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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(MARK ONE)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 2, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO _______.
COMMISSION FILE NUMBER 0-17781
- --------------------------------------------------------------------------------
SYMANTEC CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 77-0181864
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
10201 TORRE AVENUE, CUPERTINO, CALIFORNIA 95014-2132
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (408) 253-9600
- --------------------------------------------------------------------------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [x] NO [ ]
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, including 2,118,392 shares of Delrina exchangeable
stock, as of October 30, 1998:
COMMON STOCK, PAR VALUE $0.01 PER SHARE 55,411,446 SHARES
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SYMANTEC CORPORATION
FORM 10-Q
QUARTERLY PERIOD ENDED OCTOBER 2, 1998
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets
as of September 30, 1998 and March 31, 1998................................................. 3
Consolidated Statements of Operations
for the three and six month periods ended September 30, 1998 and 1997....................... 4
Consolidated Statements of Cash Flow
for the six months ended September 30, 1998 and 1997........................................ 5
Notes to Consolidated Financial Statements........................................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................................................... 17
Item 3. Quantitative and Qualitative Disclosures about Market Risk........................................... 32
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................................................... 33
Item 2. Changes in Securities and Use of Proceeds............................................................ 33
Item 4. Submission of Matters to a Vote of Security Holders.................................................. 33
Item 6. Exhibits and Reports on Form 8-K..................................................................... 34
Signatures ............................................................................................................ 36
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SYMANTEC CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, March 31,
(In thousands) 1998 1998
- ------------------------------------------------------------------- ------------ ---------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and short-term investments $ 175,403 $ 225,883
Trade accounts receivable 67,191 65,158
Inventories 4,526 3,175
Deferred income taxes 23,842 19,677
Other 13,043 14,646
--------- ---------
Total current assets 284,005 328,539
Long-term investments 32,009 34,258
Restricted investments 67,036 59,370
Equipment and leasehold improvements 51,992 50,030
Capitalized software 26,578 1,470
Other 6,316 2,793
--------- ---------
$ 467,936 $ 476,460
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 39,008 $ 34,171
Accrued compensation and benefits 19,563 21,332
Other accrued expenses 99,120 64,532
Income taxes payable 9,855 24,634
Current portion of convertible subordinated debentures 8,333 8,333
--------- ---------
Total current liabilities 175,879 153,002
Convertible subordinated debentures and other 5,951 5,951
Long-term obligations 5,455 --
--------- ---------
Total long-term liabilities 11,406 5,951
Commitments and contingencies
Stockholders' equity:
Preferred stock (authorized: 1,000; issued and outstanding: none) -- --
Common stock (authorized: 100,000; issued and outstanding: 56,307
and 57,109 shares) 563 571
Capital in excess of par value 301,220 310,949
Notes receivable from stockholders (144) (144)
Retained earnings (deficit) (2,776) 18,690
Accumulated other comprehensive income (loss) (18,212) (12,559)
--------- ---------
Total stockholders' equity 280,651 317,507
--------- ---------
$ 467,936 $ 476,460
========= =========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
3
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SYMANTEC CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
--------------------------- ---------------------------
(In thousands, except per share data; unaudited) 1998 1997 1998 1997
- ------------------------------------------------ --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net revenues $ 140,061 $ 139,013 $ 293,152 $ 274,029
Cost of revenues 21,485 22,389 41,817 43,309
--------- --------- --------- ---------
Gross margin 118,576 116,624 251,335 230,720
Operating expenses:
Research and development 25,757 23,591 50,736 45,172
Sales and marketing 70,561 61,279 140,404 122,934
General and administrative 10,272 9,024 19,453 18,058
Acquired in-process research and development 5,017 -- 34,290 --
Litigation judgment -- -- 5,825 --
Restructuring and other expenses 5,105 -- 5,105 --
--------- --------- --------- ---------
Total operating expenses 116,712 93,894 255,813 186,164
--------- --------- --------- ---------
Operating income (loss) 1,864 22,730 (4,478) 44,556
Interest income 3,992 3,261 8,481 6,168
Interest expense (320) (322) (651) (579)
Other income (expense), net (522) 1,058 2,080 654
--------- --------- --------- ---------
Income before income taxes 5,014 26,727 5,432 50,799
Provision for income taxes 2,708 6,147 8,439 11,684
--------- --------- --------- ---------
Net income (loss) $ 2,306 $ 20,580 $ (3,007) $ 39,115
========= ========= ========= =========
Net income (loss) per share - basic $ 0.04 $ 0.37 $ (0.05) $ 0.70
========= ========= ========= =========
Net income (loss) per share - diluted $ 0.04 $ 0.35 $ (0.05) $ 0.67
========= ========= ========= =========
Shares used to compute net income
(loss) per share - basic 57,071 55,938 57,246 55,698
========= ========= ========= =========
Shares used to compute net income
(loss) per share - diluted 58,762 60,008 57,246 59,192
========= ========= ========= =========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
4
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SYMANTEC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Six Months Ended
September 30,
---------------------------
(In thousands; unaudited) 1998 1997
- ------------------------- --------- ---------
<S> <C> <C>
Operating Activities:
Net income (loss) $ (3,007) $ 39,115
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization of equipment and
leasehold improvements 12,427 12,602
Amortization and write-off of capitalized software development costs 2,186 687
Amortization of goodwill 197 --
Write-off of acquired in-process research and development 34,290 --
Write-off of equipment and leasehold improvements 6 1,092
Deferred income taxes (4,254) 62
Net change in assets and liabilities, excluding effects of
acquisitions:
Trade accounts receivable 584 (8,470)
Inventories (1,072) 2,043
Other current assets 3,150 (308)
Capitalized software development costs -- (6)
Other assets 165 (581)
Accounts payable 3,528 1,688
Accrued compensation and benefits (1,912) 4,728
Other accrued expenses 10,704 5,856
Income taxes payable (14,465) 5,276
--------- ---------
Net cash provided by operating activities 42,527 63,784
--------- ---------
Investing Activities:
Capital expenditures (13,362) (14,372)
Purchased intangibles (2,376) (481)
Purchase of certain assets from IBM (8,000) --
Purchase of certain assets from Binary Research Limited (27,500) --
Purchases of marketable securities (122,070) (120,539)
Proceeds from sales of marketable securities 118,101 81,580
Purchases of long-term, restricted investments (7,666) (4,091)
--------- ---------
Net cash used in investing activities (62,873) (57,903)
--------- ---------
Financing Activities:
Repurchase of common stock (39,834) (8,373)
Net proceeds from sales of common stock and other 11,248 14,969
--------- ---------
Net cash provided by (used in) financing activities (28,586) 6,596
--------- ---------
Effect of exchange rate fluctuations on cash and cash equivalents (7,766) (1,643)
Increase (decrease) in cash and cash equivalents (56,698) 10,834
Beginning cash and cash equivalents 139,013 95,758
--------- ---------
Ending cash and cash equivalents $ 82,315 $ 106,592
========= =========
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these statements.
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SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The consolidated financial statements of Symantec Corporation ("Symantec" or the
"Company") as of September 30, 1998 and for the three and six month periods
ended September 30, 1998 and 1997 are unaudited and, in the opinion of
management, contain all adjustments, consisting of only normal recurring items
necessary for the fair presentation of the financial position and results of
operations for the interim periods. These consolidated financial statements
should be read in conjunction with the Consolidated Financial Statements and
notes thereto included in Symantec's Annual Report on Form 10-K for the year
ended March 31, 1998. The results of operations for the three and six month
periods ended September 30, 1998 are not necessarily indicative of the results
to be expected for the entire year. All significant intercompany accounts and
transactions have been eliminated. Certain previously reported amounts have been
reclassified to conform to the current presentation format.
During the September 1998 quarter, the Company acquired certain assets of Intel
Corporation ("Intel") (See Note 8 of Notes to Consolidated Financial Statements
in this Form 10-Q). During the June 1998 quarter, the Company acquired certain
assets of International Business Machines ("IBM") and Binary Research Limited
("Binary") (See Note 8 of Notes to Consolidated Financial Statements in this
Form 10-Q). The results of operations from these have been included in
Symantec's results of operations since the date of acquisition.
In October 1997 and March 1998, the Accounting Standards Executive Committee
("AcSEC") issued Statements of Position ("SOP") 97-2, "Software Revenue
Recognition," and SOP 98-4, "Deferral of the Effective Date of a Provision of
SOP 97-2, Software Revenue Recognition," respectively, which provide guidance on
applying generally accepted accounting principles in recognizing revenue on
software transactions and were effective for Symantec beginning with the June
30, 1998 quarter. AcSEC issued an exposure draft in July 1998 regarding the
permanent deferral of certain provisions of SOP 97-2. At AcSEC's October 27,
1998 meeting, the exposure draft was not approved. AcSEC approved, instead, a
revised version of the SOP, which must still be cleared by the FASB. The Company
will continue to address the revised SOP and any further developments and their
impact on the Company's net revenues and results of operations.
Symantec has a 52/53-week fiscal accounting year. Accordingly, all references as
of and for the periods ended September 30, 1998, March 31, 1998 and September
30, 1997 reflect amounts as of and for the periods ended October 2, 1998, April
3, 1998 and October 3, 1997, respectively. The six months ended September 30,
1998 comprised 26 weeks of revenue and expense activity, while the comparable
prior year period comprised 27 weeks.
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SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 2. BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
September 30, March 31,
(In thousands) 1998 1998
- -------------- ------------- ---------
(unaudited)
<S> <C> <C>
Cash, cash equivalents and short-term investments:
Cash $ 43,989 $ 28,236
Cash equivalents 38,326 110,777
Short-term investments 93,088 86,870
--------- ---------
$ 175,403 $ 225,883
========= =========
Trade accounts receivable:
Receivables $ 71,809 $ 69,574
Less: allowance for doubtful accounts (4,618) (4,416)
--------- ---------
$ 67,191 $ 65,158
========= =========
Inventories:
Raw materials $ 1,761 $ 1,091
Finished goods 2,765 2,084
--------- ---------
$ 4,526 $ 3,175
========= =========
Equipment and leasehold improvements:
Computer hardware and software $ 118,662 $ 107,724
Office furniture and equipment 31,962 29,407
Leasehold improvements 22,419 21,038
--------- ---------
173,043 158,169
Less: accumulated depreciation and amortization (121,051) (108,139)
--------- ---------
$ 51,992 $ 50,030
========= =========
Capitalized software:
Purchased product rights and technologies $ 28,651 $ 1,358
Capitalized software development costs 2,357 2,414
Less: accumulated amortization of purchased product rights and technologies (2,380) (563)
Less: accumulated amortization of capitalized software development costs (2,050) (1,739)
--------- ---------
$ 26,578 $ 1,470
========= =========
Other assets:
Goodwill, net $ 2,753 $ --
Other 3,563 2,793
--------- ---------
$ 6,316 $ 2,793
========= =========
Other accrued expenses:
Deferred revenue $ 32,107 $ 25,537
Marketing development funds 12,346 12,815
Current obligations related to purchase of certain assets of Intel 15,070 --
Other 39,597 26,180
--------- ---------
$ 99,120 $ 64,532
========= =========
Accumulated other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale investments $ (233) $ 157
Cumulative translation adjustment (17,979) (12,716)
--------- ---------
$ (18,212) $ (12,559)
========= =========
</TABLE>
7
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SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 3. NET INCOME (LOSS) PER SHARE
The Company has adopted Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings Per Share," which was required to be adopted by Symantec for the
fiscal period ending December 31, 1997. As a result, the Company has changed the
method used to compute earnings per share and has restated all prior periods.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
------------------------ -------------------------
(In thousands, except per share data; unaudited) 1998 1997 1998 1997
- ------------------------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
BASIC NET INCOME (LOSS) PER SHARE
Net income (loss) $ 2,306 $ 20,580 $ (3,007) $ 39,115
======== ======== ======== ========
Weighted average number of common
shares outstanding during the period 57,071 55,938 57,246 55,698
======== ======== ======== ========
Basic net income (loss) per share $ 0.04 $ 0.37 $ (0.05) $ 0.70
======== ======== ======== ========
DILUTED NET INCOME (LOSS) PER SHARE
Net income (loss) $ 2,306 $ 20,580 $ (3,007) $ 39,115
Interest on convertible subordinated
debentures, net of income tax effect -- 177 -- 354
-------- -------- -------- --------
Net income (loss), as adjusted $ 2,306 $ 20,757 $ (3,007) $ 39,469
======== ======== ======== ========
Weighted average number of common
shares outstanding during the period 57,071 55,938 57,246 55,698
Shares issuable from assumed exercise
of options 1,691 2,820 -- 2,244
Shares issuable from assumed conversion
of convertible subordinated debentures -- 1,250 -- 1,250
-------- -------- -------- --------
Total shares for purpose of calculating
diluted net income (loss) per share 58,762 60,008 57,246 59,192
======== ======== ======== ========
Diluted net income (loss) per share $ 0.04 $ 0.35 $ (0.05) $ 0.67
======== ======== ======== ========
</TABLE>
For the three months ended September 30, 1998, 1,190,000 shares issuable upon
conversion of convertible subordinated debentures and $169,000 of interest
expense were excluded from the computation of diluted net income per share
because the effect would have been anti-dilutive. For the six months ended
September 30, 1998, 1,190,000 shares issuable upon conversion of convertible
subordinated debentures, options to purchase 2,175,000 shares and $338,000 of
interest expense were excluded from the computation of diluted net loss per
share because the effect would have been anti-dilutive.
8
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SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 4. RESTRUCTURING AND OTHER EXPENSES
Restructuring and other expenses consisted of the following:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
--------------------- ---------------------
(In thousands; unaudited) 1998 1997 1998 1997
- ------------------------------------- ------ ---- ------ ---
<S> <C> <C> <C> <C>
Personnel severance $3,800 $-- $3,800 $--
Planned abandonment of manufacturing
facility lease 1,305 -- 1,305 --
------ --- ------ ---
Total restructuring and other expenses $5,105 $-- $5,105 $--
====== === ====== ===
</TABLE>
During the quarter ended September 30, 1998, the Company made a decision to
restructure its operations and outsource its domestic manufacturing operations.
As a result, it recorded a $3.8 million charge for personnel severance to reduce
the workforce by approximately 5% in both domestic and international operations
and a $1.3 million charge for the planned abandonment of a manufacturing
facility lease. As of September 30, 1998, $1.2 million of the $5.1 million has
been incurred. These activities will be substantially complete by the end of
fiscal 1999.
As of September 30, 1998, total accrued acquisition, restructuring and other
expenses were approximately $6.2 million and include approximately $1.8 million
for the elimination of duplicative and excess facilities, $2.5 million for
personnel severance and $1.9 million for other expenses.
9
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SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 5. COMPREHENSIVE INCOME (LOSS)
The Company has adopted SFAS No. 130, "Reporting Comprehensive Income,"
beginning with the quarter ended June 30, 1998. SFAS No. 130 establishes new
rules for the reporting and disclosure of comprehensive income and its
components; however, it has no impact on net income (loss) or stockholders'
equity. The components of comprehensive income (loss), net of tax, are as
follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
------------------------ ------------------------
(In thousands; unaudited) 1998 1997 1998 1997
- ---------------------------------------------------------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income (loss) $ 2,306 $ 20,580 $ (3,007) $ 39,115
Other comprehensive income (loss):
Add: change in unrealized gain (loss) on
available-for-sale investments,
net of a tax provision (benefit) of ($109),
$26, ($125), and $30 (232) 88 (265) 101
Less: reclassification adjustment for gains
(losses) included in net income (loss),
net of a tax provision (benefit) of $63, $0,
$146 and $0 133 -- 310 --
Add: change in cumulative translation
adjustment ("CTA"), net of a tax
benefit of ($420), ($474), ($1,684),
and ($486) (895) (1,586) (3,579) (1,627)
Less: reclassification adjustment for CTA
included in net income (loss),
net of a tax provision of $0,
$0, $604, and $0 -- -- 1,284 --
-------- -------- -------- --------
Total other comprehensive loss (1,260) (1,498) (5,438) (1,526)
-------- -------- -------- --------
Comprehensive income (loss) $ 1,046 $ 19,082 $ (8,445) $ 37,589
======== ======== ======== ========
</TABLE>
NOTE 6. LITIGATION AND CONTINGENCIES
On March 18, 1996, a class action complaint was filed by the law firm of
Milberg, Weiss, Bershad, Hynes & Lerach in Superior Court of the State of
California, County of Santa Clara, against the Company and several of its
current and former officers and directors. The complaint alleges that Symantec
insiders inflated the stock price and then sold stock based on inside
information that sales were not going to meet analysts' expectations. The
complaint seeks damages in an unspecified amount. The complaint has been refiled
twice in state court, most recently on January 13, 1997, following Symantec's
demurrers directed to previous complaints. The parties are currently conducting
discovery. On January 7, 1997, the same plaintiffs filed a complaint in the
United States District Court, Northern District of California, based on the same
facts as the state court complaint, for violation of the Securities Exchange Act
of 1934. The district court dismissed that complaint, and plaintiffs served an
amended complaint in April 1998. Symantec's motion to dismiss the new federal
complaint is currently pending. Symantec believes that neither the state court
complaint nor the federal court complaint has any merit and will vigorously
defend itself against both complaints.
On April 23, 1997, Symantec filed a lawsuit against McAfee Associates, Inc.,
which pursuant to a merger has become Network Associates, Inc. ("Network
Associates"), in the United States District Court, Northern District of
California, for copyright infringement and unfair competition. On October 6,
1997, the court found that Symantec
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SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
had demonstrated a likelihood of success on the merits of certain copyright
claims, and issued a preliminary injunction (i) prohibiting Network Associates
from infringing Symantec's rights in specified materials by marketing, selling,
transferring or directly or indirectly copying into any new Network Associates
product or new version of an existing product that has Symantec code, (ii)
requiring Network Associates to notify distributors who are still selling
versions of PC Medic 97 that have Symantec's code to tell customers that they
should upgrade to versions that do not contain Symantec code, and (iii)
requiring Network Associates to provide Symantec and the court with a sample of
the notice to be used. On October 17, 1997, Symantec amended its complaint to
include additional claims for copyright infringement and misappropriation of
trade secrets, based on additional evidence found in the discovery process. On
April 1, 1998, Symantec amended its complaint to add claims for misappropriation
of trade secrets, RICO (Racketeer Influenced and Corrupt Organizations Act) and
related claims based on additional evidence uncovered in the litigation.
Following motions by Network Associates, the court dismissed Symantec's unfair
competition and trade secret claims regarding the copyrighted code and its RICO
and interference claims. On October 22, 1998, the court consolidated this case
with the case against Network Associates and the case brought by CyberMedia,
both of which are described below.
On September 4, 1998, Symantec filed a new lawsuit against Network Associates in
the United States District Court, Northern District of California, for copyright
infringement, trade secret misappropriation and unfair competition. Symantec
continues to investigate the extent to which Network Associates may have
misappropriated Symantec's intellectual property, and plans to aggressively
pursue its remedies under this lawsuit, which include both injunctive relief and
monetary damages.
On September 15, 1997, Hilgraeve Corporation ("Hilgraeve") filed a lawsuit in
the United States District Court, Eastern District of Michigan, against
Symantec, alleging that unspecified Symantec products infringe a patent owned by
Hilgraeve. The lawsuit requests damages, injunctive relief and costs and
attorney fees. Symantec believes this claim has no merit and intends to defend
the action vigorously.
On February 4, 1998, CyberMedia, Inc. ("CyberMedia,"), which in September 1998
was acquired by Network Associates, filed a lawsuit in the United States
District Court, Northern District of California, against Symantec, ZebraSoft
Inc., and others, alleging that Symantec Norton Uninstall Deluxe infringes
CyberMedia's copyright, and asserting related state law claims. The suit
requests damages, injunctive relief, costs and attorneys fees. In May 1998,
CyberMedia filed a motion seeking a preliminary injunction prohibiting sale or
development of the challenged code, which preliminary injunction was granted
with respect to Symantec's domestic activities in September 1998. Symantec
believes it has meritorious defenses to this claim and intends to defend the
action vigorously.
On February 19, 1998, a class action complaint was filed by the Milberg, Weiss,
Bershad, Hynes & Lerach law firm in Santa Clara County Superior Court, on behalf
of a class of purchasers of pre-version 4.0 Norton AntiVirus products. A similar
complaint was filed in the same court on March 6, 1998 by an Oregon law firm.
Those actions were consolidated, and a consolidated amended complaint was filed
in late October 1998. The original complaint purports to assert claims for
breach of implied warranty, fraud, unfair business practices and violation of
California's Consumer Legal Remedies Act, among others, arising from the alleged
inability of earlier versions of Norton AntiVirus(R) to function properly after
the year 2000. The complaint seeks unspecified damages and injunctive relief.
Symantec believes that these actions have no merit and intends to defend itself
vigorously.
In connection with the May 1998 asset purchase agreement with IBM (see Note 8 of
Notes to Consolidated Financial Statements in this Form 10-Q), claims of patent
infringement previously asserted by IBM with respect to certain of the Company's
products were resolved. The terms of resolution were not material to Symantec.
In July 1998, the Ontario Court of Justice (General Division) ruled that
Symantec should pay $5.8 million plus costs to Triolet Systems, Inc. and Brian
Duncombe in a decade-old copyright action, for damages arising from the grant of
a preliminary injunction against the defendant. The damages were awarded
following the court's ruling that
11
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SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
evidence presented later in the case showed the injunction was not warranted.
Symantec inherited the case through its 1995 acquisition of Delrina Corporation,
which was the plaintiff in this lawsuit. Symantec has appealed the decision.
Symantec recorded a charge of $5.8 million in June 1998 representing the
unaccrued portion of the judgment plus costs.
Over the past few years, it has become common for software companies, including
Symantec, to receive claims of patent infringement. Symantec is currently
evaluating claims of patent infringement asserted by several parties, with
respect to certain of the Company's products. While the Company believes that it
has valid defenses to these claims, the outcome of any related litigation or
negotiation could have a material adverse impact on the Company's future results
of operations or cash flows.
Symantec is involved in a number of other judicial and administrative
proceedings incidental to its business. The Company intends to defend all of the
aforementioned pending lawsuits vigorously, and although adverse decisions (or
settlements) may occur in one or more of the cases, the final resolution of
these lawsuits, individually or in the aggregate, is not expected to have a
material adverse affect on the financial condition of the Company, although it
is not possible to estimate the possible loss or losses from each of these
cases. Depending, however, on the amount and timing of an unfavorable resolution
of these lawsuits, it is possible that the Company's future results of
operations or cash flows could be materially adversely affected in a particular
period. The Company has accrued certain estimated legal fees and expenses
related to certain of these matters; however, actual amounts may differ
materially from those estimated amounts.
NOTE 7. STOCK REPURCHASE
On June 9, 1998, the Board of Directors of Symantec authorized the repurchase of
up to 5% of Symantec's outstanding common stock before December 31, 1998. Among
other purposes, the shares will be used for employee stock purchase programs and
option grants. The Company did not repurchase any shares during the June 1998
quarter. The Company repurchased 1.7 million shares at prices ranging from
$17.13 to $27.21, for an aggregate amount of $39.8 million, during the September
1998 quarter. Of the $39.8 million, approximately $18.5 million was charged to
retained earnings after appropriate amounts were deducted from common stock and
capital in excess of par. Subsequent to September 30, 1998 and through October
30, 1998, the Company completed the repurchase and has now repurchased a total
of 2.875 million shares at prices ranging from $13.10 to $27.21, for an
aggregate amount of approximately $56.3 million.
NOTE 8. PURCHASE OF CERTAIN ASSETS
On May 19, 1998, IBM and Symantec entered into an agreement whereby Symantec
licensed IBM's immune system technology for $16.0 million plus certain potential
future royalties. Symantec also entered into a patent cross-licensing agreement
under which the parties licensed to each other their respective patent
portfolios. The transaction was accounted for as a purchase. Symantec assumed
liabilities of $3.0 million and incurred additional expenses of approximately
$1.3 million as part of the transaction. As of September 30, 1998, Symantec paid
IBM $8.0 million in cash with the remaining $8.0 million payable in two equal
installments in August 1999 and November 1999. As part of the agreement, IBM
assigned its existing anti-virus customer and OEM contracts to Symantec. Under
the transaction, Symantec recorded approximately $16.0 million for in-process
research and development acquired from IBM, $3.0 million for goodwill and $1.3
million for certain prepaid research and development and other assets. The
amount of in-process research and development acquired from IBM was established
by an independent valuation specialist based on management's estimates. Symantec
also entered into a contract research and development arrangement with IBM to
develop certain products in return for payments totaling $4.0 million, which has
been completed as of September 30, 1998.
12
<PAGE> 13
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
On June 24, 1998, Symantec entered into an agreement whereby Symantec purchased
certain assets of Binary, an Auckland, New Zealand based company, for $27.5
million. Symantec also incurred $0.7 million of acquisition related costs. The
transaction was accounted for as a purchase. Under the transaction, Symantec
recorded approximately $13.3 million for in-process research and development
acquired from Binary and $14.2 million for capitalized software technology, with
the remainder of the purchase price allocated to net tangible and intangible
assets. The amount of in-process research and development acquired from Binary
was established by an independent valuation specialist based on management's
estimates. The capitalized software is being amortized over a 3-year period. As
of September 30, 1998, the Company incurred approximately $1.6 million of
amortization expense related to this asset.
