other than the
Premises shall be condemned, taken or purchased in lieu thereof, then
Landlord may terminate this Lease by notifying Tenant of such termination
within sixty (60) days after the date of vesting of title. This Lease
shall expire on the date specified in such notice of
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termination, which date shall be not less than sixty (60) days after the
giving of such notice. The rent hereunder shall be apportioned as of such
termination date.
(c) If more than thirty percent (30%) of the surface parking area of
the Property is condemned, taken or purchased in lieu thereof, either party
shall have the right to terminate this Lease upon giving written notice to
the other party within thirty (30) days of such taking and this Lease shall
terminate thirty (30) days after the date of such notice.
(d) Any such taking, condemnation or temporary requisition which does
not result in a termination of this Lease, as hereinbefore provided in this
Paragraph 20, shall not be cause for any reduction or diminution of the
rental payment hereunder.
21. DEFAULT.
(a) If (i) Tenant fails to pay within five (5) days after notice any
rent, or any other sums required to be paid hereunder by Tenant; or (ii)
Tenant defaults in the performance or observance of any other agreement or
condition on its part to be performed or observed, and Tenant shall fail to
cure said default within twenty (20) days after receipt of written notice
thereof by Landlord within such longer period of time as may be required to
cure so long as Tenant commences such cure within twenty (20) days and
diligently proceeds to cure, Tenant files a voluntary petition in
bankruptcy or is adjudicated a bankrupt or insolvent, or files any petition
or answer seeking any arrangement, composition, liquidation or dissolution
under any present or future federal, state or other statute, law or
regulation relating to bankruptcy, insolvency or other relief for debtors
or seeks or consents to or acquiesces in the appointment of any trustee,
receiver or liquidator of Tenant or of all or any substantial part of its
properties, or of the Premises, or makes any general assignment for the
benefit of creditors, or admits in writing its inability to pay its debts
generally as they become due; or (iv) a court enters ;an order, judgment or
decree approving a petition filed against Tenant seeking any arrangement,
composition, liquidation, dissolution or similar relief under any present
or future federal, state or other statute, law or regulation relating to
bankruptcy, insolvency or other relief for debtors, and such order,
judgment or decree shall remain unvacated or unstayed for an aggregate of
sixty (60) days (whether or not consecutive); or (vi) Tenant fails to
operate or closes its business upon the Premises, for reasons other than
fire or other casualty or condemnation, for a period of fifteen (15)
consecutive days; or (vii) Tenant abandons or vacates the Premises; then in
any such event and at any time thereafter, Landlord may, without further
notice to Tenant, and in addition to and not in lieu of any other rights or
remedies available to Landlord at law or in equity, exercise any one or
more of the following rights:
(i) Landlord may (A) terminate this Lease and the tenancy
created hereby by giving notice of such election to Tenant, and (B)
reenter the Premises, by summary proceedings or otherwise, remove
Tenant and all other persons and property from the Premises and store
such property in a public warehouse or elsewhere at the sole cost and
expense of and for the account of Tenant without Landlord being deemed
guilty of trespass or becoming liable for any loss or damage
occasioned thereby.
(ii) Landlord may reenter and take possession of the Premises,
without terminating this Lease and without relieving Tenant of its
obligations under this Lease, and divide or subdivide the Premises in
any manner Landlord may desire and lease or let the Premises or
portions thereof, alone or together with other premises, for such term
or terms (which may be greater or less than the balance of the
remaining portion of the Term of this Lease) and on such terms and
conditions (which may include concessions or free rent and alterations
of the Premises) as Landlord, in its discretion, may determine.
(b) If this Lease is terminated by Landlord pursuant to this
Paragraph 21, Tenant nevertheless shall remain liable for any Base Rental,
Additional Rental, Other Charges required to be paid hereunder and damages
that may be due or sustained prior to such termination, and for all
reasonable costs, fees and expenses incurred by Landlord in pursuit of its
remedies hereunder, including attorneys', brokers' and other professional
fees (all such
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rents, damages, costs, fees and expenses being referred to herein
collectively as "Termination Damages") plus additional damages (the
"Liquidated Damages") which are hereby stipulated to be equal to the
present value of Base Rental, Additional Rental and Other Charges required
to be paid hereunder that, but for termination of this Lease, would have
become due during the remainder of the Term, plus the unamortized portion
of tenant inprovements and leasing commissions, less the fair market rental
rate for the remainder of the Term of this Lease discounted at the current
five (5) year treasure bill rate. Termination Damages and Liquidated
Damages shall be due and payable immediately upon demand by Landlord
following any termination of this Lease pursuant to this Paragraph 21.
(c) If Landlord reenters and takes possession of the Premises
pursuant to this Paragraph 21, without terminating this Lease, and relets
the Premises or any part thereof (which Landlord shall have no obligation
to do), the net rentals from such letting shall be applied first to the
costs, fees and expenses incurred by Landlord in pursuit of its remedies
hereunder, including attorneys', brokers' and other professional fees, in
renting the Premises or part thereof to others from time to time (including
the cost and expense of making such improvements to the Premises as may be
necessary, in Landlord's sole discretion, to enable Landlord to relet
same). The balance, if any, shall be applied by Landlord from time to time
on account of the rent and other payments due from Tenant hereunder, with
the right reserved to Landlord to bring such actions or proceedings for the
recovery of any deficits remaining unpaid as Landlord may deem favorable
from time to time without being obligated to await the end of the Term for
the final determination of Tenant's account. Any balance remaining,
however, after full payment and liquidation of Tenant's account as
aforesaid shall be paid to Tenant with the right reserved to Landlord at
any time to give notice in writing to Tenant of Landlord's election to
cancel and terminate this Lease and the giving of such notice and the
simultaneous payment by Landlord to Tenant of any credit balance in
Tenant's favor that may at the time be owing to Tenant shall constitute a
final and effective cancellation and termination of this Lease and the
obligations hereunder on the part of either party to the other. Landlord
shall not be liable for, nor shall Tenant's obligations be diminished by
reason of, any failure by Landlord to relet the Premises or any failure of
Landlord to collect any rent due upon such reletting.
(d) Upon the termination of this Lease or of Tenant's right to
possession of the Premises by lapse of time or earlier termination as
herein provided, Tenant shall remove its property from the Premises. Any
such property of Tenant not removed from the Premises by Tenant within
thirty (30) days after the end of the term or of Tenant's right to
possession of the Premises, however terminated, whichever occurs earlier,
shall be conclusively deemed to have been forever abandoned by Tenant and
either may be retained by Landlord as its property or may be disposed of in
such manner as Landlord may see fit.
(e) Notwithstanding anything contained herein, if Landlord shall have
given written notice of three (3) defaults in any twelve (12) month period,
no further prior notice by Landlord shall be required for Landlord to
declare this Lease to be in default.
(f) If Tenant at any time fails to make any payment or perform any
other act on its part to be made or performed under this Lease, Landlord
may, but shall not be obligated to, and after reasonable notice or demand
and without waiving or releasing Tenant from any obligations under this
Lease, make such payment or perform such other act to the extent Landlord
may deem desirable, and in connection therewith to pay expenses and employ
counsel. Tenant shall pay upon demand all of Landlord's costs, charges and
expenses, including the fees of counsel, agents and others retained by
Landlord, incurred in enforcing Tenant's obligations hereunder or incurred
by Landlord in any litigation, negotiations or transactions in which Tenant
causes Landlord, without Landlord's fault, to become involved or concerned,
which amount shall be deemed to be rent due and payable by Tenant, upon
demand by Landlord, and Landlord shall have the same rights and remedies
for the nonpayment thereof, as in the case of default in the payment of
rent.
(g) All rights and remedies of Landlord herein enumerated shall be
cumulative, and none shall exclude any other right or remedy allowed by
law. In addition to the other remedies in this Lease provided, Landlord
shall be entitled to the restraint by injunction of the violation or
attempted violation of any of the covenants, agreements or conditions of
this Lease.
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22. WAIVER OF DEFAULT OR REMEDY. No waiver of any covenant or condition
or of the breach of any covenant or condition of this Lease shall be taken to
constitute a waiver of any subsequent breach of such covenant or condition nor
to justify or authorize the nonobservance of any other occasion of the same or
of any other covenant or condition hereof, nor shall the acceptance of rent by
Landlord at any time when Tenant is in default under any covenant or condition
hereof be construed as a waiver of such default or of Landlord's right to
terminate this Lease on account of such default, nor shall any waiver or
indulgence granted by Landlord to Tenant be taken as an estoppel against
Landlord, it being expressly understood that if at any time Tenant shall be in
default in any of its covenants or conditions hereunder an acceptance by
Landlord of rental during the continuance of such default or the failure on the
part of Landlord promptly to avail itself of such rights or remedies as Landlord
may have, shall not be construed as a waiver of such default, but Landlord may
at any time thereafter, if such default continues, terminate this Lease or
assert any other rights or remedies available to it on account of such default
in the manner hereinbefore provided.
23. LANDLORD'S LIEN. As security for Tenant's payment of rent, damages
and all other payments required to be made by Tenant pursuant to this Lease,
Tenant hereby grants to Landlord a lien upon all property of Tenant now or
subsequently located upon the Premises. If Tenant abandons or vacates any
substantial portion of the Premises or is in default in the payment of any
rental, if such default is not cured within applicable notice or cure periods
damage or other payments required to be made pursuant to this Lease, Landlord
may enter upon the Premises, by force if necessary, and take possession of all
or any part of the personal property, and may sell all or part of the personal
property at a public or private sale, in one or successive sales, with or
without notice, to the highest bidder for cash, and, on behalf of Tenant, sell
and convey all or part of the personal property delivering to the highest bidder
all of Tenant's title and interest in the personal property sold. The proceeds
of the sale of the personal property shall be applied by Landlord toward the
cost of the sale and then toward the payment of all sums then due by Tenant to
Landlord pursuant to the terms of this Lease.
25. FORCE MAJEURE. If Landlord or Tenant shall be delayed, hindered in or
prevented from the performance of any act required hereunder (other than the
payment of rent and other charges payable by Tenant) by reason of strikes,
lockouts, labor troubles, inability to procure materials, failure of power,
riots, insurrection, the act, failure to act or default of the other party, war
or any other reason beyond the reasonable control of the party who is seeking
additional time for the performance of such act, then performance of such act
shall be excused for the period of the delay and the period for the performance
of such act shall be extended for a reasonable period, in no event to exceed a
period equivalent to the period of such delay. No such interruption of any
service to be provided by Landlord shall ever be deemed to be an eviction,
actual or constructive, or disturbance of Tenant's use and possession of the
Premises, the Building or the Property.
26. SUBORDINATION OF LEASE.
(a) Landlord reserves the right and privilege to subject and
subordinate this Lease to any and all mortgages, deeds of trust or land
leases now existing upon or that may be hereafter placed upon the Premises
and the Property and to all advances made or to be made thereon and all
renewals, modifications, consolidations, replacements or extensions thereof
and if such right is exercised, the lien of any such mortgages, deeds of
trust or land leases shall be superior to all rights hereby or hereunder
vested in Tenant, to the full extent of all sums secured thereby. In
confirmation of such subordination, Tenant shall, on request of Landlord or
the holder of any such mortgages, deed(s) of trust and land leases, execute
and deliver to Landlord within ten (10) days any instrument that Landlord
or such holder may reasonably request.
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(b) If the interest of Landlord under this Lease shall be transferred
by reason of foreclosure, deed in lieu of foreclosure, or other proceedings
for enforcement of any first mortgage or deed of trust on the Premises,
Tenant shall be bound to the transferee (the "Purchaser") under the terms,
covenants and conditions of this Lease for the balance of the Term
remaining, and any extensions or renewals, with the same force and effect
as if the Purchaser were the landlord under this Lease, and at the option
of Purchaser, Tenant shall attorn to the Purchaser (including the mortgagee
under any such mortgage, if it be the Purchaser), as its landlord, the
attornment to be effective and self-operative without the execution of any
further instruments upon the Purchaser succeeding to the interest of
Landlord under this Lease. The respective rights and obligations of Tenant
and the Purchaser upon the attornment, to the extent of the then remaining
balance of the Term of this Lease, and any extensions and renewals, shall
be and are the same as those set forth in this Lease.
27. NOTICES AND CONSENTS. All notices, demands, requests, consents and
approvals that may or are required to be given by either party to the other
shall be in writing and shall be deemed given when sent by United States
certified or registered mail, postage prepaid, or by overnight courier (a) if
for Tenant, addressed to Tenant at the Building, or at such other place as
Tenant may from time to time designate by notice to Landlord, or (b) if for
Landlord, addressed to Trammell Crow Company, 301 Congress Avenue, Suite 1300,
Austin, Texas 78701 Attention: Stan Erwin with a copy to Landlord, c/o OTR,
275 East Broad Street, Columbus, Ohio 43215, Attention: Real Estate Manager, or
at such other place as Landlord may from time to time designate by notice to
Tenant. All consents and approvals provided for herein must be in writing to be
valid. Notice shall be deemed to have been given if addressed and mailed as
above provided on the date two (2) days after deposit in the United States mail
or one (1) day after deposit with an overnight courier.
28. SECURITY DEPOSIT.
(a) Tenant has deposited with Landlord the sum of TEN THOUSAND ONE
HUNDRED SEVENTY ONE DOLLARS & 95/100 ($10,171.95) as security for the full
and faithful performance of every provision of this Lease to be performed
by Tenant. If Tenant defaults with respect to any provision of this Lease,
including, but not limited to, the provisions relating to the payment of
rent, Landlord may use, apply or retain all or any part of this security
deposit for the payment of any rent or any other sum in default or for the
payment of any other amount that Landlord may spend or become obligated to
spend by reason of Tenant's default, or to compensate Landlord for any
other loss, cost or damage that Landlord may suffer by reason of Tenant's
default. If any portion of said deposit is so used or applied, Tenant
shall, within five (5) days after written demand therefor, deposit cash
with Landlord in an amount sufficient to restore the security deposit
to its original amount and Tenant's failure to do so shall be a default
under this Lease. Landlord shall not, unless otherwise required by law, be
required to keep this security deposit separate from Landlord's general
funds, nor pay interest to Tenant. If Landlord is required by law to
maintain said deposit in an interest bearing account, Landlord will retain
the maximum amount permitted under applicable law as a bookkeeping and
administrative charge. If Tenant shall fully and faithfully perform every
provision of this Lease to be performed by it, the security deposit or any
balance thereof shall be returned to Tenant (or, at Landlord's option, to
the last transferee of Tenant's interest hereunder) at the expiration of
the Lease Term and upon Tenant's vacation of the Premises. In the event of
bankruptcy or other debtor-creditor proceedings against Tenant, such
security deposit shall be deemed to be applied first to the payment of rent
and other charges due Landlord for all periods prior to filing of such
proceedings.
(b) Landlord may deliver the security deposit to the purchaser of
Landlord's interest in the Premises in the event that such interest be sold
and thereupon Landlord shall be discharged from any further liability with
respect to such deposit, and this provision shall also apply to any
subsequent transferees of Landlord.
29. MISCELLANEOUS TAXES. Tenant shall pay, prior to delinquency, all
taxes assessed against or levied upon its occupancy of the Premises, or upon the
fixtures, furnishings, equipment and all other personal property of Tenant
located in the Premises, if nonpayment thereof shall give rise to a lien on the
Premises, and when possible Tenant shall cause said fixtures, furnishings,
equipment and other personal property to be assessed and billed separately from
the property of Landlord. In the event any or all of Tenant's fixtures,
furnishing, equipment and other personal property, or upon Tenant's occupancy of
the Premises, shall be assessed and taxed with the property of Landlord, Tenant
shall pay to Landlord its share
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of such taxes within ten (10) days after delivery to Tenant by Landlord of a
statement in writing setting forth the amount of such taxes applicable to
Tenant's fixtures, furnishings, equipment or personal property.
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31. BROKERAGE COMMISSION. Except for any broker, agent or other person
named below, Landlord and Tenant represent and warrant each to the other that
each has dealt with no broker, agent or other person in connection with this
transaction and that no broker, agent or other person brought about this
transaction. Landlord hereby agrees to pay to TRAMMEL CROW MANAGEMENT COMPANY,
INC. ("Agent") a leasing commission as set forth in that certain Property
Management Agreement between Landlord and Agent. Tenant agrees to indemnify and
hold Landlord harmless from and against any claims by any other broker, agent or
other person (including, without limitation, Co-op Broker) claiming a commission
or other form of compensation by virtue of having dealt with Tenant with regard
to this leasing transaction. The provisions of this Paragraph 31 shall survive
the termination of this Lease.
32. HAZARDOUS DEVICES AND CONTAMINENTS.
(a) PROHIBITION. Except with the prior written consent of Landlord,
Tenant shall not install or operate any steam or internal combustion
engine, boiler, machinery, refrigerating or heating device or air-
conditioning apparatus in or about the Premises, or carry on any mechanical
business therein. Except for Contaminants (as hereinafter defined) used in
the ordinary course of business and in compliance with Requirements of Law
(as hereinafter defined), Tenant and its agents, employees, contractors and
invitees shall not use, store, release, generate or depose of or permit to
be used, stored, released, generated or disposed of any Contaminants on or
in the Premises.
(b) INDEMNIFICATION. Tenant shall indemnify and hold harmless
Landlord, its agents, servants, employees, officers and directors forever
from and against any and all liability, claims, demands and causes of
action, including, but not limited to, any and all liability, claims,
demands and causes of action by any governmental authority, property owner
or any other third person and any and all expenses, including attorneys'
fees (including, but not limited to, attorneys' fees to enforce Tenant's
obligation of indemnification under this Paragraph 32(b)), relating to any
environmental liability resulting from (i) any Release (as hereinafter
defined) of any Contaminant at the Premises or emanating from the Premises
to adjacent properties or the surrounding environment during the Term of
this Lease; (ii) during the Term of this Lease, any generation, transport,
storage, disposal, treatment or other handling of any Contaminant at the
Premises, including, but not limited to, any and all off-site transport,
storage, disposal, treatment or other handling of any Contaminant
generated, produced, used and/or originating in whole or in part from the
Premises; and (iii) any activities at the Premises during the Term of this
Lease that in any way might be alleged to fail to comply with any
Requirements of Law. Provided however, this indemnity shall exclude
preexisting conditions, as of the date of this lease, and any such
environmental liability to the extent caused by the negligent act of
omission of Landlord or its servants, agents or employees.
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(d) DEFINITIONS.
(i) "Contaminant" shall mean any substance or waste containing
hazardous substances, pollutants, and contaminants as those terms are
defined in the federal Comprehensive Environmental Response
Compensation and Liability Act, 42 U.S.C. Section 9601 et seq. and any
substance similarly defined or identified in any other federal,
provincial or state laws, rules or regulations governing the
manufacture, import, use, handling, storage, processing, release or
disposal of substances or wastes deemed hazardous, toxic, dangerous or
injurious to public health or to the environment. This definition
includes friable asbestos and petroleum or petroleum-based products.
(ii) "Requirements of Law" shall mean any federal, state or
local law, rule, regulation, permit, agreement, order or other binding
determination of any governmental authority relating to the
environment, health or safety.
(iii) "Release" shall have the same meaning as in the federal
Comprehensive Environmental Response Compensation and Liability Act,
42 U.S.C. Section 9601, et seq.
33. EXCULPATION. This Lease is executed by certain general partners of
Landlord, not individually, but solely on behalf of, and as the authorized
nominee and agent for STRBO, and in consideration for entering into this Lease,
Tenant hereby waives any rights to bring a cause of action against the
individuals executing this Lease on behalf of Landlord (except for any cause of
action based upon lack of authority or fraud), and all persons dealing with
Landlord must look solely to STRBO's assets for the enforcement of any claim
against Landlord, and the obligations hereunder are not binding upon, nor shall
resort be had to the private property of any of, the trustees, officers,
directors, employees or agents of STRBO.
34. SIGNS. Tenant shall not display, inscribe, print, paint, maintain or
affix on any place in or about the Building any sign, notice, legend, direction,
figure or advertisement, except on the doors of the Premises, and then only such
name(s) and matter, and in such color, size, place and materials, as shall first
have been approved by Landlord in writing. Landlord reserves the right to
install and maintain a sign or signs on the exterior or interior of the
Building. If Tenant desires, Landlord shall list Tenant on the Building
directory board, at Tenant's sole cost and expense.
35. LOCKS. No additional locks or similar devices shall be attached to
any door or window without Landlord's prior written consent. Except for those
keys provided by Landlord, no keys for any door shall be made. If more than two
keys for one lock are desired, Landlord will provide the same upon payment by
Tenant. All keys must be returned to Landlord at the expiration or Termination
of this Lease. Tenant shall see that the doors and windows, if operable, of the
Premises are closed and securely locked before leaving the Building.
36. EMPLOYMENT. Tenant shall not contract for any work or service that
might involve the employment of labor incompatible with the Building employees
or employees of contractors doing work or performing services by or on behalf of
Landlord.
37. PLUMBING. Tenant must observe strict care and caution that all water
faucets and water apparatus are shut off before Tenant or its employees leave
the Building to prevent waste or damage. Plumbing fixtures and appliances shall
be used only for purposes for which constructed, and no sweepings, rubbish, rags
or other unsuitable material shall be thrown or placed therein. Damage
resulting to any such fixtures or appliances from misuse by Tenant shall be paid
by Tenant and Landlord shall not in any case be responsible therefor.
38. CERTAIN RIGHTS RESERVED TO LANDLORD. Landlord reserves the following
rights:
(a) To name the Building and to change the name or street address of
the Building;
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(b) To designate all sources furnishing sign painting and lettering,
ice, drinking water, towels, toilet supplies, shoe shining, vending
machines, mobile vending service, catering, and like services used on the
Premises or in the Building;
(c) On reasonable prior notice to Tenant, to exhibit the Premises to
prospective tenants during the last twelve (12) months of the Term, and to
exhibit the Premises to any prospective purchaser, mortgagee, or assignee
of any mortgage on the Property and to others having a legitimate interest
at any time during the Term; and
(d) To install vending machines of all kinds in the Property,
including, without limitation, the Premises, and to provide mobile vending
service therefor, and to receive all of the revenue derived therefrom;
provided, however, that no vending machines shall be installed by Landlord
in the Premises nor shall any mobile vending services be provided therefor,
unless Tenant so requests.
39. MISCELLANEOUS.
(a) No receipt of money by Landlord from Tenant after the termination
of this Lease or after the service of any notice or after the commencement
of any suit, or after final judgment for possession of the Premises shall
reinstate, continue or extend the Terms of this Lease or affect any such
notice, demand or suit or imply consent for any action for which Landlord's
consent is required.
(b) The term "Landlord" as used in this Lease, as far as covenants or
agreements on the part of Landlord are concerned, shall be limited to mean
and include only the owner (or ground lessor, as the case may be) for the
time being of the Premises. If the Premises or the underlying lease, if
any, be sold or transferred, the seller thereof shall be automatically and
entirely released of all covenants and obligations under this Lease from
and after the date of conveyance or transfer, provided the purchaser on
such sale has assumed and agreed to carry out all covenants and obligations
contained in this Lease to be performed on the part of Landlord hereunder,
it being hereby agreed that the covenants and obligations, contained in
this Lease to be performed on the part of Landlord, hereunder it being
hereby agreed that the covenants and obligations contained in this Lease
shall be binding under Landlord, its successors and assigns, only during
their respective successive period of ownership.
(c) It is understood that Landlord may occupy portions of the
Building in the conduct of Landlord's business. In such event, all
references herein to other tenants of the Building shall be deemed to
include Landlord as occupant.
(d) All of the covenants of Tenant hereunder shall be deemed and
construed to be "conditions" as well as "covenants" as though the words
specifically expressing or implying covenants and conditions were used in
each separate instance.
(e) In the event of variation or discrepancy among counterparts,
Landlord's original copy of this Lease shall control.
(f) This Lease shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns, provided
that this provision shall in no manner enlarge Tenant's rights of
assignment, which right of assignment has been restricted under the
foregoing provisions of this Lease.
40. RELATIONSHIP OF PARTIES. Any intention to create a joint venture,
partnership or principal and agent relationship between the parties hereto is
hereby expressly disclaimed. This Lease shall create the relationship of
landlord and tenant between Landlord and Tenant.
41. GENDER AND NUMBER. Whenever words are used herein in any gender, they
shall be construed as though they were used in the gender appropriate to the
context and circumstances, and whenever words are used herein in the singular or
plural form, they shall be construed as though they were used in the form
appropriate to the context and the circumstances.
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42. TOPIC HEADINGS. Headings and captions in this Lease are inserted for
convenience and reference only and in no way define, limit or describe the scope
or intent of this Lease nor constitute any part of this Lease and are not to be
considered in the construction of this Lease.
43. COUNTERPARTS. Several copies of this Lease may be executed by all of
the parties. All executed copies constitute one and the same Lease, binding
upon all parties.
44. ENTIRE AGREEMENT. This Lease contains the entire understanding
between the parties and supersedes any prior understanding or agreements between
them respecting the subject matter. No representations, arrangement, or
understandings except those fully expressed herein, are or shall be binding upon
the parties. No changes, alterations, modifications, additions or
qualifications to the terms of this Lease shall be made or be binding unless
made in writing and signed by each of the parties.
45. RECORDING. The parties agree that this Lease shall not be recorded,
but a Short Form Lease or Memorandum of Lease, complying in form with applicable
state law, shall be executed setting forth the description of the Premises, the
Term of this Lease and other pertinent provisions, which Short Form Lease or
Memorandum of Lease may be recorded by either party in lieu of recordation of
this Lease.
46. GOVERNING LAW; INVALIDITY OF ANY PROVISIONS. This Lease shall be
subject to and governed by the laws of the state in which the Premises are
located. If any term or provision of this Lease or the application thereof to
any person or circumstances shall to any extent be invalid or unenforceable, the
other terms of this Lease, or the application of such term or provision to
persons or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Lease shall be valid and be enforced to the fullest extent permitted by
law.
IN WITNESS WHEREOF, the parties have executed this Lease as of the day and
year first above written.
TENANT: LANDLORD:
NOVELLUS SYSTEMS, INC. OTR, an Ohio general partnership, acting
as the duly authorized nominee of the
BOARD OF THE STATE TEACHES RETIREMENT SYSTEM OF OHIO
/s/John P. Root By: /s/?
- ------------------------------------- ----------------------------------------
OTR, a general partner
------------------
Witness: Witness:
/s/ Robert E. Standish /s/ Pamela J. McCamron
- ----------------------------------- ----------------------------------------
5375 Branciforte Dr. /s/ Hollie ?
- ----------------------------------- ----------------------------------------
Santa Cruz, CA 95065
- -----------------------------------
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CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
STATE OF CALIFORNIA }
} ss.
COUNTY OF }
On this 25TH day of APRIL, 1995 Before me, R.E. Standish, Notary Public,
personally appeared JOHN P. ROOT
/ / Personally known to me-OR-/X/ proved to me on the basis of satisfactory
evidence to be the person /s whose name /s is/are subscribed to the within
instrument and acknowledged to me that he/she/they executed the same in
his/her/their authorized capacities, and that by his/her/their signature /s on
the instrument the person /s or the entity upon behalf of which the person /s
acted, executed the instrument.
[SEAL]
WITNESS my hand and official seal
/s/ R. E. Standish
--------------------------------------------
R. E. Standish, Notary Public
(SEAL)
THIS CERTIFICATE MUST BE ATTACHED TO THE DOCUMENT DESCRIBED BELOW:
TITLE OR TYPE OF DOCUMENT LEASE
-----------------------------------------------------
NUMBER OF PAGES THIRTY-SEVEN (37) DATE OF DOCUMENT APRIL 25, 1995
------------------ ----------------------
SIGNER(S) OTHER THAN NAMED ABOVE OTR
----------------------------------------------
/ / INDIVIDUAL /x/ CORPORATE OFFICER(S) TITLE(S) TREASURER
--------------------
/ / PARTNER(S) / / LIMITED
/ / GENERAL
/ / ATTORNEY-IN-FACT
/ / TRUSTEE(S) / / TRUSTOR(S) / / BENEFICIARY(S)
/ / GUARDIAN/CONSERVATOR
/ / OTHER:
----------------------------------------------------------------------
SIGNER IS REPRESENTING: NOVELLUS
--------------------------------------------------------
<PAGE>
STATE OF OHIO )
) SS:
COUNTY OF )
BE IT REMEMBERED, that on this 26th day of MAY, 1995 before me, the
subscriber, a Notary Public, personally appeared the above-named OTR, an Ohio
general partnership by STEPHEN A. MITCHELL, a general partner, known to me and
known to me to be the person who signed the foregoing instrument as such
partner, who acknowledged to me that he signed said instrument as such partner,
duly authorized by the partnership so to do, and that the signing of the same
was his free act and deed, as such partner, for and on behalf of said
partnership, for the uses and purposes therein set forth.
IN TESTIMONY WHEREOF, I have hereunto subscribed by name and affixed the
official seal of my office at COLUMBUS, OHIO, on the day and year last above
written.
[SEAL]
Pamela J. McCamron
----------------------------------------
Notary Public
STATE OF____________ )
) SS:
COUNTY OF __________ )
BE IT REMEMBERED, that on this ____ day of ___, 19__ before me, the
subscriber, a Notary Public, personally appeared the above-named _______________
organized under the laws of the State of _______________ by ___________________,
its _________________, known to me to be the person who signed the foregoing
instrument as such ___________, who acknowledged to me that ________ signed said
instrument as such ___________, duly authorized by the _________________________
of said ___________________ so to do, and that the signing of the same was _____
free act and deed, as such officer, for and on behalf of said _________________,
for the uses and purposes therein set forth.
IN TESTIMONY WHEREOF, I have hereunto subscribed by name and affixed the
official seal of my office at ______________, _______________, on the day and
year last above written.
----------------------------------------
Notary Public
24
<PAGE>
EXHIBIT A
[FLOOR PLAN CHART]
<PAGE>
EXHIBIT B
LEGAL DESCRIPTION
Lot 1 and a portion of Lot 2 of Crow Industrial Park South, Section Two, Plat
Book 81, Page 135, Plat Records of Travis County, Texas, more commonly referred
to as 1701 Directors Boulevard, Austin, Texas 78744.
<PAGE>
EXHIBIT C
COMMENCEMENT DATE AGREEMENT
THIS COMMENCEMENT DATE AGREEMENT ("Agreement") dated __________, 199_ is
between OTR, an Ohio general partnership, whose address is 275 East Broad
Street, Columbus, Ohio 43215, acting as the duly authorized nominee of The State
Teachers Retirement System of Ohio ("Landlord"), whose address is 275 East Broad
Street, Columbus, Ohio 43215, and ____________________________, a ______________
("Tenant") whose address is ________________________________.
WITNESSETH:
A. Landlord and Tenant executed a certain Lease dated ________, 199_ (the
"Lease").
B. The Lease provides that the Lease will commence on the date that
Landlord delivers possession of the Premises (as defined in the Lease) to
Tenant.
C. Landlord and Tenant now desire to set forth in writing the actual date
of delivery of the Premises and the actual commencement date of the Lease.
NOW THEREFORE in consideration of the mutual covenants and promises
contained herein and other valuable consideration, the parties agree that the
Lease commenced on ___________, 199_ and shall terminate on ___________, ______.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on the day and year first above written.
Signed and Acknowledged LANDLORD: OTR, an Ohio general
the Presence of partnership acting as the duly
authorized nominee of The State
Teachers Retirement System of Ohio
__________________________________ By: _______________________________
___________________________________
____________________, a general partner
TENANT:
________________________________________
__________________ a ___________________
___________________________________ By: ____________________________________
___________________________________
Its: __________________________________
Exhibit C - Page 1
<PAGE>
STATE OF OHIO )
) SS:
COUNTY OF FRANKLIN )
BE IT REMEMBERED, that on this ____ day of ___________, 199_, before me,
the subscriber, a Notary Public, personally appeared the above-named OTR, ,a
partnership organized under the laws of the State of Ohio, by Stephen A.