The following unaudited pro forma results of operations for the three and six
month periods ended September 30, 1998 and 1997 are as if the acquisition of
Binary had occurred at the beginning of each period presented. The pro forma
information excludes approximately $1.2 million of capitalized software
amortization and the tax effect of the charge for the three months ended
September 30, 1998. The pro forma information excludes the one-time write-off of
$13.3 million of in-process research and development and the tax effect of the
charge and $1.6 million of capitalized software amortization and its tax effect
for the six month period ended September 30, 1998. The pro forma information has
been prepared for comparative purposes only and is not indicative of what
operating results would have been if the acquisition had taken place at the
beginning of each period presented or of future operating results.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
--------------------------------- ---------------------------------
(In thousands, except per share data; unaudited) 1998 1997 1998 1997
- ------------------------------------------------- --------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
Net revenues $ 140,061 $ 141,989 $ 296,240 $ 278,485
============= ============= ============= =============
Net income $ 3,130 $ 21,562 $ 11,013 $ 40,961
============= ============= ============= =============
Basic net income per share $ 0.05 $ 0.39 $ 0.19 $ 0.74
============= ============= ============= =============
Diluted net income per share $ 0.05 $ 0.36 $ 0.19 $ 0.70
============= ============= ============= =============
</TABLE>
On September 28, 1998, Symantec entered into an agreement whereby it purchased
Intel Corporation's anti-virus business for approximately $16.5 million.
Symantec also licensed Intel systems management technology which it will combine
with its own anti-virus technology to create improved anti-virus management
solutions for corporate organizations. As part of the agreement, Intel will
continue to support its anti-virus customers and will transition support to
Symantec by June 1999. In addition, Intel will promote Norton Antivirus through
its worldwide reseller channels. Subsequent to September 30, 1998 and through
October 30, 1998, Symantec has paid approximately $11.9 million under the
agreement. The transaction was accounted for as a purchase. Under the
transaction, Symantec recorded approximately $5.0 million for in-process
research and development acquired from Intel, $10.7 million for capitalized
software technology and $0.8 million for certain intangible assets. The amount
of in-process research and development acquired from Intel was established by an
independent valuation specialist based on management's estimates. The
capitalized software is being amortized over a 5-year period. As of September
30, 1998, the Company has not yet recorded amortization expense related to
capitalized software.
13
<PAGE> 14
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
NOTE 9. SUPPLEMENTAL CASH FLOWS INFORMATION
<TABLE>
<CAPTION>
Six Months Ended
September 30,
(In thousands; unaudited) 1998
----------------
<S> <C>
Binary Research Limited
Fair value of assets acquired $27,500
=======
Cash paid $27,500
=======
IBM Immune System Technology and Other Assets
Fair value of assets acquired $20,250
=======
Expenses incurred $ 1,250
Liabilities assumed $ 3,000
Current obligation $ 4,000
Long-term obligation $ 4,000
Cash paid $ 8,000
-------
Total $20,250
=======
Intel Corporation Anti-Virus Business
Fair value of assets acquired $16,525
=======
Current obligations $15,070
Long-term obligations $ 1,455
-------
Total $16,525
=======
</TABLE>
NOTE 10. ADOPTION OF STOCKHOLDER RIGHTS PLAN
On August 11, 1998, Symantec's Board of Directors adopted a stockholder rights
plan designed to ensure orderly consideration of any future unsolicited
acquisition attempt to ensure fair value of the Company for its stockholders.
In connection with the plan, the Board declared a dividend of one preferred
share purchase right for each share of the company's common stock outstanding on
August 21, 1998 (the "Record Date"). The Board further directed the issuance of
one such right with respect to each share of the Company's common stock that is
issued after the Record Date, except in certain circumstances. The rights will
expire on August 12, 2008.
The rights are initially attached to the Company's common stock and will not
trade separately. If a person or a group (an "Acquiring Person") acquires 20% or
more of the Company's common stock, or announces an intention to make a tender
offer for 20% or more of the Company's common stock, the rights will be
distributed and will thereafter trade separately from the common stock. Each
right will be exercisable for 1/1000th of a share of a newly designated Series A
Junior Participating Preferred Stock at an exercise price of $150.00. The
preferred stock has been structured so that the value of 1/1000th of a share of
such preferred stock will approximate the value of one share of common stock.
Upon a person becoming an Acquiring Person, holders of the rights (other than
the Acquiring Person) will have the right to acquire shares of the company's
common stock at a substantially discounted price.
If a person becomes an Acquiring Person and the company is acquired in a merger
or other business combination, or 50% or more of its assets are sold to an
Acquiring Person, the holder of rights (other than the Acquiring Person) will
have the right to receive shares of common stock of the acquiring corporation at
a substantially discounted price. After a person has become an Acquiring Person,
the Company's Board of Directors may, at its option, require the
14
<PAGE> 15
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
exchange of outstanding rights (other than those held by the Acquiring Person)
for common stock at an exchange ratio of one share of the company's common stock
per right.
The Board may redeem outstanding rights at any time prior to a person becoming
an Acquiring Person at a price of $0.001 per right. Prior to such time, the
terms of the rights may be amended by the Board. In addition, the Board also
amended the Company's bylaws to: permit only the Chairman, President or the
Board to call a special meeting of the stockholders; require that the Board be
given prior notice of a stockholder proposal to take action by written consent
so that a record date for such action can be established; require advance notice
to the Board of stockholder-sponsored proposals for consideration at annual
meetings and for stockholder nominations for the election of directors; permit
the Board to meet on one- rather than two-day advance notice; and conform the
bylaws to applicable provisions of Delaware law regarding the inspection of
elections at stockholder meetings.
NOTE 11. LEASED BUILDINGS
In fiscal 1997, Symantec entered into lease agreements for two existing office
buildings (Cupertino City Center One or "CCC1" and World Head Quarters or
"WHQ"), one parcel of land and one office building under construction (Cupertino
City Center Five or "CCC5") in Cupertino, California. In connection with these
leases, the Company is required to maintain a restricted cash balance invested
in U.S. treasury securities with maturities not to exceed three years. In
accordance with the lease terms, these funds are not available to meet operating
cash requirements.
On September 22, 1998, an agreement was entered into, subject to certain closing
conditions that have not yet been met, whereby the landlord intends to exchange
CCC5 for another leased building (Cupertino City Center Two or "CCC2") both
located in Cupertino, California. If this transaction is consummated, Symantec
would move both personnel and equipment into CCC2 once certain tenant
improvements are completed. In conjunction, Symantec would be relieved of
responsibility for its lease of WHQ.
As of November 13, 1998, the parties are conducting due diligence which is
scheduled to end on November 20, 1998. During this period, either party may
decide not to go forward with the deal at such party's sole discretion without
penalty.
NOTE 12. RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as
derivatives) and for hedging activities. SFAS 133 will be effective for Symantec
at the beginning of the June 2000 quarter for both annual and interim reporting
periods. Symantec is evaluating the potential impact of this accounting
pronouncement on required disclosures and accounting practices.
NOTE 13. SUBSEQUENT EVENT
On October 15, 1998, Symantec announced it signed a definitive merger agreement
to acquire Quarterdeck Corporation. Under the terms of the agreement, Symantec
has commenced a cash tender offer for all outstanding shares of Quarterdeck
common stock at a price of $0.52 per share. The aggregate purchase price to be
allocated to acquired assets and liabilities is expected to be approximately
$70 to $75 million which includes common stock and equivalents, acquisition
related costs and any negative tangible net worth at the time of closing, if
the tender offer is accepted. The Boards of Directors of both companies have
approved the transaction.
15
<PAGE> 16
SYMANTEC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Completion of the tender offer is subject to certain conditions, including the
tender of a majority of the Quarterdeck shares, receipt of government approvals
and the expiration of applicable waiting periods under the Hart-Scott-Rodino
Act. Effective as of November 3, 1998, the Department of Justice has granted
early termination of the waiting period under the Hart-Scott-Rodino Act,
allowing Symantec to proceed with its acquisition of Quarterdeck Corporation.
Quarterdeck's revenue for the twelve months ended June 1998 was approximately
$57.0 million. (See Agreement and Plan of Merger, dated October 15, 1998, among
Symantec, Purchaser, and Quarterdeck Corporation filed with Symantec's Form SC
14D1 on October 19, 1998).
16
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The following discussion contains forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934, as amended, and Section
27A of the Securities Act of 1933, as amended. These forward-looking statements
are subject to significant risks and uncertainties, including those identified
in the section "Factors That May Affect Future Results" and in the Company's
annual report on Form 10-K for the year ended March 31, 1998, that may cause
actual results to differ materially from those discussed in such forward-looking
statements. The forward-looking statements within this Form 10-Q are typically
identified by words such as "believes," "anticipates," "expects," "intends,"
"may" and other similar expressions, and include the statements of future
estimates under "Year 2000 - Product Liability" and "Year 2000 - Corporate
Systems" below. However, these words are not the exclusive means of identifying
such statements. In addition, any statements which refer to expectations,
projections or other characterizations of future events or circumstances are
forward-looking statements. The Company undertakes no obligation to publicly
release the results of any revisions to these forward-looking statements which
may be made to reflect events or circumstances occurring subsequent to the
filing of this Form 10-Q with the Securities and Exchange Commission. Readers
are urged to carefully review and consider the various disclosures made by the
Company in this report and in the Company's other reports filed with the
Securities and Exchange Commission, including its Form 10-K, that attempt to
advise interested parties of the risks and factors that may affect the Company's
business.
FACTORS THAT MAY AFFECT FUTURE RESULTS
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS AND STOCK PRICE. Due to the factors
noted below, the Company's earnings and stock price have been and may continue
to be subject to significant volatility, particularly on a quarterly basis.
Symantec has previously experienced shortfalls in revenue and earnings from
levels expected by securities analysts and investors, which has had an immediate
and significant adverse affect on the trading price of the Company's common
stock. This may occur again in the future.
RAPID TECHNOLOGICAL CHANGE AND DEVELOPMENT RISKS. The Company participates in a
highly dynamic industry characterized by rapid change and uncertainty related to
new and emerging technologies and markets. The recent trend toward server-based
applications in networks and applications distributed over the Internet could
have a material adverse affect on sales of the Company's products. Future
technology or market changes may cause certain of Symantec's products to become
obsolete more quickly than expected.
The use of a Web browser (running on either a PC or network computer) to access
client/server systems is emerging as an alternative to the traditional desktop
access through operating systems which are resident on personal computers.
Should the functionality associated with such system access reduce the need for
Symantec's products, the Company's future net revenues and operating results may
be adversely affected.
OPERATING SYSTEM. The release and subsequent customer acceptance of current or
enhanced operating systems are particularly important events that increase the
uncertainty and volatility of Symantec's results. Should the Company be unable
to successfully and timely develop products that operate under existing or new
operating systems, or should pending or actual release of the new operating
systems delay the purchase of Symantec's products, the Company's future net
revenues and operating results would be materially adversely affected.
Microsoft has incorporated advanced utilities including telecommunications,
facsimile and data recovery utilities in Windows 95 and has included additional
product features in Windows 98, including enhanced disk repair, defragmentation,
system file maintenance, ISDN support and PPTP virtual private networking, that
may decrease the demand for certain of the Company's products, including those
currently under development. Fax capabilities were dropped from Windows 98.
Microsoft may also include additional features in new versions of Windows 2000
(formerly known as Windows NT 5.0) that could decrease demand for certain of the
Company's products intended for Windows 2000, including those currently under
development.
17
<PAGE> 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
Additionally, as hardware vendors incorporate additional server-based network
management and security tools into network operating systems, the demand may
decrease for certain of the Company's products, including those currently under
development. In addition, functionality previously provided only by software may
be incorporated directly into hardware, potentially reducing demand for
Symantec's products. Also, Symantec's competitors may license certain of their
products to Microsoft and OEMs for inclusion with their operating systems,
add-on products or hardware, which may also reduce the demand for certain of the
Company's products.
PERSONAL COMPUTERS, HARDWARE AND MICROSOFT WINDOWS 98. Fluctuations in customer
spending from software to hardware as the result of technological advancements
in hardware or price reductions of hardware have in the past, and may in the
future, result in reduced revenues which have had and would have a material
adverse affect on operating results.
Microsoft's Windows 98 operating system was introduced during the June 1998
quarter. The Company's ability to generate revenue from many of its current
products, and products currently under development, could be less than
anticipated in future periods due to reported incompatibilities by end-users,
and delays in the purchase of Symantec's products as end-users first deploy
Windows 98. The Company believes that weak retail software sales during the June
and September 1998 quarters compared to the March 1998 quarter were due, in
part, to the release of Windows 98 at the end of the June 1998 quarter. This
weakness could continue. In addition, the Company may face declining sales
following Microsoft's introduction of Windows 2000 (formally known as Windows NT
5.0) currently scheduled for 1999.
Symantec's stock price declined significantly within approximately 6 months
after the releases of Windows 3.1 and Windows 95, which in some cases also
caused the additional requirement for hardware upgrades. While there were a
variety of reasons for these declines in the stock price, Symantec's recent
stock price decline may have been due, in part, to the release of Windows 98.
Symantec could face additional stock price declines following the introduction
of Windows 2000 by Microsoft.
CONSOLIDATION IN THE INDUSTRY. Consolidation in the software industry continues
to occur, with competing companies merging or acquiring other companies, in
order to capture market share or expand product lines. As this consolidation
occurs, the nature of the market may change as a result of fewer players
dominating particular markets, potentially providing consumers with fewer
choices. Also, certain of these companies offer a broader range of products,
ranging from desktop to enterprise solutions, than Symantec, and Symantec may
not be able to compete effectively against certain competitors. Any or all of
these changes may have a significant adverse affect on Symantec's future
revenues and operating results.
DEPENDENCE ON THE INTERNET. Critical issues concerning the commercial use of the
Internet, including security, reliability, cost, ease of use, accessibility,
quality of service, or potential tax or other government regulation, remain
unresolved and may affect the use of the Internet as a medium to support the
functionality of certain of the Company's products, or to distribute software.
Should the Company be unable to incorporate changes in the Internet environment
into its business operations and product development successfully or in a timely
manner, the Company's future net revenues and operating results could be
adversely affected.
PRICE COMPETITION. Price competition is often intense in the microcomputer
software market, especially in regards to utility and anti-virus products, and
may continue to increase and become even more significant in the future,
resulting in reduced profit margins. Should competitive pressures in the
industry continue to increase in regards to utility and anti-virus products,
Symantec may be required to reduce prices and/or increase its spending on sales,
marketing and research and development of these products as a percentage of net
revenues, resulting in lower profit margins. These actions may not be sufficient
to offset the impact of price competition as it has done in the past, on the
Company's business and net revenues, resulting in adverse impacts on revenue,
income and cash flow.
Many of the Company's competitors have significantly reduced the price of
utility and anti-virus products. These practices may have a material adverse
impact on revenue in future periods.
18
<PAGE> 19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
The Company has raised prices on some of its products in the past and may do so
in the future. These actions, however, may not have a positive impact on the
Company's net revenues, income and cash flow.
INTEGRATED SUITES. Symantec and its competitors are now providing integrated
suites of utility products. With the shift to integrated utility suites, price
competition is likely to be intense, and cannibalization of Symantec's existing
utility and anti-virus products may occur. The price of integrated utility
suites is significantly less than the total price of individual products
included in these utility suites when such products are sold separately. As a
result, there may be a negative impact to Symantec's revenue and operating
income from selling integrated utility suites rather than individual products,
as the lower price of integrated utility suites may not be offset by increases
in the total volume of utility suites sold. Additionally, the Company's products
may not compete effectively with competitors' products or integrated utility
suites introduced in the future.
QUARTERLY BUYING PATTERNS; ABSENCE OF BACKLOG. Most retail customers tend to
make a majority of their purchases at the end of the fiscal quarter, in part
because they are able, or believe that they are able, to negotiate lower prices
and more favorable terms. This is also true of corporate customers that
negotiate site licenses near the end of each quarter. This end-of-period buying
pattern means that forecasts of quarterly and annual financial results are
particularly vulnerable to the risk that they will not be achieved, either
because expected sales do not occur or because they occur at lower prices or on
less favorable terms to the Company.
In recent quarters, the Company has noted that a growing proportion of revenues
are generated during the last month of the quarter. The reliance on a large
proportion of revenue occurring at the end of the quarter and an increase in the
dollar value of transactions that occur at the end of the quarter result in
increased uncertainty relating to quarterly revenues, and increase the chances
that the Company's results could diverge from the expectations of investors and
analysts.
The Company operates with relatively little backlog; therefore, if near-term
demand for the Company's products weakens in a given quarter, there could be an
immediate, material adverse effect on net revenues and on the Company's
operating results, which would likely result in a significant and precipitous
drop in the Company's stock price.
RETAIL DISTRIBUTION CHANNEL. A large portion of the Company's sales are made
through the retail distribution channel, which is subject to events that create
unpredictable fluctuations in consumer demand. Sales through the distribution
channel declined unexpectedly during the first six months of fiscal 1999 and had
an adverse effect on the Company's results of operations for that period. The
Company's retail distribution customers also carry the products of Symantec's
competitors. These retail distributors may have limited capital to invest in
inventory, and their decisions to purchase the Company's products is partly a
function of pricing, terms and special promotions offered by Symantec, as well
as by its competitors over which the Company has no control and which it cannot
predict.
Agreements with distributors are generally nonexclusive and may be terminated by
either party without cause. Certain distributors and resellers have experienced
financial difficulties in the past. Distributors that account for significant
sales of the Company may experience financial difficulties in the future, which
could lead to reduced sales or write-offs and could adversely affect operating
results of the Company. When this has occurred in the past, the Company has
successfully moved these inventories to other distributors. The Company may not
be able to do so in the future.
NEW DISTRIBUTION CHANNELS. Symantec may not be able to develop an effective
method of distributing its software products utilizing each of the rapidly
evolving software distribution channels, including the Internet. The presence of
new channels could adversely impact existing channels and/or product pricing,
which could have a material adverse impact on the Company's future revenues and
profitability. Symantec currently offers a broad range of products and services
over the Internet.
19
<PAGE> 20
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
SITE LICENSES. Symantec sells volume license programs (corporate site licenses)
through the distribution channel and through corporate resellers. Average site
license revenue per unit is typically lower than the average revenue per unit
from retail versions shipped through the retail distribution channel.
RELIANCE ON JOINT BUSINESS ARRANGEMENTS. Symantec has entered into various
development or joint business arrangements for the purpose of: developing new
software products and enhancements to existing software products; gaining
presence in new markets, and Symantec may continue to do so in the future.
Depending on the nature of each such arrangement, the development, distribution,
sale or marketing of the resulting product may be controlled either by Symantec
or its business partner. Products resulting from joint business arrangements may
not be technologically successful, may not achieve market acceptance and may not
be able to compete with products either currently in the market or introduced in
the future.
Symantec distributes certain of its products through value-added resellers
("VARs") and independent software vendors ("ISVs") whereby Symantec's products
are included with hardware products prior to sale through retail channels. These
licensing agreements are generally non-exclusive and do not require the VAR or
ISV to make minimum purchases. If the Company is not successful in maintaining
its current relationships and securing license agreements with additional VARs
and ISVs, or if the Company's VAR and ISV customers are not successful in
selling their products, the Company's future net revenues and operating results
may be adversely affected.
ACQUISITIONS. Symantec has completed a number of acquisitions and may acquire
other companies and technology in the future. Acquisitions involve a number of
special risks, including the diversion of management's attention to integrate
the operations and personnel of the acquired companies in an efficient and
timely manner, the retention of key employees, the burden of presenting a
unified corporate image, the integration of acquired products and of research
and development and sales efforts. In addition, because the employees of
acquired companies have frequently remained in their existing, geographically
diverse locations, the Company has not achieved certain economies of scale that
might otherwise have been realized.
On October 15, 1998, Symantec announced it signed a definitive merger agreement
to acquire Quarterdeck Corporation. Under the terms of the agreement, Symantec
will commence a cash tender offer for all outstanding shares of Quarterdeck
common stock at a price of $0.52 per share. The aggregate purchase price to be
allocated to acquired assets and liabilities is expected to be approximately $70
to $75 million which includes common stock and equivalents, acquisition related
costs and any negative tangible net worth at the time of closing, if the tender
offer is accepted. The Boards of Directors of both companies have approved the
transaction. Completion of the tender offer is subject to certain conditions,
including the tender of a majority of the Quarterdeck shares, receipt of
government approvals and the expiration of applicable waiting periods under the
Hart-Scott-Rodino Act. Effective as of November 3, 1998, the Department of
Justice has granted early termination of the waiting period under the
Hart-Scott-Rodino Act, allowing Symantec to proceed with its acquisition of
Quarterdeck Corporation. Quarterdeck's revenue for the twelve months ended June
1998 was approximately $57 million.
Symantec typically incurs significant expenses in connection with its
acquisitions, which have a significant adverse impact on the Company's
profitability and financial resources. Future acquisitions may have a
significant adverse impact on the Company's future profitability and financial
resources.
CHANNEL FILL. The Company's pattern of net revenues and earnings may be affected
by "channel fill." Distributors may fill their distribution channels in
anticipation of price increases, sales promotions or incentives. Distributor
inventories may be decreased between the date Symantec announces a new version
or new product and the date of release, because distributors, dealers and end
users often delay purchases, cancel orders or return products in anticipation of
the availability of the new version or new product. The impact of channel fill
is somewhat mitigated by the Company's deferral of revenue associated with
distributor and reseller inventories estimated to be in excess of appropriate
levels; however, net revenues may still be materially affected favorably or
adversely by the effects of channel fill, particularly in periods where a large
number of new products are simultaneously introduced.
20
<PAGE> 21
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
Channels may also become filled simply because the distributors do not sell
their inventories to retail distribution or retailers to end users as
anticipated. If sell-through does not occur at a sufficient rate, distributors
will delay purchases or cancel orders in later periods or return prior purchases
in order to reduce their inventories.
While such order delays or cancellations can cause fluctuations in net revenues
from one quarter to the next, the impact is substantially mitigated by the
Company's deferral of revenue associated with inventories estimated to be in
excess of appropriate levels in the distribution and retail channels. A material
adverse impact on revenue, however, can occur.
PRODUCT RETURNS. Product returns can occur when the Company introduces upgrades
and new versions of products or when distributors or retailers have excess
inventories. Symantec's return policy allows its distributors, subject to
certain limitations, to return purchased products in exchange for new products
or for credit towards future purchases. End users may return products through
dealers and distributors within a reasonable period from the date of purchase
for a full refund, and retailers may return older versions of the Company's
products. The Company estimates and maintains reserves for product returns.
However, future returns could exceed the reserves established by the Company,
which could have a material adverse affect on the operating results of the
Company.
FOREIGN OPERATIONS. A significant portion of Symantec's revenues, manufacturing
costs and operating expenses are transacted in foreign currencies. As a result,
the Company's results may be materially and adversely affected by fluctuations
in currency exchange rates, as well as increases in duty rates, exchange or
price controls or other restrictions on foreign currencies. The Company expects
that its non-U.S. dollar denominated sales activities may increase in the
future. Continued fluctuations in the currency markets could materially and
adversely impact Symantec's revenues.
The Company's international operations are subject to certain risks common to
international operations, such as government regulations, import restrictions,
currency fluctuations, economic volatility, repatriation restrictions and, in
certain jurisdictions, reduced protection for the Company's copyrights and
trademarks. Symantec utilizes natural hedging to mitigate Symantec's foreign
currency transaction exposure and hedges certain residual balance sheet
positions through the use of one-month forward contracts. These strategies may
not continue to be effective, and the Company may not be successful in
accurately forecasting transaction gains or losses.
TECHNICAL SUPPORT. Consistent with many companies in the software industry,
technical support costs comprise a significant portion of the Company's
operating costs and expenses. The Company's technical support levels are based,
in a large part, on projections of future sales levels. Over the short term, the
Company may not be able to respond to fluctuations in customer demand for
support services or modify the format of the Company's support services to
compete with changes in support services provided by competitors. While the
Company performs extensive quality control review over its technical support
services provided by corporate personnel and, to a lesser extent, over support
services outsourced to third-party vendors, customer satisfaction with the
services rendered may not be favorable. In the event of customer
dissatisfaction, future product and upgrade sales to that customer base may be
negatively impacted. Fee-based technical support services did not generate
material revenues in any fiscal period presented and are not expected to
generate material revenues in the near future.
UNCERTAINTY OF RESEARCH AND DEVELOPMENT EFFORTS. Symantec believes significant
research and development expenditures will be necessary in order to remain
competitive. While the Company performs extensive usability and beta testing of
new products, any products currently being developed by Symantec may not be
technologically successful, resulting products may not achieve market
acceptance, and the Company's products may not compete effectively with
competitors' products either currently in the market or introduced in the
future.
LENGTH OF PRODUCT DEVELOPMENT CYCLE. The length of Symantec's product
development cycle has generally been greater than Symantec originally expected.
Although such delays have undoubtedly had a material adverse affect on
Symantec's business, Symantec is not able to quantify the magnitude of net
revenues that were deferred or lost as a result of any particular delay because
Symantec is not able to predict the amount of net revenues that would have
21
<PAGE> 22
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
been obtained had the original development expectations been met. Delays in
future product development are likely to occur and could have a material adverse
affect on the amount and timing of future revenues. Due to the inherent
uncertainties of software development projects, Symantec does not generally
disclose or announce the specific expected shipment dates of the Company's
product introductions.
OPERATING LEVERAGE. Consistent with the experience of many companies in the
software industry, Symantec's employee and facility related expenditures
comprise a significant portion of the Company's operating expenses. The
Company's expense levels are based, in a large part, on projections of future
revenue levels. Given the fixed nature of these expenses over the short term, if
revenue levels fall below expectations, Symantec's operating results are likely
to be significantly and adversely affected.
MANAGEMENT OF EXPANDING OPERATIONS. Symantec continually evaluates its product
and corporate strategy and has in the past and will in the future undertake
organizational changes, product and marketing strategy modifications which are
designed to maximize market penetration, maximize use of limited corporate
resources and develop new products and product channels. These organizational
changes increase the risk that objectives will not be met due to the allocation
of valuable limited resources to implement changes. Further, due to the
uncertain nature of any of these undertakings, these efforts may not be
successful, and the Company may not realize any benefit from these efforts.
EMPLOYEE RISK. Competition in recruiting personnel in the software industry is
intense. Symantec believes that its future success will depend in part on its
ability to recruit and retain highly skilled management, marketing and technical
personnel. Symantec believes that it must provide personnel with a competitive
compensation package, which necessitates the continued availability of stock
options which, in turn, requires ongoing stockholder approval.
BUSINESS DISRUPTION. A disruption in communications between the Company's
geographically dispersed order entry and product shipping centers, particularly
at the end of a fiscal quarter, would likely result in an unexpected shortfall
in net revenues and could result in an adverse impact on operating results.
Disruptions in communications and Internet connectivity may also cause delays in
customer access to Symantec's Internet-based services or product sales. A
business disruption could occur as a result of natural disasters or the
interruption in service by communications carriers, and may cause delays in
product development that could adversely impact future net revenues of the
Company.
LITIGATION. Symantec is involved in a number of judicial and administrative
proceedings incidental to its business. The Company intends to defend and/or
pursue all of these lawsuits vigorously and, although an unfavorable outcome
could occur in one or more of the cases, the final resolution of these lawsuits,
individually or in the aggregate, is not expected to have a material adverse
affect on the financial position of the Company. However, depending on the
amount and timing of an unfavorable resolution of these lawsuits, it is possible
that the Company's future results of operations or cash flows could be
materially adversely affected in a particular period. (See Note 6 of Notes to
Consolidated Financial Statements in this Form 10-Q).
INTELLECTUAL PROPERTY RIGHTS. Symantec regards its software as proprietary and
relies on a combination of copyright, patent and trademark laws, non-disclosure
agreements and license agreements in an attempt to protect its rights. Despite
these precautions, it may be possible for unauthorized third parties to copy
aspects of Symantec's products or to obtain and use information that Symantec
regards as proprietary. All of Symantec's products are protected by copyright,
and Symantec has a number of patents and patent applications pending. However,
existing patent and copyright laws afford limited practical protection. In
addition, the laws of some foreign countries do not protect Symantec's
proprietary rights in its products to the same extent as do the laws of the
United States. Symantec's products are not copy protected.
22
<PAGE> 23
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
As the number of software products in the industry increases and the
functionality of these products further overlap, Symantec believes that software
developers will become increasingly subject to infringement claims. This risk is
potentially greater for companies, such as Symantec, that obtain certain of
their products through publishing agreements or acquisitions, since they have
less direct control over the development of those products.
In addition, an increasing number of patents are being issued that are
potentially applicable to software, and allegations of patent infringement are
becoming increasingly common in the software industry. It is impossible to
ascertain all possible patent infringement claims because new patents are being
issued continually, the subject of patent applications is confidential until a
patent is issued, and it may not be apparent even from a patent that has already
been issued whether it is potentially applicable to a particular software
product. This increases the risk that Symantec's products may be subject to
claims of patent infringement. Although such claims may ultimately prove to be
without merit, they are time consuming and expensive to defend. Symantec has
been involved in disputes claiming patent infringement in the past, is currently
involved in a number of such disputes and litigation, and may be involved in the
future in such disputes and/or litigation. If Symantec is alleged to infringe
one or more patents, it may choose to litigate the claim and/or seek an
appropriate license. If litigation were to commence and a license were not
available on reasonable terms or if another party were found to have a valid
patent claim against Symantec, such a result could have a material adverse
affect on Symantec's business, operating results and financial condition (See
Note 6 of Notes to Consolidated Financial Statements in this Form 10-Q).
SOFTWARE DEFECTS AND PRODUCT LIABILITY. Software products frequently contain
errors or defects, especially when first introduced or when new versions or
enhancements are released. In the past, for example, Symantec's anti-virus
software products have incorrectly detected viruses which do not exist. Although
the Company has not experienced any material adverse effects resulting from any
such defects or errors to date, defects and errors could be found in current
versions, future upgrades to current products or newly developed and released
products, despite testing prior to release. Software defects could result in
delays in market acceptance or unexpected reprogramming costs, which could have
a material adverse affect on the Company's operating results. While Symantec has
not been the target of software viruses specifically designed to impede the
performance of the Company's products, such viruses could be created and
deployed against Symantec's products in the future.
Most of the Company's license agreements with its customers contain provisions
designed to limit the exposure to potential product liability claims. It is
possible, however, that the limitation of liability provisions contained in such
license agreements may not be valid as a result of federal, state, local or
foreign laws or ordinances or unfavorable judicial decisions. A successful
product liability claim could have a material adverse affect on the Company's
business, operating results and financial condition.
EUROCURRENCY CONVERSION. Symantec conducts business and maintains operations in
Europe. Symantec will be affected by the introduction of a single European
currency, the euro. Symantec has a task force in place that is reviewing the
impact of this event on its systems, business and operations and expects to
implement the system and business modifications necessary to be euro-compliant
by January 4, 1999, Symantec's first day of the fiscal period for which
compliance is required. The financial impact on Symantec is not expected to be
material. It is uncertain when the appropriate European entities will change
their functional currency to the euro.
From a tax perspective, the conversion to the euro is not expected to have a
material impact for Symantec. In addition, our current programs related to
hedging transaction risk or using derivatives are not likely to change or be
impacted by the conversion to euro.
It is not possible to fully assess the impact of the single currency on our
European sales or whether changes being made by Symantec will be successful. As
a result, changes in the European market as a result of the introduction of the
euro and/or Symantec's response to the introduction of the euro may have an
adverse impact on revenues and results from operations.
23
<PAGE> 24
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
YEAR 2000 - PRODUCT LIABILITY. While the Company believes that most of its
currently developed and actively marketed products are Year 2000 compliant for
significantly all functionality, these software products could contain errors or
defects related to the Year 2000. Versions of the Company's products that are
not the most currently released or that are not currently being developed may
not be Year 2000 compliant. The Company sells some of its older product lines,
which are not being actively developed and updated, and such products are also
not necessarily Year 2000 compliant. Symantec is currently party to a lawsuit
related to the alleged inability of pre-version 4.0 Norton AntiVirus products to
function properly in respect to Year 2000. Symantec believes that this lawsuit
has no merit and intends to defend itself vigorously. The final resolution of
this lawsuit is not expected to have a material adverse affect on the results of
operations and financial condition of the Company, although it is not possible
to estimate the possible loss. Depending, however, on the amount and timing of
an unfavorable resolution of this lawsuit, it is possible that the Company's
future results of operations or cash flows could be materially adversely
affected in a particular period (See Note 6 of Notes to Consolidated Financial
Statements in this Form 10-Q).
YEAR 2000 - CORPORATE SYSTEMS. The Company has recently completed a major
evaluation of its applications systems and databases and is modifying or
replacing portions of its hardware and associated software to enable its
operational systems and networks to function properly with respect to dates
leading up to January 1, 2000 and thereafter. The Company continues to evaluate
system interfaces with third-party systems, such as those of key suppliers,
distributors and financial institutions, for Year 2000 functionality. The
Company expects the process of evaluating third-party Year 2000 compliance to be
an ongoing process through the Year 2000. The Company is evaluating Year 2000
exposures of its key suppliers, as well as those of company buildings and
related facilities. The costs to complete the Year 2000 project are expected to
be approximately $2 million and will be expensed as incurred.
The year 2000 Project is divided into several phases:
Assessment, where the vulnerability of the hardware, software, process or
service element is identified. Remediation Planning, where corrective
action is determined for each vulnerable element. Remediation and Unit
Testing, where the corrective action is taken and initial testing is
performed. Limited System Testing, where related elements are tested
together, using dates in the vulnerable range.
Project progress is tracked on a sub-project level as noted below. The following
table summarizes the completion status and currently expected completion date
for each phase for each sub-project. The expected completion dates are
forward-looking statements that are subject to the risks and uncertainties of
locating and correcting errors in complex computer systems, and actual dates of
completion may vary significantly.
<TABLE>
<CAPTION>
SUB-PROJECT PHASE AND STATUS OR DUE DATE
- ----------- ---------------------------------------------------------------------
Limited
Assessment Planning Remediation System Test
- ---------------------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Business Systems Complete Complete Complete Jan-Jun 1999
Networks, Servers & Communications Dec 1998 Oct-Dec 1998 Jan-Jun 1999 Jul-Dec 1999
Desktop and Mobile Computers Jan-Jun 1999 Jan-Jun 1999 Jan-Jun 1999 Jul-Dec 1999
Buildings and Related Facilities Dec 1998 Mar 1999 Jan-Jun 1999 Jul-Dec 1999
Suppliers and Outside Services Dec 1998 Mar 1999 Jan-Jun 1999 Jul-Dec 1999
</TABLE>
24
<PAGE> 25
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
The Company believes that, with its conversions to new software and
modifications to existing computer hardware and software, the Year 2000 issue
will not pose significant operational problems for its computer systems.
However, if remaining modifications and conversions are not made, or are not
completed in a timely manner, the Year 2000 issue could have a material adverse
impact on the operations of the Company.
Additionally, the systems of other companies with which Symantec does business
may not address Year 2000 problems on a timely basis, which could have an
adverse effect on Symantec's systems or business transactions.
As testing of Year 2000 functionality of the Company's systems must occur in a
simulated environment, the Company will not be able to test fully all Year 2000
interfaces and capabilities prior to Year 2000. The Company believes that its
exposure on Year 2000 issues is not material to its business as a whole and has
not deferred any other information systems projects as a result of its focus on
Year 2000 compliance issues. Periodic updates regarding the Year 2000 status are
provided to both the Executive staff and Board of Directors.
If certain key suppliers or distributors should suffer business interruptions
due to Year 2000 problems, the Company could be forced to delay product
shipments. If there should be significant periods of electric power or telephone
service interruptions, some of the Company's facilities might be unable to
operate. The Company maintains Business Recovery Plans for its major locations,
to provide for orderly response to various disaster scenarios. These will be
reviewed and augmented to provide contingency plans for potential Year 2000
related problems, both internal and external. Completion of the analysis and the
associated contingency plans is scheduled for June 1999.
25
<PAGE> 26
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
OVERVIEW
Symantec develops utility software for business and personal computing.
Symantec's business strategy is to satisfy customer needs by developing and
marketing products across multiple operating platforms that make customers
productive and keep their computers safe and reliable - anywhere, anytime.
Founded in 1982, the Company has offices in the United States, Canada, Mexico,
Asia, Australia, New Zealand, Europe, Africa and South America.
Symantec has a 52/53-week fiscal accounting year. The six months ended September
30, 1998 comprised 26 weeks of revenue and expense activity, while the
comparable prior year period comprised 27 weeks.
RESULTS OF OPERATIONS
During the September 1998 quarter, the Company acquired certain assets of Intel
Corporation ("Intel") (See Note 8 of Notes to Consolidated Financial Statements
in this Form 10-Q). During the June 1998 quarter, the Company acquired certain
assets of International Business Machines ("IBM") and Binary Research Limited
("Binary") (See Note 8 of Notes to Consolidated Financial Statements in this
Form 10-Q). The results of operations from these have been included in
Symantec's results of operations since the date of acquisition.
The following table sets forth each item from the consolidated statements of
operations as a percentage of net revenues and the percentage change in the
total amount of each item for the periods indicated.
<TABLE>
<CAPTION>
Three Months Six Months
Ended Percent Ended Percent
September 30, Change September 30, Change
---------------- in Dollar ----------------- in Dollar
1998 1997 Amounts 1998 1997 Amounts
---- ---- --------- ---- ---- ---------
<S> <C> <C> <C> <C> <C> <C>
(Unaudited)
Net revenues ...................................... 100% 100% 1% 100% 100% 7%
Cost of revenues .................................. 15 16 (4) 14 16 (3)
--- --- --- ---
Gross margin ....................... 85 84 2 86 84 9
Operating expenses:
Research and development ................. 18 17 9 17 16 12
Sales and marketing ...................... 50 44 15 48 45 14
General and administrative ............... 7 7 14 7 7 8
Acquired in-process research and
development ......................... 4 -- -- 12 -- --
Litigation judgment ...................... -- -- -- 2 -- --
Restructuring and other expenses ......... 4 -- -- 2 -- --
--- --- --- ---
Total operating expenses ............ 83 68 24 88 68 37
--- --- --- ---
Operating income (loss) ........................... 2 16 (92) (2) 16 *
Interest income ................................... 2 2 22 3 3 38
Interest expense .................................. -- -- (1) -- -- 12
Other income (expense), net ....................... -- 1 * 1 -- 218
--- --- --- ---
Income before income taxes ........................ 4 19 (81) 2 19 (89)
Provision for income taxes ........................ 2 4 (56) 3 5 (28)
--- --- --- ---
Net income (loss) ................................. 2% 15% (89) (1)% 14% *
=== === === ===
</TABLE>
* percentage change is not meaningful.
26
<PAGE> 27
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
NET REVENUES.
Net revenues increased 1% to approximately $140 million in the September 1998
quarter from $139 million in the September 1997 quarter.
Net revenues increased 7% to $293 million in the six month period ended
September 30, 1998 from $274 million in the six month period ended September 30,
1997. The increase in total revenues between the six month comparable periods
was due primarily to increases in OEM and site license revenues from
transactions that closed at the end of the June 1998 quarter (See further
discussion in Item 2: Factors That May Affect Future Results: Quarterly Buying
Patterns).
Revenues from retail sales were somewhat lower in the September and June 1998
quarters compared to the September and June 1997 quarters and also significantly
less than in the March 1998 quarter. Revenues from retail sales were lower in
the June 1998 and September 1998 quarters as compared with the March 1998
quarter primarily due to a general softness in the retail markets in the United
States and due to the economic situations in our international markets with the
exception of Europe. Net revenues were also lower in the September 1998 quarter
than expected due to: a power outage in the Company's Dublin facility on the
last day of the September 1998 quarter, recent economic changes in Latin
America, and a significant OEM contract that did not materialize in the
Company's Internet Tools division (See Item 2: Factors That May Affect Future
Results: Business Disruption; Foreign Operations; and Quarterly Buying
Patterns).
BUSINESS UNITS.
The Security and Assistance business unit is dedicated to assisting in
customers' daily use of computers by increasing productivity and keeping
computers safe and reliable. The Security and Assistance business unit comprised
approximately 52% and 48% of net revenues in the quarters ended September 30,
1998 and 1997, respectively. The Security and Assistance business unit comprised
approximately 49% and 48% of net revenues in the six month periods ended
September 30, 1998 and 1997, respectively. Increased net revenues for the
business unit in the comparable three and six month periods were primarily
related to increased revenues for two new products, Norton Ghost and the new
utility suite, Norton SystemWorks, and increases in sales of Norton Antivirus
for multi-platform workstations and Norton Antivirus for the Macintosh partially
offset by decreases in Norton Utilities for Windows. In addition, revenues from
the Company's Norton Uninstall Deluxe product were less than expected due to the
removal of the product from the market (See Note 6 of Notes to Consolidated
Financial Statements in this Form 10-Q). The Norton Ghost product was acquired
as part of the purchase of certain assets of Binary in the June 1998 quarter
(See Note 8 of Notes to Consolidated Financial Statements in this Form 10-Q).
The Remote Productivity Solutions business unit helps remote professionals
remain productive and work reliably, anywhere, anytime. The Remote Productivity
Solutions business unit comprised approximately 38% and 39% of the Company's net
revenues for the quarters ended September 30, 1998 and 1997, respectively, and
net revenues in absolute dollars were relatively flat. Revenues increased for
pcANYWHERE for Windows 95 and a new product, pcTelecommute, which was offset by
decreases in revenues for ACT! for Windows, WinFax PRO and WinFax Lite. The
Remote Productivity Solutions business unit comprised approximately 37% and 38%
of net revenues for the six month periods ended September 30, 1998 and 1997,
respectively. The absolute dollar increase for the six month comparable
September periods was primarily due to increased revenues for pcANYWHERE for
Windows 95 partially offset by decreased revenues for WinFax PRO for Windows 95,
WinFax Lite and WinFax PRO.
Internet Tools, Royalties and Other, which includes products providing an easy
to use Java development environment, as well as revenue streams from the sale of
certain of the Company's other software product lines and technologies, and
revenues from products nearing the end of their life cycles, comprised
approximately 10% and 13% of the Company's net revenues in the quarters ended
September 30, 1998 and 1997, respectively and 14% for each of the six month
periods ended September 30, 1998 and 1997. The business unit's net revenues
decreased in the quarter ended September 30, 1998 over the quarter ended
September 30, 1997 primarily due to reductions in
27
<PAGE> 28
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
revenues from products in Internet Tools and reductions in revenues from
products nearing the end of their life cycles. The business unit's net revenues
increased in the comparable six month September periods due to increased product
sales in Internet Tools, which included $6 million of revenue from a contract
with a single customer, and increased royalties, partially offset by decreased
revenues from products nearing the end of their life cycles.
Included in Internet Tools, Royalties and Other are royalties and other revenue
of approximately $10 million and $13 million recorded in the quarters ended
September 30, 1998 and 1997, respectively, and $26 million and $27 million in
the six month periods ended September 30, 1998 and 1997, respectively. These
royalties and other revenues primarily related to the sale of certain software
products, technologies and tangible assets to JetForm Corporation ("JetForm")
and the Hewlett-Packard Company ("Hewlett-Packard") during fiscal 1997.
Royalties from Hewlett-Packard will end in the December 1998 quarter.
Payments from JetForm were higher in the three and six month periods ended
September 30, 1998 over the three and six month periods ended September 30, 1997
primarily due to a past amendment to the JetForm agreement accelerating the
payment schedule . JetForm has the option to tender payment in either cash or in
registered JetForm common stock, within a contractually defined quantity
threshold. Due to the uncertainty regarding the ultimate collectibility of these
installments, Symantec is recognizing the revenue as payments are due and
collectibility is assured from JetForm. In addition, JetForm payments were lower
in the three month period ended September 30, 1998 as compared to the three
month period ended June 30, 1998, and payments are expected to decline in future
periods through the June 2000 quarter.
INTERNATIONAL. Net revenues from international sales outside of North America
were $46 million and $41 million and represented 33% and 30% of total net
revenues in the quarters ended September 30, 1998 and 1997, respectively. The
increase in net revenues was the result of sales growth in Europe, Middle East
and Africa ("EMEA") partially offset by decreases in Latin America due to their
economic slowdown.
Net revenues from international sales outside of North America were $95 million
and $82 million and represented 32% and 30% of net revenues in the six month
periods ended September 30, 1998 and 1997. The increase in net revenues was the
result of sales growth in EMEA and Japan.
Foreign exchange rate fluctuations during the three and six month periods ended
September 30, 1998 compared to the three and six month periods ended September
30, 1997 did not materially affect revenue for either period.
GROSS MARGIN.
Gross margin represents net revenues less cost of revenues. Cost of revenues
consists primarily of manufacturing expenses, costs of producing manuals,
packaging costs, royalties paid to third parties under publishing contracts and
amortization and write-off of capitalized software.
Gross margin increased to 85% of net revenues in the three month period ended
September 1998 from 84% in the three month period ended September 1997. Gross
margin increased to 86% from 84% in the six month periods ended September 30,
1998 and 1997, respectively.
Factors contributing to an increase in gross margin percentage during the
comparable three and six month September periods include a reduction in royalty
expense, partially offset by increases in capitalized software amortization from
acquisitions. In addition, for the six month comparable September periods, there
was a product mix favoring the Company's higher margin site license and OEM
business.
CAPITALIZED SOFTWARE. During the September 1998 quarter, Symantec capitalized
approximately $11 million of software technology acquired as part of the
Company's acquisition of certain assets of Intel (See Note 8 of Notes to
Consolidated Financial Statements in this Form 10-Q). During the June 1998
quarter, Symantec capitalized approximately $14 million of software technology
acquired as part of the Company's acquisition of certain assets of Binary (See
Note 8 of Notes to Consolidated Financial Statements in this Form 10-Q).
28
<PAGE> 29
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
Amortization of capitalized software, including amortization and write-off of
both purchased product rights and capitalized software development expenses,
totaled approximately $1 million and less than $1 million in the three month
periods ended September 30, 1998 and 1997, respectively. In addition,
amortization of capitalized software, including amortization and write-off of
both purchased product rights and capitalized software development expenses,
totaled approximately $2 million and less than $1 million for the six month
periods ended September 30, 1998 and 1997, respectively. Symantec expects
capitalized software amortization to increase in future periods. Symantec is
expected to record approximately $1 million of capitalized software amortization
per quarter, over the next 11 quarters, related to amounts capitalized as part
of the acquisition of certain assets of Binary. In addition, Symantec is
expected to record less than $1 million of capitalized software amortization per
quarter, over the next 20 quarters, related to amounts capitalized as part of
the acquisition of certain assets of Intel.
RESEARCH AND DEVELOPMENT EXPENSES.
Research and development expenses were 18% and 17% of net revenues for the three
month periods ended September 30, 1998 and 1997 and 17% and 16% of net revenues
for the six month periods ended September 30, 1998 and 1997. Research and
development expenses are charged to operations as incurred.
Research and development expenses increased 9% to $26 million in the September
1998 quarter from $24 million in the September 1997 quarter primarily due to
growth in legal expenses related to product claims and employee related
expenses. Research and development expenses increased 12% to $51 million in the
six month period ended September 30, 1998 from $45 million in the six month
period ended September 30, 1997 primarily due to growth in employee related
expenses and legal expenses related to product claims.
SALES AND MARKETING EXPENSES.
Sales and marketing expenses were 50% and 44% of net revenues in the three month
periods ended September 30, 1998 and 1997 and 48% and 45% of net revenues in the
six month periods ended September 30, 1998 and 1997. The increase in sales and
marketing expenses as a percentage of revenue for the comparable three and six
month September periods is abnormally high due to actual revenue coming in below
estimates partially due to the general softness in the retail market. The
absolute dollar increase in sales and marketing expenses in both the three and
six month comparable September periods is due to increases in employee related
expenses and advertising and promotion expenditures. The increase in advertising
expenditures for the six month comparable September periods primarily related to
the Company's Security and Assistance business unit.
GENERAL AND ADMINISTRATIVE EXPENSES.
General and administrative expenses increased approximately 14% to $10 million
in the three month period ended September 30, 1998 from $9 million in the three
month period ended September 30, 1997. General and administrative expenses
increased 8% to $19 million in the six month period ended September 30, 1998
from $18 million in the six month period ended September 30, 1997. The absolute
dollar increase for both the three and six month comparable September periods
primarily related to expenses incurred as a result of the termination of a
management consulting contract during the September 1998 quarter. General and
administrative expenses were 7% of net revenues during both the comparable three
and six month periods ended September 30, 1998 and 1997.
ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT EXPENSES.
Acquired in-process research and development expenses were approximately $5
million in the three month period ended September 30, 1998 in connection with
the acquisition of certain assets of Intel (See Note 8 of Notes to Consolidated
Financial Statements in this Form 10-Q). Acquired in-process research and
development expenses were approximately $34 million in the six month period
ended September 30, 1998. In addition to the
29
<PAGE> 30
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
approximately $5 million recorded in connection with the acquisition of certain
assets of Intel, Symantec recognized acquired in-process research and
development expenses of $16 million and $13 million, respectively, related to
the acquisition of certain assets of IBM and Binary in the June 1998 quarter
(See Note 8 of Notes to Consolidated Financial Statements in this Form 10-Q).
There were no acquired in-process research and development expenses recognized
in the three and six month periods ended September 30, 1997.
LITIGATION JUDGMENT.
There were no litigation judgment expenses recorded in the three months ended
September 30, 1998. Litigation judgment expenses totaled approximately $6
million in the six month period ended September 30, 1998. These expenses related
to a judgment by a Canadian court on a decade-old copyright action assumed by
Symantec when it purchased Delrina Corporation (See Note 6 of Notes to
Consolidated Financial Statements in this Form 10-Q). There were no litigation
judgment expenses recorded in the three and six month periods ended September
30, 1997.
RESTRUCTURING AND OTHER EXPENSES.
Restructuring and other expenses consisted of the following:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30,
---------------------- ----------------------
(In thousands; unaudited) 1998 1997 1998 1997
------ ---- ------ ----
<S> <C> <C> <C> <C>
Personnel severance $3,800 $-- $3,800 $--
Planned abandonment of manufacturing
facility lease 1,305 -- 1,305 --
------ ---- ------ ----
Total restructuring and other expenses $5,105 $-- $5,105 $--
====== ==== ====== ====
</TABLE>
During the quarter ended September 30, 1998, the Company made a decision to
restructure its operations and outsource its domestic manufacturing operations.
As a result, it recorded an approximately $4 million charge for personnel
severance to reduce the workforce by approximately 5% in both domestic and
international operations and an approximately $1 million charge for the planned
abandonment of a manufacturing facility lease. As of September 30, 1998,
approximately $1 million of the $5 million has been incurred. These activities
will be substantially complete by the end of fiscal 1999.
As of September 30, 1998, total accrued acquisition, restructuring and other
expenses were approximately $6 million and include approximately $2 million for
the elimination of duplicative and excess facilities, $2 million for personnel
severance and $2 million for other expenses.
INTEREST INCOME, INTEREST EXPENSE AND OTHER INCOME (EXPENSE), NET.
Interest income was approximately $4 million and $3 million in the three months
ended September 30, 1998 and 1997, respectively. Interest income increased 22%
in the three months ended September 30, 1998 over the three months ended
September 30, 1997 primarily due to a higher average invested cash balance and
gains on the sale of investments.
Interest income was approximately $8 million and $6 million in the six month
periods ended September 30, 1998 and 1997, respectively. Interest income
increased 38% in the six month period ended September 30, 1998 over the six
month period ended September 30, 1997 primarily due to a higher average invested
cash balance, gains on the sale of investments and interest income received with
income tax refunds.