Mitchell, a general partner, known to me and known to me to be the person who
signed the foregoing instrument as such partner, who acknowledged to me that he
signed said instrument as such partner, duly authorized by the partnership so to
do, and that the signing of the same was his free act and deed, as such partner,
for and on behalf of said partnership, for the uses and purposes therein set
forth.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed the
official seal of my office at Columbus, Ohio, on the day and year last above
written.
----------------------------------------
Notary Public
STATE OF ___________ )
) SS:
COUNTY OF __________ )
BE IT REMEMBERED, that on this ___ day ___________, 19__, before me, the
subscriber, a Notary Public and for said County and State, personally appeared
the above-named ________________ organized under the laws of the State of
_____________ by _____________________, its _________________, known to me and
known to me to be the person who signed the foregoing instrument as such
___________, who acknowledged to me that _______ signed said instrument as such
________, duly authorized by the ____________________ of said __________________
so to do, and that the signing of the same was ______ free act and deed, as such
officer, for and on behalf of said _________________, for the uses and purposes
therein set forth.
IN TESTIMONY WHEREOF, I have hereunto subscribed my name and affixed the
official seal of my office at ____________, ____________, on the day and year
last above written.
----------------------------------------
Notary Public
Exhibit C - Page 2
<PAGE>
EXHIBIT D
TENANT IMPROVEMENTS
Subject to the conditions hereinafter set forth, Landlord will provide Tenant
with an allowance of up to $39,500 for improvements required to the premises the
"Tenant Improvement Allowance". This Tenant Improvement Allowance is meant to
be comprehensive including but not limited to architectural and engineering
fees, actual construction material and labor, and a fee of 5% of the total
construction costs to reimburse Landlord for its management of construction and
administrative costs. The Landlord neither presumes or insures that this
allowance will completely cover the improvements as contemplated by Tenant, but
it is the amount of Tenant Finish allowed based on the Basic Rental as proposed.
For all purposes hereof, the premises contain 6,916 square feet Net Rentable
Area. Tenant recognizes that all improvements to the Premises not paid for
directly by Tenant shall remain the property of the Landlord. Landlord will
recognize that any improvements that are paid for by Tenant, and evidence is
provided of such, which are not considered fixtures and can be removed without
damage to the Premises, shall remain the property of Tenant.
<PAGE>
EXHIBIT E
TENANT ESTOPPEL CERTIFICATE
RE: Premises:
-----------------------------------
Lease Dated:
-----------------------------------
Amendment(s) Dated:
-----------------------------------
Between (Landlord)
-----------------------------------
and (Tenant)
-----------------------------------
Square Footage Leased:
-----------------------------------
Floor(s)/Suite #(s):
-----------------------------------
The undersigned, Tenant under the above-referenced lease ("Lease"),
certifies to the following:
1. We have taken possession of and accepted the Premises described above,
except as follows:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
2. The lease terms as described below are true and accurate, and the lease is
in full force and effect:
Base Rent: per year
---------------------------------------
Expense Stop: per square foot
---------------------------------------
Escalations:
---------------------------------------
Free Rent: ---------------------------------------
Commencement Date: ---------------------------------------
Expiration Date: ---------------------------------------
Renewals: ---------------------------------------
3. No part of the Premises has been subleased or assigned except as follows:
---------------------------------------------------------------------------
---------------------------------------------------------------------------
4. The rent has been paid through:
-------------------------------------------
5. The security deposit is
---------------------------------------------------
There are no tax or insurance escrows
-------------------------------------
6. We are not in default of our obligations under the Lease. Landlord, to the
best of our knowledge, is not in default of its obligations under the
Lease. There exists no defense or counterclaim to rent or other sums
required to be paid by us under or pursuant to the Lease.
If Tenant is a corporation, the undersigned is a duly appointed officer of the
corporation signing this certificate and is the incumbent in the office
indicated under his/her name. In any event, the undersigned individual is duly
authorized to execute this certificate.
Date: , 19 Signed:
------------------ -- --------------------------------
(Signature)
----------------------------------------
(Print Name & Title)
<PAGE>
EXHIBIT F
RULES AND REGULATIONS
The following rules and regulations shall apply, where applicable, to the
Property and to each portion thereof:
(1) Sidewalks, doorways, vestibules, halls, stairways and other similar
areas shall not be obstructed by tenants or used by any tenant for any purpose
other than ingress and egress to and from the premises and for going from one to
another party of the Property.
(2) Plumbing, fixtures and appliances shall be used for the purposes for
which designed, and no sweepings, rubbish, rags or other unsuitable materials
shall be thrown or placed therein. Damage resulting to any such fixtures or
appliances from misuse by a tenant or such tenant's agents, employees or
invitees shall be paid by such tenant and Landlord shall not in any case be
responsible therefor.
(3) No signs, advertisements or notices shall be painted or affixed on or
to any windows or doors or other exterior part of the Property (or be visible
from any public or common area) unless they are of such color, size and style
and in such places as shall be first approved in writing by Landlord. Landlord,
at tenant's sole cost and expense, shall install all letters or numerals by or
on doors in such tenant's leased premises which letters or numerals shall be in
building standard graphics. No nails, hooks or screws shall be driven or
inserted in any part of the Building outside the premises except by the Building
maintenance personnel nor shall any part of the Building be defaced by tenants.
No curtains or other window treatments shall be placed between the glass and the
building standard window treatments.
(4) Landlord shall provide and maintain an alphabetical directory board
for all tenants in the first floor (main lobby) of the Building and no other
directory shall be permitted unless previously consented to by Landlord in
writing.
(5) Two keys to the locks on the corridor doors entering each tenant's
leased premises shall be furnished by Landlord free of charge, with any
additional keys to be furnished by Landlord to each tenant, at tenant's cost.
Landlord shall provide all locks for other doors in each tenant's leased
premises, at the cost of such tenant, and no tenant shall place any additional
lock or locks on any door in or to its leased premises without Landlord's prior
written consent. All such keys shall remain the property of landlord. Each
tenant shall give to Landlord the explanation of the combination of all locks
for safe, safe cabinets and vault doors, if any, in such tenant's leased
premises.
(6) With respect to work being performed by tenants in any leased premises
with the approval of Landlord, all tenants will refer to all contractors,
contractors' representatives and installation technicians rendering any service
to them to Landlord for Landlord's supervision, approval and control before the
performance of any contractual services. This provision shall apply to all work
performed in the Building including, but not limited to, installation of
telephones, telegraph equipment, electrical devices and attachments, doors,
entranceways, and any and all installations of every nature affecting floors,
walls, woodwork, trim, windows, ceilings, equipment and any other physical
portion of the Building.
(7) Movement in or out of the Building of furniture or office equipment,
or dispatch or receipt by tenants of any bulky material, merchandise or
materials which requires use of elevators or stairways, or movement through the
Building entrances or lobby shall be restricted to such hours as Landlord shall
designate. All such movements shall be under the supervision of Landlord and in
the manner agreed between the tenants and Landlord by prearrangement before
performance. Such pre-arrangement initiated by a tenant will include
determination by Landlord, and subject to its decision and control, as to the
time, method, and routing of movement and as to the limitations for safety or
other concerns which may prohibit any article, equipment or any other item from
being brought into the Building. The tenants are to assume all risks as to the
damage to articles moved and injury to persons or public engaged or not engaged
in such movement, including equipment, property and personnel of Landlord if
damaged or injured as a result of acts in connection with carrying out this
service for a tenant from time of entering the property to completion of work:
and Landlord shall not be liable for acts of any person engaged in, or damage or
loss to any of said property or persons resulting from, any act in connection
with such service performed for a tenant.
(8) Landlord shall have the right to prescribe the weight and position of
safes and other heavy equipment or items, which shall in all cases, to
distribute wight, stand on supporting devices approved by Landlord. All damages
done to the Building by the installation or removal of any property of a tenant,
or done by a tenant's property while in the Building, shall
<PAGE>
be repaired at the expense of such tenant. Tenant shall bear all costs incurred
by Landlord or Tenant in determining the feasibility or actual installation of
any such heavy equipment.
(9) A tenant shall notify the Building manager when safes or other heavy
equipment are to be taken in or out of the Building and the moving shall be done
under the supervision o the Building manager after written permission from
Landlord. Persons employed to move such property must be acceptable to Landlord.
(10) Corridor doors, when not in use, shall be kept closed.
(11) Each tenant shall cooperate with Landlord's employees in keeping its
leased premises neat and clean.
(12) Landlord shall be in no way responsible to the tenants, their agents,
employees or invitees for any loss of property from the leased premises or
public areas for any damages to any property thereon from any cause whatsoever.
(13) To ensure orderly operation of the Building, no ice, mineral or other
water, towels, newspapers, etc. shall be delivered to any leased area except by
persons appointed or approved by Landlord in writing.
(14) Should a tenant require telegraphic, telephonic, annunciator or other
communication service, Landlord will direct the electrician where and how wires
are to be introduced and placed and none shall be introduced or placed except as
Landlord shall direct. Except as provided in each tenant's lease, electric
current shall not be used for heating or nonstandard power requirements without
Landlord's prior written permission.
(15) Tenant shall not make or permit and improper objectionable or
unpleasant noises or odors in the Building or otherwise interfere in any way
with other tenants or persons having business with them.
(16) Nothing shall be swept or thrown into the corridors, halls, elevator
shafts or stairways. No birds or animals shall be brought into or kept in, on
or about any tenant's leased premises.
(17) No machinery of any kind shall be operated by tenant on its leased
area without the prior written consent of Landlord, nor shall any tenant use or
keep in the Building any inflammable or explosive fluid or substance.
(18) no portion of any tenant's leased premises shall at any time be used
or occupied as sleeping or lodging quarters.
(19) Each tenant and its agents, employees and invitees shall park only in
those areas designated by Landlord for parking by such Tenant and shall not park
on any public or private streets contiguous to, surrounding or in the vicinity
of the Building without Landlord's prior written consent.
(20) Landlord will not be responsible for lot or stolen property, money or
jewelry from tenant's leased premises or public or common areas regardless of
whether such loss occurs when the area is locked against entry or not.
<PAGE>
EXHIBIT G
SPECIAL PROVISIONS
1. Upon the commencement of this Lease, the Lease between Board of the
State Teachers Retirement System of Ohio and Novellus Systems, Inc. dated August
31, 1993 shall be terminated effective on this Lease's Commencement Date, and
neither Party shall have any further rights, duties or obligations thereunder to
the other party for such Lease other than any and all obligations incurred up to
the Commencement Date of this Lease.
2. FIRST RIGHT OF REFUSAL. If, during the primary term of this Lease,
all or any part of the remaining space (the "First Refusal Space") on the NINTH
(9TH) floor of the Building consisting of approximately 8,422 square feet of Net
Rentable Area shall become available for lease and provided that no default or
event of default by or with respect to Tenant then exists hereunder, Tenant
shall have the first right and option to lease such additional space as such
additional space becomes available for lease by Landlord, subject, however, to
any extension, renewal and expansion options which may be contained in the lease
agreements between Landlord and other tenants then occupying such additional
space. When any such space becomes available for lease by Landlord, Landlord
shall first offer to lease such space to Tenant at the First Refusal Rate (as
hereinafter defined) and otherwise upon the same terms and conditions as would
then be offered by Landlord to unrelated third parties in an arm's-length
transaction, said offer to lease such additional space to Tenant to be made in
writing by Landlord when such additional spaces become available for lease. The
"First Refusal Rate" means the Adjusted Rental per square foot of NRA per annum
to be charged to Tenant for the First Refusal Space and shall equal the greater
of (a) the Adjusted Rental per square foot of NRA per annum which would then be
offered by Landlord to unrelated third parties in an arm's-length transaction or
(b) the same Adjusted Rental per square foot of NRA per annum which then and
thereafter applies to the Premises pursuant to this Lease during the remainder
of the term of this Lease and any renewal or extension thereof; provided,
however, that if the provisions of this subparagraph (b) apply, the term of the
lease for the First Refusal Space shall not extend beyond the remaining term of
this Lease and any renewal or extension hereof. If, within seven (7) days after
Landlord gives Tenant notice of the availability of the First Refusal Space,
Tenant does not notify Landlord that Tenant elects to exercise its right to
lease all of such space so offered on such terms and conditions, or if Tenant
fails to execute a lease on such terms and conditions for such space within
twenty (20) days thereafter, then Tenant's rights to lease the First Refusal
Space shall terminate and expire. Notwithstanding the foregoing, Tenant's right
to lease said space, may not be exercised at any time after Tenant, with or
without the consent of Landlord, (A) assigns all or any portion of this Lease or
(B) sublets more than twenty-five percent (25%) of the space located in the
Premises for any length of time subsequent to that date which is twelve (12)
months prior to when such additional space becomes available for lease, and
(iii) shall not inure to the benefit of any assigns or subtenants of Tenant,
whether or not any such assignee or subtenant has been approved by Landlord.
Nothing herein shall imply that Tenant may assign or sublet all or any portion
of this Lease or the Premises without the prior written consent of Landlord.
3. CANCELLATION OPTION. Tenant shall have the one time option to cancel
this Lease Agreement with an effective date of 07/01/98 by providing the
Landlord with notice of such exercise along with notice of Tenant's expansion
requirements on or before March 1, 1998 as long as the Landlord is unable to
provide "Adequate Expansion Space" within the building, hereby defined as the
amount of space in Tenants notice plus or minus 15%. Upon notification of
Tenants required expansion, the Landlord shall have 45 days to notify Tenant of
their ability to provide or not to provide Adequate Expansion Space, and an
additional 120 days to actually provide such space. If the Landlord is unable
to provide Adequate Expansion Space, and Tenant subsequently leases new office
space from a third party in Austin or the surrounding metropolitan area of at
least the amount of space called for in their notification plus the original
Lease Premises and provides evidence of such to Landlord, this Lease shall
terminate on the effective date 07/01/98.
<PAGE>
OFFICE RENTAL CONTRACT
Landlord: Suh Won Building Management Company
Tenant: Novellus Systems Korea Co., Ltd.
ARTICLE 1
Tenant is renting a part of 2nd floor (9,074 square feet) of the rental property
to use for an office space. The rental property is Suh Won Building and located
at 57 Garak-Dong Songpa-Gu, Seoul, Korea.
ARTICLE 2
Rental space is calculated including common space such as elevator, rest room,
corridor, stairs, etc.
ARTICLE 3
Rental period is from 2/1/95 to 1/31/97 (24 months).
ARTICLE 4
Rental period may be extended by the agreement between landlord and tenant.
ARTICLE 5
Payment plan for the security deposit is as follows:
At the time of contract 20,000,000 won
by 12/28/94 80,000,000 won
by 1/31/95 100,000,000 won
-----------
Total 200,000,000 won
-----------
-----------
No interest will be paid on the security deposit
ARTICLE 6
Security deposit will be refunded as soon as tenant clears leasehold improvement
and moves out.
ARTICLE 7
Monthly rental payment is 4,300,000 won and due by each month end.
ARTICLE 8
Building maintenance fee is 2,550,000 won per month and is due by each month
end. It includes general utilities and janitorial service (except for the
office furniture cleaning).
ARTICLE 9
Deleted
1
<PAGE>
ARTICLE 10
Parking fee is free for the employees of tenant and 6 parking spaces are
reserved for tenant.
ARTICLE 11
Additional utilities may be requested by tenant and cost incurred in relation to
this matter will be paid by tenant.
ARTICLE 12
Tenant may not use the office as a residence.
Tenant needs to notify landlord when working after 8 p.m. and on holidays.
ARTICLE 13
Landlord will have a security guard to protect the common area but it is
tenant's responsibility to safeguard tenant's assets unless landlord's
negligence is proved.
ARTICLE 14
Tenant is not supposed to do the activities which are harmful to the public and
to the rental property.
ARTICLE 15
Tenant should follow landlord's guideline to place its advertisement on the
rental property.
ARTICLE 16
The use of building facilities (e.g. elevators, etc.) will be limited on Sundays
and holidays.
ARTICLE 17
Tenant may improve the leased space with landlord's permission and the
improvement cost should be born by tenant.
ARTICLE 18
Tenant is prohibited to transfer the right of this contract to the third party
without landlord's permission.
ARTICLE 19
Landlord may terminate this contract when the following incidents are occurred:
[bullet] Tenant is delinquent of the rental payment and building maintenance
fee for at least two months.
[bullet] Tenant uses the security deposit as a collateral.
[bullet] Tenant is bankrupt.
2
<PAGE>
ARTICLE 20
This contract will be terminated if the rental period is not extended by the end
of the rental period.
ARTICLE 21
Tenant should clear all improvements at its own cost when the contract is
terminated and deliver the rented space to landlord at its original condition.
ARTICLE 22
Landlord may move tenant's property to an appropriate place if tenant would not
deliver the rented space upon termination of the contract.
ARTICLE 23
Landlord is not responsible for the loss of tenant or the third party by the act
of God or unless landlord's negligence is proved.
ARTICLE 24
In case of dispute, this contract will be interpreted in reference to the
governing law and the customs in Korea.
ARTICLE 25
Any law suit arising from this contract should be filed with Seoul District
Court and the appeal for the court decision is prohibited.
ARTICLE 26
Landlord may delegate its management rights and responsibilities to the third
party.
ARTICLE 27
Deleted
ARTICLE 28
This contract may not be registered with the court.
November 28, 1994
Seals of landlord and tenant are affixed, respectively.
3
<PAGE>
[BORLAND MONTGOMERIE KEYDEN - LETTERHEAD]
John Ellis, Esq
Novellus Systems Limited
7 Marine Drive
Barton on Sea
New Milton
Hants BH25 7EE
AB/NR 21st February 1995
Dear Mr Ellis
THE FORUM, CALLENDAR BUSINESS PARK, FALKIRK
I refer to your telephone call and now enclose page 10 of the Lease which
requires to be signed on behalf of your company to two Directors or one Director
and one Secretary.
I enclose schedule of Particulars of Signing for completion with the details of
signing and look forward to hearing from you on your return from America.
Kind Regards
Yours sincerely
/s/ Anne M. Blackstock
ANNE M. BLACKSTOCK
<PAGE>
DIRECTIONS FOR EXECUTING DOCUMENTS
BY
LIMITED COMPANIES
(UNDER THE LAW OF SCOTLAND)
PLEASE PRINT
COMPANY:-----------------------------------------------------------------------
DOCUMENT:----------------------------------------------------------------------
IMPORTANT NOTES TO BE READ BEFORE THE ACCOMPANYING DOCUMENT IS SIGNED.
The accompanying document requires to be signed on behalf of the company named
above. Please read through the document carefully before it is signed. If
there are any queries on the contents or alterations required, please contact
immediately the person who sent you the document.
The document must be signed on behalf of the company as follows:-
1) by two Directors; or
2) by a Director and the Secretary; or
3) by two persons authorised to sign on behalf of the company (authorised
signatories); or
4) by a Director and an authorised signatory; or
5) by the Secretary and an authorised signatory.
All signatories should sign their normal signature. A fountain pen or biro or
other pen with indelible ink should be used.
The document will consist of one or more pages and may have a schedule or
schedules and plan(s) attached. The document should be signed as follows:-
(a) at the end of the last page of text of the document (excluding attached
schedule(s) and plan(s), if any);
(b) at the end of each schedule, if any; and
(c) on each plan, if any.
Each page or plan to be signed will usually be marked with a pencil line and the
words Director' or 'Director/Secretary' written in pencil. If you are unsure
where to sign, then please contact immediately the person who sent you the
document.
Neither the company seal nor witnesses are required. Do not make any
alterations to the document. Do not fill in any blanks.
PLEASE COMPLETE THE SECTION OVERLEAF
<PAGE>
[NOVELLUS - LETTERHEAD]
Miss A. M. Blackstock 3rd February 1995
Borland Montgomerie Keyden
Apsley House
29 Wellington Street
Glasgow G2 6JA
Re: The Forum, Callendar Business Park, Falkirk
Dear Miss Blackstock,
Thank you for your letter dated 18th January 1995 concerning the engrossed Sub-
Lease for the Falkirk office.
I have signed the Sub-Lease as the only U.K. based director of Novellus Systems
Ltd. The other two directors are based in our worldwide headquarters in
California, U.S.A.
Please let me know if there are any problems with the completed documentation.
Yours sincerely,
/s/ John Ellis
John Ellis
Novellus Systems Ltd.
<PAGE>
INSTRUCTIONS FOR EXECUTION OF DEEDS BY COMPANIES
NOVELLUS SYSTEMS
------------------------------------------------------------ LIMITED
1 The Deed and the last page of any Plan, Schedule, Inventory or other
annexation should be signed by either:-
(i) Two Directors; or
(ii) A Director and the Company Secretary; or
(iii)Two persons authorised to sign on behalf of the Company.
2 The undernoted information should be entered in the spaces provided:-
Place where Deed Executed 7 MARINE DRIVE, BARTON-ON-SEA
--------------------------------------------
Date of Execution 2-2-95
--------------------------------------------
First Signatory /s/ John Ellis
(Name in Full) --------------------------------------------
Official Position DIRECTOR/SECRETARY
--------------------------------------------
Second Signatory
(Name in Full) --------------------------------------------
Official Position --------------------------------------------
3 If signed by two authorised signatories please give evidence (by way of
certified copy Power of Attorney, certified Excerpt of Board Minute etc) of
the authority of the authorised signatory to sign.
4 If it is proposed to execute the Deed otherwise than as
indicated above (eg by one Authorised Signatury under a
Power of Attorney) 2 witnesses will require to sign also but
only on the last page of the narrative of the Deed. They
should simply sign their names on the left opposite the other
signatures writing the word "Witness" after their signature.
Their full names, addresses and occupations should be added in
the spaces overleaf.
5 On completion please return the Deed and the completed Instructions to:
Mitchells Robertson
[George House]
<PAGE>
ARE FOR USE ONLY IF WITNESSES ARE REQUIRED:-
JOANNA COLLINGE /s/ Joanna Collinge
--------------------------------------------------
21 HIGH STREET LYMINGTON HANTS
--------------------------------------------------
BANK OFFICIAL
--------------------------------------------------
DEREK ELLIS /s/ Derek Ellis
--------------------------------------------------
16 GUIBAL ROAD, LEE, LONDON SE129CX
--------------------------------------------------
RETIRED
--------------------------------------------------
<PAGE>
SUB-LEASE
between
LEYLAND DAF FINANCE PLC incorporated under the Companies Acts and
having their Registered Office formerly at Kent House, Upper Mulgrave
Road, Cheam, Sutton, Surrey, SM2 7AY and now at Four Mulgrave
Chambers, 26/28 Mulgrave Road, Sutton, Surrey SM2 6LE, Registered
Number 1286313 (who and whose successors as tenants under the Lease
in their favour of the Premises aftermentioned are hereinafter
referred to as "the Mid-Landlord")
with the consent of
CENTRAL REGIONAL COUNCIL, incorporated under the Local Government
(Scotland) Act 1973, Viewforth, Stirling (who and whose successors are
hereinafter referred to as "the Landlord") OF THE ONE PART
and
NOVELLUS SYSTEMS LIMITED, incorporated under the Companies Acts and
having their registered office at 7 Marine Drive, New Milton, Hants
BH25 7EE, Registered Number 2223831 (who and whose successors in the
right of occupancy under this Sub-Lease and their permitted assignees
and sub-under-tenants and in the case of an individual his executors
and representatives are hereinafter referred to as "the Sub-Tenant")
OF THE OTHER PART
In this Sub-Lease unless there is something in the subject or context
inconsistent therewith:
1. "Date of Expiry" means the date of expiry or sooner termination of the Sub-
Lease (however the same may be determined).
<PAGE>
-3-
SECOND The Mid-Landlord hereby sub-lets to the Sub-Tenant (but
PERIOD OF THE excluding assignees and Sub-Under-Tenants legal or
SUB-LEASE voluntary and creditors and managers for creditors in any
form except where permitted under the Sub-Lease) the
Premises subject to the same provisos, conditions and
disclaimers in favour of the Mid-Landlord and where
applicable the Landlord as are contained in the Lease
and that for the period from the Second day of December
Nineteen hundred and Ninety four ("the Date of Entry") until
the First day of December Nineteen hundred and Ninety nine
and the Sub-Tenant accepts the Premises in their present
condition; Declaring, however, that either party shall be
entitled to terminate this Sub-Lease on the third
anniversary of the Date of Entry by giving written notice to
that effect to the other party not less than six months
before the said third anniversary.
THIRD The Sub-Tenant hereby undertakes:
SUB-TENANT'S
MONETARY
OBLIGATIONS
RENT 1. To pay to the Mid-Landlord the yearly rent of FIFTEEN
THOUSAND ONE HUNDRED AND TWENTY FIVE POUNDS (L15,125)
STERLING or from each Date of Review the corresponding
Revised Rent and if the Mid-Landlord has so opted or opts
or if otherwise payable by law, Value Added Tax thereon at
the standard rate (or if at any time in the future the
standard rate shall no longer apply to rents, such rate as
shall then be applicable) by equal quarterly payments in
advance at the terms of Candlemas, (28th February)
Whitsunday (28th May Lammas (28th August) and Martinmas
(28th November) clear of all deductions whatsoever the first
of such payments to be made on the Date of Entry for the
period from the Date of Entry until the term day immediately
succeeding the Date of Entry calculated on a daily basis and
so forth quarterly, termly and proportionally thereafter
during the currency of the Sub-Lease such rent or Revised
Rent to be paid without any written demand and if the
Mid-Landlord so requires by Banker's Order; Under
declaration that the Sub-Tenant is hereby granted a twenty
five per centum (25%) reduction in the rent payable in
respect of the first six months of the Sub-Lease after the
said Date of Entry.
<PAGE>
-4-
REIMBURSEMENT 2. To reimburse to the Mid-Landlord on demand all payments made
by way of reimbursement or otherwise by the Mid-Landlord to
the Landlord under the Lease with the exception of:-
(i) the rent and the Revised Rent provided for in the Lease
and
(ii) interest on and any expenses incurred by the Landlord
in procuring payment of any sum of money payable or
reimburseable to the Landlord under the Lease which
shall have become due but remain unpaid by the Mid-
Landlord.
RATES & OTHER 3. To pay when due (or reimburse the Mid-Landlord on demand any
CHARGES sum paid by the Mid-Landlord for) the rates, taxes, duties,
charges, assessments, impositions and outgoings for the
payment of which the Mid-Landlord is responsible in terms
of the Lease other than taxes arising on the rent payable
under the Sub-Lease or taxes arising on the disposal or
deemed disposal by the Mid-Landlord of or other dealing by
the Mid-Landlord with its interest in the Premises.
4. To reimburse the Mid-Landlord on demand all sums which the
Mid-Landlord may from time to time pay for insuring and
keeping insured the Premises for the loss of rent.
INTEREST ON 5. To pay on demand to the Mid-Landlord, without prejudice to
PAYMENTS any other right, remedy or power available to the Mid-
IN ARREARS Landlord, interest at the Prescribed Rate on any rent or any
other sum of money payable or reimburseable to the Mid-
Landlord under the Sub-Lease which shall have become due but
remain unpaid for fourteen days, such interest to run (as
well after as before any judgement) from the date when the
same shall become due until payment thereof.
FOURTH The Sub-Tenant also undertakes:
SUB-TENANTS
FURTHER
OBLIGATIONS
FULFILMENT 1. To fulfill the obligations of a non monetary nature
OF undertaken by the Mid-Landlord under the Lease.
MID-LANDLORD'S
OBLIGATIONS
<PAGE>
-5-
ENTRY TO 2. In any case where the Landlord has reserved a right of entry
PREMISES to the Premises under the Lease, to permit such right to be
exercised by the Landlord and/or the Mid-Landlord subject to
any condition in the Lease.
EXPENSES 3. To reimburse the Mid-Landlord all expenses incurred by the
Mid-Landlord:
a) Incidental to the preparation and service of all notices and
schedules relating to deficiencies in repair or requiring
the Sub-Tenant to remedy the breach of any of its
obligations under the Sub-Lease whether the same be served
before or after the Date of Expiry but which relate to the
period of this Sub-Lease.
b) In the preparation and service of a schedule of
dilapidations before or after the Date of Expiry which
relates to the period of this Sub-Lease.
c) In procuring the remedy of any breach of any obligation or
the payment of arrears due by the Sub-Tenant under the Sub-
Lease.
APPLICATION 4. Upon making an application for any consent or approval which
FOR CONSENT is required under the Sub-Lease to disclose to the
OR APPROVAL Mid-Landlord such information as the Mid-Landlord may
require and pay the Mid-Landlord's properly incurred
expenses in connection with such application (including
applications where consent or approval is refused or an
application is withdrawn).
ALIENATION 5. Not at any time to assign, sub-under-let or otherwise
dispose of or for any purpose or in any way deal with the
Sub-Tenant's interest in or part with or share possession or
occupation of part only of the Premises.
6. Not at any time to sub-under-let the Premises as a whole.
7. Not at any time to assign or otherwise dispose of or for any
purpose or in any way deal with the Sub-Tenant's interest in
or part with or share possession or occupation of the whole
of the Premises without the consent of the Landlord and the
Mid-Landlord.
<PAGE>
-6-
FIFTH The Mid-Landlord hereby undertakes provided that the Sub-
MID-LANDLORDS' Tenant indemnifies the Mid-Landlord against any costs
OBLIGATIONS incurred by or awarded against the Mid-Landlord in the
course of its fulfilment of such undertaking:
1. On the request of the Sub-Tenant unless such request is
demonstrably unreasonable having regard to the Mid-
Landlord's interest in the Premises to adopt any procedure
designed to enforce the fulfilment of the obligations
undertaken by the Landlord under the Lease;
2. In relation to Rent Review:--
(i) Not without the approval of the Sub-Tenant (such
approval not to be unreasonably withheld having regard
to the Mid-Landlord's interest in the Premises) to
agree with the Landlord on the Revised Rent nor on the
Surveyor to be nominated for the purposes of
determination of the Revised Rent and
(ii) If so required by the Sub-Tenant to request the
nomination by the Chairman for the time being of the
Scottish Branch of the Royal Institution of Chartered
Surveyors of a Surveyor for the purpose of such
determination; and
3. To keep in force insurance against loss of rent for three
years in an amount which would take into account potential
increases of rent in accordance with the rent review
provisions contained in the Lease and the Sub-Lease.
SIXTH The same rights and remedies as are available to the
MID-LANDLORD'S Landlord against the Tenant under the Lease shall be
REMEDIES available to the Mid-Landlord against the Sub-Tenant under
the Sub-Lease and shall be subject to the same conditions.
SEVENTH If the Premises shall at any time during the period of the
SUSPENSION OF Sub-Lease be so damaged or destroyed by reason of any of the
RENT risks against which insurance is effected in terms of the
Lease as to render the Premises unfit for occupation or use
in whole or in part in accordance with the terms and
provisions of the Sub-Lease then the Sub-Lease shall not
come to an end and if the insurance policy or policies
effected under the Lease shall not have been rendered void
or payment of the
<PAGE>
-7-
policy monies refused in whole or in part in consequence of
any act or default of the Sub-Tenant its servants or agents
the rent payable hereunder or (where part only of the
Premises has been destroyed or rendered incapable of use) a
fair proportion thereof shall be suspended until the
Premises or such part thereof have been restored to
substantially the same condition prevailing prior to such
destruction or damage and are reasonably capable of use in
accordance with the provisions hereof or until the Loss of
Rent insurance shall be exhausted, if earlier: Provided that
if at the expiry of one year from the date of such damage or
destruction, the Premises or such part thereof are still not
fit for occupation or use as aforesaid either party shall be
entitled, upon giving three month's notice to the other
party at any time after the expiry of the said one year
period, to terminate the Sub-Lease and thereupon the rights
and obligations of the parties shall cease and have no
effect but without prejudice to any antecedent right or
claim arising hereunder.