30
<PAGE> 31
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
Interest expense was approximately $0.3 million for each of the three month
periods ended September 30, 1998 and 1997, and $0.7 million and $0.6 million for
the six month periods ended September 30, 1998 and 1997, respectively. Interest
expense principally relates to Symantec's convertible subordinated debentures.
Other income (expense), net was approximately ($0.5) million and $1 million in
the three month periods ended September 30, 1998 and 1997, respectively, and $2
million and $0.7 million in the six month periods ended September 30, 1998 and
1997, respectively. Other income (expense) decreased in the three month period
ended September 30, 1998 compared to the three month period ended September 30,
1997 due to foreign currency exchange losses from fluctuations in currency
exchange rates. Other income (expense) increased in the six month period ended
September 30, 1998 compared to the six month period ended September 30, 1997
primarily due to a foreign exchange gain realized during the June 1998 quarter,
as a result of the paydown of an intercompany loan.
INCOME TAX PROVISION.
The effective tax rate on income before income taxes, excluding charges for
acquired in-process research and development expenses, for the three and six
months ended September 30, 1998 was 32%. This rate is lower than the U.S.
federal statutory tax rate primarily due to a lower statutory tax rate on the
Company's Irish operations. The effective tax rate for the three and six months
ended September 30, 1997 was 23%.
The tax provision for the six months ended September 30, 1998 consists of two
items: a $13 million (or 32% effective tax rate) provision on income before
income taxes of $40 million. The $40 million excludes a $34 million charge for
acquired in-process research and development expenses. In addition, the $13
million tax provision is partially offset by a $5 million tax benefit on the $34
million charge for acquired in-process research and development. A valuation
allowance has been established for the portion of the deferred tax asset
attributable to the acquired in-process research and development charges that is
not expected to be realized within five years.
LIQUIDITY AND CAPITAL RESOURCES.
Cash, short-term investments and long-term investments decreased $53 million to
$207 million at September 30, 1998 from $260 million at March 31, 1998. This
decrease was largely due to the repurchase of 1.7 million shares of Symantec
common stock for approximately $40 million during the September 1998 quarter. In
addition, portions of the decrease were due to the acquisition of certain assets
of Binary for $27.5 million and an $8 million payment to IBM during the quarter
ended June 30, 1998 related to the acquisition of certain assets (See Note 8 of
Notes to Consolidated Financial Statements in this Form 10-Q).
In addition to cash, short-term investments and long-term investments of $207
million, the Company has $67 million of restricted investments related to
collateral requirements under certain lease agreements entered into during
fiscal 1997. Symantec is obligated under these lease agreements for two existing
office buildings (Cupertino City Center One or "CCC1" and World Head Quarters or
"WHQ"), one parcel of land and one office building (Cupertino City Center Five
or "CCC5") under construction in Cupertino, California to maintain a restricted
cash balance invested in U.S. treasury securities with maturities not to exceed
three years. In accordance with the lease terms, these funds are not available
to meet operating cash requirements.
On September 22, 1998, an agreement was entered into, subject to certain closing
conditions that have not yet been met, whereby the landlord intends to exchange
CCC5 for another leased building (Cupertino City Center Two or "CCC2") both
located in Cupertino, California. If this transaction is consummated, Symantec
would move both personnel and equipment into CCC2 once certain tenant
improvements are completed. In conjunction, Symantec would be relieved of
responsibility for its lease of WHQ. As of November 13, 1998, the parties are
conducting due diligence which is scheduled to end on November 20, 1998. During
this period, either party may decide not to go forward with the deal at such
party's sole discretion without penalty.
31
<PAGE> 32
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
On October 15, 1998, Symantec announced it signed a definitive merger agreement
to acquire Quarterdeck Corporation. Under the terms of the agreement, Symantec
will commence a cash tender offer for all outstanding shares of Quarterdeck
common stock at a price of $0.52 per share. The aggregate purchase price to be
allocated to acquired assets and liabilities is expected to be approximately $70
to $75 million which includes common stock and equivalents, acquisition related
costs and any negative tangible net worth at the time of closing, if the tender
offer is accepted. The Boards of Directors of both companies have approved the
transaction. Completion of the tender offer is subject to certain conditions,
including the tender of a majority of the Quarterdeck shares, receipt of
government approvals and the expiration of applicable waiting periods under the
Hart-Scott-Rodino Act. Effective as of November 3, 1998, the Department of
Justice has granted early termination of the waiting period under the
Hart-Scott-Rodino Act, allowing Symantec to proceed with its acquisition of
Quarterdeck Corporation. Quarterdeck's revenue for the twelve months ended June
1998 was approximately $57 million.
Net cash provided by operating activities was approximately $43 million for the
six months ended September 30, 1998 and was comprised of the Company's net loss
of approximately $3 million, offset by non-cash related expenses of
approximately $45 million and a net decrease in assets and liabilities,
excluding effects of acquisitions, of approximately $1 million.
Net trade accounts receivable increased $2 million to $67 million at September
30, 1998 from $65 million at March 31, 1998. Days sales outstanding was 43 days
at September 30, 1998 and 38 days at March 31, 1998. The increase in days sales
outstanding is due to a greater amount of revenue booked in the month of
September 1998 versus the month of March 1998.
On June 9, 1998, the Board of Directors of Symantec authorized the repurchase of
up to 5% of Symantec's outstanding common stock before December 31, 1998. Among
other purposes, the shares will be used for employee stock purchase programs and
option grants. The Company did not repurchase any shares during the June 1998
quarter. The Company repurchased 1.7 million shares at prices ranging from
$17.13 to $27.21 for an aggregate amount of approximately $40 million during the
September 1998 quarter. Of the $40 million, approximately $18 million was
charged to retained earnings after appropriate amounts were deducted from common
stock and capital in excess of par. Subsequent to September 30, 1998 and through
October 30, 1998, the Company completed the repurchase and has now repurchased a
total of 2.875 million shares at prices ranging from $13.10 to $27.21, for an
aggregate amount of approximately $56 million.
The Company recently renewed its $10 million line of credit which expires in May
2000. The Company was in compliance with the debt covenants for this line of
credit as of September 30, 1998. At September 30, 1998, there were no borrowings
and less than $1 million of standby letters of credit outstanding under this
line. Future acquisitions by the Company may cause the Company to be in
violation of the line of credit covenants. However, the Company believes that if
the line of credit were canceled or amounts were not available under the line,
there would not be a material adverse impact on the financial results, liquidity
or capital resources of the Company.
If Symantec were to sustain significant losses, the Company could be required to
reduce operating expenses, which could result in product delays; reassess
acquisition opportunities, which could negatively impact the Company's growth
objectives; and/or pursue further financing options. The Company believes
existing cash and short-term investments and cash generated from operating
results will be sufficient to fund operations for the next year.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
32
<PAGE> 33
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Information with respect to this item is incorporated by reference to Note 6 of
Notes to Consolidated Financial Statements included herein on page 10 of this
Form 10-Q.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Information with respect to this item is incorporated by reference to Note 10 of
Notes to Consolidated Financial Statements in this Form 10-Q.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) An annual meeting of stockholders of Symantec was held on September 17,
1998.
(b) Matters voted on at the meeting and votes cast on each were as follows:
<TABLE>
<CAPTION>
Total Vote Authority
Total Vote Withheld Withheld
For Each From Each From All
Director Director Nominees
-------- -------- --------
<S> <C> <C> <C>
1. To elect seven directors to Symantec's Board of Directors, each to hold
office until his or her successor is elected and qualified or until his
or her earlier resignation or removal.
Tania Amochaev ............................................................ 49,865,846 566,368 --
Charles M. Boesenberg ..................................................... 49,617,313 815,024 --
Walter W. Bregman ......................................................... 49,866,675 565,662 --
Carl D. Carman ............................................................ 49,641,673 790,542 --
Gordon E. Eubanks, Jr ..................................................... 49,548,405 883,932 --
Robert S. Miller .......................................................... 49,828,545 603,792 --
Robert R. B. Dykes ........................................................ 49,616,528 815,809 --
</TABLE>
<TABLE>
<CAPTION>
Broker
For Against Abstain "Non-Votes"
---------- ---------- ------- -----------
<S> <C> <C> <C> <C>
2. To consider and act upon a proposal to (i) amend Symantec's 1996 Equity 27,176,496 23,121,228 135,223 --
Incentive Plan (the "96 Plan") to make available for issuance an
additional 2,275,148 shares of Symantec Common Stock, which will raise
the 96 Plan's limit on shares that may be issued pursuant to awards
granted from 6,726,654 to 9,001,802, (ii) provide formula grants of
option awards to non-employee directors of Symantec and (iii) make
certain technical changes to the 96 Plan.
</TABLE>
33
<PAGE> 34
<TABLE>
<CAPTION>
Broker
For Against Abstain "Non-Votes"
---------- ---------- ------- -----------
<S> <C> <C> <C> <C>
3. To consider and act upon a proposal to adopt Symantec's 1998 Employee 47,842,258 2,469,827 119,191 --
Stock Purchase Plan and reserve 500,000 shares of Symantec Common Stock
for issuance thereunder.
4. To consider and act upon a proposal to ratify the Board of Director's 50,303,004 47,562 82,381 --
selection of Ernst & Young L.L.P. as Symantec's independent auditors
for the 1999 fiscal year.
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following exhibits are filed as part of this Form 10-Q or
are incorporated by reference:
10.01 Office building lease, as amended, dated as of May 1, 1998,
by and between RND Funding Company I and Symantec
Corporation regarding property located in Sunnyvale,
California.
10.02 (i) Participation agreement, as amended by that certain
Master Amendment No. 2, dated as of September 21, 1998, by
and among Symantec Corporation, Sumitomo Bank Leasing and
Finance, Inc. and The Sumitomo Bank, Limited. (ii) Pledge
agreement, as amended, by that certain Master Amendment No.
2, dated as of September 21, 1998, by and among Symantec,
the Bank, and Donaldson, Lufkin & Jenrette Securities
Corporation.
10.03 Software license agreement, dated as of September 27, 1998,
between Symantec Corporation and Intel Corporation
(Incorporated by reference to Exhibit 10.1 filed with the
Registrant's Current Report of Form 8-K filed October 5,
1998).
10.04 Rights agreement, dated as of August 12, 1998 between
Symantec Corporation and BankBoston, N.A., as Rights Agent,
which includes as Exhibit A the form of Certificate of
Designations of Series A Junior Participating Preferred
Stock, as Exhibit B the Form of Right Certificate and as
Exhibit C the Summary of Rights to Purchase Preferred Shares
(Incorporated by reference to Exhibit 4.1 filed with the
Registrant's Form 8-A filed August 19, 1998).
10.05 The registrant's Bylaws, as amended and restated effective
August 11, 1998 (Incorporated by reference to Exhibit 3.1
filed with the Registrant's Current Report of Form 8-K filed
August 19, 1998).
10.06 Agreement for exchange and purchase and escrow instructions,
dated September 22, 1998, by and between Symantec
Corporation with respect to CCC5 and WHQ and TST
Development, L.L.C. with respect to CCC2.
10.07 Agreement for exchange and purchase and escrow instructions,
as amended, dated November 4, 1998 by and between Symantec
Corporation and TST Development, L.L.C.
27.01 Financial Data Schedule for the Six Months Ended September
30, 1998.
27.02 Financial Data Schedule for the Six Months Ended September
30, 1997 (restated).
34
<PAGE> 35
(b) Reports on Form 8-K
A report on Form 8-K was filed by the Company on August 19, 1998,
reporting the adoption of a stockholder rights plan, pursuant to a
Rights Agreement, dated August 12, 1998, between Symantec Corporation
and BankBoston, N.A., as Rights Agent, which includes as Exhibit A the
form of Certificate of Designations of Series A Junior Participating
Preferred Stock, as Exhibit B the Form of Right Certificate and as
Exhibit C the Summary of Rights to Purchase Preferred Shares
(Incorporated by reference to Exhibit 4.1 filed with the Registrant's
Form 8-A filed August 19, 1998.)
A report on Form 8-K was filed by the Company on October 5, 1998,
reporting that the Company acquired rights to Intel Corporation's
anti-virus business. Symantec also licensed Intel systems management
technology which it will combine with its own antivirus technology to
create anti-virus solutions for corporate organizations. This
announcement is pursuant to a Software License Agreement, dated
September 27, 1998, between Symantec and Intel Corporation.
ITEMS 3 AND 5 ARE NOT APPLICABLE AND HAVE BEEN OMITTED.
35
<PAGE> 36
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: November 13, 1998 SYMANTEC CORPORATION
By /s/ Howard A. Bain III
-------------------------------------------
Howard A. Bain III
Vice President/Worldwide
Operations and Chief Financial Officer
(duly authorized officer)
/s/ Gregory E. Myers
-------------------------------------------
Gregory E. Myers
Vice President Finance
36
<PAGE> 37
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
10.01 Office building lease, as amended, dated as of May 1, 1998, by and
between RND Funding Company I and Symantec Corporation regarding
property located in Sunnyvale, California.
10.02 (i) Participation agreement, as amended by that certain Master
Amendment No. 2, dated as of September 21, 1998, by and among
Symantec Corporation, Sumitomo Bank Leasing and Finance, Inc. and
The Sumitomo Bank, Limited. (ii) Pledge agreement, as amended, by
that certain Master Amendment No. 2, dated as of September 21, 1998,
by and among Symantec, the Bank, and Donaldson, Lufkin & Jenrette
Securities Corporation.
10.03 Software license agreement, dated as of September 27, 1998, between
Symantec Corporation and Intel Corporation (Incorporated by
reference to Exhibit 10.1 filed with the Registrant's Current Report
of Form 8-K filed October 5, 1998).
10.04 Rights agreement, dated as of August 12, 1998 between Symantec
Corporation and BankBoston, N.A., as Rights Agent, which includes as
Exhibit A the form of Certificate of Designations of Series A Junior
Participating Preferred Stock, as Exhibit B the Form of Right
Certificate and as Exhibit C the Summary of Rights to Purchase
Preferred Shares (Incorporated by reference to Exhibit 4.1 filed
with the Registrant's Form 8-A filed August 19, 1998).
10.05 The registrant's Bylaws, as amended and restated effective August
11, 1998 (Incorporated by reference to Exhibit 3.1 filed with the
Registrant's Current Report of Form 8-K filed August 19, 1998).
10.06 Agreement for exchange and purchase and escrow instructions,
dated September 22, 1998, by and between Symantec Corporation with
respect to CCC5 and WHQ and TST Development, L.L.C. with respect to
CCC2.
10.07 Agreement for exchange and purchase and escrow instructions, as
amended, dated November 4, 1998 by and between Symantec Corporation
and TST Development, L.L.C.
27.01 Financial Data Schedule for the Six Months Ended September 30, 1998.
27.02 Financial Data Schedule for the Six Months Ended September 30, 1997
(restated).
</TABLE>
<PAGE> 1
EXHIBIT 10.01
THIRD AMENDMENT TO LEASE AGREEMENT
This Third Amendment to Lease Agreement (the "Amendment") is made and entered
into as of May 1, 1998, by and between RND FUNDING COMPANY I, a Delaware
corporation ("Landlord"), and Symantec Corporation, a Delaware corporation
("Tenant"), with reference to the following facts.
RECITALS
A. Kim Camp No. VII, a California general partnership ("Original Landlord")
and Tenant have entered into that certain Lease Agreement dated as of
February 27, 1991 as subsequently amended pursuant to that certain First
Amendment dated as of October 9, 1992 and that Second Amendment dated as of
March 7, 1995, (hereinafter, collectively the "Lease") for the leasing of
certain premises consisting of approximately 78,181 rentable square feet
located at 1450 Kifer Road, Sunnyvale, California (the "Premises") as such
Premises are more fully described in the Lease.
B. In connection with the sale by Original Landlord to Landlord of certain
real property of which the Premises is a part, effective as of September 1,
1997. Original Landlord assigned all its rights, title and interest in, to
and under the Lease to Landlord and Landlord assumed the obligations of
Original Landlord under the Lease to the extent such obligations first
arise and accrue on or after September 1, 1997.
C. Landlord and Tenant now wish to amend the Lease to provide for, among other
things, the extension of the Term of the Lease, all upon and subject to
each of the terms, conditions, and provisions set forth herein. Both
parties acknowledge the Amendment is entered into as of June 17, 1998,
which date is after the effective date of the Amendment.
NOW, THEREFORE, in consideration of the foregoing and for other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, Landlord and Tenant agree as follows:
1. Recitals: Landlord and Tenant agree that the above recitals are true
and correct and are hereby incorporated herein as though set forth in
full.
2. Term: The Term of the Lease shall be extended from May 1, 1998 to
April 30, 2000 (the "Extended Term").
3. Base Rent: The Basic Lease Information and Section 4 of the Lease are
hereby modified to provide that during the Extended Term of the Lease
the monthly Base Rent payable by Tenant to Landlord, in accordance
with the provisions of Section 4 of the Lease shall be in accordance
with the following schedule:
<TABLE>
<CAPTION>
Period monthly Base Rent
<S> <C>
5/1/1998-4/30/1999 $74,132.30
5/1/1999-4/30/2000 $78,041.35
</TABLE>
4. Option to Extend the Term: The parties hereby acknowledge and agree
that Tenant did exercise the Option to Extend the Term of the Lease in
accordance with the terms and conditions set forth in Section 1.2 of
the Second Amendment to Lease Agreement. Tenant further acknowledges
and agrees that the Option to Extend the Lease as set forth in Section
1.2 of the Second Amendment to Lease Agreement is of no further force
and effect, and Tenant does not have any additional rights under the
Lease to further extend the Term of the Lease.
5. Condition of Premises: Tenant acknowledges and agrees that its
possession of the Premises after May 1, 1998 is a continuation of
Tenant's possession of the Premises under the Lease. Tenant is
familiar with the condition of the Premises, and agrees to accept the
Premises in their existing condition "AS IS", without any obligation
of Landlord to remodel, improve or alter the Premises, to perform any
other construction or work of improvement upon the Premises, or to
provide Tenant with any construction or refurbishing allowance.
1
<PAGE> 2
6. Brokers: Tenant warrants that it has had no dealing with any real
estate broker or agent in connection with the negotiation of this
Amendment whose commission shall be payable by Landlord. If Tenant
has dealt with any person, real estate broker or agent with respect
to this Amendment, Tenant shall be solely responsible for the
payment of any fee due to said person or firm, and Tenant shall hold
Landlord free and harmless against any liability with respect
thereto, including attorneys' fees and costs.
7. EFFECT OF AMENDMENT: Except as modified herein, the terms and
conditions of the Lease shall remain unmodified and continue in
full force and effect. In the event of any conflict between the
terms and conditions of the Lease and this Amendment, the terms and
conditions of this Amendment shall prevail.
8. DEFINITIONS: Unless otherwise defined in this Amendment, all terms
not defined in this Amendment shall have the meaning set forth in
the Lease.
9. AUTHORITY: Subject to the provisions of the Lease, this Amendment
shall be binding upon and inure to the benefit of the parties
hereto, their respective heirs, legal representatives, successors
and assigns. Each party hereto and the persons signing below
warrant that the person signing below on such party's behalf is
authorized to do so and to bind such party to the terms of this
Amendment.
10. The terms and provisions of the Lease are hereby incorporated in
this Amendment.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date and
year first above written.
TENANT:
Symantec Corporation,
a Delaware corporation
By: /s/ H. BAIN III
----------------------------
Its:
----------------------------
Date: 8-12-98
----------------------------
By:
----------------------------
Its:
----------------------------
Date:
----------------------------
LANDLORD:
RND FUNDING COMPANY I,
a Delaware corporation
By:
----------------------------
Its:
----------------------------
Date:
----------------------------
By: LPG MS, Inc.,
As manager and agent for RND FUNDING COMPANY I
By: /s/ BARRY DI RAIMONDO
-----------------------------
Senior Vice President
Date:
-----------------------------
2
<PAGE> 1
EXHIBIT 10.02
MASTER AMENDMENT NO. 2
THIS MASTER AMENDMENT NO. 2 ("Amendment No. 2"), dated as of September
21, 1998, to (a) that certain Participation Agreement dated as of October 18,
1996 (as amended by that certain Master Amendment No. 1, dated as of March 3,
1997 and as further supplemented, amended and restated or otherwise modified
prior to the date hereof, the "Participation Agreement") by and among SYMANTEC
CORPORATION, a Delaware corporation, as the Lessee, Pledgor and Guarantor
("Symantec"), SUMITOMO BANK LEASING AND FINANCE, INC., a Delaware corporation,
as Lessor ("SBLF") and THE SUMITOMO BANK, LIMITED, a Japanese banking
corporation, acting through its San Francisco Branch, as Agent (the "Bank") and
(b) that certain Pledge Agreement dated as of October 18, 1996 (as amended,
supplemented, amended and restated or otherwise modified prior to the date
hereof, the "Pledge Agreement") by and among Symantec, as Pledgor, the Bank, as
Agent and DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION, as Collateral
Agent ("DLJ").
THIS AMENDMENT NO. 2 IS ENTERED INTO upon the basis of the following
facts, understandings and intentions.
A. Symantec, SBLF and the Bank entered into the Participation
Agreement. Symantec, the Bank and DLJ entered into the Pledge Agreement,
executed and delivered pursuant to the Participation Agreement. Any capitalized
terms used but not defined in this Amendment No. 2 shall have the meanings
given such terms in the Participation Agreement and the Pledge Agreement.
B. Symantec, SBLF and the Bank have agreed to (a) amend the
Participation Agreement as set forth herein to add definitions for certain
terms and (b) to amend the Pledge Agreement by replacing Schedule I thereto
with a new Schedule I.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereby agree as follows:
1. Amendments to the Participation Agreement
(a) Appendix A is amended by adding the following after the definition
for "Indemnitee" and before the definition for "Insolvency":
"INDEMNITEE GROUP" means, with respect to an Indemnitee, such
Indemnitee's Affiliates and its and their respective successors, assigns,
directors, shareholders, partners, officers, employees and agents."
<PAGE> 2
(b) Appendix A is further amended by adding the following after the
definition for "Pledge Agreement" and before the definition for "Property":
"Pledged Property" means the Additional Collateral identified in
Schedule I to the Pledge Agreement, as the same may be amended from time to
time, together with all other Additional Collateral, whether now or
hereafter delivered to the Collateral Agent in connection with the Pledge
Agreement or any other Operative Document, as identified in a writing
delivered by the Collateral Agent to the Agent."
(c) Exhibit E to Participation Agreement is hereby amended and restated
in its entirety by replacing the original Exhibit E with the amended Exhibit E
attached hereto.
2. Amendments to the Pledge Agreement. As of the date of this Amendment
No. 2, Schedule I is amended and restated in its entirety by replacing the
original Schedule I with the amended Schedule I attached hereto.
3. Counterparts. This Amendment No. 2 may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall comprise a single instrument.
4. Existing Agreements. Except to the extent specifically amended
hereby, all terms and conditions of the Participation Agreement and the Pledge
Agreement remain in full force and effect.
-2-
<PAGE> 3
IN WITNESS WHEREOF, Symantec, SBLF, the Bank and DLJ have executed
this Amendment No. 2 as of the date and year first written above.
SYMANTEC CORPORATION, a Delaware
Corporation
By: /s/ H. BAIN III
-----------------------------
Name: H. Bain III
Title: Vice President/Worldwide
Operations, and Chief Financial Officer
THE SUMITOMO BANK, LIMITED, a Japanese
banking corporation, acting through its
San Francisco Branch
By: /s/ KOZO MASAKI
-----------------------------
Name: Kozo Masaki
Title: General Manager
SUMITOMO BANK LEASING AND FINANCE, INC.,
a Delaware Corporation
By: /s/ WILLIAM GINN
--------------------------
Name: William Ginn
Title: President
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ MARJORIE S. WHITE
--------------------------
Name: Marjorie S. White
Title: VP & Secretary
-3-
<PAGE> 4
EXHIBIT E
TO PARTICIPATION AGREEMENT
ASSIGNMENT AGREEMENT
AND
NOTICE OF ASSIGNMENT
To: Symantec Corporation
10201 Torre Avenue
Cupertino, California 95104
Attention: Treasury
Sumitomo Bank Leasing and Finance, Inc.
277 Park Avenue
New York, New York 10172
The Sumitomo Bank, Limited, San Francisco Branch
555 California Street
Suite 3350
San Francisco, California 94104
Attention: Treasury
Re: Participation Agreement dated as of October 18, 1996 (the "Participation
Agreement"), among Symantec Corporation (the "Lessee"), as Lessee, Pledgor
and Guarantor Agent, Sumitomo Bank Leasing and Finance, Inc. as Lessor,
the various financial institutions as are or may from time to time become
parties thereto as lenders, as the Lenders, (collectively, the "Lenders"),
and The Sumitomo Bank, Limited, San Francisco Branch, as agent (in such
capacity, the "Agent") for the Lenders.
Ladies and Gentlemen:
We refer to Section 12.1 of the Participation Agreement referenced above.
Capitalized terms used but not otherwise defined herein have the respective
meanings specified in Appendix A to the Participation Agreement, and the rules
of interpretation set forth in Appendix A to the Participation Agreement shall
apply to this Assignment Agreement.
This Assignment Agreement (this "Assignment Agreement") is entered into as
of September 21, 1998 by The Sumitomo Bank, Limited, San Francisco Branch, as
assignor (the "Assignor") and Rabobank Nederland, as assignee (the "Assignee").
Assignor wishes to sell, and Assignee wishes to buy, a portion of Assignor's
Commitment Percentage (as defined in the Participation Agreement). Except as
otherwise
<PAGE> 5
expressly provided in this Agreement, the Assignor hereby assigns, sells,
transfers and delegates to the Assignee, without recourse, and the Assignee
hereby accepts from the Assignor, $46,486,806.04 in outstanding principal
amount of Notes, (the "Assignment"). After giving effect to the foregoing
Assignment, the Assignor and the Assignee shall hold the respective Commitment
Percentages under the Participation Agreement as set forth opposite such
Person's name on the signature pages hereof. The Assignor represents and
warrants that it will be, on the Effective Date, the legal and beneficial owner
of the interests being assigned by it hereunder that such interests are free
and clear of any adverse claim.
This Assignment Agreement is delivered to you pursuant to Section 12.1 of
the Participation Agreement and also constitutes notice of the Assignment.
The Assignee hereby acknowledges and confirms that it has received a copy
of the Participation Agreement and the exhibits related thereto, the Master
Lease, each Lease Supplement and each other document delivered under the
Participation Agreement. The Assignee further confirms and agrees that in
becoming and acting as a holder of such Notes, such actions have and will be
made without recourse to, or representation or warranty by the Lessor.
Except as otherwise provided in the Participation Agreement, effective as
of the date of receipt hereof by the Lessor (the "Effective Date").
(a) the Assignee
(i) shall be deemed automatically to have become a party to the
Participation Agreement and have all the rights and obligations
of a "Participant" under the Participation Agreement and the
other Operative Documents as if it were an original signatory
thereto to the extent specified in the second paragraph hereof;
and
(ii) agrees to be bound by the terms and conditions set forth in the
Participation Agreement, and the other Operative Documents to the
extent specified in the second paragraph hereof.
(b) the Assignor shall be released from its obligations under the
Participation Agreement and the other Operative Documents to the extent
specified in the second paragraph hereof.
The Assignee (a) acknowledges that the obligations to be performed from
and after the Effective Date under the Participation Agreement and all other
Operative Documents are its obligations, including the obligations imposed by
Section 12.1 of the Participation Agreement, and (b) represents and warrants to
each Participant, the Agent and the Lessee as set forth in clauses (A) through
(E) of Section 12.1(d)(ii) of the Participation Agreement.
E-2
<PAGE> 6
The Assignee hereby advises each of you of the administrative details with
respect to the assigned Notes described in Attachment I hereto.
The Assignee agrees to furnish the tax form or forms required by Section
12.3(a) of the Participation Agreement (if so required) no later than the date
of acceptance hereof by the Owner Trustee.
This Assignment Agreement may be executed by the Assignor and Assignee in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute one
and the same agreement.
ASSIGNOR:
The Sumitomo Bank, Limited, San
Francisco Branch
Commitment Percentage 28.7078721%
By:
-----------------------------
Name:
Title:
ASSIGNEE:
Rabobank Nederland
Commitment Percentage 71.2921279%
By:
-----------------------------
Name:
Title:
E-3
<PAGE> 7
RECEIVED AND ACKNOWLEDGED this ___ day of __________________, 19__
SYMANTEC CORPORATION,
as Lessee
By:
--------------------------
Name:
Title:
RECEIVED AND ACKNOWLEDGED this ___ day of __________________, 19__
SUMITOMO BANK LEASING AND FINANCE, INC.,
as Lessor
By:
--------------------------
Name:
Title:
RECEIVED AND ACKNOWLEDGED this ___ day of __________________, 19__
THE SUMITOMO BANK, LIMITED, SAN FRANCISCO BRANCH,
as Agent
By:
--------------------------
Name:
Title:
E-4
<PAGE> 8
ATTACHMENT I to
Assignment Agreement and
Notice of Assignment
[Attach Administrative Information Sheet]
E-5
<PAGE> 9
SCHEDULE I
To Pledge Agreement
See attached
<PAGE> 10
Page 5 of 5
Run Date: 09/08/98
Run Time: 11:19am Symantec Corp.-Collateral a/c
CUST: DLJ Investment Holdings Report
CUST#: 247001225
DLJ #: 2470012251 Holdings As Of: 09/08/98
<TABLE>
<CAPTION>
QUANTITY SECURITY COUPON MTY/CALL COST ORIGINAL BOOK MARKET
(UNITS) DESCRIPTION RATE PUT DATE PRICE COST VALUE PRICE
- ---------- ----------- ------ -------- ------- ------------- ------------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
52,151,684 WINTHROP U S GOVT MONEY FUND 0.000 52,151,683.85 52,151,683.85
S&P RATING: NA
1,779,000 US TREASURY BILL 09/15/98 99.835 1,776,059.21 1,776,059.21 99.835
S&P RATING: AAA
1,720,000 US TREASURY BILL 10/08/98 97.490 1,676,826.57 1,676,826.57 97.490
S&P RATING: AAA
1,000,000 US TREASURY NOTE 5.875 10/31/98 100.414 1,004,140.62 1,000,156.95 100.062
S&P RATING: AAA
123,000 US TREASURY BILL 11/05/98 97.433 119,842.98 119,842.98 97.433
S&P RATING: AAA
8,850,000 US TREASURY BILL 02/11/99 97.868 8,661,329.06 8,661,329.06 97.868
S&P RATING: AAA
- ---------- ------------- ------------- -------
65,623,684 65,389,882.29 65,385,898.63 98.238
</TABLE>
<TABLE>
<CAPTION>
QUANTITY SECURITY MARKET ACCRUED LIQUID ITM
(UNITS) DESCRIPTION VALUE INCOME VALUE COST DTM
- ---------- ----------- ------------- --------- ------------- ----- ---
<S> <C> <C> <C> <C> <C> <C>
52,151,684 WINTHROP U S GOVT MONEY FUND 52,151,683.85 0.00 52,151,683.85 4.830 0
S&P RATING: NA
1,779,000 US TREASURY BILL 1,776,059.21 1,336.72 1,777,395.93 5.494 7
S&P RATING: AAA
1,720,000 US TREASURY BILL 1,676,826.57 36,294.28 1,713,120.86 5.164 30
S&P RATING: AAA
1,000,000 US TREASURY NOTE 1,000,620.00 21,073.37 1,021,693.37 5.644 53
S&P RATING: AAA
123,000 US TREASURY BILL 119,842.98 2,162.82 122,005.80 5.312 57
S&P RATING: AAA
8,850,000 US TREASURY BILL 8,661,329.06 8,154.36 8,669,483.42 4.908 153
S&P RATING: AAA
- ---------- ------------- --------- ------------- ----- ---
65,623,684 65,386,361.67 69,021.55 65,455,383.23 4.881 110
</TABLE>
<PAGE> 1
EXHIBIT 10.06
AGREEMENT FOR EXCHANGE AND PURCHASE AND ESCROW INSTRUCTIONS
SEPTEMBER 22, 1998
BY AND BETWEEN
SYMANTEC CORPORATION
WITH RESPECT TO
CCC5
AND
WHQ
AND
TST DEVELOPMENT, L.L.C.
WITH RESPECT TO
CCC2
1
<PAGE> 2
<TABLE>
<S> <C>
ARTICLE 1 BASIC INFORMATION...........................................................4
ARTICLE 2 AGREEMENT TERMS.............................................................6
2.1. Definitions...................................................................6
2.2. Specific Terms................................................................6
2.3. Notices......................................................................12
2.4. Schedules....................................................................13
ARTICLE 3 OWNERSHIP OF PROPERTIES....................................................13
3.1. CCC5 and WHQ.................................................................13
3.2. CCC2.........................................................................13
3.3. Symantec Right to Assign or Designate........................................14
3.4. TST Right to Assign or Designate.............................................14
ARTICLE 4 PURCHASE AND SALE..........................................................14
4.1. Exchange and Purchase........................................................14
4.2. Consideration................................................................14
ARTICLE 5 CONTINGENCIES..............................................................16
5.1. Effect of Conditions Generally...............................................16
5.2. Conditions Applicable to Both Parties........................................17
5.3. Conditions for the Benefit of Symantec.......................................20
5.4. Conditions for the Benefit of TST............................................23
5.5. Conditions of Deposit Refunds................................................25
5.6. Schedule 3 Closing Conditions................................................25
ARTICLE 6 REPRESENTATIONS AND WARRANTIES.............................................25
6.1. TST and Symantec Representations and Warranties..............................25
6.2. Additional Representations and Warranties....................................25
6.4. Survivability................................................................27
ARTICLE 7 COVENANTS..................................................................28
7.1. Inspection Rights............................................................28
7.2. Discoveries..................................................................28
7.3. Operation of the Projects....................................................29
7.4. Other Covenants..............................................................30
7.5. Leasing and Tenant Improvements..............................................31
ARTICLE 8 ESCROW AND DEFAULT.........................................................31
8.1. Agreement to Constitute Escrow Instructions..................................31
8.2. Opening of Escrow............................................................31
8.3. Closing......................................................................31
8.4. Specific Escrow Instructions.................................................32
8.5. Default by TST As to CCC5....................................................32
8.6. Default by TST As to WHQ.....................................................33
8.7. Default by SYMANTEC..........................................................34
8.8. Non-Default Termination......................................................35
8.9. Specific Performance.........................................................35
ARTICLE 9 MISCELLANEOUS PROVISIONS...................................................35
9.1. Miscellaneous Provisions.....................................................35
9.2. Incorporation of Exhibits....................................................35
9.3. Right of First Refusal and Right of First Offer..............................35
ARTICLE 10 LOSS OR CONDEMNATION PRIOR TO CLOSING.....................................37
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
10.1. Loss Does Not Exceed Materiality Limit.....................................38
10.2. Loss Exceeds Materiality Limit.............................................38
Schedule 1 DEFINITIONS...............................................................41
Schedule 2 REPRESENTATIONS AND WARRANTIES............................................43
Schedule 2A EXCEPTIONS TO SYMANTEC'S REPRESENTATIONS AND WARRANTIES..................49
Schedule 2B EXCEPTIONS TO TST'S REPRESENTATIONS AND WARRANTIES.......................51
Schedule 3 SPECIFIC ESCROW INSTRUCTIONS..............................................53
Schedule 4 MISCELLANEOUS PROVISIONS..................................................57
Schedule A to Assignment and Assumption of Leases Rent Roll [CCC5]..................80
Schedule A to Assignment and Assumption of Obligations...............................83
Schedule B to Assignment and Assumption of Obligations..............................84
Exhibit A To: Symantec Corporation..................................................89
</TABLE>
3
<PAGE> 4
ARTICLE 1
BASIC INFORMATION
This AGREEMENT FOR EXCHANGE AND PURCHASE AND ESCROW INSTRUCTIONS is made as of
September 22, 1998 by and between SYMANTEC CORPORATION, a Delaware corporation
("Symantec") and TST DEVELOPMENT, L.L.C., a Delaware limited liability company
("TST") with regard to the Real Property defined in Section 2.2.27.1 below as
"CCC5", "CCC2" and "WHQ". As used herein, the term "Party" shall refer to either
Symantec or TST as applicable, and the term "Parties" shall refer to both
Symantec and TST.
The transaction contemplated by this Agreement is an exchange at equivalent
value of CCC5 for CCC2 and a purchase by TST of WHQ all upon the terms and
conditions herein set forth.
The following Basic Information is set forth for convenience. The Basic
Information is qualified in all respects by the applicable provisions of this
Agreement, and if there is a conflict between the Basic Information and the
provisions of this Agreement, the provisions of this Agreement shall control.
<TABLE>
<CAPTION>
ITEM CCC5 CCC2 WHQ
- ---- ---- ---- ---
<S> <C> <C> <C>
Exchange Fee title to CCC2 Fee title to CCC5 $17,500,000
Value/Purchase Price
Closing Date Earliest 30 days after Concurrent with CCC5 After 180 days
notice from TST notice from
given after end of Symantec given
Feasibility Period, after end of
but not prior to Feasibility Period
Substantial but not prior to
Completion Closing of
CCC5/CCC2 exchange
Closing Date Latest Later of February Concurrently with November 1, 1999
1, 1999 and 30 days Closing for CCC5
following
Substantial
Completion but in
no event later than
March 1, 1999
Days in Feasibility 45 45 45
Period
</TABLE>
4
<PAGE> 5
<TABLE>
<S> <C> <C> <C>
Initial Deposit $50,000 $50,000 $50,000
Additional Deposit $200,000 $200,000 $950,000
First
Time for Additional End of Feasibility End of Feasibility On or before the
Deposit First Period Period First Closing
</TABLE>
5
<PAGE> 6
ARTICLE 2
AGREEMENT TERMS
2.1. DEFINITIONS. For purposes of this Agreement, terms set forth in quotes in
Section 2.2 and Schedule "1" attached, shall have the meanings indicated
therein.
2.2. SPECIFIC TERMS.
2.2.1. "AGREEMENT DATE". September 22, 1998
2.2.2. "APPLE COMPUTER". The sole tenant and occupant of CCC2.
2.2.3. "BROKER-SYMANTEC". Symantec's Broker is Cooper/Brady CRESA.
2.2.4. "BROKER-TST". None.
2.2.5. "BUILDING CCC5". The four story office building with three and
one-half stories of underground parking.
2.2.6. "BUILDING CCC5 PRELIMINARY ACCEPTANCE". TST's preliminary acceptance
of Building CCC5 following Substantial Completion of Building CCC5 pursuant
to Section 5.3.2.1.1.
2.2.7. "BUILDING CCC5 ARCHITECT". The architectural firm of Hellmuth,
Obata & Kassabaum, Inc. ("HOK").
2.2.8. "BUILDING CCC5 ARCHITECTURAL CONTRACT". That certain Agreement between
Symantec Corporation and HOK made as of June 1 1996, as amended, including
those amendments and change orders listed on Exhibit E.
2.2.9. "BUILDING CCC5 FINAL COMPLETION". Building CCC5 Final Completion shall
have occurred when the Building CCC5 General Contract has been fully
performed in accordance with Building CCC5 Plans, all the "Work" (as defined
in the Building CCC5 General Contract) has been completed, the City has
issued for Building CCC5 a "Certificate of Occupancy" or a "Temporary
Certificate of Occupancy" (with a Certificate of Occupancy to be issued upon
the satisfaction of specified conditions acceptable to TST), all
subcontractors and material suppliers have been paid (or, in the event of a
dispute over such payment, an appropriate bond has been posted or funds set
aside for payment to such subcontractors and material suppliers when such
dispute is finally resolved), a final "Certificate of Payment" (as defined in
Section 9.10 of the General Conditions to the Building CCC5 General Contract)
has been issued by the Building CCC5 Architect, and copies of those final
waivers and releases of mechanics liens then having been obtained by Symantec
from subcontractors and material suppliers are furnished to TST.
6
<PAGE> 7
2.2.10. "BUILDING CCC5 GENERAL CONTRACT". That certain Agreement between
Symantec Corporation and Webcor Builders made as of May 5, 1997, as amended,
including those amendments and change orders listed on Exhibit O.
2.2.11. "BUILDING CCC5 CONTRACTOR". Webcor Builders.
2.2.12. BUILDING CCC5 PLANS". The plans and specifications for Building CCC5
prepared by Hellmuth, Obata & Kassabaum, Inc. ("HOK") together with those
prepared by other architects (including landscape architects), engineers or
design-build subcontractors, all as described in Exhibit E.
2.2.13. "CCC1" That certain property owned by Sumitomo and leased by Symantec
consisting of land and a four story office building located at 20300 Stevens
Creek Boulevard, Cupertino, California, and known as "Cupertino City Center
One".
2.2.14. "CERTIFICATE OF SUBSTANTIAL COMPLETION". The modified AIA Document
G704 "Certificate of Substantial Completion" signed by an authorized officer
of the Building CCC5 Architect and the Building CCC5 Contractor in the form
attached as Exhibit N together with the list of items to be completed or
corrected by the Building CCC5 Contractor as attached to such Certificate of
Substantial Completion (the "Punchlist").
2.2.15. "CITY". City of Cupertino
2.2.16. "CLOSINGS". Two Closings are contemplated pursuant to this Agreement.
At the "First Closing" CCC5 will be exchanged for CCC2. At the "Second
Closing" TST will acquire WHQ in consideration for paying the WHQ Purchase
Price.
2.2.17. "CLOSING INSTRUCTIONS". Those written instructions to be given by TST
and Symantec to Escrow Holder in order to facilitate the Closing. Unless both
TST and Symantec agree to Closing Instructions which differ from the
provisions of this Agreement, each of TST and Symantec agree to deliver
Closing Instructions consistent in all material respects with the provisions
of this Agreement.
2.2.18. "CLOSING STATEMENT". Statements to be prepared by Escrow Holder based
upon this Agreement at or about the time for each Closing that details that
manner in which funds are to be debited and credited to TST and Symantec as
of the Closing Date.
2.2.19. "COUNTY". Santa Clara County, California.
2.2.20. "DEPOSITS". The Deposits shall consist of the following:
2.2.20.1. CCC5 AND CCC2 EXCHANGE. The following Deposits shall be made
with respect to the CCC5, CCC2 Exchange:
2.2.20.1.1 "INITIAL DEPOSIT CCC5 AND CCC2". An initial amount of Fifty
Thousand Dollars ($50,000) with respect to CCC5 shall be paid by TST
and
7
<PAGE> 8
Fifty Thousand Dollars ($50,000) shall be paid with respect to
CCC2 by Symantec, both Initial Deposits to be paid to Escrow
Holder as provided in Section 4.2.1.1.
2.2.20.1.2 "ADDITIONAL DEPOSIT FIRST CCC5 AND CCC2" If each of TST and
Symantec deliver an Election to Proceed at the end of the Feasibility
Period, then the Initial Deposit CCC5 and CCC2 shall be increased by
Symantec depositing an additional Two Hundred Thousand Dollars
($200,000) with respect to CCC2, and by TST depositing an additional
Two Hundred Thousand Dollars ($200,000) with respect to CCC5.
2.2.20.2. WHQ PURCHASE. The following Deposits shall be made with respect
to the WHQ purchase:
2.2.20.2.1 "INITIAL DEPOSIT WHQ". An initial amount of Fifty Thousand
Dollars US ($50,000) to be paid to Escrow Holder as provided in Section
4.2.2.1;
2.2.20.2.2 "ADDITIONAL DEPOSIT FIRST WHQ". The Deposit shall be
increased by an additional Nine Hundred Fifty Thousand Dollars US
($950,000) not later than the First Closing. The Additional Deposit
First WHQ shall be in the form of cash or an irrevocable standby letter
of credit, issued by a commercial bank and otherwise in form reasonably
acceptable to Symantec (the "Letter of Credit").
2.2.20.3. "ADDITIONAL DEPOSIT". Any Additional Deposit First may be
referred to herein as an "Additional Deposit".
2.2.21. "DESIGNATED REPRESENTATIVES". Those persons, if any, identified in
this Section 2.2.21 as being the "Designated Representatives TST" or the
"Designated Representatives Symantec." If any persons are identified as
Designated Representatives, such persons are appointed by TST or Symantec, as
the case may be, to assist in the implementation of the Agreement. The
Designated Representatives shall have NO AUTHORITY to modify this Agreement
or otherwise make binding commitments on behalf of either TST or Symantec.
The Designated Representatives may be changed from time to time by notice
from the Party designating such representatives given to the other Party.
2.2.21.1. "SYMANTEC'S DESIGNATED REPRESENTATIVES". Shall refer to the
following persons: Marcia Cohen, John Sorci.
2.2.21.2. "TST'S DESIGNATED REPRESENTATIVES". Shall refer to the following
persons: Thomas M. Shapiro, Ezra Mersey.
2.2.22. "ESCROW". The following Escrows opened or to be opened with Escrow
Holder:
8
<PAGE> 9
2.2.22.1. "ESCROW EXCHANGE". The Escrow opened for the exchange of CCC5
and CCC2 under Escrow Number: ***EscrowNumberExchange***; and
2.2.22.2. "ESCROW WHQ". The Escrow opened for the sale of WHQ under
Escrow Number: ***EscrowNumberProp3***.
2.2.23. "ESCROW HOLDER". First American Title Guaranty Company, 1737 N. First
Street., San Jose, CA 95112, Attention: ***EscrowHolderEscrowOfficer***.
2.2.24. "FEASIBILITY PERIOD". The period beginning on the Agreement Date and
terminating at 5:00 p.m. Pacific Time on the forty-fifth (45th) day from and
after the Agreement Date.
2.2.25. "MATERIALITY LIMIT". The amount of loss to the Projects resulting from
casualty or condemnation above which either of the Parties shall have a right to
terminate this Agreement pursuant to ARTICLE 10. TST may terminate if there is a
loss to CCC5 in an amount which is greater than $1,000,000 or a loss to WHQ in
an amount which is greater than $500,000 which occurs prior to the First
Closing. Symantec may terminate this Agreement if there is a loss to CCC2 in an
amount greater than $1,000,000. TST may terminate this Agreement as to WHQ only
if there is a loss to WHQ following the First Closing and prior to the Second
Closing in an amount greater than $500,000.
2.2.26. "PROJECT". One of the three (3) properties which are the subject of this
Agreement each as more particularly described in the definition of "Property"
below.
2.2.27. "PROPERTY". The property which is the subject of this Agreement and
which Symantec agrees to sell and exchange and TST agrees to purchase and
exchange is the following (each, a "Property"):
2.2.27.1. REAL PROPERTY. That certain real property consisting of the
following Projects:
2.2.27.1.1 CCC5. CCC5 consisting of land together with a four
story office building with three and one-half stories of
underground parking containing approximately 142,691 gross
square feet of building area more or less and located at 10200
S. De Anza Blvd, City of Cupertino, California on the parcel
more particularly descirbed in Exhibit A-1 ("CCC5");
2.2.27.1.2 CCC2. CCC2 consisting of land together with a four
story office building containing approximately 138,805 gross
square feet of building are more or less and located at 20330
Stevens Creek Blvd., City of Cupertino, California on the parcel
more particularly described in Exhibit A-2 ("CCC2");
2.2.27.1.3 WHQ. WHQ consisting of land together with a three
story office building with surface parking containing
approximately 91,000 gross square feet of building area more or
less and located at 10201 Torre Avenue, City of
9
<PAGE> 10
Cupertino, California on the parcel more particularly described
in Exhibit A-3 ("WHQ")
together with all rights, privileges, easements and appurtenances to the
land, including without limitation, all easements, rights-of-way, and
other appurtenances and hereditaments pertaining to the land or used or
connected with the beneficial use or enjoyments of the land that are
owned by the owner of each Property (collectively, the "Real Property").
2.2.27.2. LEASES. All leases or other agreements (if any) relating to
the occupancy of any portion of any of the Projects (it being understood
that as of the Agreement Date there are no space leases with respect to
the Property other than the Apple Lease).
2.2.27.3. INTANGIBLE PROPERTY. All intangible property used or useful in
connection with the Real Property or the Leases, including, without
limitation, all trademarks, tradenames, contract rights, guarantees,
licenses, permits, approvals, warranties, and building names
(collectively, the "Intangible Property");
2.2.27.4. SERVICE CONTRACTS. All service contracts, maintenance
agreements and operating agreements (if any) respecting the operation
and maintenance of the Property (collectively, the "Service Contracts");
and
2.2.28. "PROPERTY DOCUMENTS". All architectural drawings and plans,
documents, records, reports (including, without limitation, environmental),
surveys, maps, engineering studies, grading plans, governmental approvals,
Leases, contracts or agreements with any public or private party and other
documentary information which relates to the use, occupancy, operation or
condition of the Property or to the Intangible Property, including without
limitation documentary information in a Party's possession or control which
concerns or relates to the matters described in subsections (a) and (b) of
Section 2.02 of Schedule "2", provided that in no event shall the Property
Documents be deemed to include any appraisals or valuation reports, any
projections or proformas or any other internally generated documents
respecting the value or project cash flows or operating income of the
Property. A list of those Property Documents as to which copies thereof have
been delivered to either Party or made available for either Party's
inspection as of the Agreement Date is attached hereto as Exhibit G.
2.2.29. "WHQ PURCHASE PRICE". Seventeen Million Five Hundred Thousand Dollars
US ($17,500,000).
2.2.30. "WHQ EXTERIOR LIGHTING CONTRACT". That certain purchase order for
specified exterior lighting work with Schwartz and Lindheim.
2.2.31. "SCHEDULED CLOSING DATE". The dates scheduled for the First Closing
and the Second Closing as follows:
10
<PAGE> 11
2.2.31.1. FIRST CLOSING SCHEDULED DATE. The scheduled date for the First
Closing shall be not less than thirty (30) days following notice from TST
given after the end of the Feasibility Period to Symantec and Escrowholder
specifying a date for the First Closing, which date shall in no event (i)
be earlier than Substantial Completion of Building CCC5 nor (ii) be later
than February 1, 1999, unless the date of Substantial Completion has not
occurred by January 1, 1999, in which event, such February 1, 1999 date
shall be extended one day for each day the date of Substantial Completion
is delayed beyond January 1, 1999 up to a maximum of thirty-one (31) days,
but no matter what the reason for delay, if the First Closing has not
occurred on or before March 1, 1999, either party may terminate this
Agreement.
2.2.31.2. SECOND CLOSING SCHEDULED DATE. The scheduled closing date for
the Second Closing shall be not less than 180 days following notice from
Symantec given after the end of the Feasibility Period to TST and
Escrowholder specifying a date for the Second Closing, which date shall in
no event be later than November 1, 1999, nor earlier than one hundred
eighty (180) days following the First Closing.
2.2.32. "PROPERTY OWNERS". The following parties are, as of the Agreement
Date, the record title holders with respect to the properties identified to
each specific Property Owner below, but all of such Property Owners shall be
referred to collectively herein as "Property Owners":
2.2.32.1. CCC5. Sumitomo Bank Leasing and Finance, Inc., a Delaware
corporation ("Sumitomo");
2.2.32.2. CCC2. The Travelers Insurance Company, a Connecticut corporation
("Travelers");
2.2.32.3. WHQ Sumitomo.
2.2.33. "SYMANTEC AFFILIATE". Any person or entity that directly or
indirectly controls Symantec and any person or entity that is directly or
indirectly controlled by any such person or entity.