EIGHTH
IRRITANCY Subject to Sections 4 to 7 of the Law Reform (Miscellaneous
Provisions) (Scotland) Act 1985, if at any time during the
Period of the Sub-Lease:--
(a) the rents payable under the Sub-Lease or the Revised
Rent (or any of them or any part thereof) shall be in
arrear and unpaid for fourteen days after becoming
payable (whether legally demanded or not), or
(b) there shall be any material breach, non-performance or
non-observance by the Sub-Tenant of any of the
obligations and conditions contained in the Sub-Lease;
or
(c) the Sub-Tenant passes a resolution to wind-up, enter
into liquidation or insolvency whether compulsory or
voluntary (save for the purpose of amalgamation or
reconstruction of a solvent company) or has a Receiver
or Administrator appointed of its undertaking or enters
into an arrangement or composition for the benefit of
its creditors, or suffers any diligence to be done or
execution to be levied on its
<PAGE>
-8-
goods or being a firm shall be sequestrated; the Mid-
Landlord shall be entitled forthwith to terminate this Sub-
Lease and treat this Sub-Lease and all transmissions thereof
with all that has followed or can competently follow thereon
as void and null and that without the necessity of any
declarator, process of removal, or other procedure at law
and the Premises shall thereupon revert to the Mid-Landlord.
In such event it shall be lawful for the Mid-Landlord or
any person or persons duly authorised by the Mid-
Landlord on their behalf to enter upon the possession of the
Premises or any part thereof in name of the whole and to
eject the Sub-Tenant and occupiers and thereafter use,
possess and enjoy the same free of all claims by the Sub-
Tenant as if this Sub-Lease had never been granted without
prejudice to any right of action or remedy of the Mid-
Landlord in respect of the premature termination of the Sub-
Lease or of any antecedent breach by the Sub-Tenant of any
of the conditions contained in the Sub-Lease which irritancy
is hereby declared to be pactional and not penal and shall
not be purgeable at the bar; Provided that (ONE) in the case
of a breach which is capable of being remedied the Mid-
Landlord shall not be entitled to terminate this Sub-Lease
as aforesaid unless it shall first have given notice of the
breach to the Sub-Tenant prescribing a time which in the
opinion of the Mid-Landlord is reasonable in the
circumstances (such circumstances not including the
financial position of the Sub-Tenant) within which such
breach must be remedied and the Sub-Tenant shall have
failed to remedy the breach within the time prescribed in
the notice and declaring that where the breach is the
failure to pay any sum of money, a reasonable time shall be
a period of not less than fourteen days; (TWO) in the case
of the Sub-Tenant going into liquidation (other than for
reconstruction or amalgamation as aforesaid) or in the case
of a Receiver or Administrator being appointed the Mid-
Landlord shall not exercise such right of forfeiture on the
ground of liquidation or insolvency or appointment of a
Receiver or Administrator unless and
<PAGE>
-9-
until they have allowed the Liquidator, Receiver or
Administrator or interim or permanent trustee (as the case
may be) a period of six months in which to dispose of the
Sub-Tenant's interest in this Sub-Lease and shall only be
entitled to terminate this Sub-Lease if the Liquidator,
Receiver, Administrator or interim or permanent trustee as
the case may be shall have failed to dispose of the Sub-
Tenant's said interest at the end of said period provided
always that the Liquidator, Receiver or Administrator or
interim or permanent trustee shall accept and implement in
writing within twenty one days of the date of liquidation or
receivership or appointment of an interim or permanent
trustee as the case may be personal responsibility for
payment of the rent for the Premises and performance of all
the Sub-Tenant's obligations under this Sub-Lease whether
arising before or after the date of liquidation or
receivership or appointment of an interim or permanent
trustee as the case may be to the expiry of the said period
or, if earlier, the date of entry under the disposal of the
Sub-Tenant's interest in this Sub-Lease and it is hereby
expressly declared that the Mid-Landlord shall deal with any
request to consent to assign this Sub-Lease made by such
Liquidator, Receiver, Administrator or interim or permanent
trustee as the case may be in the same manner as if such
requests had been made by the Sub-Tenant.
NINTH
VALUE
ADDED TAX 1. Where there is a provision under the Sub-Lease for the Sub-
Tenant to pay any fees, costs, charges, commission,
remunerations, expenses or outlays the Sub-Tenant shall also
be responsible for payment of any Value Added Tax thereon
together with interest thereon from the date of the demand
(or, in the case of rent), from the date when same falls
due) until paid by the Sub-Tenant.
2. Without prejudice to the foregoing sub-paragraph, in the
event that Value Added Tax shall be chargeable on the Mid-
Landlord in respect of any supplies as defined in the Value
Added Tax Act 1983 (or any statutory modification or
<PAGE>
-10-
Sub-Tenant the Sub-Tenant shall in addition to any amounts
otherwise payable, pay to the Mid-Landlord the amount of the
Value Added Tax so chargeable.
3. Any rents and other sums payable under the Sub-Lease shall
(notwithstanding any present or future statutory provision
to the contrary) be exclusive of any Value Added Tax
chargeable thereon (whether or not chargeable as the result
of any change in the law and whether or not chargeable as
the result of the exercise by the Mid-Landlord the Sub-
Tenant or the Mid-Landlord and the Sub-Tenant jointly of any
option in respect of the charging of Value Added Tax).
TENTH
NOTICES The provisions for notices contained in the Lease shall apply
also under the Sub-Lease as if "the Mid-Landlord" had been
substituted for "the Landlords" and "the Sub-Tenant" had been
substituted for "the Tenants".
ELEVENTH
CONSENT TO
REGISTRATION The parties consent to registration hereof for preservation and
execution: IN WITNESS WHEREOF
<PAGE>
SUB-LEASE
between
LEYLAND DAF FINANCE PLC
and
NOVELLUS SYSTEMS LIMITED
with consent of
CENTRAL REGIONAL COUNCIL
-------------------------------
SUBJECTS Upper Ground Floor
(East Wing)
The Forum
Callendar Business park
Falkirk
--------------------------------------------------------------------
MITCHELLS ROBERTON
SOLICITORS
GEORGE HOUSE
36 NORTH HANOVER STREET
GLASGOW G1 2AD
AB/DBR FAS 5026 RE BOX 77
LEY001.LSE
<PAGE>
COMMERCIAL
LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into as of the date set forth below
between Faison & Associates, Inc. d/b/a Southland Management Company, not
individually, but solely as Management and Leasing Broker for PLAZA CENTRAL I (a
---------------
registered fictitious name), hereinafter referred to as "Lessor" and NOVELLUS
--------
SYSTEMS, INC., hereafter referred to as "Lessee":
- --------------
W I T N E S S E T H:
1. LEASED PREMISES: In consideration of the rents, terms, provisions and
covenants of this Lease, Lessor hereby leases, lets and demises to Lessee the
following described premises (referred to as "leased premises" and containing
approximately 1,720 square feet) situated at PLAZA CENTRAL I, (sometimes
---------------
referred to as "the building" or "the project"):
6220 S. Orange Blossom Trail
Suite 186
Orlando, Florida 32809
(See Exhibit "A" (floor plan)
attached hereto and made a part
hereof.)
2. TERM: Subject to and upon the conditions set forth below, the term of
this Lease shall commence on (FEBRUARY 1, 1996, the "commencement date"), and
------------------
shall terminate THIRTY-SIX (36) months thereafter.
---------------
3. RENT: (a) Lessee agrees to pay monthly as base rental during the term
of this Lease the sum of ONE THOUSAND SEVEN HUNDRED TWENTY & 00/100 DOLLARS
---------------------------------------------------
($1,720.00), which amount shall be payable to Lessor at the address shown below
- -----------
on the first day of the month. One monthly installment of rent shall be due and
payable on the date of execution of this Lease by Lessee for the first month's
rent and a like monthly installment shall be due and payable on or before the
first day of each calendar month succeeding the "commencement date" during the
demised term; provided, that if the "commencement date" should be a date other
than the first day of a calendar month, the monthly rental set forth above shall
be prorated to the end of that calendar month, and all succeeding installments
of rent shall be payable on or before the first day of each succeeding calendar
month during the demised term. Lessee shall pay, as additional rental, all
other sums due under this Lease.
(b) On the date of execution of this Lease by Lessee, there shall be
due and payable by Lessee a security deposit in an amount equal to one monthly
rental installment to be held for the performance by Lessee of Lessee's
covenants and obligations under this lease, it being expressly understood that
the deposit shall not be considered an advance payment of rental or a measure of
Lessor's damage in case of default by Lessee. Upon the occurrence of any event
of default by Lessee or breach by Lessee of Lessee's covenants under this Lease,
Lessor may, from time to time, without prejudice to any other remedy, use the
security deposit to the extent necessary to make good any arrears of rent and/or
any damage, injury, expense or liability caused to Lessor by the event of
default or breach of covenant, any remaining balance of the security deposit to
be returned by Lessor to Lessee upon termination of this Lease.
(c) If any increase in the fire insurance premiums paid by Lessor
for the building in which Lessee occupies space is caused by Lessee's use and
occupancy of the leased premises, or if Lessee vacates the leased premises
and causes an increase in such premiums, then Lessee shall pay as additional
rental the amount of such increase to Lessor.
(d) Other remedies for nonpayment of rent notwithstanding, if the
monthly rental payment is not received by Lessor on or before the tenth day of
the month for which rent is due, or if any other payment due Lessor by Lessee is
not received by Lessor on or before the tenth day of the month next following
the month in which Lessee was invoiced, a service charge of five per cent (5%)
of such past due amount shall become due and payable in addition to such amounts
owed under this Lease.
-1-
<PAGE>
See Addendum
4. SIGNS: (a) If the leased premises are within a multi-story
building, Lessor will furnish and install a suitable building directory and
establish suite numbers to facilitate locating and identifying Lessee's
premises. In order to effect uniformity, to control the graphics, and to
maintain dignified aesthetics, Lessor will also furnish and install at the
entrance door to Lessee's premises a uniform suite number plate and a name
plate. Signs, name plates or graphics which are wholly within the leased
premises and not visible from the exterior of the building or from public
spaces within the building will be permitted.
(b) If the leased premises are within a single-story building which
has integral exterior sign pylons or sign plaques, Lessee shall have the right
to install letters upon a sign plaque provided by Lessor or upon the sign pylon
adjacent to the leased premises, if space is available. The letters, numerals,
emblems, trademarks, insignia and other designs shall be of non-illuminated
plastic, porcelain enamel or aluminum and shall be individual cut-out letters
using the surface of the pylon or sign plaque as background and shall be subject
to approval of Lessor for the purpose of maintaining architectural continuity
and quality of design. If Lessee has not installed a sign in accordance with
the provisions of this paragraph within ninety (90) days following the
commencement date of this Lease, Lessee's right to install a sign shall
terminate.
(c) If the leased premises are within a single story building with or
without integral exterior sign pylons, Lessee shall have the right to place
lettering upon the entrance doors, plate glass windows or sign plaques of the
leased premises; provided, however, that the lettering shall not exceed six
inches in height and shall be subject to the approval of Lessor. If the leased
premises open off of a public corridor or lobby, Lessor will furnish and install
a uniform number plate and name plate for Lessee for installation at the
corridor door, and Lessor will furnish and install a suitable building directory
to facilitate locating and identifying Lessee's premises.
(d) Lessee agrees that no other sign (mobile or stationary) of any
description shall be erected, placed or painted in or about the leased premises.
Lessee shall, at Lessee's expense, remove all signs at the termination of this
Lease, and the installation and removal shall be in such manner as to avoid
injury, defacement or overloading of the building or other improvements.
5. USAGE AND INSURANCE: Lessee warrants and represents to Lessor that the
leased premises shall be used and occupied only for the purpose of general
office use. Lessee shall occupy the leased premises, conduct its business and
control its agents, employees, invitees and visitors in such a manner as is
lawful, reputable and will not create any nuisance or otherwise interfere with,
annoy or disturb any other tenant in its normal business operations or Lessor in
its management of the building. Lessee shall not commit, or suffer to be
committed, any waste on the leased premises, nor shall Lessee permit the leased
premises to be used in any way which would, in the opinion of the Lessor, be
extra hazardous on account of fire or otherwise which would in any way increase
or render void the fire insurance on the leased premises or contents of the
building.
6. JANITORIAL SERVICE: Lessor shall furnish janitorial services during
the term of this Lease. The janitorial services shall be provided five times
per week during the term of this Lease.
7. BUILDING SERVICES: (a) Lessor shall furnish gas, water and
electricity for Lessee during the term of this Lease. Lessee shall pay all
telephone charges. Lessor shall furnish Lessee hot and cold water at those
points of supply provided for general use of other tenants in the building,
central heating and air conditioning in season (at times Lessor normally
furnishes these services to other tenants in the building, and at temperatures
and in amounts as are considered by Lessor to be standard or in compliance with
any governmental regulations, such service on Saturday afternoons, Sundays and
holidays to be furnished only upon the request of Lessee, who shall bear the
entire cost). Lessor shall also furnish routine maintenance, painting and
electrical lighting service for all public areas and special service areas of
the building in the manner and to the extent deemed by Lessor to be standard.
Lessor shall not bear the utility costs (including meter installation and air
conditioning costs) occasioned by electrodata processing machines, computers and
similar machines of high electrical consumption. Failure by Lessor to any
extent to furnish these defined services, or any cessation thereof, resulting
from causes beyond the control of Lessor shall neither render Lessor liable in
any respect for damages to either person or property, be construed as an
eviction of Lessee, work an abatement of rent nor relieve Lessee from
fulfillment of any covenant in this Lease. Should any of the equipment or
machinery break down, or for any cause cease to function properly, Lessor shall
use reasonable diligence to repair the same promptly, but Lessee shall have no
claim for rebate on account of any interruption in service occasioned from the
repairs.
(b) Lessor shall furnish and install window coverings on all exterior
windows to maintain a uniform exterior appearance. Lessee shall not remove or
replace these window coverings or install any other window covering which would
affect the exterior appearance of the building. Lessee may install lined or
unlined over draperies on the interior sides of the Lessor furnished draperies,
for interior appearance, or to reduce light transmission, provided such over
draperies do not affect the exterior appearance of the building.
-2-
<PAGE>
8. RELOCATION: In the event Lessor determines to utilize the leased
premises for other purposes during the term of this Lease, Lessee agrees to
relocate to other space in the building and/or project designated by Lessor,
provided such other space is of equal or larger size than the leased premises
and has at least the same number of windows. Lessor shall pay all out-
of-pocket expenses of any such relocation, including the expenses of moving and
reconstruction of all Lessee furnished and Lessor furnished improvements. In
the event of such relocation, this Lease shall continue in full force and effect
without any change in the terms and other conditions, but with the new location
substituted for the old location set forth in paragraph 1 of this Lease.
9. REPAIRS AND MAINTENANCE: (a) Unless otherwise expressly provided,
Lessor shall not be required to make any improvements, replacements or repairs
of any kind or character to the leased premises during the term of this Lease,
except repairs to walls, doors, corridors, windows and other structures and
equipment within and serving the leased premises, and additional maintenance as
may be necessary because of damage by persons other than Lessee, its agents,
employees, invitees, licensees or visitors, and as may be necessary solely
because of the negligence of Lessor, which repairs shall be made by Lessor at
its expense beginning not more than fifteen (15) days after written notice by
Lessee. Lessor's cost of maintaining the items set forth in this subparagraph
are subject to the additional rental provisions in paragraph 3. Lessor shall
not be liable to Lessee, except as expressly provided in this Lease, for any
damage or inconvenience, and Lessee shall not be entitled to any abatement or
reduction of rent by reason of any repairs, alterations or additions made by
Lessor under this Lease.
(b) Lessee shall, at its own cost and expense, repair or replace any
damage or injury to all or any part of the leased premises caused by Lessee or
Lessee's agents, employees, invitees, licensees or visitors; provided, however,
if Lessee fails to make the repairs or replacements promptly, Lessor may, at its
option, make the repairs or replacements and the costs of such repairs or
replacements shall be charged to Lessee as additional rental and shall become
payable by Lessee with the payment of the rental next due hereunder.
(c) Lessee shall not allow any damage to be committed on any portion
of the leased premises, and at the termination of this Lease, by lapse of time
or otherwise, Lessee shall deliver the leased premises to Lessor in as good
condition as existed at the commencement date or completion date of this Lease,
ordinary wear and tear excepted. The cost and expense of any repairs necessary
to restore the condition of the leased premises shall be borne by Lessee, and if
Lessor undertakes to restore the leased premises it shall have a right of
reimbursement against Lessee.
(d) All requests for repairs or maintenance that are the
responsibility of Lessor pursuant to any provision of this Lease must be made in
writing to Lessor at the address set forth below.
10. COMPLIANCE WITH LAWS, RULES AND REGULATIONS: Lessee, at Lessee's
expense, shall comply with all laws, ordinances, orders, rules and regulations
of state, federal, municipal or other agencies or bodies having jurisdiction
relating to the use, condition and occupancy of the leased premises. Lessee
will comply with the rules of the building adopted by Lessor which are set forth
on a schedule attached to this Lease. Lessor shall have the right at all times
to change the rules and regulations of the building or to amend them in any
reasonable manner as may be deemed advisable for the safety, care and
cleanliness, and for the preservation of good order, of the leased premises.
All changes and amendments in the rules and regulations of the building will be
sent by Lessor to Lessee in writing and shall thereafter be carried out and
observed by Lessee.
11. LESSOR IMPROVEMENTS: If construction to the leased premises is to be
performed by Lessor prior to Lessee's occupancy, Lessor will, at its expense,
commence and/or complete the construction of the improvements constituting the
leased premises, including partitions, in accordance with the floor plan and its
specifications agreed to by the parties and made a part of this Lease by
reference. The plans and specifications shall be approved and signed by the
parties prior to the commencement of construction. Any changes or modifications
to the approved plans and specifications shall be made and accepted by written
change order signed by Lessor and Lessee and shall constitute an amendment to
this Lease. Upon completion of the building and other improvements in
accordance with the plans and specifications, Lessee agrees to execute and
deliver to Lessor a letter accepting delivery of the leased premises.
12. ALTERATIONS AND IMPROVEMENTS: Lessee shall not make or allow to be
made any alterations or physical additions in or to the leased premises without
first obtaining the written consent of Lessor. Any alterations, physical
additions or improvements to the leased premises made by Lessee shall at once
become the property of Lessor and shall be surrendered to Lessor upon the
termination of this Lease. Lessor, at its option, may require Lessee to remove
any physical additions and/or repair any alterations in order to restore the
leased premises to the condition existing at the time Lessee took possession,
all costs of removal and/or alterations to be borne by Lessee. This clause
shall not apply to moveable equipment or furniture owned by Lessee which may be
removed by Lessee at the end of the term of this Lease if Lessee is not then in
default and if such equipment and furniture is not then subject to any other
rights, liens and interests of Lessor.
13. CONDEMNATION: (a) If, during the term (or any extension or renewal)
of this Lease, all or a substantial part of the leased premises are taken for
any public or quasi-public use under any governmental law, ordinance or
regulation, or by right of eminent domain or by purchase in lieu thereof, and
the taking would prevent or materially interfere with the use of the leased
premises for the purpose for which they are then being used, this Lease shall
terminate and the rent shall be abated during the unexpired portion of this
Lease effective on the date physical possession is taken by the condemning
authority. Lessee shall have no claim to the condemnation award.
(b) In the event a portion of the leased premises shall be taken for
any public or quasi-public use under any governmental law, ordinance or
regulation, or by right of eminent domain or by purchase in lieu thereof, and
this Lease is not terminated as provided in subparagraph (a) above, Lessor may,
at Lessor's sole risk and expense, restore and reconstruct the building and
other improvements on the leased premises to the extent necessary to make it
reasonably tenable. The rent payable under this Lease during the unexpired
portion of the term shall be adjusted to such an extent as may be fair and
reasonable under the circumstances. Lessee shall have no claim to the
condemnation award.
14. FIRE AND CASUALTY: (a) If the leased premises should be totally
destroyed by fire or other casualty, or if the leased premises should be so
damaged so that rebuilding cannot reasonably be completed within ninety (90)
working days after the date of written notification by Lessee to Lessor of the
destruction, this Lease shall terminate and the rent shall be abated for the
unexpired portion of the Lease, effective as of the date of the written
notification.
(b) If the leased premises should be partially damaged by fire or
other casualty, and rebuilding or repairs can reasonably be completed within
ninety (90) working days from the date of written notification by Lessee to
Lessor of the destruction, this Lease shall not terminate, but Lessor may at its
sole risk and expense proceed with reasonable diligence to rebuild or repair the
building or other improvements to substantially the same condition in which they
existed prior to the damage. If the leased premises are to be rebuilt or
repaired and are untenantable in whole or in part following the damage, and the
damage or destruction was not caused or contributed to by act or negligence of
Lessee, its agents, employees, invitees or those for whom Lessee is responsible,
the rent payable under this Lease during the period for which the leased
premises are untenantable shall be adjusted to such an extent as may be fair and
reasonable under the circumstances. In the event that Lessor fails to complete
the necessary repairs or rebuilding within ninety (90) working days from the
date of written notification by Lessee to Lessor of the destruction, Lessee may
at its option terminate this Lease by delivering written notice of termination
to Lessor, whereupon all rights and obligations under this Lease shall cease to
exist.
15. PROPERTY INSURANCE: Lessor shall at all times during the term of this
Lease maintain a policy or policies of insurance with the premiums paid in
advance, issued by and binding upon some solvent insurance company, insuring the
building against all risk of direct physical loss in an amount equal to ninety
percent (90%) of the full replacement cost of the building structure and its
improvements as of the date of the loss; provided, that Lessor shall not be
obligated in any way or manner to insure any personal property (including, but
not limited to, any furniture, machinery, goods or supplies) of Lessee or which
Lessee may have upon or within the leased premises or any fixtures installed by
or paid for by Lessee upon or within the leased premises or any additional
improvements which Lessee may construct on the leased premises. Lessee shall
provide to Lessor a Certificate of Insurance as proof of coverage.
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16. WAIVER OF SUBROGATION: Anything in this Lease to the contrary
notwithstanding, Lessor and Lessee hereby waive and release each other of and
from any and all rights of recovery, claim, action or cause of action, against
each other, their agents, officers and employees, for any loss or damage that
may occur to the leased premises, improvements to the building of which the
leased premises are a part, or personal property (building contents) within the
building, by reason of fire or the elements regardless of cause or origin,
including negligence of Lessor or Lessee and their agents, officers and
employees. Because this paragraph 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 Lease agrees immediately to give to each
insurance company which has issued to it policies of insurance covering all risk
of direct physical loss, written notice of the terms of the mutual waivers
contained in this paragraph, 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 paragraph.
17. HOLD HARMLESS: Lessor shall not be liable to Lessee's employees,
agents, invitees, licensees or visitors, or to any other person, for any injury
to person or damage to property on or about the leased premises caused by the
negligence or misconduct of Lessee, its agents, servants or employees, or of any
other person entering upon the leased premises under express or implied
invitation by Lessee, or caused by the building and improvements located on the
leased premises becoming out of repair, or caused by leakage of gas, oil, water
or steam or by electricity emanating from the leased premises. Lessee agrees to
indemnify and hold harmless Lessor of and from any loss, attorney's fees,
expenses or claims arising out of any such damage or injury.
18. QUIET ENJOYMENT: Lessor warrants that it has full right to execute
and to perform this Lease and to grant the estate demised and that Lessee, upon
payment of the required rents and performing the terms, conditions, covenants
and agreements contained in this Lease, shall peaceably and quietly have, hold
and enjoy the leased premises during the full term of this Lease as well as any
extension or renewal thereof. Lessor shall not be responsible for the acts or
omissions of any other lessee or third party that may interfere with Lessee's
use and enjoyment of the leased premises.
19. LESSOR'S RIGHT OF ENTRY: Lessor shall have the right, at all
reasonable hours, to enter the leased premises for the following reasons:
inspection; cleaning or making repairs; making alterations or additions as
Lessor may deem necessary or desirable; determining Lessee's use of the leased
premises, or determining if an act of default under this Lease has occurred.
20. ASSIGNMENT OR SUBLEASE: Lessor shall have the right to transfer and
assign, in whole or in part, its rights and obligations in the building and
property that are the subject of this Lease. Lessee shall not assign this Lease
or sublet all or any part of the leased premises without the prior written
consent of Lessor. Lessor shall have the option, upon receipt from Lessee of
written request for Lessor's consent to subletting or assignment, to cancel this
Lease as of the date the requested subletting or assignment is to be effective.
The option shall be exercised, if at all, within fifteen (15) days following
Lessor's receipt of such written request by delivery to Lessee of written notice
of Lessor's intention to exercise the option. In the event of any assignment or
subletting, Lessee shall nevertheless at all times remain fully responsible and
liable for the payment of the rent and for compliance with all of its other
obligations under the terms, provisions and covenants of this Lease. Upon the
occurrence of an "event of default" as defined below, if all or any part of the
leased premises are then assigned or sublet, Lessor, in addition to any other
remedies provided by this Lease or provided by law, may, at its option, collect
directly from the assignee or subtenant all rents becoming due to Lessee by
reason of the assignment or sublease, and Lessor shall have a security interest
in all properties on the leased premises to secure payment of such sums. Any
collection directly by Lessor from the assignee or subtenant shall not be
construed to constitute a novation or a release of Lessee from the further
performance of its obligations under this Lease.
21. LANDLORD'S LIEN: As security for payment of rent, damages and all
other payments required to be made by this Lease, Lessee hereby grants to Lessor
a lien upon all property of Lessee now or subsequently located upon the leased
premises. If Lessee abandons or vacates any substantial portion of the leased
premises or is in default in the payment of any rentals, damages or other
payments required to be made by this Lease or is in default of any other
provision of this Lease, Lessor may enter upon the leased premises, by picking
or changing locks if necessary, and take possession of all or any part of the
personal property, and may sell all or any part of the personal property at a
public or private sale, in one or successive sales, with or without notice, to
the highest bidder for cash, and, on behalf of Lessee, sell and convey all or
part of the personal property to the highest bidder, delivering to the highest
bidder all of Lessee's title and interest in the personal property sold to him.
The proceeds of the sale of the personal property shall be applied by Lessor
toward the reasonable costs and expenses of the sale, including attorney's fees,
and then toward the payment of all sums then due by Lessee to Lessor under the
terms of this Lease; any excess remaining shall be paid to Lessee or any other
person entitled thereto by law.
22. UNIFORM COMMERCIAL CODE: This Lease is intended as and constitutes a
security agreement within the meaning of the Uniform Commercial Code of the
state in which the leased premises are situated and, Lessor, in addition to the
rights prescribed in this Lease, shall have all of the rights, titles, liens and
interests in and to Lessee's property now or hereafter located upon the leased
premises which are granted a secured party, as that term is defined, under the
Uniform Commercial Code to secure the payment to Lessor of the various amounts
provided in this Lease. Lessee will on request execute and deliver to Lessor a
financing statement for the purpose of perfecting Lessor's security interest
under this Lease or Lessor may file this Lease or a copy thereof as a financing
statement.
23. DEFAULT BY LESSEE: The following shall be deemed to be events of
default by Lessee under this Lease:
(a) Lessee shall fail to pay when due any installment of rent or any
other payment required persuant to this Lease; and such failure is not cured by
Lessee within 5 days from receipt of written notice;
(b) Lessee shall abandon any substantial portion of the leased
premises;
(c) Lessee shall fail to comply with any term, provision or covenant
of this Lease, other than the payment of rent, and the failure is not cured
within thirty (30) days after written notice to Lessee;
(d) Lessee shall file a petition or be adjudged bankrupt or insolvent
under the National Bankruptcy Act, as amended, or any similar law or statute of
the United States or any state; or a receiver or trustee shall be appointed for
all or substantially all of the assets of Lessee; or Lessee shall make a
transfer in fraud of creditors or shall make an assignment for the benefit of
creditors; or
(e) Lessee shall do or permit to be done any act which results in a
lien being filed against the leased premises or the building and/or project of
which the leased premises are a part.
24. REMEDIES FOR LESSEE'S DEFAULT: Upon the occurrence of any event of
default set forth in this Lease, Lessor shall have the option to pursue any one
or more of the following remedies without any notice or demand:
(a) Terminate this Lease, in which event Lessee shall immediately
surrender the leased premises to Lessor, and if Lessee fails to surrender the
leased premises, Lessor may, without prejudice to any other remedy which it
may have for possession or arrearages in rent, enter upon and take possession
of the leased premises, by picking or changing locks if necessary, and lock
out, expel, or remove Lessee and any other person who may be occupying all or
any part of the leased premises without being liable for prosecution of any
claim for damages. Lessee agrees to pay on demand the amount of all loss and
damage which Lessor may suffer by reason of the termination of the Lease
under this subparagraph, whether through inability to relet the leased
premises on satisfactory terms or otherwise.
(b) Enter upon and take possession of the leased premises, by picking
or changing locks if necessary, and lock out, expel or remove Lessee and any
other person who may be occupying all or any part of the leased premises without
being liable for any claim for damages and relet the leased premises on behalf
of Lessee and receive directly the rent by reason of the reletting. Lessee
agrees to pay Lessor on demand any deficiency that may arise by reason of any
reletting of the leased premises; further, Lessee agrees to reimburse Lessor for
any expenditures made by it for remodeling or repairing in order to relet the
leased premises.
(c) Enter upon the leased premises, by picking or changing locks if
necessary, without being liable for prosecution of any claim for damages, and do
whatever Lessee is obligated to do under the terms of this Lease. Lessee agrees
to reimburse Lessor on
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<PAGE>
demand for any expenses which Lessor may incur in effecting compliance with
Lessee's obligations under this Lease; further, Lessee agrees that Lessor shall
not be liable for any damages resulting to Lessee from effecting compliance with
Lessee's obligations under this subparagraph caused by the negligence of Lessor
or otherwise.
25. WAIVER OF DEFAULT OR REMEDY: Failure of Lessor to declare an event of
default immediately upon its occurrence, or delay in taking any action in
connection with an event of default, shall not constitute a waiver of the
default, but Lessor shall have the right to declare the default at any time and
take such action as is lawful or authorized under this Lease. Pursuit of any one
or more of the remedies set forth in paragraph 24 above shall not preclude
pursuit of any one or more of the other remedies provided elsewhere in this
Lease or provided by law, nor shall pursuit of any remedy provided constitute
forfeiture or waiver of any rent or damages accruing to Lessor by reason of the
violation of any of the terms, provisions or covenants of this Lease. Failure
by Lessor to enforce one or more of the remedies provided upon an event of
default shall not be deemed or construed to constitute a waiver of the default
or of any other violation or breach of any of the terms, provisions and
covenants contained in this Lease.
26. ACTS OF GOD: Lessor shall not be required to perform any covenant or
obligation in this Lease, or be liable in damages to Lessee, so long as the
performance or non-performance of the covenant or obligation is delayed, caused
by or prevented by an act of God or force majeure.
27. ATTORNEY'S FEES: In the event Lessee defaults in the performance of
any of the terms, covenants, agreements or conditions contained in this Lease
and Lessor places in the hands of an attorney the enforcement of all or any part
of this Lease, the collection of any rent due or to become due or recovery of
the possession of the leased premises, Lessee agrees to pay Lessor reasonable
attorney's fees for the services of the attorney, whether suit is actually filed
or not. In no event shall the attorney's fees be less than fifteen percent of
the outstanding balance owed by Lessee to Lessor.
28. HOLDING OVER: In the event of holding over by Lessee after the
expiration or termination of this Lease, the hold over shall be as a tenant at
will and all of the terms and provisions of this Lease shall be applicable
during that period, except that Lessee shall pay Lessor as rental for the period
of such hold over an amount equal to one and one-half the rent which would have
been payable by Lessee had the hold over period been a part of the original term
of this Lease. Lessee agrees to vacate and deliver the leased premises to
Lessor upon Lessee's receipt of notice from Lessor to vacate. The rental
payment during the hold over period shall be payable to Lessor on demand. No
holding over by Lessee, whether with or without consent of Lessor, shall operate
to extend this Lease except as otherwise expressly provided.
29. RIGHTS OF FIRST MORTGAGEE: Lessee accepts this Lease subject and
subordinate to any recorded first mortgage or deed of trust lien presently
existing or hereafter created upon the leased premises. Lessor is hereby
irrevocably vested with full power and authority to subordinate Lessee's
interest under this Lease to any first mortgage or deed of trust lien hereafter
placed on the leased premises, and Lessee agrees upon demand to execute
additional instruments subordinating this Lease as Lessor may require. If the
interests of Lessor under this Lease shall be transferred by reason of
foreclosure or other proceedings for enforcement of any first mortgage or deed
of trust on the leased premises, Lessee shall be bound to the transferee
(sometimes called the "Purchaser"), at the option of the Purchaser, under the
terms, covenants and conditions of this Lease for the balance of the term
remaining, and any extentions or renewals, with the same force and effect as if
the Purchaser were Lessor under this Lease, and, if requested by the Purchaser,
Lessee agrees to attorn to the Purchaser, including the first mortgagee under
any such mortgage if it be the Purchaser, as its lessor.
30. ESTOPPEL CERTIFICATES: Lessee agrees to furnish promptly, from time
to time, upon request of Lessor or Lessor's mortgage, a statement certifying, if
applicable, that Lessee is in possession of the leased premises; the leased
premises are acceptable; the Lease is in full force and effect; the Lease is
unmodified; Lessee claims no present charge, lien, or claim of offset against
rent; the rent is paid for the current month, but is not prepaid for more than
one month and will not be prepaid for more than one month in advance; there is
no existing default by reason of some act or omission by Lessor; and such other
matters as may be reasonably required by Lessor or Lessor's mortgagee.
31. SUCCESSORS: This Lease shall be binding upon and inure to the
benefit of Lessor and Lessee and their respective heirs, personal
representatives, successors and assigns. It is hereby covenanted and agreed
that should Lessor's interest in the leased premises cease to exist for any
reason during the term of this Lease, then notwithstanding the happening of
such event this Lease nevertheless shall remain unimpaired and in full force and
effect and Lessee hereunder agrees to attorn to the then owner of the leased
premises.
32. RENT TAX: If applicable in the jurisdiction where the leased premises
are situated, Lessee shall pay and be liable for all rental, sales and use taxes
or other similar taxes, if any, levied or imposed by any city, state, county or
other governmental body having authority, such payments to be in addition to all
other payments required to be paid to Lessor by Lessee under the terms of this
Lease. Any such payment shall be paid concurrently with the payment of the rent
upon which the tax is based as set forth above.
33. DEFINITIONS: The following definitions apply to the terms set forth
below as used in this Lease:
(a) "Abandon" means the vacating of all or a substantial portion of
the leased premises by Lessee, whether or not Lessee is in default of the rental
payments due under this Lease.
(b) An "act of God" or "force majeure" is defined for purposes of
this Lease as strikes, lockouts, sit-downs, material or labor restrictions by
any governmental authority, unusual transportation delays, riots, floods,
washouts, explosions, earthquakes, fire, storms, weather (including wet grounds
or inclement weather which prevents construction), acts of the public enemy,
wars, insurrections and any other cause not reasonably within the control of
Lessor and which by the exercise of due diligence Lessor is unable, wholly or in
part, to prevent or overcome.
(c) The "commencement date" shall be the date set forth in paragraph
2. The "commencement date" shall constitute the commencement of this Lease for
all purposes, whether or not Lessee has actually taken possession.
(e) "Real property tax" means all school, city, state and county
taxes and assessments including special district taxes or assessments.
(f) "Square feet or "square foot" as used in this Lease includes the
area contained within the space occupied by Lessee together with a common area
percentage factor of Lessee's space proportionate to the total building area.
34. MISCELLANEOUS: The captions appearing in this Lease are inserted only
as a matter of convenience and in no way define, limit, construe or describe the
scope or intent of such paragraph. If any provision of this Lease shall ever be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of this Lease, and such other provisions shall
continue in full force and effect.
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<PAGE>
35. NOTICE: (a) All rent and other payments required to be made by Lessee
shall be payable to Lessor at the address set forth below.
(b) All payments required to be made by Lessor to Lessee shall be
payable to Lessee at the address set forth below, or at any other address within
the United States as Lessee may specify from time to time by written notice.
(c) Any notice or document required or permitted to be delivered by
this Lease shall be deemed to be delivered (whether or not actually received)
when deposited in the United States Mail, postage prepaid, certified mail,
return receipt requested, addressed to the parties at the respective addresses
set out below:
LESSOR: LESSEE:
SOUTHLAND MANAGEMENT COMPANY NOVELLUS SYSTEMS, INC.
6220 S. Orange Blossom Trail 3970 N. First Street
Suite 160 San Jose, CA 95134
Orlando, Florida 32809
37. ENTIRE AGREEMENT AND LIMITATIONS OF WARRANTIES: IT IS EXPRESSLY
AGREED BY LESSEE, AS A MATERIAL CONSIDERATION FOR THE EXECUTION OF THIS LEASE,
THAT THIS LEASE, WITH THE SPECIFIC REFERENCES TO WRITTEN EXTRINSIC DOCUMENTS, IS
THE ENTIRE AGREEMENT OF THE PARTIES; THAT THERE ARE, AND WERE, NO VERBAL
REPRESENTATIONS, WARRANTIES, UNDERSTANDINGS, STIPULATIONS, AGREEMENTS OR
PROMISES PERTAINING TO THIS LEASE OR THE EXPRESSLY MENTIONED WRITTEN EXTRINSIC
DOCUMENTS NOT INCORPORATED IN WRITING IN THIS LEASE. LESSOR AND LESSEE EXPRESSLY
AGREE THAT THERE ARE AND SHALL BE NO IMPLIED WARRANTIES OR MERCHANTABILITY,
HABITABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OF ANY OTHER KIND ARISING OUT
OF THIS LEASE AND THERE ARE NO WARRANTIES WHICH EXTEND BEYOND THOSE EXPRESSLY
SET FORTH IN THIS LEASE. IT IS LIKEWISE AGREED THAT THIS LEASE MAY NOT BE
ALTERED, WAIVED, AMENDED OR EXTENDED EXCEPT BY AN INSTRUMENT IN WRITING SIGNED
BY BOTH LESSOR AND LESSEE.
38. OTHER PROVISIONS:
RADON GAS: "Radon is a naturally occurring radioactive gas that, when
it has accumulated in a building in sufficient quantities,
may present health risks to persons who are exposed to it
over time. Levels of radon that exceed federal and state
guidelines have been found in buildings in Florida.
Additional information regarding radon and radon testing may
be obtained from your county public health unit."
39. ADDENDUM: There is an Addendum attached hereto and made a part
hereof.
Signed at Orlando, FL , this 22nd day of December , 1995
-------------- ------ ---------------- --
Faison & Associates,
Inc. d/b/a LESSOR: LESSEE:
Southland Management Company, NOVELLUS SYSTEMS, INC.
not individually, but solely as
Management and Leasing Broker for
PLAZA CENTRAL I
By /s/ By /s/
------------------------------ ------------------------------
Title Vice President and Title Treasurer
--------------------------- ---------------------------
Authorized Agent
WITNESS: WITNESS:
/s/ Ed Bennett /s/ Ciska Perry
- --------------------------------- ------------------------------
/s/ Lisa Bailey /s/ Gina Corrales
- --------------------------------- ------------------------------
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<PAGE>
ADDENDUM
1) INCREASES IN BASE RENT: The monthly rent for each twelve-month period
subsequent to the first complete twelve-month period occurring during the term
of this Lease shall increase by seven percent (7%) as follows:
Commencing February 1, 1997 the monthly rent shall be increased to
$1,840.40; commencing February 1, 1998 the monthly rent shall be
increased to $1,969.40.
Lessee agrees to pay the adjusted monthly rent, together with any applicable
taxes, on the first day of each and every month as outlined in Paragraph 3(a) of
the Lease.
<PAGE>
[Map]
<PAGE>
RULES AND REGULATIONS
1. Lessor agrees to furnish Lessee two keys without charge. Additional keys
will be furnished at a nominal charge.
2. Lessee will refer all contractors, contractor's representatives and
installation technicians rendering any service on or to the leased
premises for Lessee, to Lessor for Lessor's approval and supervision before
performance of any contractual service. This provision shall apply to all
work performed on or about the leased premises or project, including
installation of telephones, telegraph equipment, electrical devices and
attachments and installations of any nature affecting floors, walls,
woodwork, trim, windows, ceilings and equipment or any other physical
portion of the leased premises or project.
3. Lessee shall not at any time occupy any part of the leased premises or
project as sleeping or lodging quarters.
4. Lessee shall not place, install or operate on the leased premises or in any
part of the building, any engine, stove or machinery, or conduct mechanical
operations or cook thereon or therein, or place or use in or about the
leased premises or project any explosives, gasoline, kerosene, oil, acids,
caustics, or any flammable, explosive or hazardous material without written
consent of Lessor.
5. Lessor will not be responsible for lost or stolen personal property,
equipment, money or jewelry from the leased premises or the project
regardless of whether such loss occurs whether the area is locked against
entry or not.
6. No dogs, cats, fowl, or other animals shall be brought into or kept in or
about the leased premises or project.
7. Employees of Lessor shall not receive or carry messages for or to any
Lessee or other person, nor contract with or render free or paid services
to any Lessee or Lessee's agents, employees or invitees.
8. None of the parking, plaza, recreation or lawn areas, entries, passages,
doors, elevators, hallways or stairways shall be blocked or obstructed, or
any rubbish, litter, trash, or material of any nature placed, emptied or
thrown into these areas or such area be used by Lessee's agents, employees
or invitees at any time for purposes inconsistent with their designation by
Lessor.
9. The water closets and other water fixtures shall not be used for any
purpose other than those for which they were constructed, and any damage
resulting to them from misuse, or by the defacing or injury of any part of
the building shall be borne by the person who shall occasion it. No person
shall waste water by interfering with the faucets or otherwise.
10. No person shall disturb occupants of the building by the use of any radios,
record players, tape recorders, musical instruments, the making of unseemly
noises, or any unreasonable use.
11. Nothing shall be thrown out of the windows of the building or down the
stairways or other passages.
12. Lessee and its employees, agents and invitees shall park their vehicles
only in those parking areas designated by Lessor. Lessee shall furnish
Lessor with state automobile license numbers of Lessee's vehicles and its
employees' vehicles within five days after taking possession of the leased
premises and shall notify Lessor of any changes within five days after such
change occurs. Lessee shall not leave any vehicle in a state of disrepair
(including without limitation, flat tires, out of date inspection
stickers or license plates) on the leased premises or project. If Lessee or
its employees, agents or invitees park their vehicles in areas other than
the designated parking areas or leave any vehicle in a state of disrepair,
Lessor, after giving written notice to Lessee of such violation, shall have
the right to remove such vehicles at Lessee's expense.
TOWER SECTION (If Applicable)
13. Movement in or out of the building of furniture or office supplies and
equipment, or dispatch or receipt by Lessee of any merchandise or
materials, which require use of elevators or stairways, or movement through
the building entrances or lobby, shall be restricted to hours designated by
Lessor. All such movement shall be under supervision of Lessor and carried
out in the manner agreed between Lessee and Lessor by prearrangement before
performance. Such prearrangement will include determination by Lessor of
time, method, and routing of movement and limitations imposed by safety
or other concerns which may prohibit any article, equipment or any other
item from being brought into the building. Lessee assumes, and shall
indemnify Lessor against, all risks and claims of damage to persons and
properties arising in connection with any said movement.
14. Lessor will provide and maintain an alphabetical directory board in the
ground floor lobby of the building and allot one name strip for Lessee.
15. Lessor shall not be liable for any damages from the stoppage of elevators
for necessary or desirable repairs or improvements or delays of any sort or
duration in connection with the elevator service.
It is Lessor's desire to maintain in the building or project the highest
standard of dignity and good taste consistent with comfort and convenience for
Lessees. Any action or condition not meeting this high standard should be
reported directly to Lessor. Your cooperation will be mutually beneficial and
sincerely appreciated. Lessor reserves the right to make such other and further
reasonable rules and regulations as in its judgment may from time to time be
necessary, for the safety, care and cleanliness of the leased premises, and for
the preservation of good order therein.
<PAGE>
OFFICE LEASE
FOR
CORNELL OAKS CORPORATE CENTER
This Lease is dated as of March 20, 1995, by and between HARTFORD UNDERWRITERS
INSURANCE COMPANY, a Connecticut corporation, having an office at Hartford,
Connecticut (Landlord), and NOVELLUS SYSTEMS INC., a California corporation,
having an office at San Jose, California (Tenant).
I. DEMISE OF PREMISES
Landlord hereby leases to Tenant and Tenant leases from Landlord the Premises
located in the Building, together with the nonexclusive right to use, in common
with Landlord and others, the following portions of the Building and Land: the
entrance foyer and lobby; the corridors and lavatories on the floor on which the
Premises are situated; the stairways, elevators, shipping and receiving areas;
and exterior sidewalks and driveways.
II. SUMMARY OF TERMS
As used in this Lease, the following terms shall have the following meanings:
A. PREMISES: That part of the Building outlined on the attached Plan showing
the Premises, called Suite B-340, on the first floor of the Building,
including all tenant improvements made by Landlord pursuant to the attached
Work Letter.
B. BUILDING: The building on the Land, known as the Parkside Building B,
having an address of 15350 North West Greenbrier Parkway, Beaverton, Oregon
97006, as shown on the attached Land and Building Plan.
C. LAND: The real property shown on the Land and Building Plan.
D. OFFICE PARK: If indicated on the Land and Building Plan, the office park,
including land and buildings, of which the Land and Building are a part.
E. BUILDING MANAGER: Norris, Beggs & Simpson, 15455 North West Greenbrier
Parkway, Suite 200, Beaverton, Oregon 97006, or such other person as
Landlord may designate.
<PAGE>
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F. COMMENCEMENT DATE: The later of May 1, 1995 (the Expected Commencement
Date), or that date on which the Premises are substantially completed
pursuant to Section 1 of the Lease.
G. TERMINATION DATE: The last day of the 3rd Lease Year, unless extended as
provided in this Lease.
H. LEASE YEAR: A 12 month period, the first of which shall commence on the
Commencement Date if it is the first day of a month, otherwise, on the
first day of the month next following the Commencement Date, and each
subsequent Lease Year shall begin on successive anniversaries of the
commencement of the first Lease Year.
I. TERM: A period commencing on the Commencement Date and expiring at
midnight on the Termination Date, unless sooner terminated as provided in
this Lease.
J.&K. BASE RENT & MONTHLY INSTALLMENTS OF BASE RENT:
Base Rent Monthly Installments
Lease Year per Annum of Base Rent
------------- --------------- --------------------------
1 $29,424.00 $2,452.00
2 30,804.00 2,567.00
3 32,184.00 2,682.00
L. TENANT'S PROPORTIONATE SHARE: 2.44 percent.
M. Intentionally omitted.
N. Intentionally omitted.
O. SECURITY DEPOSIT: $2,681.70.
P. LANDLORD'S MAILING ADDRESS:
Hartford Plaza, Hartford, Connecticut 06115, Attention: Real Estate
Department.
Q. TENANT'S MAILING ADDRESS:
Prior to Commencement Date: 18200 South East 24th Way, Carnas, Washington
98607.
As of Commencement Date: 15350 North West Greenbrier Parkway, Suite B-350,
Beaverton, Oregon 97006.
R. NORMAL BUSINESS HOURS: The hours from 8 a.m. to 6 p.m. Monday through
Friday and 8 a.m. to 12 p.m. on Saturday, except recognized holidays.
S. STATE: The State of Oregon.
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T. PARKING SPACES: Tenant shall be entitled to the nonexclusive use in common
with Landlord and others of a maximum of 15 spaces in the parking area
which is shown on the Land and Building Plan.
U. PARKING FEE: Initially $-0- per Parking Space per month. During the
initial Term the Parking Fee shall not be changed except for such amounts
as may be charged by a governmental authority as provided in Section 28(b).
V. BROKER: Norris, Beggs & Simpson.
W. PERMITTED USE (in addition to light industrial and general office
purposes): None.
X. TENANT'S REPRESENTATIVES: Tenant's employees, agents, contractors,
licensees and invitees.
III. ATTACHMENTS
The attachments listed below are incorporated in this Lease and are to be
construed as part hereof:
1. General Terms, Covenants and Conditions
2. Plan showing the Premises
3. Land and Building Plan
4. Rules and Regulations
5. Expense Escalation
6. Work Letter
7. Plans and Specifications of Leasehold Improvements and Tenant Layout
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease or caused
it to be executed.
LANDLORD: TENANT:
HARTFORD UNDERWRITERS NOVELLUS SYSTEMS INC.
INSURANCE COMPANY
By --------------------------------- By ----------------------------------
--------------------------------- ----------------------------------
[Print Name] [Print Name]
Its -------------------------------- Its ---------------------------------
[Title] [Title]
<PAGE>
GENERAL TERMS, COVENANTS AND CONDITIONS
1. COMMENCEMENT OF TERM.
(a) The Premises shall be deemed substantially completed upon the issuance
of a certificate of substantial completion by Landlord's architect or a
certificate of occupancy by the local building authority, notwithstanding that
minor or insubstantial details of construction, mechanical adjustment or
decoration remain to be performed. If the substantial completion of the
Premises by Landlord is delayed in any way by Tenant or Tenant's
Representatives, the Premises shall be deemed substantially completed for
purposes of this Section on the date when they would have been substantially
completed but for such delay.
(b) Tenant's taking possession of the Premises shall be conclusive
evidence that the Premises were in good order, condition and repair when Tenant
took possession, except for those matters (for which Landlord is responsible as
provided in this Lease) of which Tenant gives Landlord notice within 10 days
after taking possession. Landlord shall complete or repair such matters as soon
as reasonably possible.
(c) If Landlord is unable to deliver possession of the Premises to Tenant
within 180 days after the Expected Commencement Date (the Outside Commencement
Date), then Tenant, as its sole remedy, may terminate this Lease by notice to
Landlord given within 10 days after the Outside Commencement Date. The Outside
Commencement Date shall be extended by the period of any delay described in
Section 1(a). Landlord shall not be liable to Tenant or any third party for its
failure to deliver possession of the Premises to Tenant. If the Commencement
Date does not occur within one year after the Expected Commencement Date, this
Lease shall terminate and Landlord and Tenant shall have no further obligations
to the other, except as may otherwise be provided in this Lease.
(d) After the Commencement Date has been determined, Landlord and Tenant
shall execute a supplemental agreement specifying the Commencement Date,
Termination Date and such other information as Landlord shall reasonably
require.
2. RENT.
Tenant shall pay Monthly Installments of Base Rent in advance on the first
day of each month of the Term. Monthly Installments of Base Rent for any
partial month (including any partial month prior to the first Lease Year) shall
be prorated on a per diem basis. All costs and expenses which Tenant assumes or
agrees to pay and any other sum payable by Tenant pursuant to this Lease shall
be deemed additional rent (together with Base Rent referred to as the Rent).
The Rent shall be paid in lawful money of the United States of America to the
Building Manager or to such other person or at such other place as Landlord may
from time to time designate, without any prior notice or demand therefor and
without deduction or offset.
3. LATE PAYMENTS.
If any part of the Rent is not paid within 5 days after it is due, Tenant
shall pay Landlord (a) an administrative fee of 5 percent of the amount due, and
(b) interest on the amount due from its due date until paid at the lesser of 12
percent per annum or the maximum rate which Landlord may lawfully charge Tenant.
4. USE OF THE PREMISES.
Tenant shall use the Premises only for general office purposes and the
Permitted Use (if any) and all other uses or purposes are prohibited. Tenant
shall not commit waste in the Premises and shall not store, dispose or generate
any hazardous materials (except as is customary for an office use) or permit
anything to be done in the Premises which causes injury to persons or to the
Building, impairs the economic maintenance and operation of the Building, or
interferes with or inconveniences other tenants or occupants of the Building.
5. RULES AND REGULATIONS.
Tenant shall comply with and cause Tenant's Representatives to comply with
the attached Rules and Regulations and with such reasonable modifications and
additions as Landlord may from time to time make. Landlord shall not be
responsible for the violation of the Rules and Regulations of others.
6. SERVICES.
(a) Landlord shall furnish the following services (Normal Services):
elevator service (if the Building is equipped with elevators) for use in common
with the occupants of the Building; standard janitorial and cleaning services to
the Premises and common areas of the Building; domestic water in reasonable
quantities to the common areas (and the Premises, if required by this Lease);
electricity for lighting the Premises and the operation of ordinary office
equipment, but not in excess of that usually required for general office use
during Normal Business Hours; and climate control to the Premises during Normal
Business Hours as reasonably required for the comfortable use
<PAGE>
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of the Premises.
(b) If any utilities or services are specially or exclusively supplied to
Tenant or the Premises (Special Services), Tenant shall pay the cost of the
Special Services to Landlord or the applicable utility company, as required.
(c) To enable Landlord to fulfill its service obligations, Tenant shall
comply with the conditions of occupancy and connected electrical load reasonably
established by Landlord for the Building. Tenant shall not use utilities or
other services in excess of Normal Services or in a manner which exceeds or
interferes with any Building systems or Landlord's ability to provide services
to other tenants in the Building. To avoid possible adverse effects upon the
Building's electrical and mechanical systems, Tenant shall not, without
Landlord's prior consent in each instance (which shall not be unreasonably
withheld), connect air conditioning equipment, computers, appliances, heavy duty
equipment or other similar electrical equipment (High Usage Equipment) to the
Building's electrical system. Landlord may survey Tenant's use of services from
time to time. Tenant shall pay Landlord all costs arising out of any excess use
or the connection of High Usage Equipment, including the cost of all repairs and
alterations to the Building's mechanical and electrical systems (including the
installation of meters) and the cost of the additional electricity made
available to Tenant, if any. Tenant shall pay such costs within 10 days of
Landlord's demand therefor and as periodically billed to Tenant thereafter.
(d) Landlord does not warrant that the services supplied by Landlord will
be free from interruption. Any interruption or discontinuance of service shall
not be deemed an eviction or disturbance of Tenant's use or possession of the
Premises, or any part thereof, nor render Landlord liable to Tenant for damages
by abatement of Rent or otherwise, nor relieve Tenant from performance of
Tenant's obligations under this Lease. Landlord shall, however, exercise
reasonable diligence to restore any services so interrupted.
7. REPAIRS AND MAINTENANCE.
Tenant shall keep the Premises in good order and condition. Tenant shall
give Landlord prompt notice of any damage to or defective condition in the
Building. Except as provided in Sections 1, 6 and 8, Tenant shall be
responsible for all repairs, replacements and alterations in and to the
Premises. Landlord shall repair, replace and maintain those other portions of
the Building which do not constitute a part of the Premises and are not leased
to others (except as provided in Section 11). All repairs, replacements and
maintenance shall be performed with reasonable promptness and in a good and
workmanlike manner.
8. ALTERATIONS.
(a) Alterations to the Premises shall not be made without the prior
consent of Landlord, which shall not be unreasonably withheld. Unless Landlord
permits Tenant to make approved alterations (which permission may be withheld in
Landlord's sole discretion), alterations shall be made by Landlord and Tenant
shall pay Landlord the cost thereof plus 15 percent for Landlord's overhead and
profit within 10 days of Landlord's demand. If Tenant is permitted to make
alterations, the work shall be done in accordance with such requirements as
Landlord may reasonably impose. Any review or approval by Landlord of plans or
specifications with respect to any alteration is solely for Landlord's benefit,
and without any representation or warranty whatsoever to Tenant with respect to
the adequacy, correctness or efficiency thereof. If required by Landlord,
alterations shall be removed by Tenant upon the termination of the Term and
Tenant shall at its expense repair any damage to the Premises or the Building
caused by the removal.
(b) Tenant shall indemnify and defend Landlord for, from and against any
and all mechanics' and other liens and encumbrances filed by any person claiming
through or under Tenant and against all costs, expenses, losses and liabilities
(including reasonable attorneys' fees) incurred by Landlord in connection with
any such lien or encumbrance or any action or proceeding brought thereon.
Tenant at its expense shall procure the discharge of record of all such liens
and encumbrances within 20 days after notice thereof.
9. INSURANCE.
Tenant shall at its expense maintain property insurance on Tenant's
property and above-standard leasehold improvements and comprehensive general
liability insurance in such amounts as Tenant determines in its reasonable
judgment. All such insurance shall be issued by insurers authorized to do
business in the State, shall name Landlord as an additional insured or shall
contain appropriate endorsements denying Tenant's insurers the right of
subrogation against Landlord. Tenant shall, upon request, furnish Landlord with
certificates evidencing such insurance coverages. If during the Term insurance
premiums on any insurance policy carried by Landlord on the Building or the
Premises are increased due to or resulting from Tenant's occupancy hereunder,
Tenant shall pay to Landlord as additional rent the amount of the increase in
insurance premiums within 10 days after Landlord's demand (accompanied by
<PAGE>
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reasonable evidence of the increase).
10. INDEMNIFICATION.
Tenant shall indemnify and defend Landlord for, from and against all
claims, expenses, liabilities and losses (other than those for which liability
is waived by express provision in this Lease), including reasonable attorneys'
fees, resulting from any injury in or upon the Land or Building to property
or persons due to any negligence of Tenant or Tenant's Representatives or
resulting from Tenant's failure to comply with the Laws (as provided in Section
11). Landlord shall indemnify and defend Tenant for, from and against all
claims, expenses, liabilities and losses (other than those for which liability
is waived by express provision in this Lease), including reasonable attorneys'
fees, resulting from any injury in or upon the Land or the Building to property
or persons due to any negligence of Landlord, its agents, employees or
contractors or resulting from Landlord's failure to comply with the Laws (as
provided in Section 11). Anything in this Lease to the contrary
notwithstanding, Landlord and Tenant each waive any claims (except claims
arising under Section 11) that either of them may have against the other for any
damage or injury to property caused by the other's negligence, including the
Premises and the Building, arising from a peril coverable by fire or extended
coverage insurance, whether or not caused by the other, or its agents, employees
or contractors. Neither party shall in any event (except as provided in
Sections 13 and 23) be liable to the other for indirect or consequential damages
for any breach of this Lease. The provisions of this Section shall survive the
termination or expiration of this Lease.
11. OBSERVANCE OF LAWS.
Tenant shall at its expense comply with all laws, including the
requirements and regulations of any governmental authority having jurisdiction
(collectively, the Laws), including those which relate to: (a) the partitioning,
equipment operation, alteration, occupancy and use of the Premises, (b)
environmental matters (including the storage, disposal or generation of
hazardous materials), (c) the making of any repairs, replacements or
improvements to the Premises, and (d) any business conducted in the Premises.
Except as provided in the preceding sentence, Landlord shall comply with all
Laws which relate to the Building, provided nevertheless, that structural
changes shall be the responsibility of Tenant if they are changes required by
reason of a condition which has been created or caused by Tenant, or are
required by reason of a default by Tenant.
12. SURRENDER OF THE PREMISES.
Tenant, on the Termination Date or earlier expiration of the Term, shall
surrender the Premises in as good condition as when Tenant took possession,
except for reasonable wear and tear. Any of Tenant's property (except money and
securities) left on the Premises shall be deemed abandoned and, at Landlord's
option, title shall pass to Landlord under this Lease as by a bill of sale or,
if Landlord elects to remove all or any part of Tenant's property, the cost of
such removal, including repairing any damage to the Premises or Building caused
by the removal and the cost of storage and sale, shall be paid by Tenant within
10 days of Landlord's demand.
13. HOLDING OVER.
If Tenant retains possession of all or part of the Premises after the
Termination Date, Tenant's occupancy shall be as a tenant at sufferance,
terminable at any time by Landlord. Tenant shall pay Landlord rent for such
time as Tenant remains in possession at the monthly rate of 150 percent of the
Base Rent payable hereunder for the month immediately preceding the Termination
Date plus all other Rent required by the terms of this Lease and, in addition
thereto, shall pay Landlord for all damages (including consequential damages)
sustained by reason of Tenant's retention of possession. The provisions of this
Section do not exclude Landlord's rights of reentry or any other right
hereunder.
14. DAMAGE.
(a) If the Building, Land or Premises are damaged by fire or other
casualty and this Lease is not terminated as provided below, Landlord shall
repair the damage at its expense (except for excess costs related to above-
standard leasehold improvements in the Premises which shall be at Tenant's
expense), with reasonable promptness after notice to it of the damage; provided,
however, that Landlord shall not be required to repair or replace any of
Tenant's property or any alteration or improvements made by Tenant. If the
Premises are damaged by fire or other casualty, then to the extent that the
Premises are rendered untenantable, the Rent shall equitably abate from the date
of the damage to the date the damage is repaired. If repairs are delayed in any
way by Tenant
<PAGE>
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or Tenant's Representatives, the damage shall be deemed repaired for purposes of
this Section on the date when they would have been repaired but for such delay.
(b) If the Building, Land or Premises are substantially damaged by fire or
other casualty, Landlord may terminate this Lease by notice to Tenant within 90
days after the date of the damage and this Lease shall terminate upon the 30th
day after such notice by which date Tenant shall vacate and surrender the
Premises to Landlord. The Rent shall be equitably prorated to the date of
termination. The Building, Land or Premises (whether or not the Premises are
damaged) shall be deemed substantially damaged if: (1) Landlord is required to
expend for repairs more than 20 percent of the replacement value of the Building
immediately prior to the damage, or (2) repair is not possible in accordance
with Landlord's reasonable estimate within 180 days following the date of the
damage.
(c) If this Lease has not been terminated and Landlord does not
substantially complete the repair or restoration of the Building, Land or
Premises within 180 days after the date of the casualty, and if such failure has
a material, adverse effect on Tenant's business in the Premises, Tenant may
(provided such failure is not due to any fault of Tenant or Tenant's
Representatives) terminate this Lease by notice to Landlord given within 10 days
after the end of the 180-day period. Termination shall be effective 30 days
after such notice is given unless Landlord shall substantially complete the
repair or restoration within the 30-day period, in which case Tenant's notice of
termination shall be deemed withdrawn. This Section is intended to provide the
only remedies available to Tenant for damage caused by casualty and, therefore,
to the extent permitted by Law, Tenant waives the provisions of any Laws which
would provide alternative or additional remedies in the event of such damage.
15. CONDEMNATION.
(a) If the Building, Land or Premises are taken for more than 180 days by
condemnation or under threat thereof for any public or quasi-public purpose,
this Lease shall terminate as of the date Tenant is required to vacate the
Premises by reason of the taking and the Rent shall be equitably prorated to
such date. If any part of the Building or Land is so taken, this Lease shall be
unaffected by such taking, except that (1) Landlord may terminate this Lease by
notice to Tenant within 90 days after the date of taking if (A) the cost of
restoration will exceed the award received as a result of the taking, (B) repair
is not possible in accordance with Landlord's reasonable estimate within 180
days following the date of the taking, or (C) in Landlord's reasonable judgment,
it will be unable to economically operate the Building in light of Landlord's
agreements ad obligations regarding the Building, and (2) Tenant may terminate
this Lease by notice to Landlord within 90 days after the date of taking if 20
percent or more of the Premises shall be taken and the remaining area of the
Premises shall not be reasonably sufficient for Tenant to continue operation of
its business. This Lease shall terminate on the 30th day after such notice by
which date Tenant shall vacate and surrender the Premises to Landlord and the
Rent shall be equitably prorated to such date. If this Lease continues in force
upon a temporary taking (180 days or less) or a partial taking, the Base Rent,
Tenant's Proportionate Share and other relevant items shall be equitably
adjusted according to the rentable area of the Premises and Building remaining.
(b) In the event of any taking, all of the proceeds of any award payable
by the condemning authority shall be and remain the sole and exclusive property
of Landlord, and Tenant hereby assigns all of its right, title and interest in
and to any award to Landlord. Tenant, however, shall have the right, to the
extent that the same shall not reduce, delay or prejudice Landlord's award, to
claim from the condemning authority, but not from Landlord, such compensation as
may be recoverable by Tenant in its own right for moving expenses.