2.2.34. "TST AFFILIATE". Any person or entity that directly or indirectly
controls TST or is under common control with TST and any person or entity
that is directly or indirectly controlled by or is under common control with
any such person or entity.
2.2.35. "SUBSTANTIAL COMPLETION OF BUILDING CCC5". Substantial Completion of
Building CCC5 shall have the meaning as set forth in Section 9.8 of the
General Conditions to the Building CCC5 General Contract and shall be deemed
to have occurred as of the date of "Substantial Completion" established in
the Certificate of Substantial Completion.
2.2.36. "TITLE INSURER". First American Title Insurance Company.
11
<PAGE> 12
2.2.37. "TITLE INSURANCE AMOUNT". The Title Policy for CCC5 shall be issued
in the amount shown on the CCC5 Title Pro Forma, for CCC2 shall be issued in
the amount shown on the CCC2 Title Pro Forma, and for WHQ shall be issued in
the amount of $17,500,000.
2.2.38. "TITLE PRO FORMA". The Pro Forma Title Insurance Policies for each
Project issued by the Title Insurer and more particularly identified by
Project and specifying the form of title policy, the condition of title, and
such endorsements as each Party shall require at the Closing with respect to
each Property as follows:
2.2.38.1. CCC5 TITLE PRO FORMA. The Pro Forma Policy prepared by Title
Insurer as specified in the Election to Proceed with respect to CCC5;
2.2.38.2. CCC2 TITLE PRO FORMA. The Pro Forma Policy prepared by Title
Insurer as specified in the Election to Proceed with respect to CCC2.
2.2.38.3. WHQ TITLE PRO FORMA. The Pro Forma Policy prepared by Title
Insurer as specified in the Election to Proceed with respect to WHQ.
2.2.39. "TRANSFEREE PARTY". The Party that will be the grantee at the Closing
with respect to a particular Property.
2.2.40. "TRANSFEROR PARTY". The Party that will be the grantor at the Closing
with respect to a particular Property.
2.3. NOTICES. All notices requests, demands and other communication given or
required to be given hereunder shall be in writing, duly addressed to the
parties and pursuant to Section 4.03 of Schedule 4 as follows:
2.3.1. TST. If to TST at:
TST Development, L.L.C.
c/o Tishman Speyer Properties, L.P.
520 Madison Avenue
New York, New York 10022
Attention: Thomas M. Shapiro
Telephone: 212-715-0389
Facsimile: 212-588-1895
2.3.2. COPY TO: With a copy to:
Tishman Speyer Properties, L.P.
520 Madison Avenue
New York, NY 10022
Attention: General Counsel
Telephone: 212-715-0338
Facsimile: 212-935-8239
12
<PAGE> 13
Greene Radovsky Maloney & Share LLP
Four Embarcadero Center, Suite 4000
San Francisco, CA 94111
Attention: Thomas M. Feldstein
Telephone: (415) 248-1517
Facsimile: (415) 777-4961
2.3.3. SYMANTEC. If to Symantec at:
10201 Torre Avenue
City of Cupertino, California 95014-9600
Attention: John Sorci, Sr. Director-Logistics and
Operations
Telephone: (408) 481-4004
Facsimile: (408) 524-0329
With a copy to:
Symantec Corporation.
10201 Torre Avenue
City of Cupertino, California 95014-9600
Attention: General Counsel
Telephone: (408) 253-9600
Facsimile: (408) 252-5101
2.4. SCHEDULES.
2.4.1. SCHEDULE 1. Definitions
2.4.2. SCHEDULE 2. Representations and Warranties
2.4.3. SCHEDULE 3. Specific Escrow Instructions
2.4.4. SCHEDULE 4. Miscellaneous Provisions
ARTICLE 3
OWNERSHIP OF PROPERTIES
3.1. CCC5 AND WHQ. Pursuant to various agreements, CCC5 and WHQ are currently
owned by the Sumitomo Bank Leasing and Finance, Inc. Symantec has control over
such Properties pursuant to such agreements. Symantec agrees to cause Sumitomo
Bank Leasing and Finance, Inc. to cooperate in the fulfillment of such
provisions hereof that require the execution or participation of the owner of
the fee title to such Properties.
3.2. CCC2. CCC2 is currently owned by Travelers. TST (or a TST Affiliate) has
the contractual right to acquire CCC2 pursuant to an agreement with Travelers
and shall either complete such acquisition prior to the First Closing or
otherwise cause Travelers to directly deed CCC2 to Symantec or its designee at
the First Closing. TST agrees to use its commercially reasonable efforts to
obtain the cooperation of Travelers in the
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fulfillment of such provisions hereof that require the execution or
participation of the owner of the fee title to such Properties.
3.3. SYMANTEC RIGHT TO ASSIGN OR DESIGNATE. Symantec shall have the right at any
time and without the consent of TST, to assign all or part of this Agreement
with respect to the acquisition of CCC2 to another party; provided, however,
that no such assignment shall relieve Symantec of any of its obligations under
this Agreement.
3.4. TST RIGHT TO ASSIGN OR DESIGNATE. TST shall have the right at any time and
without the consent of Symantec, to assign all or part of this Agreement with
respect to the acquisition of CCC5 and WHQ to another party; provided, however,
that no such assignment shall relieve TST of any of its obligations under this
Agreement.
ARTICLE 4
PURCHASE AND SALE
4.1 EXCHANGE AND PURCHASE. Subject to the terms and conditions contained in
this Agreement:
4.1.1. EXCHANGE OF CCC5 AND CCC2.
(i) Symantec agrees to cause the entire interest in CCC5 to be
transferred to TST (or the party designated by TST) in exchange for
the transfer to the party designated by Symantec of the entire
interest in CCC2; and
(ii) TST agrees to cause the entire interest in CCC2 to be transferred to
the party designated by Symantec in exchange for the transfer to the
party designated by TST of the entire interest in CCC5.
4.1.2. PURCHASE OF WHQ. Symantec agrees to cause the sale of WHQ to TST (or
the party designated by TST) and TST agrees to purchase WHQ from the owner of
WHQ.
4.2 CONSIDERATION. The consideration for the Exchange and Purchase described in
Section 4.1 shall be as follows:
4.2.1. CONSIDERATION FOR EXCHANGE OF CCC5 AND CCC2. As consideration for the
Exchange of CCC5 and CCC2, with respect to CCC5, Symantec, and with respect
to CCC2, TST, shall cause the following to occur:
4.2.1.1. INITIAL DEPOSIT CCC5 AND CCC2. Symantec and TST shall pay to
Escrow Holder in cash or other immediately available funds the following
amounts as the Initial Deposit within five (5) days of the Agreement Date:
(i) Symantec shall pay Fifty Thousand Dollars ($50,000); and
(ii) TST shall pay Fifty Thousand Dollars ($50,000).
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4.2.1.2. ADDITIONAL DEPOSIT CCC5 AND CCC2. Within three (3) business days
following confirmation that each Party has delivered its Election to
Proceed, the Parties shall pay in cash or other immediately available
funds to Escrowholder the following amounts as the Additional Deposit CCC5
and CCC2:
(i) Symantec shall pay Two Hundred Thousand Dollars ($200,000) with
respect to CCC2; and
(ii) TST shall pay Two Hundred Thousand Dollars ($200,000) with respect to
CCC5.
4.2.1.3. CLOSING. At the Closing for the Exchange of CCC5 and CCC2, the
following shall occur:
(i) Grant Deeds in the form attached as Exhibits B with respect to each
Property shall be delivered to the Transferee Party;
(ii) Such transfers shall be subject to no monetary encumbrances other
than a lien for real property taxes not yet due and payable and any
owner association assessments; and
(iii) The Initial Deposits and the Additional Deposits with respect to
CCC5 and CCC2 together with any interest earned thereon shall be
returned to the Party making such deposits.
4.2.2. CONSIDERATION FOR WHQ. The Purchase Price for WHQ shall be paid as
follows:
4.2.2.1. DEPOSIT. TST shall pay to Escrow Holder in cash or other
immediately available funds the amount of the Initial Deposit WHQ within
five (5) days of the Agreement Date. The Deposit shall be further
increased by the amount of the Additional Deposit WHQ in the amount of
Nine Hundred Fifty Thousand Dollars ($950,000) as provided in Section
2.2.20.2.2 which shall be made by TST in cash or other immediately
available funds or in the form of the Letter of Credit delivered to
Escrowholder not later than the First Closing.
4.2.2.2. CASH REMAINDER. The remainder of the Purchase Price for WHQ shall
be paid in cash or through other immediately available funds through
escrow at Closing.
4.2.3. INTEREST ON DEPOSITS.
4.2.3.1. ESCROW HOLDER TO ESTABLISH INTEREST BEARING ACCOUNT. Any portion
of the Deposits that will be held by Escrow Holder for more than two (2)
days shall be placed by Escrow Holder in an interest bearing account
satisfactory to Symantec and TST.
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4.2.4. APPLICATION OF DEPOSIT AT CLOSING OR OTHERWISE. If the Closing of the
CCC5/CCC2 exchange occurs, the amount of the Initial Deposit plus the amount
of the Additional Deposit together with any interest earned thereon shall be
returned to the party depositing the same. If the closing of TST's purchase
of WHQ occurs, the amount of the Initial Deposit plus the amount of the
Additional Deposit (both with respect to WHQ) together with any interest
earned thereon shall be applicable to the Purchase Price for WHQ, or, if the
Additional Deposit is in the form of a Letter of Credit, the Letter of Credit
shall be returned to TST upon deposit of cash sufficient to complete the
payment of the Purchase Price. If a Closing does not occur as a result of the
default of either Party, the non-defaulting Party shall be entitled to retain
the Deposit together with any interest earned thereon as liquidated damages
in accordance with Section 8.5 hereof. If a Closing does not occur other than
as a result of default by one of the parties, or if this Agreement terminates
other than as a result of default by one of the parties, the Deposits
together with any interest earned thereon shall be returned by Escrow Holder
to the respective parties making the respective Deposits.
ARTICLE 5
CONTINGENCIES
5.1. EFFECT OF CONDITIONS GENERALLY. The Closings and the parties' obligations
with respect to each Property shall be contingent upon the satisfaction (or
deemed satisfaction as specifically set forth in each Section herein) or waiver
by TST or Symantec of all of the conditions that are expressly stated to be in
favor of each as set forth in this Article and the Conditions to Closing as set
forth in Schedule "3" hereof, within the time limits specified in each Section
of this Article and such Schedule.
5.1.1. FAILURE OF CONDITIONS. In the event that any such condition is neither
satisfied within the time limits specified in each such Section nor waived in
writing by the Party specifically stated to be benefited by such Section,
such condition shall be deemed to have failed and the Party specifically
stated to be benefited by such failed condition, may elect to terminate this
Agreement by notice to the other Party and to Escrow Holder given before such
failed condition has been satisfied. In the event of any termination pursuant
to this Article, TST and Symantec shall be released from their respective
obligations to exchange, purchase or sell under this Agreement and shall have
no further rights or remedies regarding exchange, purchase or sale against
the other as a result of such termination, except for (a) the return to TST
of TST's Deposit (if applicable) with interest actually earned thereon
pursuant to Section 4.2.3.1 and the payment of 50% of any escrow cancellation
fees, and (b) the return to Symantec of Symantec's Deposit (if applicable)
with interest actually earned thereon pursuant to Section 4.2.3.1 and the
payment of 50% of any escrow cancellation fees. In such event, TST and
Symantec shall comply with any requirements reasonably imposed by Escrow
Holder to evidence such termination.
5.1.2. CONDITIONS ARE NOT COVENANTS. Conditions specified in this ARTICLE 5
or in Schedule "3" as being for the benefit of TST or Symantec are NOT also
to be considered as "covenants" of TST or Symantec unless such conditions are
also listed
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as either "TST's Covenants" or "Symantec's Covenants" in ARTICLE 5 or in
Schedule "3."
5.2. CONDITIONS APPLICABLE TO BOTH PARTIES. The following conditions shall be
for the benefit of each Party:
5.2.1. FEASIBILITY STUDIES. This Agreement is contingent on each Party's
approval of any and all investigations, studies or analyses for the Property
deemed appropriate by a Party to aid such Party in determining whether to
consummate the transaction ("Feasibility Studies"). Either Party may elect in
such Party's sole and unreviewable discretion, at any time prior to the end
of the Feasibility Period to terminate this Agreement.
Upon such election to terminate, the Deposit together with interest earned
thereon shall be returned to the Party making such Deposit.
Without limiting the generality of the foregoing, each Party shall have the
right to have prepared and to evaluate, both at the requesting Party's sole
expense, during the Feasibility Period, including, but not limited to, the
following:
5.2.1.1. LEASES. The Leases, if any, for each Property;
5.2.1.2. SITE APPRAISAL. An appraisal of the Property;
5.2.1.3. SURVEY. An ALTA survey, and Symantec agrees that as soon as
reasonably possible following the Agreement Date, Symantec shall obtain at
Symantec's sole cost and expense, and deliver to TST an ALTA "As Built"
survey showing the location on the CCC5 Property of Building CCC5;
5.2.1.4. SITE IMPROVEMENTS. An inspection of any existing site
improvements (including, without limitation, location and availability of
utilities and a consultant's analysis of the buildings and other
improvements on the Property);
5.2.1.5. ENVIRONMENTAL, SOIL, AND GROUND WATER CONDITIONS. Environmental,
soil and groundwater conditions concerning, without limitation, (i) the
stability and load bearing capacity of the soil, and (ii) the presence of
Hazardous Material on or under the Property or the potential for migration
of Hazardous Material onto or under the Property from other property;
provided, however, each Party agrees not to perform any drilling without
giving the other Party notice at least two (2) business days in advance;
5.2.1.6. ENTITLEMENTS AND APPROVALS. An analysis of governmental approvals
and entitlements for the Projects;
5.2.1.7. SERVICE CONTRACTS. The Service Contracts, if any, for each
Property; and
5.2.1.8. WITH RESPECT TO CCC2. Without limiting the generality of Section
5.2.1, TST specifically acknowledges that, in addition to the general
rights available to
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both Symantec and TST to terminate this Agreement for any reason prior to
the end of the Feasibility Period, Symantec may decline to give its
Election to Proceed as to CCC2 unless both of the following have occurred
within the Feasibility Period:
5.2.1.8.1 FINANCING. TST is aware that CCC5 and WHQ are owned by
Sumitomo Bank Leasing and Finance, Inc. and leased to Symantec in an
"off balance sheet" financing transaction known as a "Synthetic Lease."
Symantec intends to utilize a Synthetic Lease financing structure to
acquire CCC2 in exchange for CCC5, and commitments satisfactory to
Symantec from sources acceptable to Symantec to provide such a
structure as of the First Closing shall have been obtained by Symantec
prior to the end of the Feasibility Period.
5.2.1.8.2 APPLE LEASE TERMINATION. CCC2 is currently occupied by Apple
Computer as "Tenant" pursuant to a lease (the "Apple Lease") that has
an expiration date of October 31, 2000 and a right of renewal for an
additional two (2) years. Symantec intends during the Feasibility
Period to seek a commitment from Apple Computer pursuant to which
commitment Apple Computer agrees to terminate the Apple Lease and
vacate CCC2 not later than a date satisfactory to Symantec, and such a
commitment in form and content satisfactory to Symantec should have
been obtained prior to the end of the Feasibility Period. Symantec
covenants and agrees that it shall not have any meetings or discussions
with representatives of Apple Computer (nor shall Symantec send Apple
Computer any written proposals) without first notifying TST and
affording TST the right to be present at such meetings or discussions
or to first review and approve (in its sole and absolute discretion)
any such written proposals. No agreement between Symantec and Apple
Computer shall bind TST or Travelers or otherwise affect Building CCC2,
and any such agreement shall be expressly conditioned upon Symantec
having acquired CCC2 at the First Closing.
In the event a termination agreement is reached with Apple that is
conditioned upon a termination payment being made to Apple, Symantec
and TST agree to contribute at the First Closing up to Two Hundred
Thousand Dollars ($200,000) each toward such termination payment.
5.2.2. CONDITION OF TITLE.
5.2.2.1. TITLE REVIEW; RESPONSIBILITY OF EACH PARTY. The Parties agree
that all matters regarding title with respect to all Properties shall be
resolved during the Feasibility Period. Each Party shall be responsible
for evaluating the condition of title for the Property(ies) to be acquired
by such Party. The Election to Proceed required to be given pursuant to
Section 5.2.3 with respect to each Property requires that the Party giving
the Election to Proceed identify a Title Pro Forma that such Party will
accept as a condition to the Closing for such Property. During the
Feasibility Period, each Party shall be responsible for obtaining from the
Title Insurer such title information as each Party shall deem appropriate
and to obtain the binding commitment of the Title Insurer as to the form
of Title Policy including endorsements that the Title Insurer will deliver
at Closing which commitment shall
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only be subject to the effect of encumbrances to title occurring
subsequent to the date of such Title Pro Forma.
5.2.2.2. PROCEDURES FOR TITLE OBJECTIONS.
5.2.2.2.1 DURING FEASIBILITY PERIOD. During the Feasibility Period, if
either Party objects to an exception to title with respect to a
Property controlled by the other Party, such objecting Party may
identify such title objection and make written request that the other
Party cure such title objection. Such other Party may, but shall not be
obligated to respond to such request, provided, however, that the
Transferor must agree to remove any voluntary monetary liens or
encumbrances created or suffered by Transferor. If such title
objections are not cured prior to the end of the Feasibility Period,
but such other Party has agreed in writing given prior to the end of
the Feasibility Period to use its best efforts to cure such title
objection prior to the Closing, then the Election to Proceed may be
conditioned upon the issuance by the Title Insurer of a Title Policy in
the form of the Title Policy Pro Forma subject only to the cure of such
title objection as a condition to Closing. If a Party requests that the
other Party agree to cure a title objection and such other Party either
does not respond to such request prior to the end of the Feasibility
Period or declines to cure such title objection, then such Party making
such request may either terminate this Agreement with respect to the
Property which is the subject of such request or give its Election to
Proceed with respect to such Property, in which latter event such
requesting Party shall have agreed to accept such Property at the
Closing without a cure of such title objection and in accordance with
the Title Policy Pro Forma identified in its Election to Proceed.
5.2.2.2.2 SUBSEQUENT ENCUMBRANCES. If a Title Pro Forma is amended (an
"Amendment") to reflect the existence of any exceptions to title
arising subsequent to the Feasibility Period with respect to a
particular Property, the Transferee Party shall have three (3) business
days from the date of Transferee Party's receipt of such Amendment in
which to approve, in writing, any such easements, encumbrances, or
other exceptions or requirements shown thereon which were not disclosed
by the applicable Title Pro Forma or a previous Amendment (the
"Additional Encumbrances"). If such Transferee does not approve such
Amendment within such three (3) business day period, such Additional
Encumbrances shall be deemed disapproved. If such Transferee Party
approves the Additional Encumbrances within such time period, then the
Additional Encumbrances shall be deemed Permitted Exceptions and the
Title Pro Forma identified on Exhibit L for the Property affected shall
be deemed amended to incorporate the Amendment. If the Additional
Encumbrances are not approved, then, except with respect to monetary
liens or encumbrances voluntarily created by the Transferor Party, such
Transferor Party shall have the right to terminate this Agreement in
accordance with the provisions of the Section hereof entitled "Non
Default Termination" unless Transferor Party has elected (i) in the
next succeeding sentence. Transferor Party, within three (3) business
days after Transferee Party's written or deemed disapproval, shall, in
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Transferor Party's sole discretion: (i) notify Transferee Party in
writing that Transferor Party will eliminate the Additional
Encumbrances before the Closing; or (ii) notify Transferee Party that
unless Transferee Party waives its disapproval of the Additional
Encumbrances within three (3) business days after receipt of Transferor
Party's notice, Transferor Party shall cancel this Agreement; provided,
however, that the Transferor must agree to remove any monetary liens or
encumbrances voluntarily created or suffered by Transferor. If
Transferor Party elects (i) above, Transferor Party shall eliminate the
Additional Encumbrances prior to the Closing. If Transferor Party
elects (ii) above, this Agreement shall automatically terminate upon
the expiration of the 3-day period referenced therein unless Transferee
Party notifies Transferor Party that it waives Transferee Party's
disapproval of the Additional Encumbrances, in which case the
Additional Encumbrances shall be deemed Permitted Exceptions and the
Title Pro Forma identified on Exhibit L for the Property affected shall
be deemed amended to incorporate the Amendment.
5.2.2.2.3 COST OF TITLE INSURANCE.
Each Transferee Party shall bear all costs of the title insurance
required as a condition of the First Closing. With respect to the
Second Closing as to WHQ, Symantec shall be responsible for the costs
of a CLTA owner's policy and TST shall be responsible for any costs of
title insurance in excess thereof; provided, however, if any Title Pro
Forma includes a mechanics lien endorsement, the Transferor Party with
respect to the Closing in which such a Title Pro Forma is required
shall be responsible for providing such indemnities as may be required
by the Title Insurer as a condition to providing such endorsement.
5.2.3. ELECTION TO PROCEED. By giving an Election to Proceed with respect to
a Property or Properties, the Party giving such Election to Proceed shall be
deemed to have agreed at the Closing with respect to the Property covered by
such Election to Proceed as follows: (i) to accept such Property in its then
"As Is" condition except for such representations are warranties given by the
Transferor Party and are intended to survive the Closing and (ii) to accept
title to such Property in the condition specified in the Title Pro Forma
specified in such Election to Proceed. The Title Pro Forma specified in the
Election to Proceed shall be incorporated into the Condition of Title at
Closing on Exhibit L with respect to the applicable Property.
5.3. CONDITIONS FOR THE BENEFIT OF SYMANTEC. In addition to any other conditions
to Symantec's obligations contained in this Agreement, the following shall
constitute conditions to Symantec's obligation (i) to transfer CCC5 to TST in
exchange for CCC2 and (ii) to sell WHQ to TST and are for the benefit of
Symantec as specified below:
5.3.1. GENERAL CONDITIONS. The following conditions in this Section 5.3.1 are
conditions to Symantec's obligations to continue this Agreement, and the
failure of any of the following shall allow Symantec, without TST's approval,
to terminate this Agreement:
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5.3.1.1. TST'S ELECTION TO PROCEED AS TO CCC5 AND WHQ. TST's delivery to
Symantec of TST's written Election to Proceed with the acquisition of CCC5
in the form of Exhibit D-1 and with the acquisition of WHQ in the form of
Exhibit D-3;
5.3.1.1.1 ENTITY APPROVAL FOR SYMANTEC. Symantec's obligations under
this Agreement are contingent upon the approval of the transaction
contemplated by this Agreement by Symantec's Board of Directors which
shall be deemed to have occurred if Symantec delivers its Election to
Proceed; and
5.3.1.2. ADDITIONAL DEPOSIT FIRST AS TO WHQ. TST shall have made the
Additional Deposit First as to WHQ.
5.3.2. CONDITIONS APPLICABLE TO THE EXCHANGE OF CCC5 AND CCC2. In addition to
any other conditions to Symantec's obligations contained in this Agreement,
including, without limitation, the General Conditions set forth in Section
5.3.1, the following shall constitute additional specific conditions to
Symantec's obligation to transfer CCC5 to TST in exchange for CCC2:
5.3.2.1. PRE-CLOSING CONDITIONS. The following conditions to Symantec's
obligations contained in this Agreement must be satisfied or waived on or
before the times set forth below:
5.3.2.1.1 PRELIMINARY ACCEPTANCE OF CCC5 BUILDING. Within thirty (30)
days following notice to TST from Symantec that Substantial Completion
of Building CCC5 has occurred and delivery to TST of the Certificate of
Substantial Completion, TST shall have delivered to Symantec and Escrow
Holder, the Building CCC5 Preliminary Acceptance in the form of Exhibit
M.
5.3.2.1.2 SYMANTEC RIGHTS UPON CONDITIONAL PRELIMINARY ACCEPTANCE.
In the event that TST's Building CCC5 Preliminary Acceptance is
conditioned upon the completion, installation, repair or correction of
any items other than those set forth on the Punchlist attached to the
Certificate of Substantial Completion ("TST's Additional Completion
Requirements"), the following procedures shall apply:
a. Within five (5) days following Symantec's receipt of TST's
Building CCC5 Preliminary Acceptance, Symantec shall notify TST
whether or not Symantec is willing to allow the First Closing to
be conditioned upon satisfaction of some or all of TST's
Additional Completion Requirements;
b. If Symantec does not so notify TST within such five (5) day
period, Symantec shall be deemed to have disapproved all of TST's
Additional Completion Requirements;
c. If Symantec approves some of TST's Additional Completion
Requirements and so notifies TST, such of TST's Additional
Completion Conditions shall be deemed added to the Punchlist;
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d. If Symantec disapproves or is deemed to have disapproved any of
TST's Additional Completion Requirements and, if Symantec and TST
have not reached agreement as to any of TST's Additional
Completion Requirements within thirty (30) days, then either
Symantec or TST may elect to terminate this Agreement.
5.3.2.2. FIRST CLOSING CONDITIONS. The following conditions must be
satisfied or waived on or before the First Closing:
5.3.2.2.1 SIMULTANEOUS TRANSFER OF CCC2. A grant deed in the form of
Exhibit B naming Symantec or its designee as grantee of CCC2 shall have
been recorded in the Official Records of Santa Clara County;
5.3.2.2.2 ASSIGNMENT AND ASSUMPTION OF APPLE LEASE AND SECURITY
DEPOSITS. TST shall have executed and delivered at or prior to Closing
the Assignment and Assumption of Apple Lease in the form of Exhibit H.