16. ASSIGNMENT AND SUBLETTING.
(a) Tenant shall not, either directly or indirectly (including transfers
of interests in Tenant), assign or encumber this Lease or any interest therein
or sublet the Premises or any part thereof without the prior consent of Landlord
in each instance, which consent shall not be unreasonably withheld; provided,
however, in no event may this Lease be assigned or the Premises sublet to any
governmental authority or agency or to any tenant or occupant of the Building,
nor may the rental rate of any sublease be less than the market rate for such
space. The consent by Landlord to an assignment or subletting shall not be
construed to relieve Tenant from obtaining Landlord's consent to any further
assignment or subletting.
(b) Tenant shall give Landlord notice of Tenant's intent to assign this
Lease or sublet the Premises in whole or in part (including Tenant's estimate of
the date the assignment or sublease will be effective (Estimated Date) and, in
the case of a sublease, the area affected and the intended period of the
sublease) and Landlord shall have the option, exercisable by delivery to Tenant
of notice within 90 days after receipt of Tenant's notice, to terminate this
Lease (in the case of a proposed assignment) or to terminate or suspend this
Lease as to that portion of the Premises which Tenant seeks to sublet (if
Landlord elects to suspend, the Lease with respect to the sublet area shall be
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suspended only during the period specified by Tenant in its notice and the Rent
shall be equitably reduced only for such period). If Landlord fails to give
such notice, Landlord shall be deemed to have rejected its option to terminate
or suspend and Tenant may proceed to attempt to assign or sublet, subject to the
requirements of this Section 16, including Landlord's prior consent. If
Landlord exercises its option to terminate or suspend, Landlord shall be
entitled to recover possession of all or such portion of the Premises as is
applicable and Tenant shall vacate the same on the later of the date which is 60
days after the giving of Landlord's notice of termination (or suspension) or the
Estimated Date, the Rent shall be adjusted to the date of vacation and
thereafter (or for the period of the suspension) Tenant shall be relieved of all
liability for the vacated portion of the Premises. In the case of a suspension,
Landlord shall redeliver possession of the suspended portion of the Premises to
Tenant "as is" at the expiration thereof.
(c) If Landlord gives its consent to any assignment of this Lease or to
any sublease, Tenant shall in consideration therefor, pay to Landlord, as
additional rent: (1) in the case of an assignment, an amount equal to all sums
and other consideration paid to Tenant by the assignee for or by reason of such
assignment (including any sums paid for the sale, rental or use of Tenant's
property in excess of the then market value of Tenant's property), less the
reasonable expenses actually paid by Tenant in connection with the assignment;
and (2) in the case of a sublease, any rents, additional charges or other
consideration payable under the sublease to Tenant by the subtenant (including
any sums paid for the sale, rental or use of Tenant's property in excess of the
then market value of Tenant's property) which are in excess of the Rent during
the term of the sublease in respect of the subleased space, less the reasonable
expenses actually paid by Tenant in connection with the subletting. The sums
payable hereunder shall be paid to Landlord as and when payable by the assignee
or subtenant to Tenant.
(d) No assignment or subletting shall affect the continuing primary
liability of Tenant (which, following an assignment, shall be joint and several
with the assignee), and Tenant shall not be released from performing any of the
terms, covenants and conditions of this Lease.
17. SUBORDINATION.
This Lease and all rights of Tenant hereunder shall be, at the option and
designation of Landlord, subordinate or superior to any lease of the Building or
Land (an Underlying Lease) and to any mortgage or deed of trust (a Mortgage)
which may now or hereafter affect the Building or Land. If Landlord designates
this Lease as subordinate or superior to any Underlying Lease or Mortgage, this
Section shall be self-operative and no further agreements of subordination or
superiority shall be required but, in confirmation of such subordination or
superiority, Tenant shall promptly execute, acknowledge and deliver any
agreement that Landlord, the lessor under any Underlying Lease (Lessor) or the
holder of any Mortgage (Mortgagee) or any of their respective assigns or
successors in interest may reasonably request to evidence such subordination or
superiority. If any Lessor or Mortgagee (or any purchaser at a foreclosure
sale) succeeds to the rights of Landlord under this Lease, whether through
possession or foreclosure action or delivery of a new lease or deed (a Successor
Landlord), Tenant shall, upon request, attorn to and recognize the Successor
Landlord as Tenant's landlord under this Lease and shall promptly execute and
deliver any agreement that the Successor Landlord may reasonably request to
evidence such attornment. If a Lessor, Mortgagee or Successor Landlord requires
that an agreement of subordination, superiority or attornment be executed by
Tenant in accordance with this Section, Tenant's failure to do so within 15 days
after Landlord's request shall be deemed an event of default under this Lease.
18. ESTOPPEL CERTIFICATE.
Tenant shall from time to time deliver to Landlord a statement in writing
certifying the status of this Lease and any options contained herein, the
performance hereunder of Landlord and Tenant and such other matters as Landlord
shall reasonably request. Tenant's failure to do so within 15 days after
Landlord's request shall be deemed an event of default under this Lease.
19. TRANSFER OF LANDLORD'S INTEREST.
The term "Landlord" as used in this Lease shall be limited to mean and
include only the owners of Landlord's interest in this Lease at the time in
question. Upon any transfer of such interest, Landlord herein named (and in
case of any subsequent transfer, the then transferor) shall thereafter be
relieved of all liability for the performance of any obligations on the part of
Landlord contained in this Lease.
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20. QUIET ENJOYMENT.
Tenant, upon paying the Rent and performing all of the terms, covenants and
conditions on its part to be performed, shall peaceably and quietly enjoy the
Premises subject, nevertheless, to the terms of this Lease.
21. RIGHTS RESERVED TO THE LANDLORD.
Landlord reserves the right: (a) to name the Building and Office Park, to
change the name or street address of the Building and Office Park, and to
install and maintain all signs in the Office Park (including the exterior and
interior of the Building); (b) on reasonable prior notice to Tenant, to exhibit
the Premises to any prospective purchasers or mortgagee of the Building or Land
and to others having an interest therein at any time during the Term, and to
prospective tenants during the last 12 months of the Term; (c) to enter the
Premises to make necessary inspections, repairs and adjustments or otherwise to
comply with the terms of this Lease; and (d) to relocate, alter, improve, reduce
or add to the configuration of and the various facilities and improvements
within the Building, the Land and the Office Park, provided that the change
shall not materially restrict Tenant's access to or use of the Premises.
22. DEFAULT.
The following shall be deemed events of default under this Lease: (a)
Tenant's failure to make any payment of Rent when it is due and payable
(provided that Tenant shall be entitled to 10 days notice of nonpayment during
which Tenant may cure the default, unless on 2 prior occasions within the same
12-month period there has been a default in the payment of Rent which has been
cured after notice has been given by Landlord, in which case no such notice need
be given for the remainder of the 12-month period and no such default in the
payment of Rent shall be curable, except as may be required by applicable Laws),
(b) any matter defined as an event of default in this Lease, (c) Tenant's
failure to cure a default in the performance of any other covenant or obligation
of Tenant under this Lease within a period of 30 days after notice from Landlord
specifying the default (or if the specified default is not capable of cure
within the 30-day period, if Tenant fails immediately after notice from Landlord
to commence to cure the default and diligently to pursue completion of the cure
during and after the 30-day period), and (d) Tenant's failure to occupy
substantially all of the Premises within 30 days after Landlord delivers the
Premises to Tenant in the condition required by this Lease or Tenant's vacation
of more than 50 percent of the Premises for more than 30 days except in
accordance with an approved assignment or sublease.
23. REMEDIES.
(a) If any event of default occurs, Landlord may, without prejudice to
Landlord's other rights hereunder and in addition to all other rights and
remedies which Landlord may have under the Laws:
(1) cure such default and any reasonable costs and expenses
incurred by Landlord therefor shall be deemed additional rent payable on
demand; or
(2) with or without terminating this Lease, reenter the Premises
and take possession thereof from Tenant by legal proceedings or otherwise.
If Landlord takes possession of the Premises and if the remedy provided in
this Section 23(a)(2) is permitted under the Laws after termination of a
lease, this Lease shall terminate, otherwise it shall remain in full force
and effect. Thereafter Landlord may recover from Tenant: (A) the worth at the
time of award of the unpaid Rent which had been earned at the time of such
termination; (B) the worth at the time of award of the amount by which the
unpaid Rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that Tenant proves could have
been reasonably avoided; (C) the worth at the time of award of the amount by
which the unpaid Rent for the balance of the Term after the time of award
exceeds the amount of such rental loss that Tenant proves could be reasonably
avoided; and (D) any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things would
be likely to result therefrom. The "worth at the time of award" of the
amounts referred to in Subdivisions (A) and (B) is computed by allowing
interest at the lesser of 12 percent per annum or the maximum rate which
Landlord may lawfuuly charge Tenant. The worth at the time of award of the
amount referred to in Subdivision (C) is computed by discounting such amount
at the discount rate of the nearest Federal Reserve Bank at the time of award
plus one percent. Efforts by Landlord to mitigate the damages caused by
Tenant's breach of this Lease shall not constitute a waiver of Landlord's
right to recover damages under this or any other Section. Nothing in this
Section shall affect Landlord's rights to indemnification under any of the
other provisions of this Lease; or
(3) continue this Lease in full force and effect for so long as
Landlord does not exercise Landlord's
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right to terminate this Lease and Landlord may enforce all Landlord's rights and
remedies under this Lease, including the right to recover the Rent as it becomes
due. For purposes of this Section, the following acts by Landlord shall not
constitute a termination of Tenant's right to possession of the Premises or a
termination of the Lease: (A) acts of maintenance or preservation or effects to
relet the Premises; or (B) the appointment of a receiver upon the initiative of
Landlord to protect Landlord's interest under this Lease.
(b) Landlord shall use reasonable efforts to mitigate its damages in the
event of Tenant's default. If Tenant has vacated the Premises, Landlord shall
be deemed to have satisfied its obligation under this provision if it markets
the Premises in the same manner as it markets other available space in the
Building or the Office Park (if applicable). Landlord, however, shall not be
required to prefer the Premises over such other available space.
(c) Except as provided in Section 23(a)(2), no reentry or taking
possession of the Premises by Landlord shall be construed as an election to
terminate this Lease, unless notice to such effect is given by Landlord to
Tenant. If Landlord does reenter or take possession without terminating this
Lease, Landlord may, at any time thereafter, terminate this Lease by giving
notice to Tenant. All of the remedies given to Landlord in this Lease upon any
event of default are in addition to all other rights or remedies to which
Landlord may be entitled under the Laws, including, if available, the right to
restrict Tenant's access to the Premises; all such remedies shall be deemed
cumulative and the election of one shall not be deemed a waiver of any other or
further rights or remedies. Unless otherwise expressly provided herein,
Tenant's obligation to pay all the Rent due through the Termination Date shall
survive any termination or expiration of this Lease.
24. SECURITY DEPOSIT
Tenant has deposited with Landlord the Security Deposit as security for the
faithful performance of every provision of this Lease to be performed by Tenant.
If Tenant defaults with respect to any provision of this Lease, including
payment of the Rent, Landlord may apply all or any part of the Security Deposit
for the payment of any Rent or to compensate Landlord for any other loss, cost
or liability which Landlord may incur by reason of Tenant's default. If any
portion of the Security Deposit is so applied, Tenant shall, within 10 days
after notice thereof, deposit cash with Landlord in an amount sufficient to
restore the Security Deposit to its original amount and Tenant's failure to do
so shall be deemed an event of default under this Lease. The Security Deposit
or any balance thereof shall be returned to Tenant without interest (or, at
Landlord's option, to the last transferee of Tenant's interest hereunder) at the
expiration of the Term and upon Tenant's vacation of the Premises in accordance
with the terms of this Lease. If the Building is sold, the Security Deposit may
be transferred to the new owner and Landlord shall be discharged from further
liability with respect thereto.
25. BANKRUPTCY.
If Tenant files a voluntary petition pursuant to the Bankruptcy Code
(including any successor code) or takes the benefit of any insolvency act or is
dissolved, or if an involuntary petition is filed against Tenant pursuant to the
Bankruptcy Code and the petition is not dismissed within 60 days after the
filing, or if a receiver is appointed for Tenant's business or assets and the
appointment of the receiver is not vacated within 60 days after the appointment,
or if Tenant shall make an assignment for the benefit of creditors, then
Landlord shall have all of the rights provided in Section 23 for nonpayment of
the Rent to the extent permitted by the Laws.
26. FORCE MAJEURE.
Landlord shall be excused for the period of any delay in the performance of
any obligations hereunder when prevented from doing so by causes beyond its
control, including labor disputes, civil commotion, hostilities, sabotage,
governmental regulations or controls, fire or other casualty, inability to
obtain any material, financing or services, and acts of God. Tenant shall
similarly be excused for delay in performance of any obligation hereunder,
provided that nothing contained in this Section shall be deemed to excuse or
permit any delay in the payment of Rent or any delay in the cure of any default
which may be cured by the payment of money.
27. LIMITATION OF LIABILITY.
If Landlord becomes obligated to pay Tenant a money judgment arising out of
any failure by Landlord to perform any of its obligations under this Lease,
Tenant shall be limited for the satisfaction of the money judgment solely to
Landlord's interest in the Building and Land and no other property or assets of
Landlord or the individual partners, directors, officers, or shareholders of
Landlord shall be subject to levy, execution or other enforcement procedure
whatsoever for the satisfaction of the money judgment.
<PAGE>
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28. PARKING.
(a) Landlord hereby permits Tenant the right to use the Parking Spaces.
Landlord, at its sole election, may designate the types and locations of the
Parking Spaces and Landlord shall have the right, at Landlord's sole election,
to change the types and locations from time to time; provided, however, such
designation shall not reduce the number of Parking Spaces permitted Tenant by
this Lease. If Landlord institutes an automobile identification procedure,
Tenant shall cooperate with Landlord's reasonable requirements therefor.
(b) Commencing on the Commencement Date, Tenant shall pay Landlord the
Parking Fee, if any, as additional rent, payable monthly in advance with Monthly
Installments of Base Rent. Thereafter, and throughout the Term, the Parking Fee
may be changed from time to time based on Landlord's standard parking rates
(plus any amounts assessed or required to be paid to any governmental authority
on account of the parking of motor vehicles) for each type of parking space
provided to Tenant.
29. RELOCATION.
Landlord may elect by notice to Tenant to substitute for the Premises other
office space in the Building or the Office Park (the Substitute Premises)
designated by Landlord and reasonably satisfactory to Tenant, provided that the
Substitute Premises shall contain at least the same usable area as the Premises
and have a configuration substantially similar to the Premises. Landlord shall,
at Landlord's expense, be responsible for: (a) completion of all improvements to
the Substitute Premises to Tenant's reasonable satisfaction, (b) moving all of
Tenant's property, (c) prompt reimbursement of all Tenant's reasonable out-of-
pocket expenses incurred by Tenant in connection with Tenant's move from the
Premises to the Substitute Premises provided such costs are approved by Landlord
in advance, which approval shall not be unreasonably withheld. Tenant shall
vacate and surrender the Premises and shall occupy the Substitute Premises
within 15 days after Landlord has substantially completed the work to be
performed by Landlord in the Substitute Premises pursuant to this Section.
Tenant shall pay the same Rent with respect to the Substitute Premises as was
payable with respect to the Premises, notwithstanding that the usable area of
the Substitute Premises may be greater than that of the Premises. This Lease
shall remain in full force and effect, and the Substitute Premises shall
thereafter be deemed to be the Premises.
30. BROKERAGE FEES.
Tenant warrants and represents that it has not dealt with any other party
(including a broker or other agent) in connection with this Lease except Broker.
Tenant shall indemnify and defend Landlord for, from and against any claims,
expenses, liabilities and losses (including reasonable attorneys' fees)
resulting from any compensation , commissions or charges claimed by or owing to
any other party in connection with this Lease by reason of any act of Tenant.
31. NOTICES.
All notices, demands, consents, approvals, elections or other
communications permitted or required to be given hereunder (a notice or notices)
shall be in writing and shall be deemed given on the date of actual receipt by
the party to which it is directed, notwithstanding any further direction to the
attention of any individual or department; provided that if notices are required
by this lease to be sent to the attention of any individual or department, the
notice shall be effective only if the envelope or wrapper in which it is sent is
so addressed. Notices shall be addressed as follows: (a) if to Landlord, to
the Landlord's Mailing Address and to the Building Manager, and (b) if to
Tenant, to the Tenant's Mailing Address. Any address or name specified above
may be changed by a notice given to the addressee by the other party in
accordance with this Section. The inability to deliver a notice because of a
changed address for which no prior notice was given or rejection or other
refusal to accept any notice shall be deemed to be the receipt of the notice as
of the date of such inability to deliver or rejection or refusal to accept.
32. MISCELLANEOUS.
(a) This Lease shall be deemed to have been made in and shall be construed
in accordance with the Laws of the State. This lease has been executed in
several counterparts, all of which constitute one and the same instrument. The
captions appearing within the body of this Lease have been inserted as a matter
of convenience and for reference only and in no way define, limit or enlarge the
scope or meaning of this Lease or of any provisions hereof. This Lease sets
forth all the agreements and understandings between Landlord and Tenant and
there are no agreements or understandings, either oral or written, between them
other than as are herein set forth. No
<PAGE>
-9-
amendment or change to this Lease shall be binding upon Landlord or Tenant
unless reduced to writing and signed by both of them.
(b) As used in this Lease, any list of one or more items preceded by the
word "including" shall not be deemed limited to the stated items but shall be
deemed without limitation.
(c) If any provision of this Lease is or becomes illegal or unenforceable
because of current or future Laws effective during the Term, the intention of
the parties hereto is that the remaining parts of this Lease shall not be
affected thereby.
(d) The failure of either party to exercise any remedy or election shall
not be construed as a waiver for the future of such remedy or election, but the
same shall remain in full force and effect. The receipt by Landlord of full or
partial Rent with knowledge of a breach of this Lease shall not be deemed a
waiver of such breach. No payment of a lesser amount than the Rent due Landlord
shall be deemed to be other than on account of the Rent and Landlord may accept
payment without prejudice to Landlord's right to recover the balance of such
Rent or pursue any other remedy provided in this Lease, notwithstanding any
endorsement or statement accompanying the payment to the contrary.
(e) In any proceeding which Landlord or Tenant may prosecute to enforce
its rights hereunder, the unsuccessful party shall pay all costs incurred by the
prevailing party (as such parties are hereafter defined), including reasonable
attorneys' fees. Prior to commencing any proceeding the parties shall each
submit to the other a final offer of settlement. The failure of a party (as
plaintiff) to submit a settlement offer shall be deemed a demand for all the
relief requested in its complaint and the failure of a party (as defendant) to
submit a responding settlement offer within 10 days after its receipt of a
settlement offer shall be deemed a rejection of any relief for the benefit of
the plaintiff. If the forum in which the proceeding is heard renders a judgment
at least as favorable to a party as its settlement offer, such party shall be
deemed the prevailing party for purposes of this Section.
(f) If any proceeding is commenced between the parties to settle any
dispute, neither Landlord nor Tenant shall permit its attorneys to engage in any
dilatory conduct. At the conclusion thereof and regardless of the outcome, the
attorneys appearing of record for both parties shall be required to submit
themselves to the judge or other adjudicator for a review of their conduct
during the proceeding. If any such attorney is found to have engaged in
dilatory conduct, that attorney shall agree to perform up to 10 hours of
community or pro bono service, as directed by the judge or adjudicator.
(g) If Landlord commences any summary proceeding (or equivalent) or an
action for nonpayment of Rent, Tenant shall not interpose any non-mandatory
counterclaim of any nature or description in the proceeding or action, provided
that this prohibition shall not prevent Tenant from raising any appropriate
defense in such proceeding or action and any such underlying claim shall be
preserved for any subsequent action commenced by Tenant against Landlord.
Tenant and Landlord both waive a trial by jury of any or all issue arising in
any action or proceeding between the parties under this Lease.
(h) All the terms and provisions of this Lease shall be binding upon and,
except as prohibited or limited by Section 16, inure to the benefit of the
parties hereto and their respective heirs, legal representatives, successors and
assigns.
(i) In no event shall this Lease be recorded. If Tenant records this
Lease in violation of the terms hereof, such action shall be deemed an event of
default.
(j) Time shall be of the essence regarding the payment of Rent and, if
Tenant is granted (by express provision of this Lease) any option to extend or
shorten the Term or expand or reduce the size of the Premises, time shall be of
the essence regarding the exercise by Tenant of any such options.
(k) Tenant shall assume and pay to Landlord at the time of paying the rent
any excise, sales, use, gross receipts or other taxes (other than a net income
or excise profits tax) which may be imposed on or measured by such Rent or may
be imposed on or account for this Lease (including utilities and other services
specially or separately billed or supplied to Tenant) and which Landlord may be
required to pay or collect under any Laws now in effect or hereafter enacted.
Tenant shall also assume and pay all taxes on the value of Tenant's leasehold
improvements in excess of Landlord's standard improvements.
(l) If more than one person or entity executes this Lease as Tenant, each
such person or entity shall be jointly and severally liable for observing and
performing each of the terms, covenants, conditions and provisions to be
observed or performed by Tenant.
<PAGE>
[Map]
<PAGE>
[Map]
<PAGE>
RULES AND REGULATIONS
1. The sidewalks, entrances, passages, courts and stairways of the
Building shall not be obstructed or used for any purpose other than ingress and
egress to and from the tenant's premises.
2. Nothing shall be attached to the outside walls or windows of the
Building. No curtains, blinds, shades, or screens shall be used in connection
with any exterior window or door of the tenant's premises, except as Landlord
designates as Building standard.
3. No sign, advertisement, object, notice or other lettering shall be
exhibited, inscribed, painted or affixed on any part of the outside, or inside
if visible from the outside, of the tenant's premises or the Building without
the prior consent of Landlord.
4. The restrooms and other plumbing fixtures shall not be used for any
purposes other than those for which they were constructed. No tenant shall
bring or keep any inflammable, combustible, explosive or hazardous fluid,
material, chemical or substance in or about the tenant's premises without
Landlord's prior consent.
5. No tenant shall mark, paint, nail, tape or drill into any part of the
Building except the premises, and then only with the prior consent of Landlord.
No tenant shall install any resilient tile or similar floor covering in the
tenant's premises except in a manner approved by Landlord.
6. No bicycles, vehicles or animals of any kind shall be brought into the
tenant's premises (except as may be required by handicapped persons). No
cooking shall be done or permitted in the Building by any tenant without the
approval of Landlord, except as is customary for general office purposes (such
as the use of microwave ovens and coffee machines). No tenant shall cause any
unusual or objectionable odors to emanate from the tenant's premises.
7. No tenant shall create, or permit to be created, any nuisance, or
interfere with other tenants or occupants of the Building or neighboring
buildings or premises.
8. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows, nor shall any changes be made in locks or the mechanism
thereof. Each tenant shall, upon the termination of its tenancy, deliver to
Landlord all keys of stores, offices and restrooms obtained by such tenant.
9. Landlord shall have the right to prohibit any advertising by any
tenant which, in Landlord's reasonable opinion, impairs the reputation of the
Building.
10. If the tenant's premises become infested with vermin, such tenant, at
its sole cost and expense, shall cause its premises to be exterminated, from
time to time, to the satisfaction of Landlord, and shall employ such
exterminators therefor as shall be approved by Landlord.
11. No premises shall be used, or permitted to be used for lodging or
sleeping, or for any illegal purpose.
12. The requirements of tenants will be attended to only upon application
at the office of the Building Manager. Building employees shall not be required
to perform any work outside of their regular duties, unless under specific
instructions from the office of Building Manager.
13. Canvassing, soliciting and peddling in the Building are prohibited and
each tenant shall cooperate in seeking their prevention.
14. In the delivery or receipt of merchandise, freight or other matter,
only hand trucks or other means of conveyance equipped with rubber tires, rubber
side guards and such other safeguards as Landlord may require shall be used.
15. With respect to work being performed by a tenant in its premises with
the approval of Landlord, the
<PAGE>
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tenant shall refer all contractors, contractors' representatives and
installation technicians to the Building Manager for its supervision, approval
and control prior to the performance of any work or services. This provision
shall apply to all work performed in the Building including installation of
telephones, electrical devices and attachments.
16. Each tenant and all of Tenant's Representatives shall observe and
comply with the driving and parking signs and markers on the Land and the Office
Park and Landlord shall not be responsible for any damage to any vehicle towed
because of noncompliance with parking regulations.
17. No radio or television antenna, loudspeaker, music system or other
device shall be installed on the roof or exterior walls of the Building or on
common walls with adjacent tenants.
18. No material shall be placed in the trash boxes or receptacles in the
Building unless such material may be disposed of in the ordinary and customary
manner of removing and disposing of trash and garbage and will not result in a
violation of any Laws governing such disposal. All garbage and refuse disposal
shall be made only through entryways provided for such purposes and at such
times as Landlord shall designate.
19. If the Building is equipped with elevators, at least one elevator
shall remain in service at all times. Landlord may designate a specific
elevator for use as a service elevator.
20. Tenant shall pay to Landlord on demand the costs incurred by Landlord
for extra or unusual cleaning required because of the condition or nature of the
Premises.
21. If Tenant requires climate control at any time after Normal Business
Hours, Landlord shall use reasonable efforts to furnish such service upon
reasonable notice from Tenant, and Tenant shall pay Landlord's charges therefor
on demand.
22. No vending machines of any kind shall be installed in the tenant's
premises, except by Landlord upon the tenant's request. Only Landlord may
install vending machines in the Building and Landlord shall receive all of the
revenue derived therefrom.
<PAGE>
EXPENSE ESCALATION
EXPENSE CONTRIBUTION
ESCALATION. The Base Rent does not include any amount reflecting taxes on the
Land, the Building and other improvements on the Land (collectively the
Property) or the cost of operations and maintenance of the Property. In order
that the Rent payable throughout the Term shall reflect any such taxes and cost,
the parties agree as follows:
1. DEFINITIONS
(a) REAL ESTATE TAXES: (1) all general and special taxes, assessments,
duties and levies, if any, payable (adjusted after protest or litigation, if
any) for any part of the Term, exclusive of penalties or discounts, on the
Property; (2) any service, user or license fees or taxes, or any taxes which
shall be levied on the rentals of the Building in addition to or in lieu of any
of the foregoing in whole or in part; and (3) the reasonable expenses of
contesting the amount or validity of any such taxes, charges or assessments,
such expense to be applicable to the period of the item contested.
(b) OPERATING EXPENSES: all expenses paid or incurred by Landlord or on
Landlord's behalf in respect of the management, repair, operation and
maintenance of the Property, including: (1) utilities; (2) rent, casualty,
liability and fidelity insurance; (3) cleaning, snow and ice removal, and
security services; (4) landscaping; (5) alterations and improvements to the
Property made by reason of the Laws or the requirements of insurance bodies; (6)
management fees or, if an independent property manager is not employed by
Landlord, a sum which is not in excess of the then prevailing rates for
management fees of other comparable buildings in the area in which the Building
is located; (7) capital improvements, replacements or additions to the Property
made during the Term which Landlord reasonably projects will reduce Operating
Expenses, but only to the extent of the projected reduction for each relevant
calendar year; (8) reasonable administrative expenses; (9) expenses (including
real estate taxes) attributable to the Property as part of an Office Park (if
applicable); and (10) all other charges properly allocable to the repair,
operation and maintenance of the Building in accordance with generally accepted
accounting principles. Operating Expenses shall not include expenses for any
capital repairs, replacements or improvements (except as provided above);
depreciation; expenses (other than Operating Expenses) for which Landlord is
reimbursed; brokerage commissions, advertising expenses and expenses of
renovating space incurred in procuring new tenants; interest on and
amortization of debts; and any cost or expense representing an amount paid to a
related or affiliated person or entity which is in excess of the amount which
would be paid in the absence of such relationship.
(c) If during any calendar year the Building is not fully occupied or if
any tenant of the Building (other than Tenant) furnishes to itself any services
which would otherwise have been furnished by Landlord, Operating Expenses shall
be adjusted to the expiration of each calendar year as if the Building were 95
percent occupied during the entire year and as if Landlord had furnished such
services. "Fully occupied" shall be defined as occupancy of 95 percent or more
of the rentable area of the Building.
2. TOTAL EXPENSES.
Tenant shall pay Landlord an amount equal to Tenant's Proportionate Share
of the sum of the Real Estate Taxes and the Operating Expenses for each calendar
year during the Term (the sum is referred to as the Total Expenses). Tenant's
Proportionate Share of the total Expenses shall be prorated as necessary for the
first and last calendar years of the Term if the Commencement Date or
Termination Date are other than the first or last day of the year, respectively.
3. CURRENT PAYMENTS AND ADJUSTMENT.
(a) In order to provide for current payments on account of Total Expenses
Tenant shall pay as additional rent, together with Monthly Installments of Base
Rent, an amount equal to Tenant's Proportionate Share of the Total Expenses due
for the ensuing 12 months (as reasonably estimated by Landlord from time to
time) in 12 equal monthly installments commencing on the first day of the month
following the month in which Landlord notifies Tenant of the amount.
(b) On or before April 1 of each calendar year (or as soon thereafter as
is practical), Landlord shall deliver to Tenant a statement (certified by an
officer of Landlord) of Tenant's Proportionate Share of the Total Expenses for
the preceding calendar year. If Tenant's Proportionate Share of the actual
Total Expenses for the previous calendar year exceeds the aggregate of the
estimated monthly payments made by Tenant for that year, Tenant shall within 10
days of receipt of the
<PAGE>
-2-
statement, pay Landlord such excess as additional rent. If the aggregate
exceeds Tenant's Proportionate Share of the actual Total Expenses, then Landlord
shall credit against Tenant's next ensuing monthly installment or installments
of the Rent an amount equal to the difference until the credit is exhausted.
4. TERMINATION.
(a) Landlord may at any time after the end of the Term give Tenant notice
of Landlord's reasonable estimate of Tenant's Proportionate Share of the Total
Expenses for the calendar year in which the Term ends. Tenant shall within 30
days after receipt of such notice pay Landlord the amount specified.
Adjustments shall thereafter be made in accordance with this Section.
(b) If a credit is due from Landlord at the end of the Term or at the time
of adjustment, Tenant shall be entitled to receive the amount of the credit in
the form of payment from Landlord, provided that Landlord may, in lieu of such
payment, apply the credit against any Rent which is due but not paid on that
date. No interest or penalties shall accrue on any amounts which Landlord is
obliged to credit or pay to Tenant by reason of this Rider.
5. STATEMENTS.
Each statement given by Landlord pursuant to this Rider shall be conclusive
and binding upon Tenant unless within 60 days after receipt of the statement
Tenant shall notify Landlord that it disputes the correctness of the statement,
specifying the particular respects in which it is claimed to be incorrect.
Pending resolution of the dispute, Tenant shall pay additional rent in
accordance with the statement but such payment shall be without prejudice to
Tenant's position. If the dispute is determined in Tenant's favor, Landlord
shall immediately credit Tenant the amount of Tenant's overpayment of additional
rent resulting from compliance with Landlord's statement. If resolution of the
dispute indicates that Tenant underpaid, Tenant shall immediately pay Landlord
the amount of such underpayment (no interest shall be due thereon, provided
Tenant paid all additional rent due in accordance with this Rider). Landlord
shall grant Tenant reasonable access to Landlord's books and records for the
purpose of verifying the Total Expenses.
<PAGE>
WORK LETTER
Landlord and Tenant agree as follows:
1. (a) Landlord shall prepare the Premises (the Work) in accordance with
the Plans (hereinafter defined). Landlord shall prepare a preliminary layout
with Tenant's cooperation and for Tenant's approval. Tenant's failure to
approve or disapprove the layout within 5 days of its receipt by Tenant shall
be deemed as approval. Upon approval of the layout Landlord shall prepare
working drawings adequate in detail to perform the Work (together with the
preliminary layout, the drawings are referred to as the Plans). Tenant's
failure to approve or disapprove the drawings within 5 days of their receipt
by Tenant shall be deemed as approval. Tenant shall not unreasonably
withhold its approval of the Plans or any part thereof. Any programming or
interior design services or unreasonable or excessive revisions to the Plans
required by Tenant shall be at Tenant's sole cost and expense and shall be
considered a Tenant delay.
(b) Except as set forth in this Work Letter, Landlord has no other
agreement with Tenant and has no other obligation to do any other work with
respect to the Premises.
2. If Landlord further agrees to do, at Tenant's request and upon
submission by Tenant (at Tenant's sole cost and expense) of all necessary
drawings, plans and specifications, any other work in addition to the Work
described in Section 1 hereof, such other work shall be done at Tenant's sole
cost and expense as a Tenant's extra. Prior to commencing any such other work
requests by Tenant, Landlord shall submit to Tenant written estimates of the
cost of such other work. If Tenant shall fail to approve said estimates within
5 days from the receipt thereof, the same shall be deemed disapproved in all
respects by Tenant and Landlord shall not be authorized to proceed thereon.
Tenant agrees to pay to Landlord promptly upon being billed therefor, at any
time and from time to time, the cost of all such other work together with 15
percent of said cost for Landlord's profit and overhead.
3. Landlord, at Landlord's discretion, may permit Tenant and Tenant's
agents to enter the Premises prior to the Commencement Date in order that Tenant
may do such other work as may be required by Tenant to make the Premises ready
for Tenant's use and occupancy. If Landlord permits such entry prior to the
Commencement Date, such permission is conditioned upon Tenant and Tenant's
Representatives working in harmony and not interfering with Landlord and its
agents, contractors and employees in doing Landlord's work in the Premises or
for other tenants and occupants of the Building. If at any time such entry
shall cause or threaten to cause disharmony or interference, Landlord shall have
the right to withdraw such permission upon 24 hours notice to Tenant. Tenant
agrees that any such entry into and occupation of the Premises shall be deemed
to be under all of the provisions of the Lease except as to the covenant to pay
Base Rent, and Landlord shall not be liable in any way for any injury, loss or
damage which may occur to any of Tenant's work and installations made in the
Premises or to properties placed therein prior to the commencement of the Term,
the same being at Tenant's sole risk.
4. (a) Landlord shall provide Tenant an allowance (the Allowance) which
shall be applied to the cost of Work and Plans and which shall be an amount up
to the product of (1) the usable square footage of the Premises (measured by
Landlord in accordance with ANSI 765.1-1980 as published by BOMA International),
multiplied by (2) the Square Foot Allowance, as defined in Section 4(b). If the
cost of the Work and Plans exceeds the Allowance, Tenant shall pay such excess
as additional rent within 20 days after demand therefor.
(b) the Square Foot Allowance shall be: $8.00.
<PAGE>
Attachment 7
Plans and Specifications of Leasehold Improvements and Tenant Layout will be
attached upon completion.
<PAGE>
LEASE AGREEMENT
[Translation]
This Agreement is made as of February 29, 1996 by and between Wu-hsiang Lin
(hereinafter called "Party A") and Novellus Systems Taiwan (hereinafter called
"Party B") for the lease of property.
ARTICLE 1 SUBJECT OF THE LEASE
(1) Party A shall lease one unit of the property which it owns at S/F-3 295,
Section 2 Kuang Fu Road, Hsinchu, to Party B for office use. The location
is shown in the attachment and the interior is as in its current condition.
The total area of lease is 78.36 pings.
(2) ____parking spots numbered ___ at basement___ of the same building as the
premises concerned shall be leased along with the premises for parking
purposes. The location is shown in the attachment and the condition is as
the current one.
ARTICLE 2 TERM
This Agreement shall be a term of two years from March 1, 1996 to February 28,
1998 and terminated at its expiry and shall not be renewed unless agreed to in
writing by Party A.
ARTICLE 3 RENTAL
(1) The monthly rental of the premises of the first year shall be NT$74,442,
with $950 per ping.
(2) The rental of the parking spots of the first year shall be NT$__________.
(3) Upon the execution of this Agreement, Party B shall issue 12 cheques as
payment of the total rental of NT$893,304 to Party A. Each period of rental
payment shall comprise one month. If any of the cheques is dishonored, a
late charge of 1% of the monthly rental due shall be payable to Party A for
each day the cheque is dishonored. If the honoring of the cheque is delayed
for up to ten days, Party A may terminate the Agreement and discontinue the
water and power supply of the premises, in which case Party B shall have no
objection
-1-
<PAGE>
and shall immediately vacate the premises and pay off the outstanding
rental, late charge, other fees due and compensation for Party A's losses.
ARTICLE 4 DEPOSIT
(1) Party B shall pay a deposit of NT$223,326 to Party A upon the execution of
the Agreement. Any deposit left after Party B vacates and returns the
premises and after any outstanding rental and payment for damage to the
premises or payment due form Party B pursuant to the Agreement but not
paid is deducted at the expiry of the lease shall be refunded to Party B
free of interest.
(2) Party B shall neither claim to pay the rental with the deposit nor use the
receipt of the deposit as guarantee of any liability during the lease.
ARTICLE 5 COMMON LAND AND FACILITIES
(1) Common land and facilities shall include passageways, lift lobby,
stairwells, lavatories, kitchen and electricity room of the building.
(2) Party A shall have free access to the above area and may use the above
facilities, provided it shall not place objects, install additional
residential facilities or perform any act that impedes the common use of
such area and facilities.
(3) Party B shall be liable for any damage incurred from its improper use of
the common area and facilities.
(4) Party B shall apply to the Directorate General of Telecommunications for
connection of telephone lines at its own cost using the lines and sockets
preinstalled by Party A.
(5) Party B shall comply with regulations pertaining to the use of the premises
and parking spots such as Residents' Convention or Building Management
Regulations.
ARTICLE 6 WATER AND ELECTRICITY BILLS, TAX AND MANAGEMENT FEE
(1) During the lease, Party B shall bear the water and electricity bills,
telephone bills, common facilities cost, business tax and other costs
incurred from use of the premises by the lessee.
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(2) The property tax and income tax on the lease shall be borne by Party A.
(3) Party B shall pay a management fee to the management committee of the
building on schedule.
(4) Upon the execution of the agreement, Party A shall collect and deliver a
total management fund of $11,754, with $150 per ping, to the management
committee of the Empire Trade Building as working fund for the management
of the building, and shall return such fund to Party B free of interest
upon Party B's vacating the premises.
ARTICLE 7 DECORATION AND RENOVATION
If it is necessary for Party B to install facilities or production equipment
within the premises, it shall obtain the prior written consent of Party A,
provided the structure of the construction shall not be affected. All costs
incurred shall be borne by Party B. Upon the extinguishment of the lease, the
original condition shall be borne by Party B. Upon the extinguishment of the
lease, the original condition shall be restored by Party B except for items
accepted by Party A, and the premises shall not be damaged. If the original
condition is not restored by Party B within 15 days of the above
extinguishment, Party B agrees to abandon any facilities or equipment
installed thereby and have the original condition restored by Party A at
Party B's cost.
ARTICLE 8 RESTRICTIONS ON THE USE OF THE PREMISES
Party B shall use the premises with the care of a good administrator and shall
not perform the following business or acts:
(1) The premises shall not be used for residential, factory and kitchen
purposes, and no act against sanitation, safety, public order and peace
shall be committed.
(2) Neither contraband shall be placed nor illegal business operated.
(3) Electrical appliances of excessive voltage shall not be used or high
voltage electrical facilities or neon lights shall not be installed
without authorization, the original design of the electrical facilities
or lines shall not be altered.
(4) Operation, experimentation or storage of dangerous goods is not allowed on
the premises; no such goods or weapons shall be allowed on the premises.
(5) The lessee shall not stick or hang any advertisements or signboards on the
outer wall or on either side of the glass panes of the premises so that the
overall
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appearance of the building will be maintained.
(6) Party B shall not sublet, lend, offer or provide in any disguised manner
for use the premises of parking spots in part or in whole to a third party
except a branch company or an affiliate of Party B acknowledged by Party A.
ARTICLE 9 DAMAGES
Party B shall preserve intact the premises and common facilities and shall be
responsible for repair of or compensation for any damage, whether caused on
purpose or cased by negligence, unless such is caused by FORCE MAJEURE such as
natural disasters. If the damage is incurred by an unrelated third party, Party
A shall pursue the liability for repair.
ARTICLE 10 RETURN OF THE PREMISES
(1) Upon the expiry of the lease or termination of the agreement, Party B shall
immediately return the premises and restore them to their original
condition. If it defers returning or refuse to return the premises, Party A
may claim a penalty from Party B at five times the monthly rental until the
premises are returned.
(2) If Party B does not renew the agreement at the expiry of the term, it
shall immediately vacate and return to Party A the premises and parking
spots under this agreement and shall not claim relocation fee,
renovation fee or other costs from Party A.
(3) If the parking spots are still occupied by vehicles upon the termination of
the lease, Party A may directly tow away such vehicles. The cost incurred
therefrom shall be deducted from the deposit. Party A shall not be liable
for damage caused to Party B's vehicles during the tow.
ARTICLE 11 TERMINATION OF THE AGREEMENT BEFORE EXPIRY
If either party desires to terminate the agreement before the expiry of the
lease, it shall notify the other party two months in advance and seek consent
from the other party and unconditionally agree for the other party to deduct
half of the total deposit as termination pay.
ARTICLE 12 DEFAULT
If Party B is in default of any of the terms and conditions hereunder, Party A
shall
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notify Party B in writing that improvement shall be made within a
prescribed period, otherwise the lease agreement shall be immediately
terminated, the water and power supply originally available to Party B
shall be cut off and Party B shall not be allowed to park its vehicles
inside and shall pay an amount equivalent to the deposit to Party A as
punitive damages.
ARTICLE 13 RENTAL ADJUSTMENT
Party B agrees to the right of Party A to increase the rental of the premises
and parking spots at the expiry of the first year of lease, provided the
adjustment shall be within 15% (inclusive of 15%) of the rental of the preceding
year and the same for all units and parking spots on the same floor in order to
be fair.
ARTICLE 14 PRIOR NOTIFICATION OF LEASE TERM
(1) Party B shall notify Party A of its desire to or not to renew the agreement
after it expires two months before the expiry. If Party B desires to renew
the agreement, it shall seek the consent of Party A to the lease the above
notification and executes a new agreement in writing with Party A before
continuing to use the premises and parking spots.
(2) Notices of both parties shall be made in writing and served at the address
stated herein.
ARTICLE 15
Both parties shall strictly comply with the agreement and resolve any dispute
through negotiation in good faith. In case of a lawsuit, both parties shall
submit themselves to the sole jurisdiction of the Hsinchu District Court in the
first instance.
ARTICLE 16 COPIES
This Agreement shall be executed in duplicate, each to be held by both parties
as evidence.
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<PAGE>
LESSOR (PARTY A): Wu-hsiang Lin
I.D. No: F105990445
Responsible person:
Address 4/F, 8, Lane 10, Section 2 Minsbeng Road, Lin 17, Chich
Shou Li, Panchiao, Taipei County
Telephone: (035) 726-188
LESSEE (PARTY B): Novellus Systems Taiwan
Uniform invoice no: 84897212
Responsible person: Tsong-hsin Chan
Address: 5/F-1, 295, Section 2 Kuang Fu Road, Hsinchu
Telephone: (035) 730-550
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<PAGE>
LEASE AGREEMENT
[Translation]
This Agreement is made as of February 29, 1996 by and between Wen-yi Li
(hereinafter called "Party A") and Novellus Systems Taiwan (hereinafter called
"Party B") for the lease of property.
ARTICLE 1 SUBJECT OF THE LEASE
(1) Party A shall lease one unit of the property which it owns at S/F-1 295,
Section 2 Kuang Fu Road, Hsinchu, to Party B for office use. The location
is shown in the attachment and the interior is as in its current condition.
The total area of lease is 82.72 pings.
(2) ____parking spots numbered ___ at basement___ of the same building as the
premises concerned shall be leased along with the premises for parking
purposes. The location is shown in the attachment and the condition is as
the current one.
ARTICLE 2 TERM
This Agreement shall be a term of two years from March 1, 1996 to February 28,
1998 and terminated at its expiry and shall not be renewed unless agreed to in
writing by Party A.
ARTICLE 3 RENTAL
(1) The monthly rental of the premises of the first year shall be NT$74,448,
with $900 per ping.
(2) The rental of the parking spots of the first year shall be NT$__________.
(3) Upon the execution of this Agreement, Party B shall issue 12 cheques as
payment of the total rental of NT$893,376 to Party A. Each period of rental
payment shall comprise one month. If any of the cheques is dishonored, a
late charge of 1% of the monthly rental due shall be payable to Party A for
each day the cheque is dishonored. If the honoring of the cheque is delayed
for up to ten days, Party A may terminate the Agreement and discontinue the
water and power supply of the premises, in which case Party B shall have no
objection and shall immediately vacate the premises and pay off the
outstanding rental,
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<PAGE>
late charge, other fees due and compensation for Party A's losses.
ARTICLE 4 DEPOSIT
(1) Party B shall pay a deposit of NT$223,344 to Party A upon the execution of
the Agreement. Any deposit left after Party B vacates and returns the
premises and after any outstanding rental and payment for damage to the
premises or payment due form Party B pursuant to the Agreement but not
paid is deducted at the expiry of the lease shall be refunded to Party B
free of interest.
(2) Party B shall neither claim to pay the rental with the deposit nor use the
receipt of the deposit as guarantee of any liability during the lease.
ARTICLE 5 COMMON LAND AND FACILITIES
(1) Common land and facilities shall include passageways, lift lobby,
stairwells, lavatories, kitchen and electricity room of the building.
(2) Party A shall have free access to the above area and may use the above
facilities, provided it shall not place objects, install additional
residential facilities or perform any act that impedes the common use of
such area and facilities.
(3) Party B shall be liable for any damage incurred from its improper use of
the common area and facilities.
(4) Party B shall apply to the Directorate General of Telecommunications for
connection of telephone lines at its own cost using the lines and sockets
preinstalled by Party A.
(5) Party B shall comply with regulations pertaining to the use of the premises
and parking spots such as Residents' Convention or Building Management
Regulations.
ARTICLE 6 WATER AND ELECTRICITY BILLS, TAX AND MANAGEMENT FEE
(1) During the lease, Party B shall bear the water and electricity bills,
telephone bills, common facilities cost, business tax and other costs
incurred from use of the premises by the lease.
(2) The property tax and income tax on the lease shall be borne by Party A.
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<PAGE>
(3) Party B shall pay a management fee to the management committee of the
building on schedule.
(4) Upon the execution of the agreement, Party A shall collect and deliver a
total management fund of $12,408, with $150 per ping, to the management
committee of the Empire Trade Building as working fund for the
management of the building, and shall return such fund to Party B free of
interest upon Party B's vacating the premises.
ARTICLE 7 DECORATION AND RENOVATION
If it is necessary for Party B to install facilities or production equipment
within the premises, it shall obtain the prior written consent of Party A,
provided the structure of the construction shall not be affected. All costs
incurred shall be borne by Party B. Upon the extinguishment of the lease, the
original condition shall be borne by Party B. Upon the extinguishment of the
lease, the original condition shall be restored by Party B except for items
accepted by Party A, and the premises shall not be damaged. If the original
condition is not restored by Party B within 15 days of the above
extinguishment, Party B agrees to abandon any facilities or equipment
installed thereby and have the original condition restored by Party A at
Party B's cost.
ARTICLE 8 RESTRICTIONS ON THE USE OF THE PREMISES
Party B shall use the premises with the care of a good administrator and shall
not perform the following business or acts:
(1) The premises shall not be used for residential, factory and kitchen
purposes, and no act against sanitation, safety, public order and peace
shall be committed.
(2) Neither contrabands shall be placed nor illegal business operated.
(3) Electrical appliances of excessive voltage shall not be used or high
voltage electrical facilities or neon lights shall not be installed
without authorization the original design of the electrical facilities
or lines shall not be altered.
(4) Operation, experimentation or storage of dangerous goods is not allowed on
the premises; no such goods or weapons shall be allowed on the premises.
(5) The lessee shall not stick or hang any advertisements or signboards on the
outer wall or on either side of the glass panes of the premises so that the
overall appearance of the building will be maintained.
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<PAGE>
(6) Party B shall not sublet, lend, offer or provide in any disguised manner
for use the premises or parking spots in part or in whole to a third party
except a branch company or an affiliate of Party B acknowledged by Party A.
ARTICLE 9 DAMAGES
Party B shall preserve intact the premises and common facilities and shall be
responsible for repair of or compensation for any damage, whether caused on
purpose or caused by negligence, unless such is caused by FORCE MAJEURE such as
natural disasters. If the damage is incurred by an unrelated third party, Party
A shall pursue the liability for repair.
ARTICLE 10 RETURN OF THE PREMISES
(1) Upon the expiry of the lease or termination of the agreement, Party B shall
immediately return the premises and restore them to their original
condition. If it defers returning or refuse to return the premises, Party A
may claim a penalty from Party B at five times the monthly rental until the
premises are returned.
(2) If Party B does not renew the agreement at the expiry of the term, it
shall immediately vacate and return to Party A the premises and parking
spots under this agreement and shall not claim relocation fee, renovation
fee or other costs from Party A.
(3) If the parking spots are still occupied by vehicles upon the termination of
the lease, Party A may directly tow away such vehicles. The cost incurred
therefrom shall be deducted from the deposit. Party A shall not be liable
for damage caused to Party B's vehicles during the tow.
ARTICLE 11 TERMINATION OF THE AGREEMENT BEFORE EXPIRY
If either party desires to terminate the agreement before the expiry of the
lease, it shall notify the other party two months in advance and seek consent
from the other party and unconditionally agree for the other party to deduct
half of the total deposit as termination pay.
ARTICLE 12 DEFAULT
If Party B is in default of any of the terms and conditions hereunder, Party A
shall notify Party B in writing that improvement shall be made within a
prescribed period, otherwise the lease agreement shall be immediately
terminated, the water and power
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<PAGE>
supply originally available to Party B shall be cut off and Party B shall not be
allowed to park its vehicles inside and shall pay an amount equivalent to the
deposit to Party A as punitive damages.
ARTICLE 13 RENTAL ADJUSTMENT
Party B agrees to the right of Party A to increase the rental of the premises
and parking spots at the expiry of the first year of lease, provided the
adjustment shall be within 15% (inclusive of 15%) of the rental of the preceding
year and the same for all units and parking spots on the same floor in order to
be fair.
ARTICLE 14 PRIOR NOTIFICATION OF LEASE TERM
(1) Party B shall notify Party A of its desire to or not to renew the agreement
after it expires two months before the expiry. If Party B desires to renew
the agreement, it shall seek the consent of Party A to the lease the above
notification and executes a new agreement in writing with Party A before
continuing to use the premises and parking spots.
(2) Notices of both parties shall be made in writing and served at the address
stated herein.
ARTICLE 15
Both parties shall strictly comply with the agreement and resolve any dispute
through negotiation in good faith. In case of a lawsuit, both parties shall
submit themselves to the sole jurisdiction of the Hsinchu District Court in the
first instance.
ARTICLE 16 COPIES
This Agreement shall be executed in duplicate, each to be held by both parties
as evidence.
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<PAGE>
LESSOR (PARTY A): Wen-yi Li
I.D. No: F121358276
Responsible person:
Address 42-2, Lane 285, Section 1 Wenhua Road, Lin 7,
Kungkuan Li, Panchiao, Taipei County
Telephone: (035) 726-188
LESSEE (PARTY B): Novellus Systems Taiwan
Uniform invoice no: 84897212
Responsible person: Tsong-hsin Chan
Address: 5/F-1, 295, Section 2 Kuang Fu Road, Hsinchu
Telephone: (035) 730-550
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<PAGE>
DISTRIBUTION AGREEMENT
This Agreement, made and entered into this 1st day of January, 1996 by and
between NOVELLUS SYSTEMS, INC. having its principal place of business at 3970
North First Street, San Jose, California 95134, U.S.A. (hereinafter referred to
as "Manufacturer") and SEKI TECHNOTRON CORPORATION, having its principal place
of business at 5-6-30, Kiba, Koto-ku, Tokyo 135, Japan (hereinafter referred to
as "Distributor").
WITNESSETH:
WHEREAS, Manufacturer is engaged in the business of the manufacture of various
equipment including the Product hereinafter defined and
WHEREAS, Distributor is engaged in the business of the sales, service and
marketing of merchandise, and
WHEREAS, Distributor is desirous of being appointed exclusive distributor for
all customers except for the customers assigned to Nippon Novellus (see Exhibit
"A") for all Novellus Systems, Inc. CVD products in the Territory hereinafter
defined.
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained, Manufacturer and Distributor do hereby agree to the terms and
conditions set forth below.
1. DISTRIBUTORSHIP, PRODUCTS AND TERRITORY
1.01 EXCLUSIVE DISTRIBUTORSHIP - Manufacturer hereby grants to Distributor
during the term of this Agreement the exclusive right to sell and
service all Products in the Territory to all accounts except those
specified in Exhibit "A" in accordance with the terms and conditions
herein set forth. All inquiries and/or orders received by Manufacturer
from Distributor's customers within the Territory or for delivery in the
Territory to such customers shall be transmitted to Distributor for
handling.
1.02 PRODUCTS - The term Products as used herein shall refer to all CVD
products manufactured by Novellus Systems, Inc., including parts hereof,
as well as all accessories, attachments, spare parts and renewal parts
therefore. Manufacturer shall have the right to modify, alter, improve,
change or discontinue any or all of the Products covered by this
Agreement upon thirty (30) days notice to Distributor. In the event
Manufacturer manufactures any new or additional Products similar to or
related to the Products hereunder, said Products, shall be added to the
Products covered by the Agreement as long as there is no conflict of
Distributors Product line.
1.03 TERRITORY - Territory as used herein shall mean the Country of Japan.
2. ORDERS AND SHIPMENT
2.01 Distributor may place orders through its subsidiary SEOCAL, 361 Lytton
Avenue, Palo Alto, CA 94301-1431 for the Products with Manufacturer.
Distributor shall set forth the quantity of Products, the specifications
therefor, and the desired delivery date. Manufacturer, after its
acceptance of the purchase order, shall sell the Products to Distributor
for resale in the Territory. Manufacturers subsidiary (Nippon Novellus)
shall place orders directly with Manufacturer without involvement of
Distributor.
<PAGE>
2.02 The products sold to Distributor by Manufacturer shall be shipped FOB
Destination to the destination in the territory designated in the
purchase order ("Destination") (i.e., title shall pass at Destination),
unless otherwise agreed to by the parties. Manufacturer shall bear risk
of loss for the products until delivery to Distributor at Destination.
Manufacturer will pay all freight charges to Destination and invoice
such charges to Distributor, however Distributor's subsidiary SEOCAL
reserves the right to designate the freight company to be used by
Manufacturer. Distributor will take delivery at Destination and be
responsible for clearing the products through customs, and for all
customs and other fees. The parties hereto agree to cooperate for
purposes of obtaining all necessary export licenses and complying with
U.S. export laws.
2.03 Manufacturer and Distributor agree that an order for Manufacturer's
Product(s), that is designated as a Distributor's customer, can be
accepted by Manufacturer from a customer in the Territory that is tied
to a Volume Pricing Agreement negotiated by the Manufacturer.
Manufacturer agrees to pay Distributor a sales commission of 5% and a
service commission of 7% of the U.S. list price in lieu of Distributor
acting in their normal distribution role, assuming Distributor has
participated in the selling process and will be servicing the system
during start up and the warranty period.
2.04 When Manufacturer's sales and marketing personnel assigned to its
Japanese subsidiary perform the selling and servicing function at
specifically identified accounts (see Exhibit "A") its subsidiary,
Nippon Novellus, will bill directly to customers that which it sells and
services.
2.05 Distributor agrees to service the Products sold by it, unless any of
Distributor's accounts are transferred to Manufacturer, or
Manufacturer's designee, by mutual agreement of the parties hereto. In
addition, upon the mutual agreement of the parties hereto, Distributor
may service accounts other than Distributor's accounts. Any accounts
transferred under service contract or warranty will carry a prorated
portion of that service with the new servicing party.
2.06 When Manufacturer's personnel assigned to its Japanese subsidiary
perform the servicing function and Distributor's personnel perform the
selling function for those accounts specifically identified in the
Exhibit "A", Distributor will be responsible for Japanese customer
engineering special modification and system installation, Manufacturer
will be responsible for servicing the system once the system has been
accepted by the customer, and Distributor will forfeit its 7% service
commission.
2.07 Following accounts transfer (see Exhibit "A") Manufacturer agrees that
Nippon Novellus serves during start up and the warranty period on all
systems Distributor sold to the customers transferred. For those
systems serviced by Nippon Novellus for which a service commission (6%;
7% less 1% for installation) has been paid to Distributor, Distributor
will pay to Nippon Novellus a rebate. The rebate will be calculated by
taking the number of months for which Nippon Novellus has assumed the
warranty obligation divided by the warranty period (24 months) and
multiply by the amount of the commission.
3. PRICING AND TERMS OF PAYMENT
3.01 SALES PRICES - Attached hereto and made a part hereof as Exhibit "B" is
Manufacturer's List Price for the Products, parts and accessories. The
price to Distributor shall be eighty eight percent (88%) of the U.S.
Domestic List Price at any given point in time unless otherwise covered
by another provision of this Agreement. Said prices shall be subject to
change by Manufacturer from time to time by 3 months prior written
notice to Distributor; provided however, that no such
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<PAGE>
price increase shall affect purchase orders accepted by Manufacturer
prior to notification of Distributor of the price change by
Manufacturer. This price shall cover Distributor's sales and service of
the Product.
3.02 TERMS OF PAYMENT - Unless otherwise agreed by the parties, payment shall
be made by Distributor separately for each shipment per purchase order
accepted by Manufacturer. Unless otherwise agreed by the parties,
payment by Distributor to Manufacturer for Products shall be made in
full net forty-five (45) days from shipment date.
3.03 CURRENCY - Currency for payments covered by this Agreement shall be U.S.
Dollars.
4. MARKETING AND ADVERTISING
4.01 DISTRIBUTOR'S UNDERTAKING - Distributor shall exert its best efforts to
vigorously promote the sale of Products in the Territory during the term
of this Agreement and to develop a market demand for the same in the
Territory. Distributor shall advertise the Products throughout the
Territory in appropriate advertising media and in a manner insuring
proper and adequate publicity for the Products. Distributor shall
maintain a sales and service organization which can be best utilized for
the promotion of the sales of the Product, that is appropriate to the
customer base serviced by Distributor.
Given reasonable notice from Manufacturer or its Japanese subsidiary,
Nippon Novellus, Distributor shall arrange joint customer visits.
Manufacturer or its subsidiary, Nippon Novellus, has the right to
independently arrange customer visits, with prior notification to the
Distributor, that may not include representatives of Distributor.
Distributor shall not, without prior written consent of Manufacturer,
manufacture, sell, distribute or otherwise handle products which, in the
opinion of Manufacturer, are similar to or competitive with the Products
of Manufacturer. Failure to comply with the foregoing provision will
subject this Agreement to immediate termination.
Distributor shall not, without prior knowledge, approval and written
consent of Manufacturer, design or cause to be installed any
modification or change to the system hardware, software or process in
part or whole. Distributor shall not utilize or transfer Manufacturer's
process techniques or technologies to equipment or systems other than
those supplied by Manufacturer.
Distributor shall send at the Distributor's expense appropriate
personnel to required sales and service meetings scheduled by
Manufacturer and shall dispatch designated personnel to Manufacturer's
plant for specific Product and service training as is deemed necessary
to properly execute the sales and service functions envisioned in the
Agreement. Distributor shall arrange customer visits to Manufacturer's
facilities, provided Distributor has given Manufacturer adequate notice
thereof and Manufacturer has consented to any such visit.
4.02 SPARE PARTS - Distributor shall stock spare parts commensurate with the
number of systems both in and out of warranty installed by Distributor
in the Territory. Parts will be purchased from Manufacturer's
subsidiary (Nippon Novellus). If Manufacturer discontinues or obsoletes
any part, then Distributor may return the discontinued or obsolete parts
purchased from Manufacturer or its subsidiary for credit in the amount
of one hundred (100%) percent of invoiced amount. If Distributor does
not elect to purchase replacements for any such obsolete parts, then
Distributor will receive a credit equal to 80% of the invoiced amount
for any such obsolete invoiced parts
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<PAGE>
against amounts thereafter payable to Novellus hereunder for other spare
parts and Products. Parts on consignment will be ordered from
Manufacturer's subsidiary and shipped upon completion of a mutually
acceptable consignment agreement between Distributor and Manufacturer's
subsidiary.
4.03 TERRITORY DEMONSTRATION CENTER - Manufacturer's subsidiary (Nippon
Novellus), shall provide process demonstration facilities including, but
not limited to, fully functional system, test and evaluation equipment,
trained personnel and consumable items. For such services, Distributor
shall pay Nippon Novellus an annual retainer and a fee for each Demo.
ANNUAL RETAINER- Distributor will pay to Nippon Novellus an annual
retainer fee for 1996 of $300,000 by January 31, 1996. For years
subsequent to 1996, the annual retainer fee will be calculated by taking
the prior years fee and adding an amount equal to the prior years fee,
times the inflation rate announced by the Japanese Government for the
prior year. Such fee will be invoiced by Nippon Novellus when the
inflation rate is announced, and payable by Distributor upon receipt of
invoice.
DEMO FEE - Distributor shall pay a fee for each demo. Nippon Novellus
will provide a quote for the fee to Distributor based on estimated
material and labor hours required to complete the demo.
4.04 FAIRS AND EXHIBITIONS - Distributor agrees to participate in appropriate
industry exhibitions to exploit Product in the Territory. The cost of
the exhibitions and displays and the responsibility therefor shall be
borne by the Distributor. If Manufacturer and Distributor have a booth
together then they will negotiate a reasonable fee to be paid by each
party.
4.05 SERVICE PERSONNEL - Distributor shall maintain sufficient service
personnel as is necessary to properly perform the service and support
functions required for the installed systems. Distributor agrees to
provide Manufacturer with personnel plan for satisfying the service
requirements for installed systems during the term of this Agreement.
The parties agree that one field engineer for every three Concept One
systems in warranty and one field engineer for every five Concept One
systems not in warranty will provide sufficient personnel to service
Concept One installed systems. The parties also agree that one field
engineer for every Concept Two system in warranty will provide
sufficient personnel to service Concept Two installed systems.
4.06 DISTRIBUTOR'S GOAL - Distributor agrees that goals will be set mutually
by Manufacturer and Distributor yearly. The goals for calendar year
1995 through 1999 will be established by Manufacturer and Distributor in
January of each respective year.
4.07 PERFORMANCE EVALUATION - Manufacturer will conduct semiannual
performance evaluations of Distributor based upon Manufacturer's review
of major accounts, including MEC and Fujitsu. The criteria of this
performance evaluation will follow the guidelines as provided by
manufacturer and will include without limitation, criteria such as the
adequacy of personnel training, the level of service and support
provided to customers and the accomplishment of the goals as set forth
in Section 4.06. The criteria will be jointly established by
Distributor and Manufacturer on January of each year, and the
performance evaluations based on the established criteria will be
conducted the following July and January. In the event Manufacturer, in
its sole discretion, determines as a result of any performance
evaluation that Distributor has not met the established criteria,
Manufacturer shall have the right to transfer the accounts not meeting
this criteria to Nippon Novellus earlier than the original schedule.
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5. CONFIDENTIALITY OF INFORMATION AND MATERIALS
Distributor agrees to use best efforts to hold in strict confidence and
not to disclose to others or use, either before or after termination of
the Agreement, any technical or business information, manufacturing
technique, process experimental work, trade secret or other confidential
matter relating to Products. Distributor shall, upon request (and upon
termination of this Agreement without request), deliver to Manufacturer
any and all drawings, notes, documents and materials received from
Manufacturer or developed in conjunction with the sale or service of
Products.