5.3.2.2.3 ASSIGNMENT AND ASSUMPTION OF OBLIGATIONS. TST shall have
executed and delivered at or prior to Closing the Assignment and
Assumption of Obligations in the form of Exhibit I.
5.3.2.2.4 DELIVERY OF TST'S CERTIFICATE. TST shall have executed and
delivered at or prior to Closing a Buyer's Certificate in the form of
Exhibit J reaffirming that TST's acquisition of CCC5 is strictly on an
"AS IS" basis.
5.3.2.2.5 NO MATERIAL CHANGES TO TST'S REPRESENTATIONS AND WARRANTIES.
Any changes to TST's representations and warranties given in Schedule 2
or elsewhere in this Agreement that would have a material adverse
impact on Symantec's acquisition of CCC2 shall have been approved by
Symantec.
5.3.2.2.6 ASSIGNMENT OF PROPERTY DOCUMENTS. At Closing, TST shall
assign, at no cost to Symantec, in form acceptable to Symantec, all of
TST's assignable rights in the Property Documents and the Intangible
Property with respect to CCC2.
5.3.2.2.7 ESTOPPEL CERTIFICATES. Except where Symantec has entered into
a termination agreement with Apple Computer, Symantec shall have
received from Apple Computer an estoppel certificate in the form of
Exhibit Q.
5.3.3. CONDITIONS APPLICABLE TO THE SALE OF WHQ. In addition to any other
conditions to Symantec's obligations contained in this Agreement, including,
without limitation the General Conditions set forth in Section 5.3.1, the
following shall constitute additional specific conditions to Symantec's
obligation to transfer WHQ to TST at the Second Closing which must be
satisfied by the Second Closing Scheduled Date:
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5.3.3.1. FIRST CLOSING AS TO CCC2. The First Closing shall have occurred
with title to CCC2 having been acquired by the Party designated by
Symantec.
5.3.4. SYMANTEC RIGHT TO EXTEND FIRST CLOSING IN CERTAIN LIMITED EVENTS. If
Symantec has elected to employ a Synthetic Lease financing structure in
connection with the First Closing and has a commitment therefor from a
financing source, but the documentation for such transaction is not completed
by the date scheduled for the First Closing, Symantec may, by written notice
to TST at least five (5) business days prior to the date scheduled for the
First Closing, extend the First Closing one time for a period of ten (10)
days in order to allow time to complete any such documentation.
5.4. CONDITIONS FOR THE BENEFIT OF TST. In addition to any other conditions to
TST's obligations contained in this Agreement, the following shall constitute
conditions to TST's obligation to acquire CCC5 in an exchange and to purchase
WHQ from Symantec and are for the benefit of TST:
5.4.1. PRE-CLOSING CONDITIONS. The following conditions must be satisfied or
waived on or before the times set forth below:
5.4.1.1. SYMANTEC'S ELECTION TO PROCEED. Symantec's delivery at or before
the end of the Feasibility Period to TST of Symantec's written Election
to Proceed with the acquisition of CCC2 in the form of Exhibit D-2;
5.4.1.2. ENTITY APPROVAL FOR TST. TST's obligations under this Agreement
are contingent upon the approval of the transaction contemplated by
this Agreement by TST's Investment Committee which shall be deemed to
have occurred if TST delivers its Election to Proceed.
5.4.1.3. PRELIMINARY ACCEPTANCE OF CCC5 BUILDING. Within thirty (30) days
following notice to TST from Symantec that Substantial Completion of
Building CCC5 has occurred and delivery to TST of the Certificate of
Substantial Completion, TST shall have delivered to Symantec and Escrow
Holder, the Building CCC5 Preliminary Acceptance in the form of Exhibit
M.
5.4.2. FIRST CLOSING CONDITIONS. The following conditions must be satisfied
or waived on or before the First Closing:
5.4.2.1. SIMULTANEOUS TRANSFER OF BUILDING CCC5. A grant deed in the form
of Exhibit B naming TST or its designee as grantee of Building CCC5
shall have been recorded in the Official Records of the County;
5.4.2.2. BUILDING CCC5 FINAL COMPLETION. Building CCC5 Final Completion
shall have occurred, and no material defects in construction shall
exist which the Building CCC5 Contractor has not agreed, at no cost to
TST to correct;
5.4.2.3. ASSIGNMENT OF PROPERTY DOCUMENTS. At Closing, Symantec shall
assign, at no cost to TST, in form acceptable to TST, all of Symantec's
assignable rights in the Property Documents and the Intangible Property
with respect to CCC5.
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5.4.2.4. ASSIGNMENT AND ASSUMPTION OF OBLIGATIONS. Symantec shall have
executed and delivered at or prior to Closing the Assignment and
Assumption of Obligations in the form of Exhibit I;
5.4.2.5. NO MATERIAL CHANGES TO SYMANTEC'S REPRESENTATIONS AND WARRANTIES.
Any changes to Symantec's representations and warranties given in
Schedule 2 or elsewhere in this Agreement that would have a material
adverse impact on TST's acquisition shall have been approved by TST;
5.4.2.6. DELIVERY OF SYMANTEC'S CERTIFICATE. Symantec shall have executed
and delivered at or prior to Closing a Buyer's Certificate in the form
of Exhibit J reaffirming that Symantec's acquisition of CCC2 is
strictly on an "As Is" basis;
5.4.2.7. ACKNOWLEDGEMENT OF HOK AND WEBCOR. Each of HOK and the Building
CCC5 Contractor shall have executed the form of acknowledgement,
consent and estoppel certificate in the form of Exhibit P attached
hereto;
5.4.2.8. LIEN WAIVERS. Symantec shall have delivered to TST final
unconditional waivers and releases of liens from the Building CCC5
Contractor and all subcontractors and materialmen with respect to all
materials supplied and work performed through Substantial Completion
and copies of those final waivers and releases of mechanics liens then
having been obtained by Symantec from subcontractors and material
suppliers are furnished to TST; provided, however, that Symantec agrees
to use reasonable efforts following the First Closing to obtain
unconditional waivers and releases of liens from those Building CCC5
subcontractors and materialmen from whom such waivers and releases had
not been obtained as of the First Closing; and
5.4.2.9. SYNTHETIC LEASES. Symantec and Sumitomo shall have effected the
termination of any synthetic lease affecting CCC5.
5.4.3. SECOND CLOSING CONDITIONS. The following conditions must be
satisfied or waived on or before the Second Closing:
5.4.3.1. ASSIGNMENT OF PROPERTY DOCUMENTS. At Closing, Symantec shall
assign, at no cost to TST, in form acceptable to TST, all of Symantec's
assignable rights in the Property Documents and the Intangible Property
with respect to WHQ.
5.4.3.2. ASSIGNMENT AND ASSUMPTION OF OBLIGATIONS. Symantec shall have
executed and delivered at or prior to Closing the Assignment and
Assumption of Obligations in the form of Exhibit I.
5.4.3.3. NO MATERIAL CHANGES TO SYMANTEC'S REPRESENTATIONS AND WARRANTIES.
Any changes to Symantec's representations and warranties given in
Schedule 2 or elsewhere in this Agreement that would have a material
adverse impact on TST's purchase shall have been approved by TST.
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5.4.3.4. VACATION OF WHQ. Symantec and any other tenants or other
occupants of WHQ shall have vacated WHQ.
5.4.3.5. SYNTHETIC LEASE. Symantec and Sumitomo shall have effected the
termination of any synthetic lease affecting WHQ.
5.4.4. TST RIGHT TO EXTEND FIRST CLOSING IN CERTAIN LIMITED EVENTS. If TST
has elected to employ a financing structure in connection with the First
Closing and has a commitment therefor from a financing source, but the
documentation for such transaction is not completed by the date scheduled for
the First Closing, TST may, by written notice to Symantec at least five (5)
business days prior to the date scheduled for the First Closing, extend the
First Closing one time for a period of ten (10) days in order to allow time
to complete any such documentation. If TST has elected to employ a financing
structure in connection with the Second Closing and has a commitment therefor
from a financing source, but the documentation for such transaction is not
completed by the date scheduled for the Second Closing, TST may, by written
notice to Symantec at least five (5) business days prior to the date
scheduled for the Second Closing, extend the Second Closing one time for a
period of ten (10) days in order to allow time to complete any such
documentation.
5.5. CONDITIONS OF DEPOSIT REFUNDS. Any Deposit together with any interest
actually earned on such Deposit shall be refundable to the Party making such
Deposit: (i) upon termination of this Agreement as a result of either Party's
failure to give its Election(s) to Proceed as to a particular Property on or
before the end of the Feasibility Period (as provided in Section 5.3.1.1
hereof), and/or (ii) upon termination of this Agreement for any reason other
than as a result of default by such Party to Close, as provided in Section 8.5
hereof. Without limiting the foregoing, a Deposit shall be refundable to the
Party making the Deposit on account of the failure of conditions intended to
benefit such Party as set forth in this ARTICLE 5 or Schedule "3" attached
hereto. Once both Parties have delivered Elections to Proceed with respect to
the Property, the total Deposit will be non-refundable in the event of a default
by the Party making the Deposit to Close, as provided in Section 8.5 hereof.
5.6. SCHEDULE 3 CLOSING CONDITIONS. The parties' obligations to complete the
respective transactions described in this Agreement are subject in each instance
to the satisfaction of the closing conditions set forth on Schedule 3 attached
hereto in addition to the conditions set forth in this ARTICLE 5.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
6.1. TST AND SYMANTEC REPRESENTATIONS AND WARRANTIES. TST and Symantec hereby
make those representations and warranties as set forth in Schedule "2" attached
hereto.
6.2. ADDITIONAL REPRESENTATIONS AND WARRANTIES. In addition to those
representations and warranties set forth in Schedule "2" attached hereto,
Symantec and TST each hereby represent to the other as follows:
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6.2.1. BROKER. Symantec represents and warrants to TST that it has employed
no broker, agent and/or finder with respect to this Agreement other than
Broker-Symantec.
TST represents and warrants to Symantec that it has employed no broker, agent
and/or finder with respect to this Agreement. It being understood that TST
has agreed, pursuant to the terms of a separate agreement, to pay certain
sums to Broker-Symantec.
6.2.2. ENTITLEMENTS. During the Feasibility Period, each Party will have an
opportunity to review any statutes, ordinances, regulations or other laws
concerning the development potential of the Property and to make such
inquiries to governmental agencies concerning the same as each Party deems
appropriate. Except as expressly set forth herein, neither Party makes any
representations or warranties concerning the development potential of the
Property, including but not limited to the nature or extent of any existing
approvals, applications for approval or other entitlements; provided,
however, that any Party giving an election to Proceed with respect to any
Property shall be deemed to have represented and warranted to the other Party
that the Party giving such Election to Proceed has no knowledge about any
conditions related to such approvals or entitlements which have not either
been disclosed or made available to such Party or are otherwise discoverable
by such Party in connection with such Party's diligence.
6.2.3. PROPERTY DOCUMENTS. Each Party hereby represents and warrants that (i)
it will deliver or otherwise make available to the other Party true and
accurate copies of all Property Documents that, to the best of its actual
knowledge, are in its possession, (ii) that it will deliver to the other
Party all such Property Documents that, to the best of its actual knowledge,
are under each Party's control, and (iii) that, to the best of each Party's
actual knowledge, such requested Property Documents provided to the other
Party do not contain any material inaccuracies or omissions.
6.2.4. NO LEASES. Symantec represents and warrants to TST that there are no
leases affecting Building CCC5 or WHQ other than the "Synthetic" leases with
Sumitomo Bank Leasing and Finance, Inc.. TST represents and warrants to
Symantec that there are no leases affecting CCC2 other than the Apple Lease.
6.2.5. AS-IS ACQUISITION
6.2.5.1. "AS IS" GENERALLY. Except as otherwise expressly provided herein
and not in derogation of any rights TST may have against the Building CCC5
General Contractor or the Building CCC5 Architect or that Symantec may
have against any architect or contractor that may have performed work with
respect to CCC2 (including, without limitation, the representations and
warranties of Symantec and TST expressly set forth in this Agreement), the
transfer of each Property as provided for herein is made on an "AS-IS"
basis and Symantec and TST each acknowledge, understand, and agree with
each and all of the provisions of this Section 6.2.5 and Section 2.02 of
Schedule 2.
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6.2.5.2. MUTUAL RELEASES. At each Closing, the Transferee Party shall have
released the Transferor Party from certain claims and liabilities as
provided in Section 2.02 of Schedule 2. Symantec and TST hereby
specifically acknowledge that each of them have carefully reviewed this
Section 6.2.5 and Section 2.02 of Schedule 2, have discussed its import
with legal counsel, is fully aware of its consequences, and that Symantec
and TST are hereby granting the releases set forth in Section 2.02 of
Schedule 2.
6.2.5.3. WAIVER OF SECTION 1542. WITH RESPECT TO THE MATTERS SET FORTH IN
THIS SECTION 6.2.5 AND SECTION 2.02 OF SCHEDULE "2," EACH OF SYMANTEC AND
TST WAIVE THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH IS
SET FORTH BELOW:
"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."
6.2.5.4. INDEFINITE SURVIVAL. This Section 6.2.5 shall survive the Closing
indefinitely.
6.2.5.5. ACKNOWLEDGMENT. SYMANTEC AND TST'S INITIALS BENEATH THIS SECTION
CONSTITUTE SYMANTEC AND TST'S ACKNOWLEDGMENT THAT EACH OF SYMANTEC AND TST
HAVE READ AND FULLY UNDERSTAND THE IMPLICATIONS OF THIS SECTION 6.2.5 AND
SECTION 2.02 OF SCHEDULE "2" AND THAT EACH OF SYMANTEC AND TST HAVE HAD
THE CHANCE TO CONSULT ITS COUNSEL ABOUT ITS MEANING AND SIGNIFICANCE AND
AGREES TO ITS TERMS.
_/s/___III_________________ _/s/___SW_________________
Symantec Initials TST Initials
Even though the First Closing will occur some time after the occurrence of
Substantial Completion of Building CCC5, TST acknowledges that in most cases the
time period for any warranties given by the Building CCC5 Contractor or any of
the subcontractors or contractors will commence to run upon the date of
Substantial Completion set forth in the Certificate of Substantial Completion.
6.4. SURVIVABILITY. Except where a longer or shorter period is specified
elsewhere in this Agreement, each Party's representations, warranties and
indemnities (if any) shall survive the Closing and the delivery of the Grant
Deed, but shall terminate on the date which is one (1) year after each Closing
except as to claims and matters as to which either Party has given specific
notice to the other within such one (1) year period. Any claim against a Party
with respect to any breach of such Party's representations, warranties and
indemnities (if any) as to which notice has been given to a Party within such
one (1) year period and which has not been satisfied shall be deemed discharged
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<PAGE> 28
unless the party making such claim shall have pursued such claim pursuant within
six (6) months following the end of such one (1) year period.
ARTICLE 7
COVENANTS
7.1. INSPECTION RIGHTS. Subject to the rights of Apple Computer pursuant to the
terms and provisions of the Apple Lease, each Party and its agents and
contractors shall have the right to enter on the Property ("Access") to inspect
it and conduct tests and each Party hereby agrees to indemnify the other Party
and the fee owners of the Property from any liability, loss, cost or damage
resulting from physical damage caused by a Party or its agents during such entry
or inspection; provided, however, each Party agrees not to perform any drilling
without giving the other Party reasonable notice of not less than one (1) full
business day. Either Party may contact any federal, state or local governmental
authority or agency to investigate any matters relating to the Property. With
respect to the rights of Apple Computer pursuant to the Apple Lease, TST agrees
to use its commercially reasonable efforts to cause Apple Computer to permit
inspections by Symantec and its agents as contemplated above.
7.2. DISCOVERIES. Each Party acknowledges that it may discover Hazardous
Materials on, under or about the Property or some other fact or condition
pertaining to the Property which a Party believes may negatively impact the
value or development potential of the Property in some manner (the "Discovery").
If either Party makes any such Discovery prior to Closing but nevertheless
completes the acquisition of a particular Property, the Party acquiring such
Property further covenants and agrees to refrain from bringing any claim for
damages, causes of action, or lawsuit against other Party or the other Party's
Related Parties, or their successors, heirs, contractors, engineers and/or
attorneys which in any way alleges that the other Party failed to disclose the
existence of such Hazardous Materials or other fact or condition which was
discovered prior to Closing by the Party completing such acquisition. The
foregoing shall not limit a Party's right to seek legal or equitable remedies
against the other Party for such other Party's breach of its representations,
warranties or covenants contained in this Agreement unless the Party completing
such acquisition had actual knowledge of the material facts relating to such
breach prior to Closing.
7.2.1. TERMINATION UPON CERTAIN DISCOVERIES. Each Party acknowledges that
during the Feasibility Period, it will have sufficient time to make such
investigations with respect to the Property as it deems appropriate. Once a
Party gives such Party's Election to Proceed pursuant to Section 5.3.1.1 with
respect to a particular Property, any failure by such Party to close on
account of a later Discovery shall constitute a default by such Party and the
provisions of Section 8.5 shall apply. Notwithstanding the foregoing, if
either Party fails to close following its Election to Proceed on account of a
Discovery of a "Material Hazardous Material Problem" which was not disclosed
(and could not reasonably have been discovered upon the performance of
customary environmental due diligence during the Feasibility Period), such
failure to close shall constitute a non-default termination pursuant to
Section 8.8. As used herein, "Material Hazardous Material Problem" shall
exist only if a Party gives written notice to the
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<PAGE> 29
other Party signed by an officer of the Party giving the notice at the
level of Vice President or Senior Managing Director or above which
notice states that subsequent to the end of the Feasibility Period, (i)
such Party has Discovered that there exists with respect to the Property
a Hazardous Material issue that such Party believes will materially
impact such Party's business operations if such Party completes the
acquisition of the Property pursuant to this Agreement and (ii)
describes such Hazardous Material issue with particularity.
7.3. OPERATION OF THE PROJECTS. The Parties hereby covenant and agree that from
the Agreement Date until either the Closing with respect to a particular
Property occurs or this Agreement is terminated, that the Properties will be
maintained and operated as set forth below:
7.3.1. CCC5. Symantec shall continue to manage the construction of the
Building CCC5 as Sumitomo Bank Leasing and Finance, Inc.'s construction agent
and build-to-suit lessee under the Building CCC5 General Contract in
accordance with Symantec's current practices with a view toward achieving
Substantial Completion of Building CCC5 in accordance with the Building CCC5
Plans as soon as practicable. So long as this Agreement has not been
terminated with respect to CCC5, Symantec agrees that without the prior
written consent of TST: (i) it shall not cause any leases to be executed with
respect to any portion of Building CCC5 and (ii) it shall not construct or
install any improvements, in the nature of "tenant improvements" or
otherwise, or install any furniture or fixtures, except as shown on the
Building CCC5 Plans. Without TST's prior approval (which approval shall not
be unreasonably withheld or delayed) Symantec shall not make any changes to
the Building CCC5 Plans or amend or modify the Building CCC5 Architectural
Contract or the Building CCC5 General Contract if any single such change will
result in an increase or decrease in the cost of construction of Building
CCC5 by $100,000 or if all such changes cumulatively will exceed $250,000.
7.3.2. CCC2. TST shall continue to manage CCC2 in accordance with TST's
current practices as Traveler's managing agent as an office building occupied
entirely by Apple Computer. So long as this Agreement has not been
terminated, TST agrees (but subject to the rights of Travelers as the fee
owner of the Property as to which TST shall have no liability of
responsibility) that without the prior written consent of Symantec: (i) it
shall not amend, extend or modify in any material way the Apple Lease, (ii)
it shall not enter into any new leases with respect to any portion of CCC2,
(iii) except as necessary to fulfill its obligations under the Apple Lease or
as reasonably prudent in the judgment of TST as the property manager for a
first class office building, it shall not construct any improvements or
modify the building in any way.
7.3.3. WHQ. Symantec shall continue to manage WHQ as an office building
housing its business operations in accordance with Symantec's current
practices and agrees to manage to completion, at its sole cost and expense,
the WHQ Exterior Lighting Contract provided that without TST's written
consent, Symantec shall not enter into any leases or occupancy agreements for
any space within WHQ.
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7.3.4. ALL PROPERTIES; SERVICE CONTRACTS. Without limiting the generality of
the foregoing, each Party agrees that from and after the date of this
Agreement that with respect to the Properties controlled by each Party (but
subject to the rights of Travelers as the fee owner of the CCC2 as to which
TST shall have no liability or responsibility), each Party will not enter
into new service or other contracts or amendments to existing service or
other contracts unless such new or amended service or other contracts contain
clauses permitting cancellation of such contracts on not more than thirty
(30) days notice without a termination fee.
7.3.4.1. DURING FEASIBILITY PERIOD; EXISTING SERVICE CONTRACTS. During the
Feasibility Period, if either Party objects to an existing service
contract with respect to a Property controlled by the other Party, such
objecting Party may identify such service contract and make written
request that the other Party terminate such service contract as of the
Closing applicable to such Property. Such other Party may, but shall not
be obligated to respond to such request. If such service contracts are not
terminated prior to the end of the Feasibility Period, but such other
Party has agreed in writing given prior to the end of the Feasibility
Period to use its best efforts to terminate such service contracts prior
to the Closing, then the Election to Proceed may be conditioned upon the
termination of such service contracts as a condition to Closing. If a
Party requests that the other Party agree to terminate a service contract
and such other Party either does not respond to such request prior to the
end of the Feasibility Period or declines to terminate such service
contracts, then such Party making such request may either terminate this
Agreement with respect to the Property which is the subject of such
request or give its Election to Proceed with respect to such Property, in
which latter event such requesting Party shall have agreed to accept such
Property at the Closing without a termination of such service contracts.
7.4. OTHER COVENANTS. Each Party hereby further covenants and agrees as
follows:
7.4.1. COVENANTS OF BOTH PARTIES. Both Parties covenant and agree as follows:
7.4.1.1. PROPERTY INSPECTION AND DOCUMENTS. To reasonably cooperate with
the other Party in the inspection of the Property and the Property
Documents. Within ten (10) days after the Agreement Date, each Party shall
deliver to the other Party all Property Documents that, to the best of the
delivering Party's actual knowledge, are in the delivering Party's
possession or are under the delivering Party's control, including all
third-party inspection reports.
7.4.2. SYMANTEC'S COVENANTS. Symantec hereby further covenants and agrees to
execute and deliver at the First Closing and the Second Closing, as
applicable, the documents described as conditions in Sections 5.4.2.3,
5.4.2.4, 5.4.2.6, 5.4.3.1, and 5.4.3.2.
7.4.3. TST'S COVENANTS. TST hereby further covenants and agrees to execute
and deliver at the First Closing and the Second Closing, as applicable, the
documents described as conditions in Sections 5.3.2.2.2, 5.3.2.2.3,
5.3.2.2.4, and 5.3.2.2.6.
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7.5. LEASING AND TENANT IMPROVEMENTS. The Parties agree to conform to the
following covenants with respect to leasing and the construction of tenant
improvements with respect to CCC5 and WHQ:
7.5.1. CCC5 LEASING AND TENANT IMPROVEMENTS. The following shall apply with
respect to leasing and tenant improvements with respect to Building CCC5:
7.5.1.1. TST RIGHT TO LEASE. TST may negotiate and enter into leases
with third parties for all or a portion of Building CCC5, so long as all
of the following are true:
a. The term of such leases shall not commence prior to the First
Closing; and
b. The tenants under such leases shall not occupy any portion of
Building CCC5 prior to the First Closing;
7.5.1.2. NO RIGHT TO CONSTRUCT TENANT IMPROVEMENTS. TST may not enter
Building CCC5 and construct tenant improvements for tenants under leases
entered into pursuant to Section 7.5.1.1 unless and until the First
Closing occurs.
7.5.2. WHQ TENANT IMPROVEMENTS. No tenant improvements or other
construction shall be undertaken by TST with respect to WHQ prior to the
Second Closing.
ARTICLE 8
ESCROW AND DEFAULT
8.1. AGREEMENT TO CONSTITUTE ESCROW INSTRUCTIONS. This Agreement shall
constitute escrow instructions and a copy hereof shall be deposited with Escrow
Holder for this purpose.
8.2. OPENING OF ESCROW. Escrow shall open on the date Escrow Holder receives a
fully executed original or originally executed counterparts of this Agreement
and the Deposits. Escrow Holder shall notify both TST and Symantec of the date
escrow is opened.
8.3. CLOSING. Provided that all of the contingencies contained in Article III
herein and all of the conditions to the Closing contained in Schedule "3"
attached hereto have been satisfied (or deemed satisfied as the case may be) or
waived, the Closings shall occur as follows:
8.3.1. FIRST CLOSING AS TO CCC5 AND CCC2. First Closing shall occur on the
First Closing Scheduled Date; and
8.3.2. SECOND CLOSING AS TO WHQ. The Second Closing shall occur on the Second
Closing Scheduled Date.
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8.4. SPECIFIC ESCROW INSTRUCTIONS. Specific escrow instructions are attached
hereto as Schedule 3.