6. WARRANTY
6.01 Manufacturer warrant that the Product shall be free from defect in
design, materials and workmanship for a period of twenty-four (24)
months from the date of delivery to the site of the customer subject to
Section 6.02. Manufacturer shall supply Distributor free of charge,
replacement parts necessary for the warranty servicing performed by
Distributor.
If Manufacturer requests return of defective goods subject to Section
6.02, Manufacturer shall pay all transportation charges for the return
of defective goods and all transportation and customs clearance charges
for the replacement of goods.
6.02 LIMITATION. MANUFACTURER'S LIABILITY UNDER THE WARRANTY SET FORTH IN
THIS SECTION 6 SHALL BE LIMITED TO EITHER (AT MANUFACTURER'S OPTION) A
REFUND OF THE CUSTOMER'S PURCHASE PRICE OR THE REPLACEMENT OF DEFECTIVE
GOODS. IN NO EVENT SHALL MANUFACTURER BE LIABLE FOR THE COST OF
PROCUREMENT OF SUBSTITUTED GOODS BY THE CUSTOMER OR FOR ANY SPECIAL,
CONSEQUENTIAL OR INCIDENTAL DAMAGES FOR BREACH OF WARRANTY. EXCEPT FOR
THE EXPRESS WARRANTY SET FORTH IN THIS SECTION 6, MANUFACTURER GRANTS NO
OTHER WARRANTIES, AND EXPRESSLY DISCLAIMS ANY OTHER WARRANTIES, EXPRESS
OR IMPLIED, BY STATUTE OR OTHERWISE, REGARDING THE PRODUCTS, THEIR
FITNESS FOR ANY PURPOSE, THEIR QUALITY, THEIR MERCHANTABILITY, OR
OTHERWISE.
Distributor is responsible for maintaining an inventory of consigned
warranty parts and to pay for any reported shortages. As defined in the
Consigned Inventory Agreement executed in connection herewith,
Distributor shall report to Manufacturer monthly on the inventory of
consigned warranty parts.
7. PRODUCTS LIABILITY
Manufacturer shall maintain at all times during the effective term of
the Agreement at its own expense product liability insurance providing
limits of not less than $1,000,000 per person and not less than
$2,000,000 per occurrence on all Products sold under this Agreement.
All such insurance policies shall designate Distributor as an additional
insured, or such policies shall contain coverage protecting Distributor
as a vendor of the products. Manufacturer shall furnish Distributor
with satisfactory evidence of such insurance coverage.
Furthermore, Manufacturer shall indemnify Distributor from any and all
damages, expenses and obligations which Distributor may incur or sustain
by reason of the purchase or sale of any defective Products, except as
to the extent that the defect is attributable to modifications made by
the Distributor.
5
<PAGE>
8. REPORTS
Distributor agrees to furnish to Manufacturer monthly reports
regarding sales to customers, lost business reports, forecasts of
future sales to prospective customers in the Territory, and
competitive information. Distributor also agrees to furnish every
Friday a brief weekly status report on sales and support activities so
Manufacturer can have a sense of the market and how well Distributor
is achieving the sales objectives mutually set forth.
9. INTELLECTUAL PROPERTY
9.01 USE OF NAME - Manufacturer agrees that Distributor may, during the
term of this Agreement, use all trademarks, the name of the Products,
and the term "Exclusive Distributor in Japan for Manufacturer" in
advertising and promotional materials only in connection with sales of
Products to Distributor's customers in accordance with the terms set
forth herein. The Products are offered for sale and are sold by
Manufacturer subject in every case to the condition that such sale
does not convey any license express or implied, to manufacturer,
duplicate or otherwise copy or reproduce any of the Products or any
part thereof. Distributor shall take appropriate steps with its
customers to inform them of and to assure compliance with the
restrictions contained in this Section 9.01. Distributor agrees that
Manufacturer owns all right, title, and interest in the product lines
that include the Products and in all of Manufacturer's patents,
designs, copyrights, trademarks, trade names, inventions, know-how,
and trade secrets except the matters known to the public relating to
the design, manufacture, operation and service of the Products. The
use by Distributor of any of the property rights described in this
Section 9.01 is authorized only for the purposes and during the period
set forth herein. Manufacturer further agrees that after termination
or the expiration of this Agreement, Distributor may use
Manufacturer's trademarks in connection with the sale of its remaining
inventory of Products for a period not to exceed one (1) year from the
date of termination or expiration of this Agreement so long as such
termination is not as a result of any default by Distributor in its
performance hereunder.
9.02 INDEMNIFICATION - In the event Distributor or its customer is served
with notice of alleged infringement of any patents, designs,
copyrights and trademarks arising from the sale of any of the
Products, Manufacturer shall, indemnify Distributor or such customer
on the terms set forth in this Section 9.02. Distributor agrees that
Manufacturer has the right to defend or at its option to settle, and
Manufacturer agrees, at its own expense, to defend or at its option to
settle, any action, claim, suit or proceeding brought against
Distributor or its customer on the issue of infringement of any United
States or Japanese patent, copyright, or trademark by the Products
sold hereunder or the use thereof, subject to the limitations
hereinafter set forth. Manufacturer shall have sole control of any
such action, claim, suit or proceeding and settlement negotiations
relating thereto, and Manufacturer agrees to pay subject to the
limitations hereinafter set forth, any final judgment entered against
Distributor or its customer on such issue in any claim action, claim
suit or proceeding defended by Manufacturer. Distributor agrees that
Manufacturer at its sole option shall be relieved of the foregoing
obligations unless Distributor or its customer notifies Manufacturer
promptly in writing of such action, claim, suit or proceeding and
gives Manufacturer authority to proceed as contemplated herein, and,
at Manufacturer's expense, gives Manufacturer proper and full
information and assistance to settle and/or defend any such action,
claim, suit or proceeding. If the Products, or any part thereof, are,
or in the opinion of Manufacturer may become, the subject of any
claim, action, suit or proceeding for infringement of any United
States or Japanese patent, copyright or trademark, or it is
adjudicatively determined that the Products, or any part thereof,
infringe any Untied States or Japanese patent, copyright or trademark,
or if the sale or use of the Products, or any part thereof, is, as a
result,
6
<PAGE>
enjoined, then Manufacturer may, at its option and expense either: (i)
procure for Distributor and its customers the right under such patent,
copyright or trademark to sell or use, as appropriate, the Products or
such part thereof; or (ii) replace the Products, or part thereof, with
other suitable Products or parts; or (iii) suitably modify the
Products, or part thereof; or (iv) if the use of the Products, or part
thereof, is prevented by injunction, remove the Products, or part
thereof, and refund the aggregate payments paid thereof by
Distributor's customer, less a reasonable sum for use and damage.
Manufacturer shall not be liable for any costs or expenses incurred
without its prior written authorization. Notwithstanding the
foregoing, Manufacturer assumes no liability for (i) infringements
covering completed equipment or any combination, method or process in
which any of the Products or parts thereof may be used but not
covering the Products or parts thereof when used alone; (ii) trademark
infringements involving any marking or branding not applied by
manufacturer or involving any marking or branding applied at the
request of Distributor; or (iii) infringements involving the
modification or servicing of the Products, or any part thereof, unless
such modification or servicing was performed by Manufacturer. The
foregoing provisions of this Section 9.02 state the entire liability
and obligation of Manufacturer and the exclusive remedy of Distributor
and its customers, with respect to any alleged infringement of
patents, copyrights, trademarks or other intellectual property rights
by the Products or any part thereof.
10. RELATIONSHIP OF PARTIES
The relationship between Manufacturer and Distributor shall not be
that of a principal and an agent, but shall be that of a seller and
purchaser, each acting as an independent contractor. Distributor
shall have no right or authority to (and shall not) incur, assume or
create, in writing or otherwise, any warranty, liability, or
obligation of any kind, express or implied, in the name of or on
behalf of Manufacturer. All sales and other agreements between
Distributor and its customers are Distributor's exclusive
responsibility.
11. OTHER PROVISIONS
11.01 When Seki requests technical assistance of Novellus or Nippon Novellus
the engineer must follow Seki's direction at that account.
11.02 In this regard, Novellus, Nippon Novellus and Seki agree not to hire
each other's employees without full mutual agreement.
12. ASSIGNMENT
Neither party shall assign or transfer any of its rights or
obligations under this Agreement in whole or in part to any
individual, firm or corporation without the prior written consent of
the other party.
13. TERM OF AGREEMENT
13.01 TERM AND RENEWAL - This Agreement becomes effective on the date
mentioned above and remains in effect until December 31, 1999. Either
party shall have the right thereafter to terminate this Agreement on
ninety (90) days notice to the other party.
7
<PAGE>
13.02 TERMINATION PROTECTION - In the event of termination of this
Agreement, (i) all Distributor backlog at the time of termination
shall ship per the terms of this Agreement and (ii) Manufacturer shall
pay to Distributor a sales commission rate of 5% of the net invoice
price at the shipment date for each system in the backlog and (iii)
Distributor shall service all systems during start up and the warranty
period on all backlog orders at the time of termination and (iv)
Manufacturer shall pay to Distributor a service commission rate of 7%
of the net invoice price for start up and warranty services at the
shipment date for each system in the backlog.
Upon request of Distributor, Manufacturer may repurchase after the
termination of the Agreement, all products including demonstration
units in hands of Distributor with good condition at the price equal
to that paid by Distributor for the inventory and at the depreciated
price for the demonstration units.
13.03 LIMITATION ON LIABILITY - Except as otherwise expressly provided
herein, in the event of termination by either party in accordance with
any of the provisions of this Agreement, neither party shall be liable
to the other, because of such termination, for compensation,
reimbursement or damages on account of the loss of prospective profits
or anticipated sales or on account of expenditures, investments,
leases or commitments in connection with the business or goodwill of
Manufacturer or Distributor. Termination shall not, however, relieve
either party of obligations incurred on or prior to the date of
termination.
14. EVENTS OF TERMINATION
14.01 In addition to the right of termination set forth in paragraph 13.01,
either party may terminate this agreement as follows:
14.011 BANKRUPTCY, ETC. - By either party immediately and without
prior written notice to the other party in the event that proceedings
in bankruptcy or insolvency are instituted by or against the other
party, or a receiver is appointed, or if any substantial part of the
assets of the other party is the object of attachment, sequestration
or other type of comparable proceeding, and such proceeding is not
vacated or terminated within thirty (30) days after its commencement
or institution.
14.012 DEFAULT - By either party immediately if one party defaults in
the performance of any of the provisions of this Agreement and does
not cure the default within thirty (30) days after receipt of written
notice given by the other party.
14.013 LICENSES - By either party immediately if either party is
unable to obtain or renew any permit, license, patent or other
governmental approval necessary to carry on the business contemplated
under this Agreement.
14.02 LIMITATION ON TERMINATION RIGHTS - The parties hereto expressly agree
that none of the rights set forth in the second paragraph of Section
13.02 shall apply to a termination pursuant to this Section 14.
14.03 SURVIVAL - In the event of a termination pursuant to Section 13 or
this Section 14, Section 3.01 (Sales Prices), 3.03 (Terms of Payment,
5 (Confidentiality, 6 (Warranty), 9 (Intellectual Property), 10
(Relationship of Parties), 13 (Term), 14 (Events of Termination), 16
(Export-Import Laws), 17 (Limitation of Liability), 18 (Governing Law)
and 19 (Arbitration) shall
8
<PAGE>
survive such termination for a period of three (3) years, and for a
period of ten (10) years on Section 7 (Products Liability) after
termination of this agreement.
15. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties
hereto and supersedes all previous negotiations, agreements and
commitments in respect thereto, and shall not be released, discharged,
changed or modified in any manner, except by instruments signed by
duly authorized officers or representative of each of the parties
hereto. Notwithstanding the foregoing, the parties intend the
agreement between them in effect prior to the commencement of the term
of this Agreement to continue to apply to define the rights and
obligations of the parties with respect to all sales made prior to the
commencement date of this Agreement.
16. EXPORT-IMPORT LAWS - Distributor shall, at its own expense, pay all
import and export licenses and permits and take all other actions
required to accomplish the export and import of the Products purchased
by Distributor. Distributor understands the Manufacturer is subject
to regulation by agencies of the U.S. Government, including the U.S.
Department of Commerce, which prohibit export or diversion of certain
technical products to certain countries. Distributor warrants that it
will comply in all respects with the export and re-export restrictions
set forth in the export license for every Product shipped to
Distributor or its customers.
17. LIMITATION ON LIABILITY
MANUFACTURER'S LIABILITY ARISING OUT OF THIS AGREEMENT AND/OR SALE OF
THE PRODUCTS SHALL BE LIMITED TO THE AMOUNT PAID BY THE CUSTOMER FOR
THE PRODUCTS. IN NO EVENT SHALL MANUFACTURER BE LIABLE FOR COSTS OF
PROCUREMENT OF SUBSTITUTE GOODS. IN NO EVENT SHALL EITHER PARTY BE
LIABLE TO THE OTHER PARTY OR ANY OTHER ENTITY FOR ANY SPECIAL,
CONSEQUENTIAL, INCIDENTAL, OR INDIRECT DAMAGES, HOWEVER CAUSE, ON ANY
THEORY OF LIABILITY.
18. GOVERNING LAW
The validity and interpretation of the Agreement and of each clause
and part thereof shall be governed by the laws of the State of
California.
19. ARBITRATION
Any controversy arising between the parties in connection with this
Agreement, which cannot be amicably settled by the parties, shall be
referred to arbitration in accordance with the Agreement between the
Japan Commercial Arbitration Association and the American Arbitration
Association to facilitate the Use of Commercial Arbitration in Trade
between Japan and the United States of America dated September 16,
1952 and the decision of such arbitration proceeding shall be binding
and conclusive upon the parties hereto. Arbitration shall be
conducted in California if Distributor demands arbitration, and in
Tokyo, Japan if Manufacturer demands arbitration. The expense of any
such arbitration shall be decided as part of the arbitration
settlement.
9
<PAGE>
20. SEPARABILITY OF PROVISIONS
A judicial or administrative declaration in any jurisdiction on the
invalidity of any one or more of the provisions hereof shall not
invalidate the remaining provisions of this Agreement in that
jurisdiction, nor shall such declaration have any effect on the
validity or interpretation of the Agreement outside of that
jurisdiction.
21. WAIVER OF COMPLIANCE
Any failure by any party hereto to enforce at any time any term or
condition under this Agreement shall not be considered a waiver of
that party's rights thereafter to enforce each and every term and
condition of the Agreement.
22. NOTICES
All notices and other communication in connection with this Agreement
shall be in writing and shall be sent to the respective parties at the
following addresses, or to such other addresses as may be designated
by the parties in writing from time to time by registered or certified
mail or facsimile:
TO MANUFACTURER: NOVELLUS SYSTEMS, INC.
3970 NORTH FIRST STREET
SAN JOSE, CA 95134 U.S.A.
TO DISTRIBUTOR: SEKI TECHNOTRON CORPORATION
5-6-30 KIBA, KOTO-KU
TOKYO 135 JAPAN
In WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective duly authorized representative.
/s/Peter Hanley
-----------------------------------------------------------
MANUFACTURER: NOVELLUS SYSTEMS, INC.
Name: Peter Hanley
Title: Executive Vice President, Sales and Marketing
Date: February 1, 1996
/s/ Shu Seki
-----------------------------------------------------------
DISTRIBUTOR: SEKI TECHNOTRON CORPORATION
Name: Shu Seki
Title: President
Date: February 1, 1996
-----------------------------------------------------------
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<PAGE>
EXHIBIT "A"
Nippon Novellus shall assume the service and sales responsibilities from Seki
Technotron Corporation for the accounts and upon the dates specified below:
ACCOUNTS SERVICE TRANSFER* SALES TRANSFER*
-------- ----------------- ---------------
Sony 6/1995 1/1996
Fujitsu 6/1999 1/2000
MEC 6/1999 1/2000**
NSI 6/1996 1/1997
Nittetsu 6/1997 1/1998
Rohm 6/1997 1/1998
Yamaha 6/1999 1/2000
All Others 6/1999 1/2000
*Determination of the exact date of the transfer will be coordinated
between the appropriate sales or service group of Distributor and Manufacturer
based upon the circumstances existing at that time. Manufacturer reserves the
right to transfer any of these accounts at an earlier date if Distributor's
performance does not meet the criteria set forth under Section 4.07 of the
Distribution Agreement.
**Distributor must increase sales for this account either directly or
indirectly by furnishing sales information and coordination to Novellus in order
for Novellus to book orders outside territory. In the event sales for this
account do not increase year over year, Novellus maintains the right to
accelerate transition of this account.
11
<PAGE>
<TABLE>
<CAPTION>
SELECTED CONSOLIDATED FINANCIAL DATA
- -----------------------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Consolidated Statements of Income Data:
Net sales $373,732 $224,679 $113,543 $69,800 $80,014
Gross profit 216,147 128,453 64,479 38,907 47,419
Net income 82,543 44,932 16,115 6,240 16,777
Net income per share $ 4.82 $ 2.72 $ 1.10 $ 0.44 $ 1.15
Shares used in per share calculations 17,137 16,495 14,670 14,342 14,546
</TABLE>
<TABLE>
<CAPTION>
(IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheets Data:
Cash, cash equivalents,
and short-term investments $149,799 $136,539 $ 48,622 $ 42,988 $ 40,542
Working capital 226,257 183,581 83,486 65,276 66,566
Total assets 364,688 265,000 113,117 97,334 94,654
Long-term obligations, excluding
current portions - - - 763 985
Shareholders' equity 272,782 214,214 105,461 82,681 80,897
Cash dividends per share - - - - -
</TABLE>
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
- --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
NET SALES
Net sales were $373,732,000, $224,679,000 and $113,543,000 in 1995, 1994, and
1993 respectively. The increases of 66.3% from 1994 to 1995 and 97.9% from 1993
to 1994 were caused by continued robust worldwide demand for semiconductor
equipment. resulting in significant growth in all product lines. Growth was
particularly strong in our Concept Two products, which are continuing to
penetrate key accounts and state-of-the-art wafer fabrication facilities
throughout the world. Approximately 78.4% and 80.4% of the sales growth in 1995
and 1994 was due to increased shipments and approximately 21.6% and 19.6% in
1995 and 1994 was due to higher average unit prices. The higher average unit
prices were primarily caused by an increased proportion of sales coming from the
higher priced Concept Two product lines. International sales, which include
sales by the Company's Japanese subsidiary were 54.4%, 53.6%, and 43.6% of total
sales in 1995, 1994, and 1993, respectively. Strong demand in the Far East was
the primary cause of the increases in international sales. The Company expects
international sales to continue to represent a significant portion of its
overall net sales.
GROSS PROFIT
Gross profit was $216,147,000, $128,453,000 and $64,479,000 in 1995, 1994,
and 1993, respectively. The increases were due to the higher net sales. As
a percentage of net sales, gross profit was 57.8%, 57.2%, and 56.8% in
1995, 1994, and 1993, respectively. The increases in gross profit as a
percentage of net sales were primarily due to increased manufacturing
efficiencies and material cost reductions on our Concept Two product line,
as well as overall efficiencies and lower fixed costs per system due to the
higher volume of systems manufactured and shipped each year as compared to
the prior year.
RESEARCH AND DEVELOPMENT
Research and development expenses were $41,009,000, $26,012,000, and
$16,860,000 in 1995, 1994, and 1993, respectively. The increases were due
to continued increased spending on new product development. As a percentage
of net sales, research and development expenses were 11.0%, 11.6%, and
14.8% in 1995, 1994, and 1993, respectively, as sales grew faster than the
spending increases. The Company plans to continue to invest in new products
and increase research and development spending in absolute dollars.
SELLING, GENERAL, AND ADMINISTRATIVE
Selling, general, and administrative expenses were $59,347,000,
$38,744,000, and $24,263,000 in 1995, 1994, and 1993,
respectively. As a percentage of net sales, selling, general, and
administrative expenses were 15.9%, 17.2%, and 21.4%,
respectively. The Company has invested in personnel, facilities,
and other infrastructure to support the rapidly growing sales,
particularly in the Far East.
Gross profit, research and development expenses, and selling,
general, and administrative expenses were affected throughout the
periods indicated by changes in expenses for the Company's bonus
program. Amounts charged for bonuses in 1995, 1994, and 1993 were
$8,418,000, $6,247,000 and $3,047,000, respectively.
NET INTEREST INCOME
Net interest income was $9,274,000, $4,382,000, and $1,425,000 in 1995, 1994 and
1993, respectively. The increases were due to additional cash, cash equivalents,
and short-term investments resulting from cash generated from operations and
proceeds from the Company's common stock offering in 1994, as well as generally
higher interest rates.
PROVISION FOR INCOME TAXES
The provision for income taxes reflects an effective tax rate of
34% in 1995 and 1994, and 35% in 1993. The decrease from 1993 to
1994 is due primarily to additional tax benefits realized by the
Company's Foreign Sales Corporation.
At December 31, 1995, the Company has recognized a deferred tax
asset of $16,666,000 related to temporary differences between the
book and tax basis of assets and liabilities. It is the opinion
of management that it is more likely than not that this asset
will be realized by offset against the recognized deferred tax
liability of $386,000 and by carryback against previously paid
income taxes.
REPURCHASE OF COMMON STOCK
During 1995, the Company repurchased 641,000 shares of
common stock. This repurchase resulted in an increase to
earnings per share for 1995 of approximately $0.02.
18
<PAGE>
FOREIGN CURRENCY ACCOUNTING
For all foreign operations except Japan, the functional currency is the U.S.
Dollar. Gains or losses, which result from the process of remeasuring foreign
currency financial statements into U.S. Dollars, are immaterial and included in
net income except for Japan. To reflect the changing nature of the operation of
the Company's Japanese subsidiary, on January 1, 1995 the Company changed the
functional currency of this subsidiary to the Japanese Yen. Accordingly,
translation gains and losses related to the Japan subsidiary are included as a
component of shareholders' equity subsequent to January 1, 1995.
FOREIGN EXCHANGE CONTRACTS
The Company conducts its business in various foreign currencies.
As a result, it is subject to the transaction exposures that
arise from foreign exchange rate movements between the dates that
foreign currency transactions are recorded (i.e., export sales)
and the date they are consummated (i.e., cash receipts in foreign
currencies). The Company enters into forward foreign exchange
contracts primarily to hedge against the short-term impact of
foreign currency fluctuations of intercompany accounts payable
denominated in U.S. Dollars recorded by the Japanese subsidiary.
The Company also enters into forward foreign exchange contracts
to buy and sell foreign currencies as economic hedges of the
Company's remaining foreign net monetary asset position where the
U.S. Dollar is the functional currency. In 1995, these hedging
contracts were denominated primarily in pound sterling. The
maturities of all the forward foreign exchange contracts are
generally short-term in nature. Because the impact of movements
in currency exchange rates on forward foreign exchange contracts
offsets the related impact on the underlying items being hedged,
these financial instruments do not subject the Company to
speculative risk that would otherwise result from changes in
currency exchange rates. Net foreign currency gains and losses
have not been material.
OTHER ISSUES
In 1995, the Financial Accounting Standards Board released the
Statement of Financial Accounting Standards No. 121 (SFAS 121)
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of". SFAS 121 requires recognition of impairment
of long lived assets in the event the net book value of such assets
exceeds the future undiscounted cash flows attributable to such
assets. SFAS 121 is effective for fiscal years beginning after
December 15, 1995. Adoption of SFAS 121 is not expected to have a
material impact on the Company's financial condition or results of
operations.
The Company accounts for its stock option plans and its
employee stock purchase plan in accordance with provisions
of the Accounting Principles Board's Opinion No. 25 (APB 25)
"Accounting For Stock Issued to Employees". In 1995, the
Financial Accounting Standards Board released the Statement
of Financial Accounting Standard No. 123 (SFAS 123)
"Accounting for Stock Based Compensation". SFAS 123 provides
an alternative to APB 25 and is effective for fiscal years
beginning after December 15, 1995. The Company expects to
continue to account for its employee stock plans in
accordance with the provisions of APB 25. Accordingly, SFAS
123 is not expected to have any material impact on the
Company's financial condition or results of operations.
CAUTIONARY STATEMENTS
Certain of the statements contained in this annual report are forward looking
statements that involve a number of risks and uncertainties. These risks and
uncertainties could cause actual results to differ materially from those
described herein and include the following:
MARKET RISK
The Company's business depends predominantly on capital expenditures of
semiconductor manufacturers, which, in turn, depend on the current and
anticipated market demand for integrated circuits and products utilizing
integrated circuits. The semiconductor industry has historically been very
cyclical and has experienced periodic downturns, which have had a material
adverse effect on the semiconductor industry's demand for semiconductor
processing equipment, including equipment manufactured and marketed by the
Company. No assurance can be given that the Company's net sales and operating
results will not be adversely affected if downturns or slowdowns in the rate of
capital investment in the semiconductor industry occur in the future. In
addition the semiconductor equipment industry is highly competitive, and subject
to rapid change and new products and enhancements.
COMPETITION
The Company faces substantial competition in each of the markets
in which it sells its products. Certain of the Company's
competitors are larger, and have greater resources, financial and
otherwise, than the Company. There can be no assurance that the
Company will be successful, or as successful as its competitors,
in selecting, developing, manufacturing, and marketing its new
products, or enhancing its existing products. Failure to
successfully develop new products could materially adversely
affect the Company's business, financial condition, and results
of operations.
19
<PAGE>
PATENTS AND PROPRIETARY RIGHTS
There has also been substantial litigation regarding patent and other
intellectual property rights in semiconductor related industries. The
Company is currently involved in such litigation (see Note 9 to the
consolidated financial statements); and, although it is not aware of
any infringement by its products of any patent or proprietary rights
of others, it could become involved in additional litigation in the
future. Although the Company does not believe the outcome of the
current litigation will have a material impact on the Company's
financial condition or results of operations, no assurances can be
given that this litigation or future litigation will not have such an
impact.
INTERNATIONAL OPERATIONS
Export sales accounted for approximately 37%, 41%, and 32% of net
sales in 1995, 1994, and 1993, respectively. The Company
anticipates that export sales will account for a significant
portion of net sales in the foreseeable future. As a result, a
significant portion of the Company's sales will be subject to
certain risks, including tariffs and other barriers, difficulties
in staffing and managing foreign subsidiary operations,
difficulties in managing distributors, potentially adverse tax
consequences, and the possibility of difficulty in accounts
receivable collection. The Company is also subject to the risks
associated with the imposition of legislation and regulations
relating to the import or export of semiconductor products. The
Company cannot predict whether quotas, duties, taxes, or other
charges or restrictions will be implemented by the United States
or any other country upon the importation or exportation of the
Company's products in the future. There can be no assurance that
any of these factors or the adoption of restrictive policies will
not have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, sales
of systems shipped by the Company's Japanese subsidiary are
denominated in Japanese Yen. The company sells the systems to its
Japanese subsidiary in U.S. Dollars. It then enters into forward
foreign exchange contracts to hedge against the short-term impact
of foreign currency fluctuations of intercompany accounts payable
denominated in U.S. Dollars recorded by the Japanese subsidiary.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations and capital resources through cash flow
from operations, sale of equity securities, and borrowings. The Company's
primary sources of funds at December 31, 1995 consisted of $149,799,000 of cash,
cash equivalents, and short-term investments. In addition at December 31, 1995
there was $10,000,000 available under bank lines of credit that expire at
various dates through April 30, 1997. At December 31, 1995 approximately
$7,369,000 was outstanding under these bank lines of credit which bear interest
at the banks' prime lending rates.
Cash and cash equivalents increased $14,127,000 from $45,987,000 to
$60,114,000 at December 31, 1995. Net cash provided by operating
activities increased by $59,309,000 primarily due to net income of
$82,543,000, depreciation and amortization of $7,649,000, and
increases in accounts payable ($18,021,000), income taxes payable
($9,484,000), and accrued warranty ($7,001,000). These amounts were
partially offset by increases in accounts receivable ($51,774,000),
inventories ($12,137,000), and prepaid taxes and other current
assets ($9,538,000). The increases are generally due to the higher
levels of business activity in 1995 over 1994, as evidenced by the
66.3% increase in net sales. The increase in accounts receivable
was affected by an increase in days sales outstanding in
receivables, from 58 days at December 31, 1994 to 86 days at
December 31, 1995. This increase is primarily due to the expansion
of business in Japan, as receivables there typically have longer
collection cycles. Inventory turnover (based on year-end balances)
continued a positive trend, increasing from 3.0 turns in 1994 to
3.4 turns in 1995. In 1995, the Company used $18,997,000 of cash
for investing activities, primarily for capital expenditures to
increase manufacturing capacity, support new product development,
and expand other facilities to support the higher levels of
business activity. Net cash used for financing activities in 1995
was $26,185,000, as expenditures under the Company's common stock
repurchase plan ($35,732,000) were partially offset by purchases
under the stock option and employee stock repurchase plan
($6,696,000).
In addition to capital expenditures, property and equipment
increased approximately $2,561,000 in 1995 from the net
transfer of customer evaluation units and other equipment
from inventory. Approximately $3,961,000 was transferred
from inventory to property and equipment and $1,400,000 was
transferred from property and equipment to inventory. The
transfers were made at historical cost, which was less than
net realizable value. As a result, no write-down would have
been required in absence of such a transfer.
The Company believes that funds generated from operations,
existing cash balances, and borrowing capacity will be
sufficient to meet the Company's requirements through 1996.
20
<PAGE>
STOCK INFORMATION
Novellus' common stock is traded on the Nasdaq Stock Market and is quoted on the
Nasdaq National Market under the symbol NVLS. The following table sets forth the
high and low closing prices as reported by the Nasdaq National Market for the
periods indicated:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
1995 High Low
- ------------------------------------------------------------
<S> <C> <C>
First Quarter $ 65 1/2 $42 3/4
Second Quarter 72 1/4 55 3/4
Third Quarter 87 1/4 66 7/8
Fourth Quarter 74 1/4 47 3/4
- ------------------------------------------------------------
1994 High Low
- ------------------------------------------------------------
First Quarter $ 45 $31 3/4
Second Quarter 38 1/4 25 3/4
Third Quarter 48 1/2 33 1/4
Fourth Quarter 56 1/2 41 3/4
</TABLE>
The Company has not paid cash dividends on its common stock
since inception, and its Board of Directors presently plans
to reinvest the Company's earnings in its business.
Accordingly it is anticipated that no cash dividends will be
paid to holders of common stock in the foreseeable future.
Additionally, certain covenants set forth in the Company's
bank lines of credit limit the Company's ability to pay
dividends. As of December 31, 1995 there were 591 holders of
record of the Company's common stock.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $373,732 $224,679 $113,543
Cost of sales 157,585 96,226 49,064
----------------------------------------------------------
Gross profit 216,147 128,453 64,479
Operating expenses
Research and development 41,009 26,012 16,860
Selling, general and administrative 59,347 38,744 24,263
----------------------------------------------------------
Total operating expenses 100,356 64,756 41,123
----------------------------------------------------------
Operating income 115,791 63,697 23,356
Interest:
Income 9,501 4,670 1,531
Expense (227) (288) (106)
----------------------------------------------------------
Net interest 9,274 4,382 1,425
----------------------------------------------------------
Income before provision for income taxes 125,065 68,079 24,781
Provision for income taxes 42,522 23,147 8,666
----------------------------------------------------------
Net income $82,543 $44,932 $16,115
----------------------------------------------------------
----------------------------------------------------------
Net income per share $4.82 $2.72 $1.10
----------------------------------------------------------
----------------------------------------------------------
Shares used in per share calculations 17,137 16,495 14,670
----------------------------------------------------------
----------------------------------------------------------
SEE ACCOMPANYING NOTES.
</TABLE>
21
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 60,114 $ 45,987
Short-term investments 89,685 90,552
Accounts receivable, net of allowance for doubtful
accounts of $2,196 in 1995 and $1,761 in 1994 112,088 60,590
Inventories 36,779 27,279
Deferred taxes 16,666 8,291
Prepaid and other current assets 2,831 1,668
--------------------------------------------
Total current assets 318,163 234,367
Property and equipment:
Machinery and equipment 41,916 31,261
Furniture and fixtures 2,587 1,801
Leasehold improvements 23,947 11,875
--------------------------------------------
68,450 44,937
Less accumulated depreciation and amortization 23,745 15,528
--------------------------------------------
44,705 29,409
Other assets 1,820 1,224
--------------------------------------------
Total assets $ 364,688 $ 265,000
--------------------------------------------
--------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current obligations under lines of credit $ 7,369 $ 4,518
Accounts payable 32,866 14,845
Accrued payroll and related expenses 15,578 10,119
Accrued warranty 15,261 8,260
Other accrued liabilities 9,580 6,979
Income taxes payable 11,252 6,065
--------------------------------------------
Total current liabilities 91,906 50,786
Commitments and contingencies
Shareholders' equity:
Preferred stock, no par value; 10,000 shares
authorized, no shares issued and outstanding - -
Common stock, no par value; 40,000 shares authorized,
15,942 issued and outstanding at December 31, 1995
(16,169 issued and outstanding at December 31, 1994) 118,423 112,532
Retained earnings 153,595 101,682
Cumulative translation adjustments 764 -
--------------------------------------------
Total shareholders' equity 272,782 214,214
--------------------------------------------
--------------------------------------------
Total liabilities and shareholders' equity $ 364,688 $ 265,000
--------------------------------------------
--------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
22
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows provided by operating activities:
Net income $ 82,543 $ 44,932 $ 16,115
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 7,649 3,973 3,716
Changes in operating assets and liabilities:
Accounts receivable (51,774) (24,294) (18,504)
Inventories (12,137) (11,946) (6,643)
Deferred taxes and prepaid and other current assets (9,538) (6,857) (824)
Accounts payable 18,021 6,622 4,102
Accrued payroll and related expenses 5,459 5,852 1,781
Accrued warranty 7,001 4,860 1,470
Other accrued liabilities 2,601 4,274 953
Income taxes payable 9,484 7,244 3,497
----------------------------------------------------------
Total adjustments (23,234) (10,272) (10,452)
----------------------------------------------------------
Net cash provided by operating activities 59,309 34,660 5,663
Cash flows from investing activities:
Purchase of held-to-maturity debt securities (518,021) (128,565) (24,564)
Proceeds from the sale and maturity of
held-to-maturity debt securities 518,888 62,577 19,685
Capital expenditures (19,268) (6,900) (6,589)
(Increase) decrease in other assets (596) 58 695
----------------------------------------------------------
Net cash used for investing activities (18,997) (72,830) (10,773)
Cash flows from financing activities:
Principal payments under capital lease obligations - (38) (146)
Proceeds from lines of credit 2,851 38 2,862
Payment of long-term debt - - (801)
Common stock issued 6,696 60,099 4,601
Common stock repurchased (35,732) - (651)
----------------------------------------------------------
Net cash provided by (used for) financing activities (26,185) 60,099 5,865
----------------------------------------------------------
Net increase in cash and cash equivalents 14,127 21,929 755
Cash and cash equivalents at the beginning of the period 45,987 24,058 23,303
----------------------------------------------------------
Cash and cash equivalents at the end of the period $ 60,114 $ 45,987 $ 24,058
----------------------------------------------------------
----------------------------------------------------------
Supplemental disclosures:
Cash paid during the year for:
Interest $ 227 $ 287 $ 106
Income taxes 40,209 21,892 5,756
Other noncash changes:
Income tax benefits from employee stock plans 4,297 3,722 2,715
Systems transferred from inventory to property and equipment 3,961 8,803 3,268
Systems transferred from property and equipment to inventory 1,400 3,014 1,639
Transfers of securities from held-to-maturity to available-for-sale 145,265 - -
</TABLE>
SEE ACCOMPANYING NOTES.
23
<PAGE>
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
(IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK RETAINED TRANSLATION TOTAL SHAREHOLDERS'
SHARES AMOUNT EARNINGS ADJUSTMENT EQUITY
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992 13,684 $ 41,531 $ 41,150 $ - $ 82,681
Exercise of stock options 446 3,796 - - 3,796
Shares issued under employee stock
purchase plan 81 805 - - 805
Income tax benefits realized from
activity in employee stock plans - 2,715 - - 2,715
Common stock repurchased (44) (136) (515) - (651)
Net income - - 16,115 - 16,115
------------------------------------------------------------------------------------
Balance at December 31, 1993 14,167 48,711 56,750 - 105,461
Exercise of stock options 456 5,213 - - 5,213
Shares issued under employee stock
purchase plan 46 999 - - 999
Income tax benefits realized from
activity in employee stock plans - 3,722 - - 3,722
Stock offering 1,500 53,887 - - 53,887
Net income - - 44,932 - 44,932
------------------------------------------------------------------------------------
Balance at December 31, 1994 16,169 112,532 101,682 - 214,214
Exercise of stock options 372 5,230 - - 5,230
Shares issued under employee stock
purchase plan 42 1,466 - - 1,466
Income tax benefits realized from
activity in employee stock plans - 4,297 - - 4,297
Common stock repurchased (641) (5,102) (30,630) - (35,732)
Cumulative translation adjustment - - - 764 764
Net income - - 82,543 - 82,543
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
Balance at December 31, 1995 15,942 $ 118,423 $ 153,595 $ 764 $ 272,782
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
</TABLE>
SEE ACCOMPANYING NOTES.
24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
NOTE 1 BUSINESS AND NATURE OF OPERATIONS
- --------------------------------------------------------------------------------
NATURE OF OPERATIONS
Novellus Systems, Inc. is a leading manufacturer of chemical vapor deposition
(CVD) systems used in the fabrication of integrated circuits. The Company's
products are differentiated by their ability to provide simultaneous solutions
to productivity and wafer quality problems facing the worldwide semiconductor
manufacturing industry. Novellus serves the global semiconductor manufacturing
market from its corporate headquarters in San Jose, California and through
subsidiaries in Europe and the Far East.
CONCENTRATIONS OF CREDIT RISK
The Company uses financial instruments that potentially subject it to
concentrations of credit risk. Such instruments include cash equivalents,
short-term investments, accounts receivable, and financial instruments used
in hedging activities. The Company invests its cash in cash deposits, money
market funds, commercial paper, certificates of deposit, readily marketable
debt securities, or medium term notes. The Company places its investments
with high-credit-quality financial institutions and limits the credit
exposure from any one financial institution or instrument. To date, the
Company has not experienced losses on these investments. The Company
performs ongoing credit evaluations of its customers' financial condition
and generally requires no collateral. The Company has an exposure to
nonperformance by counterparties on the foreign exchange contracts used in
hedging activities. These counterparties are large international financial
institutions and to date, no such counterparty has failed to meet its
financial obligations to the Company. The Company does not believe there is
a significant risk of non-performance by these counterparties because the
Company continuously monitors its positions and the credit ratings of such
counterparties and the amount of agreements and contracts it enters into
with any one party.
CONCENTRATIONS OF OTHER RISKS
Certain of the statements contained in this annual report are forward looking
statements that involve a number of risks and uncertainties. These risks and
uncertainties could cause actual results to differ materially from those
described herein and include the following:
MARKET RISK
The Company's business depends predominantly on capital expenditures of
semiconductor manufacturers, which, in turn, depend on the current and
anticipated market demand for integrated circuits and products utilizing
integrated circuits. The semiconductor industry has historically been very
cyclical and has experienced periodic downturns, which have had a material
adverse effect on the semiconductor industry's demand for semiconductor
processing equipment, including equipment manufactured and marketed by the
Company. No assurance can be given that the Company's net sales and
operating results will not be adversely affected if downturns or slowdowns
in the rate of capital investment in the semiconductor industry occur in
the future. In addition, the semiconductor equipment industry is highly
competitive, and subject to rapid technological change and new products and
enhancements.
COMPETITION
The Company faces substantial competition in each of the markets in which
it sells its products. Certain of the Company's competitors are larger, and
have greater resources, financial, and otherwise, than the Company. There
can be no assurances that the Company will be successful or as successful
as its competitors, in selecting, developing, manufacturing and marketing
its new products, or in enhancing its existing products. Failure to
successfully develop new products could materially adversely affect the
Company's business, financial condition, and results of operations.
PATENTS AND PROPRIETARY RIGHTS
There has been substantial litigation regarding patent and other
intellectual property rights in semiconductor related industries. The
Company is currently involved in such litigation (see Note 9) and
although it is not aware of any infringement by its products of any
patents or proprietary rights of others, it could become involved in
additional litigation in the future. Although the Company does not
believe the outcome of the current litigation will have a material
impact on the Company's financial condition or results of operations,
no assurances can be given that this litigation or future litigation
will not have such an impact.
INTERNATIONAL OPERATIONS
Export sales accounted for approximately 37%, 41%, and 32% of net
sales in 1995, 1994, and 1993, respectively. The Company anticipates
that export sales will account for a significant portion of net sales
in the forseeable future. As a result, a significant portion of the
Company's sales will be subject to certain risks, including tariffs
and other barriers, difficulties in staffing and managing foreign
subsidiary operations, difficulties in managing distributors,
potentially adverse tax consequences, and the possibility of
difficulty in accounts receivable collection. The Company is also
subject to the risks associated with the imposition of legislation and
regulations related to the import or export of semiconductor products.
The Company cannot predict whether quotas, duties, taxes, or other
charges or restrictions will be
25
<PAGE>
implemented by the United States or any other country upon the
importation or exportation of the Company's products in the future.
There can be no assurance that any of these factors or the adoption of
restrictive policies will not have a material adverse affect upon the
Company's business, financial condition, and results of operations. In
addition, sales of systems shipped by the Company's Japanese
subsidiary are denominated in Japanese Yen. The Company sells the
systems to its Japanese subsidiary in U.S.Dollars. It then enters
into forward foreign exchange contracts to hedge against the short-
term impact of foreign currency fluctuations of intercompany accounts
payable denominated in U.S. Dollars recorded by the Japanese
subsidiary.
- --------------------------------------------------------------------------------
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries after elimination of all significant
intercompany accounts and transactions.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results inevitably will differ from those estimates and such differences
may be material to the financial statements.
REVENUE RECOGNITION
Net sales consist of system and spare part sales as well as revenues from
maintenance and service contracts. Revenue related to system and spare part
sales is recognized on shipment. Revenue related to maintenance and service
contracts is recognized ratably over the duration of the contracts.
Unearned maintenance and service contract revenue is immaterial and
included in accrued liabilities.
WARRANTY AND INSTALLATION
The Company generally warrants its systems for a period of up to 24 months
from shipment for material and labor to repair and service the system. A
provision for the estimated cost of installation and warranty is recorded
upon shipment.
CASH AND CASH EQUIVALENTS
For the purpose of the statement of cash flows, the Company
considers all highly liquid debt instruments with insignificant
interest rate risk and maturities of ninety days or less to be
cash equivalents.
SHORT TERM INVESTMENTS
The Company classifies its marketable debt and equity securities into
held-to-maturity and available-for-sale categories in accordance with
the provisions of the Statement of Financial Accounting Standards No.
115 (SFAS No. 115), "Accounting for Certain Instruments in Debt and
Equity Securities." Securities classified as available-for-sale are
reported at fair market value with the related unrealized gains and
losses included in retained earnings. Realized gains and losses and
declines in value of securities judged to be other than temporary are
included in net interest. Interest on all securities is included in
net interest.
INVENTORIES
Inventories are stated at the lower of cost (first-in, first out) or
market. Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
-----------------------------------------------------------------
DECEMBER 31, 1995 1994
-----------------------------------------------------------------
<S> <C> <C>
Purchased and spare parts $17,571 $14,238
Work-in-process 14,550 10,971
Finished goods 4,658 2,070
-----------------------------------------------------------------
$36,779 $27,279
-----------------------------------------------------------------
</TABLE>
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization
are provided mainly on the straight-line method over the following useful lives:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Machinery and equipment 5-8 Years
Furniture and fixtures 5-8 Years
Leasehold improvements and assets under capital lease Shorter of useful life or remaining lease term
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
In 1995, the Financial Accounting Standards Board released the Statement of
Financial Accounting Standards No. 121 (SFAS 121), "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of".
SFAS 121 requires recognition of impairment of long-lived assets in the event
the net book value of such assets exceeds the future undiscounted cash flows
attributable to such assets. SFAS 121 is effective for fiscal years beginning
after December 15, 1995. Adoption of SFAS 121 is not expected to have a material
impact on the Company's financial position or results of operations.
FOREIGN CURRENCY ACCOUNTING
The U.S. Dollar is the functional currency for all foreign operations
except Japan. Gains or losses, which result from the process of remeasuring
foreign currency financial statements into U.S. Dollars, are immaterial and
included in net income for all foreign operations except Japan. To reflect
the changing nature of the operation of the Company's Japanese subsidiary,
on January 1, 1995 the Company determined that the functional currency of
this subsidiary is the Japanese Yen. Accordingly, translation gains or
losses related to the Japan subsidiary are included as a component of
stockholders' equity subsequent to January 1, 1995.
FORWARD FOREIGN EXCHANGE CONTRACTS
Forward foreign exchange contracts are purchased primarily to
hedge sales orders denominated in yen as well as to protect the
value of investments in foreign subsidiaries. Gains and losses
on hedge contracts related to the yen sales orders are deferred
and included in other assets or liabilities, respectively. The
gains or losses on these contracts are included in income in the
year in which the related transaction takes place. Realized gains
and losses from the hedge contracts related to protecting the
value of its investments in foreign subsidiaries are included
in operations. The maturities of all of the forward exchange
contracts are generally short-term in nature.
NET INCOME PER SHARE
Net income per share is based on the weighted average common and
dilutive common equivalent shares outstanding during the period.
Stock options are considered common stock equivalents and are
included in the weighted average computation using the treasury
stock method.
ADVERTISING EXPENSES
The Company accounts for advertising costs as expenses in the period
in which they are incurred. Advertising expenses for 1995, 1994, and
1993 were $2,692,000, $1,164,000, and $923,000, respectively.
EMPLOYEE STOCK PLANS
The Company accounts for its stock option plans and its employee stock
purchase plan in accordance with the provisions of the Accounting
Principles Board's Opinion No. 25 (APB 25), "Accounting For Stock
Issued to Employees". In 1995, the Financial Accounting Standards
Board released the Statement of Financial Accounting Standard No. 123
(SFAS 123), "Accounting For Stock Based Compensation". SFAS provides
an alternative to APB 25 and is effective for fiscal years beginning
after December 15, 1995. The Company expects to continue to account
for its employee stock plans in accordance with the provisions of APB
25. Accordingly, SFAS 123 is not expected to have any material
impact on the Company's financial position or results of operations.
- --------------------------------------------------------------------------------
NOTE 3 FINANCIAL INSTRUMENTS
- --------------------------------------------------------------------------------
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK
As part of the Company's asset and liability management, the Company enters
into various types of transactions that involve financial instruments with
off-balance sheet risk. These instruments are entered into in order to
manage foreign exchange risk. The notional values, carrying amounts, and
fair values are as follows at December 31,:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1995 1994
NOTIONAL CARRYING ESTIMATED NOTIONAL CARRYING ESTIMATED
AMOUNT AMOUNT FAIR VALUE AMOUNT AMOUNT FAIR VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sell foreign currency, primarily yen $24,031 ($222) $2,257 $16,059 ($192) ($193)
</TABLE>
27
<PAGE>
The Company conducts its business in various foreign currencies. As a
result, it is subject to the transaction exposures that arise from foreign
exchange movements between the dates that foreign currency transactions are
recorded and the date they are consummated. The Company enters into forward
foreign exchange contracts primarily to hedge against the short-term impact
of foreign currency fluctuations of intercompany accounts payable
demominated in U.S. dollars recorded by the Company's Japanese subsidiary.
The Company also enters into forward foreign exchange contracts to buy and
sell currencies as economic hedges of the Company's remaining foreign net
monetary asset position of its subsidiaries where the U.S. Dollar is the
functional currency. In 1995, these hedging contracts were denominated
primarily in pounds sterling. The maturities of all the forward foreign
exchange contracts are generally short-term in nature. Because the impact
of movements in currency exchange rates on forward foreign exchange
contracts offsets the related impact on the underlying items being hedged,
these financial instruments do not subject the Company to speculative risk
that would otherwise result from changes in currency exchange rates. Net
foreign currency gains and losses have not been material.
SECURITIES HELD-TO-MATURITY AND AVAILABLE FOR SALE
Investments at December 31, which were all due in less than one
year consisted of the following (in thousands):
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
1995 1994
GROSS GROSS ESTIMATED GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE COST GAINS LOSSES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Available-for-Sale:
Institutional Money Market Funds $ 2,942 $ - $ - $ 2,942 $ - $ - $ - $ -
Commercial Paper 52,638 - - 52,638 - - - -
-----------------------------------------------------------------------------------------------
Amounts included in cash
and cash equivale 55,580 - - 55,580 - - - -
-----------------------------------------------------------------------------------------------
Commercial Paper 76,019 - - 76,019 - - - -
U.S. Treasury securities
and obligations of
U.S. Goverment Agencies 13,666 - - 13,666 - - - -
-----------------------------------------------------------------------------------------------
Amounts included
in short-term investments 89,685 - - 89,685 - - - -
-----------------------------------------------------------------------------------------------
Total available-for-sale $ 145,265 $ - $ - $145,265 $ - $ - $ - $ -
-----------------------------------------------------------------------------------------------
Held-to-Maturity:
Institutional Money Market Funds $ - $ - $ - $ - $ 15,434 $ - $ - $ 15,434
Commercial Paper - - - - 27,371 - - 27,371
-----------------------------------------------------------------------------------------------
Amounts included in cash
and cash equivalents - - - - 42,805 - - 42,805
-----------------------------------------------------------------------------------------------
Commercial Paper - - - - 67,219 - - 67,219
U.S. Treasury securities
and obligations of
U.S. Goverment Agencies - - - - 23,333 - - 23,333
-----------------------------------------------------------------------------------------------
Amounts included in
short-term investments - - - - 90,552 - - 90,552
-----------------------------------------------------------------------------------------------
Total Held-to-Maturity $ - $ - $ - $ - $ 133,357 $ - $ - $ 133,357
-----------------------------------------------------------------------------------------------
</TABLE>
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 (SFAS No. 115), "Accounting for Certain Investments
in Debt and Equity Securities." Under SFAS No. 115, all affected debt and equity
securities must be stated at fair value and classified as held-to-maturity,
trading, or available for sale. The cumulative effect as of January 1, 1994, of
adopting SFAS No. 115 was immaterial.
On November 15, 1995, the Financial Accounting Standards Board (FASB) staff
issued a Special Report "A Guide to Implementation of Statement 115 on
Accounting for Certain Investments in Debt and Equity Securities". In accordance
with the provisions in that Special Report, the Company chose to reclassify
securities from held-to-maturity to available-for-sale. At December 31, 1995,
(the date of transfer) the amortized cost of these securities was $145,265,000
and the unrealized gain was not material.
28
<PAGE>
FAIR VALUE OF OTHER FINANCIAL INSTRUMENTS
The carrying and fair values of the Company's other financial instruments at
December 31 were as follows (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994
CARRYING ESTIMATED CARRYING ESTIMATED
VALUE FAIR VALUE VALUE FAIR VALUE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $60,114 $60,114 $45,987 $45,987
Current obligations under
lines of credit $7,369 $7,369 $4,518 $4,518
- --------------------------------------------------------------------------------
</TABLE>
The fair values of the Company's short-term investments are based on quoted
market prices as of December 31, 1995 and 1994. The fair value of the Company's
obligations under lines of credit is based on current rates offered to the
Company for similar debt instruments of the same remaining maturities.
-----------------------------------------------------------------
NOTE 4 LINES OF CREDIT
-----------------------------------------------------------------
The Company has lines of credit with three banks under which the
Company can borrow up to $10,000,000 at the banks' prime rates
(2.0 to 8.5% at December 31,1995) which expire at various dates
through April 1997. The lines restrict payment of cash dividends
on the Company's stock. A portion of this facility ($8,000,000)
is available to the Company's Japanese subsidiary, Nippon
Novellus Systems K.K. Borrowings by the subsidiary are at various
rates as negotiated with the banks. At December 31, 1995 and
December 31, 1994, there were no borrowings by the parent
company, and $7,369,000 and $4,518,000 by the subsidiary at
weighted average interest rates of 3.80% and 3.01%,
respectively.
---------------------------------------------------------------------------
NOTE 5 COMMITMENTS
---------------------------------------------------------------------------
The Company leases its facilities under operating leases. These leases
expire February 28, 1996 through March 1, 2001. One lease has an option to
renew for five years. As of December 31, 1995, the minimum annual rental
commitments are as follows (in thousands):
Years Ending December 31,
1996 $3,006
1997 2,673
1998 2,394
1999 1,802
2000 1,029
Beyond 2000 131
---------------------------------------------------------------------------
$11,035
---------------------------------------------------------------------------
Rent expense was approximately $2,854,000, $1,748,000 and $1,437,000
for the years ended December 31, 1995, 1994 and 1993, respectively.
In January 1996, the Company entered into certain agreements which, if
consummated, will result in an increase in future operating lease
commitments related to five buildings, three of which are currently
leased.
29
<PAGE>
---------------------------------------------------------------------------
NOTE 6 EMPLOYEE BENEFIT PLANS
---------------------------------------------------------------------------
EMPLOYEE STOCK OPTION PLANS
The Company grants options to employees under the 1984 and 1992 Stock
Option Plans (the Plans). Under the Plans, options to purchase up to
5,670,000 shares of the Company's common stock may be granted at not less
than fair market value. Options are generally exercisable over a 48-month
period beginning one year after issuance or as determined by the Board
of Directors. At December 31, 1995, approximately 2,191,000 shares were
reserved for future issuance under the Employee Stock Option Plans and
options to purchase 373,000 shares were exercisable at a weighted
average exercise price of $21.33.
Information with respect to stock option activity is as follows:
<TABLE>
<CAPTION>
(in thousands, except per share data)
- --------------------------------------------------------------------------------
AUTHORIZED OUTSTANDING PRICE PER SHARE
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at December 31, 1994 43 1,835 $0.40-$53.38
Additional authorization 700 - -
Options granted (771) 771 $48.13-$83.25
Options exercised - (372) $5.69-$53.38
Options cancelled 179 (194) $8.38-$83.25
-------------------------------------------------
Balance at December 31, 1995 151 2,040 $0.40-$83.25
-------------------------------------------------
</TABLE>
EMPLOYEE STOCK PURCHASE PLANS
In December 1988 and May 1992, the Company adopted qualified
Employee Stock Purchase Plans under Sections 421 and 423 of the
Internal Revenue Code and reserved 200,000 and 150,000 shares of
common stock for issuance under the plans, respectively. In 1995,
the Company's shareholders approved an amendment to increase
shares reserved for issuance under the 1992 Employee Stock
Purchase Plan from 150,000 shares to 250,000 shares. Under the
two plans, qualified employees are entitled to purchase shares
at 85% of the fair market value on specified dates. There were
approximately 42,000, 46,000, and 81,000 shares issued under the
two plans in 1995, 1994, and 1993, respectively. At
December 31, 1995, approximately 82,000 shares were reserved for
future issuance under the Employee Stock Purchase Plans.
COMMON STOCK REPURCHASE PROGRAM
In October 1992, the Company announced it would repurchase 700,000 shares
of common stock for issuance in future Company employee benefit and
compensation plans and other requirements. During 1995, the Company
repurchased 641,000 shares under the program, and had purchased a total of
695,000 shares as of December 31, 1995. At December 31, 1995, approximately
$9,000,000 in accounts payable related to repurchases of stock.
EMPLOYEE SAVINGS AND RETIREMENT PLAN
The Company maintains a 401(K) retirement savings plan for its full-time
employees. Participants in the plan may contribute up to 20% of their
annual salary, limited by the maximum dollar amount allowed by the Internal
Revenue Code.
BONUS PROGRAM
The Company has a bonus plan that distributes a bonus based on the
performance of the Company and its employees, including the executive
officers. Charges to operations under the plan were $8,418,000,
$6,247,000, and $3,047,000 in 1995, 1994, and 1993, respectively.
30
<PAGE>
- -------------------------------------------------------------------------------
NOTE 7 TAXES ON INCOME
- -------------------------------------------------------------------------------
Significant components of the provision for income taxes attributable to
operations are as follows (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
State:
Current $ 6,251 $ 4,053 $ 1,208
Deferred (1,248) (466) (55)
------------------------------------------
5,003 3,587 1,153
Federal:
Current 38,245 21,084 5,331
Deferred (7,186) (5,662) (533)
------------------------------------------
31,059 15,422 4,798
------------------------------------------
Foreign:
Current 2,163 416 -
Income tax benefits attributable
to employee stock plan activity
allocated to shareholders' equity 4,297 3,722 2,715
------------------------------------------
Total provision for income taxes $ 42,522 $ 23,147 $ 8,666
------------------------------------------
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities at
December 31, 1995 and December 31, 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Financial valuation accounts $ 5,524 $ 2,939
Expenses not currently deductible 9,754 4,296
State and other taxes 1,388 882
Foreign losses - 174
------------------------------------------
Total deferred tax assets 16,666 8,291
------------------------------------------
Deferred tax liabilities:
Fixed assets (386) (445)
------------------------------------------
Total net deferred tax assets $ 16,280 $ 7,846
------------------------------------------
</TABLE>
The provisions for income taxes differ from provisions calculated by applying
the federal statutory tax rate to income before taxes because of the following
(in thousands):
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Expected provisions at 35% $ 43,773 $ 23,828 $ 8,673
State taxes, net of federal benefit 3,252 2,332 750
Research and development credits (566) (962) (318)
Foreign Sales Corporation benefit (3,868) (2,195) (476)
Other (69) 144 37
------------------------------------------
$42,522 $23,147 $8,666
------------------------------------------
</TABLE>
31
<PAGE>
---------------------------------------------------------------------------
NOTE 8 GEOGRAPHIC INFORMATION REPORTING AND MAJOR CUSTOMERS
---------------------------------------------------------------------------
The Company and its subsidiaries operate in one industry segment,
principally the development, manufacture, sale and service of chemical
vapor deposition reactors for use in the manufacture of integrated
circuits.
The following is a summary of operations in geographic areas (in
thousands):
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
NORTH AMERICA EUROPE FAR EAST ELIMINATIONS CONSOLIDATED
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995
Sales to unafilliated customer $304,625 $2,967 $66,140 $- $373,732
Transfers between geographic
locations 50,508 2,190 8,677 (61,375) -
---------------------------------------------------------------------------------------------
Total net sales 355,133 5,157 74,817 (61,375) 373,732
Operating income 119,849 201 5,365 (9,624) 115,791
Identifiable assets 364,157 6,402 53,755 (59,626) 364,688
1994
Sales to unafilliated customer 194,562 2,635 27,482 - 224,679
Transfers between geographic
locations 24,154 1,286 7,920 (33,360) -
---------------------------------------------------------------------------------------------
Total net sales 218,716 3,921 35,402 (33,360) 224,679
Operating income 67,251 223 1,818 (5,595) 63,697
Identifiable assets 337,342 4,496 33,844 (110,682) 265,000
1993
Sales to unafilliated customer 98,476 1,695 13,372 - 113,543
Transfers between geographic
locations 13,877 602 3,770 (18,249) -
---------------------------------------------------------------------------------------------
Total net sales 112,353 2,297 17,142 (18,249) 113,543
Operating income 26,853 179 382 (4,058) 23,356
Identifiable assets 158,502 401 22,616 (50,402) 131,117
</TABLE>
Transfers and commission arrangements between geographic areas are at prices
sufficient to recover a reasonable profit.
In 1995 and 1994, sales to one customer (a distributor) were 11% and 13% of net
sales, respectively. In 1993, sales to an additional customer were 12% of net
sales.
Export sales were 37% of net sales in 1995 (28% to the Far East, 9% to all
other), 41% of net sales in 1994 (29% to the Far East, 12% to all other), and
32% of net sales in 1993 (22% to the Far East, 10% to all other). Export sales
do not include sales by the Company's Japanese subsidiary.
----------------------------------------------------------------------
NOTE 9 LEGAL PROCEEDINGS AND CONTINGENCIES
----------------------------------------------------------------------
On January 30, 1995, Applied Materials, Inc. (Applied) filed a patent
infringement suit against the Company, alleging that the Company's
TEOS products infringe one of Applied's patents that was issued in
November 1994. On September 15, 1995, the Company filed a patent
infringement suit against Applied, alleging that Applied's tungsten
products infringe one of the Company's patents issued in August 1993.
Also on September 15, 1995, Applied filed a patent infringement suit
against the Company, alleging that one of the Company's tungsten
processes infringes one of Applied's patents that was issued in 1991.
On October 10, 1995, the Company filed a counterclaim alleging that
Applied's TEOS products infringe one of the Company's patents that was
issued in June 1995. On October 26, 1995, the Company filed an amended
counterclaim alleging that Applied's tungsten products infringe one of
the Company's patents issued in December 1994. Management's
expectations are that the ultimate resolution of these matters will
not have a material adverse effect on the Company's financial
position, cash flows or results of operations; however, based on
future developments, management's estimate of the ultimate outcome
could change in the near term.
In the normal course of business, the Company from time to time
receives inquiries with regard to possible patent infringements.
Management believes that it is unlikely that the outcome of the patent
infringment inquiries will have a material adverse effect on the
Company's financial position or results of operations.
32
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
THE SHAREHOLDERS AND BOARD OF DIRECTORS
NOVELLUS SYSTEMS, INC.
We have audited the accompanying consolidated balance sheets of Novellus
Systems, Inc. as of December 31, 1995 and 1994, and the related consolidated
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 1995. 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 Novellus Systems,
Inc. at December 31, 1995 and 1994, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
San Jose, California
January 24, 1996
33
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Novellus Systems, Inc. of our report dated January 24, 1996, included in the
1995 Annual Report to Shareholders of Novellus Systems, Inc.
Our audits also included the financial statement schedule of Novellus Systems,
Inc. listed in Item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration Statements
on Form S-8 (Nos. 33-88156, 33-51056, 33-36787, 33-25897, 33-62807) pertaining
to the Amended and Restated 1992 Employee Stock Purchase Plan, the Amended and
Restated 1984 Stock Option Plan, the Employee Stock Purchase Plan, and the
Amended and Restated 1992 Stock Option Plan, in the Registration Statement on
Form S-3 (No. 33-25418) pertaining to 1,500,000 shares of common stock and in
the Registration Statement on Form S-8 and Form S-3 (No. 33-30093) pertaining to
the 1984 Stock Option Plan, and in the related prospectuses with respect to the
consolidated financial statements incorporated herein by reference, and our
report included in the preceding paragraph with respect to the financial
statement schedule included in this Annual Report (Form 10-K) of Novellus
Systems, Inc.
March 13, 1996
San Jose, California /s/ Ernst & Young LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FORM NOVELLUS
SYSTEMS, INC 1995 10K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 60,114
<SECURITIES> 89,685
<RECEIVABLES> 114,284
<ALLOWANCES> 2,196
<INVENTORY> 36,779
<CURRENT-ASSETS> 318,163
<PP&E> 68,450
<DEPRECIATION> 23,745
<TOTAL-ASSETS> 364,688
<CURRENT-LIABILITIES> 91,906
<BONDS> 0
0
0
<COMMON> 118,423
<OTHER-SE> 154,359
<TOTAL-LIABILITY-AND-EQUITY> 364,688
<SALES> 373,732
<TOTAL-REVENUES> 373,732
<CGS> 157,585
<TOTAL-COSTS> 157,585
<OTHER-EXPENSES> 100,356
<LOSS-PROVISION> 495
<INTEREST-EXPENSE> 227
<INCOME-PRETAX> 125,065
<INCOME-TAX> 42,522
<INCOME-CONTINUING> 82,543
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 82,543
<EPS-PRIMARY> 4.82
<EPS-DILUTED> 4.82
</TABLE>