8.5. DEFAULT BY TST AS TO CCC5. IF TST DEFAULTS IN ITS OBLIGATIONS HEREUNDER TO
ACQUIRE CCC5 AND SYMANTEC WAS OTHERWISE READY, WILLING, AND ABLE TO COMPLETE THE
EXCHANGE IN ACCORDANCE WITH THIS AGREEMENT, SYMANTEC SHALL HAVE THE FOLLOWING
RIGHTS:
A. TO BE PAID BY ESCROWHOLDER AND TO RETAIN ANY OF THE DEPOSIT,
INCLUDING ALL INTEREST EARNED THEREON, WITH RESPECT TO CCC5 AS
LIQUIDATED DAMAGES FOR TST'S DEFAULT; or
B. TO SUE FOR SPECIFIC PERFORMANCE.
THE PARTIES HERETO EXPRESSLY AGREE AND ACKNOWLEDGE THAT SYMANTEC'S ACTUAL
DAMAGES IN THE EVENT OF ANY SUCH DEFAULT BY TST WOULD BE EXTREMELY DIFFICULT OR
IMPRACTICABLE TO ASCERTAIN AND THAT THE AMOUNT OF THE DEPOSIT TOGETHER WITH THE
INTEREST ACTUALLY EARNED THEREON REPRESENTS THE PARTIES' REASONABLE ESTIMATE OF
SUCH DAMAGES. THE PAYMENT OF SUCH AMOUNT AS LIQUIDATED DAMAGES IS NOT INTENDED
AS A FORFEITURE OR PENALTY. SUCH SUMS SHALL BE THE AMOUNT THAT SYMANTEC IS
ENTITLED TO RECEIVE AS LIQUIDATED DAMAGES AND SHALL BE SYMANTEC'S SOLE AND
EXCLUSIVE RIGHT TO DAMAGES IN THE EVENT OF DEFAULT BY TST. SYMANTEC SHALL HAVE
NO RIGHT, AND HEREBY WAIVES ALL RIGHT, TO AN ACTION FOR ACTUAL DAMAGES.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS SECTION, SYMANTEC AND
TST AGREE THAT THIS LIQUIDATED DAMAGES PROVISION IS NOT INTENDED TO APPLY TO ANY
DEFAULT OR BREACH BY TST UNDER ANY OF ITS OBLIGATIONS THAT SURVIVE THE CLOSING
(INCLUDING ANY INDEMNITY OBLIGATIONS) UNDER THIS AGREEMENT OR UNDER ANY
INSTRUMENT OR DOCUMENT DELIVERED BY TST AT CLOSING PURSUANT HERETO OR IN
CONNECTION HEREWITH, IT BEING UNDERSTOOD AND AGREED THAT FROM AND AFTER THE
CLOSING, SYMANTEC SHALL HAVE ALL RIGHTS AND REMEDIES AT LAW AND IN EQUITY WITH
RESPECT TO ANY SUCH DEFAULT OR BREACH.
_/s/___III_____________ _/s/___SW___________
Symantec's Initials TST's Initials
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8.6. DEFAULT BY TST AS TO WHQ. IF TST DEFAULTS IN ITS OBLIGATIONS HEREUNDER TO
ACQUIRE WHQ IN ACCORDANCE WITH THIS AGREEMENT, SYMANTEC SHALL BE ENTITLED TO THE
FOLLOWING RIGHTS:
A. TO BE PAID BY ESCROWHOLDER AND TO RETAIN ANY OF THE DEPOSIT,
INCLUDING ANY INTEREST EARNED THEREON, WITH RESPECT TO WHQ AS
LIQUIDATED DAMAGES FOR TST'S DEFAULT; AND
B. IN ADDITION, TST SHALL PAY TO SYMANTEC WITHIN TEN (10) DAYS, THE
SUM OF THREE HUNDRED SEVENTY-FIVE THOUSAND DOLLARS ($375,000).
THE PARTIES HERETO EXPRESSLY AGREE AND ACKNOWLEDGE THAT SYMANTEC'S ACTUAL
DAMAGES IN THE EVENT OF ANY SUCH DEFAULT BY TST WOULD BE EXTREMELY DIFFICULT OR
IMPRACTICABLE TO ASCERTAIN AND THAT THE AMOUNT OF THE DEPOSIT REPRESENTS THE
PARTIES' REASONABLE ESTIMATE OF SUCH DAMAGES. THE PAYMENT OF SUCH AMOUNT AS
LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY. SUCH SUMS SHALL
BE THE AMOUNT THAT SYMANTEC IS ENTITLED TO RECEIVE AS LIQUIDATED DAMAGES AND
SHALL BE SYMANTEC'S SOLE AND EXCLUSIVE REMEDY IN THE EVENT OF DEFAULT BY TST IN
THE PURCHASE OF WHQ. WITH RESPECT TO WHQ, SYMANTEC SHALL HAVE NO RIGHT, AND
HEREBY WAIVES ALL RIGHT, TO AN ACTION FOR SPECIFIC PERFORMANCE OF THIS AGREEMENT
AND/OR AN ACTION FOR ACTUAL DAMAGES. NOTWITHSTANDING ANYTHING TO THE CONTRARY
CONTAINED IN THIS SECTION, SYMANTEC AND TST AGREE THAT THIS LIQUIDATED DAMAGES
PROVISION IS NOT INTENDED TO APPLY TO ANY DEFAULT OR BREACH BY TST UNDER ANY OF
ITS OBLIGATIONS THAT SURVIVE THE CLOSING (INCLUDING ANY INDEMNITY OBLIGATIONS)
UNDER THIS AGREEMENT OR UNDER ANY INSTRUMENT OR DOCUMENT DELIVERED BY TST AT
CLOSING PURSUANT HERETO OR IN CONNECTION HEREWITH, IT BEING UNDERSTOOD AND
AGREED THAT FROM AND AFTER THE CLOSING, SYMANTEC SHALL HAVE ALL RIGHTS AND
REMEDIES AT LAW AND IN EQUITY WITH RESPECT TO ANY SUCH DEFAULT OR BREACH.
_/s/______III__________ _/s/___SW___________
Symantec's Initials TST's Initials
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8.7. DEFAULT BY SYMANTEC. IF SYMANTEC DEFAULTS IN ITS OBLIGATIONS HEREUNDER TO
CONVEY CCC5 AND/OR WHQ TO TST IN ACCORDANCE WITH THIS AGREEMENT OR TO ACQUIRE
CCC2 IN EXCHANGE FOR CCC5, TST MAY, AT ITS OPTION:
(A) TERMINATE THIS AGREEMENT AND RECEIVE ALL OF THE ENTIRE DEPOSIT,
INCLUDING, WITHOUT LIMITATION, ANY AMOUNTS DEPOSITED WITH
ESCROWHOLDER (INCLUDING INTEREST EARNED THEREON), AND
(B) BE PAID BY ESCROWHOLDER AND TO RETAIN ANY OF THE DEPOSIT,
INCLUDING ANY INTEREST EARNED THEREON, WITH RESPECT TO CCC2 AS
LIQUIDATED DAMAGES FOR SYMANTEC'S DEFAULT; OR
(C) PURSUE AN ACTION FOR THE SPECIFIC PERFORMANCE OF SYMANTEC'S
OBLIGATIONS HEREUNDER.
THE PARTIES HERETO EXPRESSLY AGREE AND ACKNOWLEDGE THAT TST'S ACTUAL DAMAGES IN
THE EVENT OF ANY SUCH DEFAULT BY SYMANTEC WOULD BE EXTREMELY DIFFICULT OR
IMPRACTICABLE TO ASCERTAIN AND THAT THE AMOUNT OF THE DEPOSIT REPRESENTS THE
PARTIES' REASONABLE ESTIMATE OF SUCH DAMAGES. THE PAYMENT OF SUCH AMOUNT AS
LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY. SUCH SUMS SHALL
BE THE AMOUNT THAT TST IS ENTITLED TO RECEIVE AS LIQUIDATED DAMAGES AND SHALL BE
TST'S SOLE AND EXCLUSIVE REMEDY IN THE EVENT OF DEFAULT BY SYMANTEC IN THE
EXCHANGE OF CCC5.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS SECTION, SYMANTEC AND
TST AGREE THAT THIS LIQUIDATED DAMAGES PROVISION IS NOT INTENDED TO APPLY TO ANY
DEFAULT OR BREACH BY SYMANTEC UNDER ANY OF ITS OBLIGATIONS THAT SURVIVE THE
CLOSING (INCLUDING ANY INDEMNITY OBLIGATIONS) UNDER THIS AGREEMENT OR UNDER ANY
INSTRUMENT OR DOCUMENT DELIVERED BY SYMANTEC AT CLOSING PURSUANT HERETO OR IN
CONNECTION HEREWITH, IT BEING UNDERSTOOD AND AGREED THAT FROM AND AFTER THE
CLOSING TST SHALL HAVE ALL RIGHTS AND REMEDIES AT LAW AND IN EQUITY WITH RESPECT
TO ANY SUCH DEFAULT OR BREACH.
_/s/___III_____________ _/s/__SW____________
Symantec's Initials TST's Initials
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8.8. NON-DEFAULT TERMINATION. In the event of any termination of this Agreement
(except only a termination of this Agreement to which Sections 8.5, 8.6 or 8.7
are applicable), the following provisions shall apply:
8.8.1. ALL OBLIGATIONS TERMINATE. Except for those obligations which
expressly survive termination of this Agreement, neither TST nor Symantec
shall have any further obligations hereunder after termination of this
Agreement.
8.8.2. RETURN OF DEPOSIT. The entire Deposit (including, without limitation,
any amounts deposited with Escrow Holder, including interest earned thereon),
plus accrued interest, shall be returned to the Party making such Deposit
upon such Party's delivery of written notice to Escrowholder (with a copy to
the other Party) terminating this Agreement, expressly acknowledging the
termination of all of such Party's interest in the Property and this
Agreement; provided, however, that failure of either Party to give such
notice shall not be construed to expand either Party's rights or remedies in
any manner.
8.9. SPECIFIC PERFORMANCE. Each Party shall have the right to specific
performance of this Agreement.
ARTICLE 9
MISCELLANEOUS PROVISIONS
9.1. MISCELLANEOUS PROVISIONS. TST and Symantec hereby agree to those
miscellaneous provisions as set forth in Schedule "4" attached hereto.
9.2. INCORPORATION OF EXHIBITS. All schedules and exhibits attached hereto and
referred to herein are incorporated in this Agreement as though fully set forth
herein.
9.3. RIGHT OF FIRST REFUSAL AND RIGHT OF FIRST OFFER. If, and only if, TST or
its assignee (i) completes the First Closing and acquires CCC5 AND (ii)
completes the Second Closing and acquires WHQ, then with respect to each of CCC2
and CCC1, TST shall have the following special rights:
9.3.1. RIGHT OF FIRST REFUSAL. TST shall have a "Right of First Refusal"
to acquire CCC2 and CCC1 for a period ending at the end of 3 (three)
years following the First Closing as to CCC2.
9.3.2. RIGHT OF FIRST OFFER. TST shall have a "Right of First Offer" for
a period ending at the end of 5 (five) years following the time when the
Right of First Refusal granted pursuant to Section 9.3.1 has ended.
9.3.3. PROCEDURES FOR RIGHT OF FIRST REFUSAL AND RIGHT OF FIRST OFFER.
TRIGGERING EVENT. For purposes of this Section 9.3.3, a "Triggering
Event" shall mean: (i) in the case of the Right of First Refusal, the
receipt by Symantec of a bona fide written offer (a "Purchase Offer") to
purchase either or both CCC1 or CCC2 (each an "Affected Property" and
collectively, the "Affected Properties") and (ii) in the case of the
Right of First Offer, thirty (30) days before Symantec
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gives written notice to parties other than TST of Symantec's intent to
sell (an "Intent to Sell") either or both Affected Properties.
9.3.3.2. TRIGGERING EVENT OFFER NOTICE. Within ten (10) days following
the occurrence of a Triggering Event, Symantec shall give notice to TST
(the "Triggering Event Offer Notice") listing the principal terms (the
"Triggering Event Terms") of the Intent to Sell or including a copy of
the Purchase Offer, as the case may be.
9.3.3.3. TRIGGERING EVENT PURCHASE NOTICE. TST shall have ten (10)
business days following the Triggering Event Offer Notice within which
to notify Symantec that TST desires to purchase the Affected Property
upon the Triggering Event Terms (the "Triggering Event Purchase
Notice").
9.3.3.4. NO TST PURCHASE. If TST either notifies Symantec that TST
declines to purchase the Affected Property upon the Triggering Event
Terms or fails to give Symantec a Triggering Event Purchase Notice,
Symantec shall be free to enter into and complete a sale of the Affected
Property upon the Triggering Event Terms without any further notice to
TST. In such event, TST shall have no further Right of First Refusal or
Right of First Offer with respect to the Affected Property (but such
rights shall continue with respect to the other Property) so long as:
(a) within six (6) months following the Triggering Event Offer
Notice, Symantec enters into a binding agreement with a third
party for the purchase and sale of the Affected Property
substantially in accordance with the Triggering Event Terms and
otherwise upon "net economic terms"(as hereinafter defined) of
not less than ninety-five percent (95%) of the net economic terms
offered to TST in the Triggering Event Offer Notice (the "Third
Party Agreement), and
(b) thereafter such sale closes pursuant to the terms of the Third
Party Agreement;
(c) provided, however, if the purchase and sale of the Affected
Property does not close pursuant to the terms of the Third Party
Agreement within a reasonable time following the date for closing
set forth in the Third Party Agreement and/or if the Third Party
Agreement is terminated, the Affected Property shall again be
subject to the Right of First Refusal and the Right of First
Offer;
(d) provided, further, if the Triggering Event Terms did not include
seller financing, and if Symantec later offers seller financing,
it shall be deemed that the Third Party Agreement is not
substantially in accordance with the Triggering Event Terms;
(e) for purposes of this Section 9.3.3.4, "net economic terms' shall
mean the purchase price reduced by the monetary value of (i) any
credits or offsets
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to be given to the buyer at closing, (ii) the present value
(calculated using a discount rate of ten percent (10%)) of any
rents or other amounts to be paid by Symantec to the buyer
following the closing, and (iii) if seller financing is part of
the Triggering Event Terms, the present value (calculated using
a discount rate of ten percent (10%)) of the amount by which the
periodic payments to be made pursuant to the financing terms
which are part of the Triggering Event Terms are less than the
actual financing terms set for in the Third Party Agreement.
9.3.3.5. YES TST PURCHASE. If TST gives a Triggering Event Purchase
Notice, but either of the following occur, such Affected Property shall no
longer be subject to either the Right of First Refusal or the Right of
First Offer:
(a) within sixty (60) days following such Triggering Event Purchase
Notice, and despite the parties' good faith commercially reasonable
efforts, Symantec and TST have not executed a mutually acceptable
binding agreement which (except for the specific terms set forth in
the Triggering Event Offer Notice) shall be on substantially the
same terms, conditions, representations and warranties as set forth
in this Agreement (the "Affected Property Agreement") providing for
the purchase by TST of the Affected Property; provided, however, if
the parties have not executed the Affected Property Agreement
within such sixty (60) day period but are continuing to use good
faith commercially reasonable efforts to do so, either party may,
by notice to the other party given prior to the end of such sixty
(60) day period, assert that such party believes that with the
continuation of such good faith commercially reasonable efforts,
the parties are likely to execute the Affected Property Agreement
within an additional thirty (30) days, in which event such sixty
(60) day period shall be so extended for an additional thirty (30)
days;
(b) Symantec and TST enter into an Affected Property Agreement, but the
purchase and sale of the Affected Property does not close pursuant
to the terms of the Affected Property Agreement within a reasonable
time following the date for closing set forth in the Affected
property Agreement and/or if the Affected property Agreement is
terminated for reasons other than the breach or default of
Symantec.
9.3.3.6. RIGHT TO ASSIGN. The provisions of Section 3.4 shall apply to the
exercise by TST of the rights set forth in this Section 9.3.
ARTICLE 10
LOSS OR CONDEMNATION PRIOR TO CLOSING
Notwithstanding the provisions of the Uniform Vendor and Purchaser Risk Act, the
parties hereto agree that if a loss to all or any portion of the Property occurs
prior to Closing from any cause whatsoever, including, without limitation, due
to a casualty or a taking under the power of eminent domain, the following
provisions will apply:
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10.1. LOSS DOES NOT EXCEED MATERIALITY LIMIT. In the event of any condemnation
or taking of the Property, or loss or damage by fire or other casualty to the
Property prior to the Closing which does not exceed the Materiality Limit, the
Closing shall occur just as if such condemnation, loss or damage had not
occurred, and the Transferor Party shall assign to the Transferee Party all of
Transferor Party's interest in any condemnation actions and proceeds, or deliver
to Transferee Party any and all proceeds paid to Transferor Party by Transferee
Party's insurer with respect to such fire or other casualty (together with the
amount of any deductible); provided, however, that Transferor Party shall be
entitled to retain an amount of such insurance proceeds equal to Transferor
Party's reasonable expenses, if any, incurred in repairing the damage caused by
fire or other casualty (together with the amount of any deductible). Each Party
shall maintain "all risk" replacement value insurance coverage in place on the
Property at all times prior to the Closing. During the Feasibility Period, each
Party has reviewed the other Party's current insurance policies for the Property
(or the relevant portions thereof) and agrees that such policies, if continued
through Closing, will satisfy such requirements for "all risk" replacement value
insurance coverage within the meaning of the preceding sentence. At Closing, in
the case of a fire or other casualty, Transferor Party shall give Transferee
Party a credit on the Purchase Price equal to the lesser of the estimated cost
of restoration or the amount of the deductible.
10.2. LOSS EXCEEDS MATERIALITY LIMIT. In the event of any condemnation of all or
a part of the Property, or loss or damage by fire or other casualty to the
Property prior to the Closing which exceeds the Materiality Limit, at Transferee
Party's sole option, either:
10.2.1. TERMINATE AGREEMENT. Elect to terminate this Agreement in accordance
with the Section 8.8 if Transferee Party shall so notify Transferor Party in
writing within ten (10) days of Transferee Party having actual knowledge of
the casualty or condemnation; or
10.2.2. CLOSE. If Transferee Party shall not have timely notified Transferor
Party of its election to terminate this Agreement in accordance with
Subsection (a) above, the Closing shall occur just as if such condemnation,
loss, or damage had not occurred, without reduction in the Purchase Price,
and Transferor Party shall assign to Transferee Party all of Transferor
Party's interest in any condemnation actions and proceeds or deliver to
Transferee Party any and all proceeds paid to Transferor Party by Transferor
Party's insurer with respect to such fire or other casualty; provided,
however, that Transferor Party shall be entitled to retain an amount of such
insurance proceeds equal to Transferor Party's reasonable expenses, if any,
incurred in repairing the damage caused by such fire or other casualty. At
Closing, in the case of a fire or other casualty, Transferor Party shall give
Transferee Party a credit on the Purchase Price equal to the lesser of the
estimated cost of restoration or the amount of the deductible.
[SIGNATURES ON FOLLOWING PAGE]
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[THIS IS THE SIGNATURE PAGE FOR THE AGREEMENT FOR EXCHANGE AND PURCHASE AND
ESCROW INSTRUCTIONS dated September 22, 1998 by and between Symantec Corporation
as and TST Development, L.L.C.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
Agreement Date.
<TABLE>
<S> <C>
"SYMANTEC" "TST"
SYMANTEC CORPORATION, a Delaware corporation TST DEVELOPMENT, L.L.C., a Delaware limited
liability company
By: _/s/__H. Bain III_____________ By:__/s/ Steven R. Wechsler____________
Name: Howard Bain III_____________ Name: _Steven R. Wechsler____________
Its _Vice President/WorldWide Operations and Its _Vice President____________________
Chief Financial Officer_________
</TABLE>
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CONSENT OF ESCROW HOLDER
The undersigned Escrow Holder hereby agrees to (i) accept the
foregoing Agreement, (ii) be escrow agent under said Agreement, and (iii) be
bound by said Agreement in the performance of its duties as escrow agent.
First American Title Guaranty Company
By: /s/ Carol Weir
--------------------------------
Its: Authorized Agent
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SCHEDULE 1
DEFINITIONS
1.0 General Definitions. For the purposes of this Agreement, the terms set
forth below in quotes shall have the meanings indicated in this Schedule
"1."
1.1. "Agreement" means this Agreement for Exchange and Purchase and
Escrow Instructions.
1.2 [Intentionally Omitted]
1.3 "Closing" means the delivery and recordation of the Grant Deed
and the delivery by Transferee Party to Escrowholder of the
consideration for the Property pursuant to the terms of the
Agreement together with instructions to deliver such to the
Transferor Party immediately after the due recordation of the
Grant Deed.
1.4 "Closing Date" means the date on which the Closing occurs.
1.5 "Contract Period" means, with respect to each Property, the
period commencing upon the Agreement Date and ending upon the
first to occur of the Closing or the termination of this
Agreement.
1.6 "Grant Deed" means a deed in favor of a Transferee Party in a
form substantially similar to that attached hereto as Exhibit
"B."
1.7 "Hazardous Material" means any substance, the presence of which
is regulated or requires remediation under any federal, state or
local statute, regulation or law, including, without limitation,
asbestos, polychlorinated biphenyls, and petroleum (including
crude oil or any fraction thereof), and materials or substances
defined as "hazardous waste," "hazardous substances," "hazardous
materials," "pollutants," or "toxic substances" in the
Comprehensive Environmental Response Compensation and Liability
Act of 1980 ("CERCLA") as amended by the Superfund Amendments
and Reauthorization Act of 1986 (PL 99-499); the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801, et seq.;
the Toxic Substance Control Act, 15 U.S.C. Section 2601, et
seq.; the Resource Conservation and Recovery Act ("RCRA"), as
amended, 42 U.S.C. Section 690l, et seq.; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Section 1251, et
seq.; any environmental law promulgated by the State of
California; and in the rules or regulations adopted and
guidelines promulgated pursuant to said laws.
1.8 "Permitted Exceptions" means:
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(a) those certain matters constituting exceptions to and/or
encumbrances against the Property approved or deemed approved by
a Transferee Party pursuant to the Agreement;
(b) the lien for non-delinquent real property taxes and all
non-delinquent interest installments on assessments or bonds;
(c) any mechanic's or other liens arising out of a Transferee
party's entry upon or activities at the Property or otherwise
created by such Transferee Party or its employees, contractors,
agents and invitees; and
(d) all other exceptions to title voluntarily consented to by
Transferee Party in writing prior to Closing.
1.9 "Release" shall mean releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging, injecting, escaping,
leaching, disposing or dumping.
1.10 "Title Commitment" means a Title Commitment issued by the Title
Insurer providing for the issuance at the Closing to a
Transferee Party of a Title Policy and complete copies of all
documents referenced as exceptions therein.
1.11 "Title Policy" shall mean an ALTA Owner's Policy of Title
Insurance Form B 1970 from Title Insurer insuring the insured
party as fee owner of the Property, with liability in the amount
and with the condition of title and the endorsements required by
the party insured as a condition of Closing as set forth on
Exhibit L and providing affirmative insurance with respect to
mechanics liens.
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SCHEDULE 2
REPRESENTATIONS AND WARRANTIES
2.01 Transferor Party's Representations and Warranties. Each Transferor Party
hereby makes the following representations and warranties to each
Transferee Party, except as set forth in Schedule 2A and except to the
extent that Transferee Party makes any Discovery:
(1) Unqualified Representations and Warranties. The representations and
warranties set forth below in this Section 2.01(1) are given by
Transferor Party without qualification pursuant to their terms:
(a) Other Agreements. Neither this Agreement, nor anything provided
to be done hereunder, violates or shall violate any contract,
agreement or instrument to which Transferor Party is a party, or
to the best of Transferor Party's actual knowledge, which
affects Transferor Party's Property or any portion thereof;
(b) Organization and Standing. Transferor Party is an entity of the
type described in the opening paragraph of the Agreement, duly
organized, validly existing and in good standing under the laws
of the State of its formation, has, or with respect to TST, as
of the First Closing will have all necessary authority to
transact business in California and, subject to obtaining the
internal approvals identified in the Agreement, has full power
and authority to enter into this Agreement and complete the
transaction contemplated hereunder;
(c) No Other Sales. Transferor Party has not entered into, and has
no legal notice of any claim relating to, any other contracts
for the sale of all, any portion of, or any interest in
Transferor Party's Property, and Transferor Party has not
granted, and has no legal notice of any claim relating to, any
rights of first refusal or options to purchase the all, any
portion of, or any interest in Transferor Party's Property;
(d) Approvals. Transferor Party has not received written notice (or,
if any such notice has been received the violation described in
such notice has been cured) that any consent, authorization,
variance, license, permit, or approval (collectively, the
"Approvals") relating to or required for the operation or
occupancy of Transferor Party's Property and required in order
for Transferor Party to carry out the transactions contemplated
hereby has not been validly and unconditionally obtained (or, if
there existed any condition with respect thereto, such condition
has been satisfied) or is not in full force and effect.
Materially true, accurate, and complete copies of all Approvals
in Transferor Party's possession have been, or will be,
delivered to the Transferee Party prior to the Closing as part
of the Property Documents. All fees, charges, and other payments
in connection with the Approvals have been paid in full. Without
the prior
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written approval of Transferee Party, as of the Closing Date,
except in the ordinary course of business, there will be no
application for any Approval which is pending. Transferor Party
shall have no liability with respect to this Subsection (d) to
the extent of information that was readily available to
Transferee Party from public records on the date on which
Transferee Party conducted its due diligence;
(e) Tenant Agreements. Other than the Leases and the Permitted
Encumbrances, there are no other lease amendments or agreements
between Transferor Party and any tenant. Transferor Party has
made no other agreements (whether written or oral) in the nature
of a lease affecting Transferor Party's Property that has not
expired or terminated or will not expire or terminate as of the
Closing;
(f) No Continuing Employees. There are no persons employed in
connection with the use, operation, maintenance or management of
Transferor Party's Property whom the Transferee Party would be
obligated to retain or compensate or provide benefits for after
the Closing, unless Transferee Party obligates itself to do so
by a separate written agreement;
(g) Personal Property. A materially true and accurate list of the
personal property of material value used in connection with the
operations of Transferor Party's Property shall be attached as
Exhibit K hereto within thirty (30) days of the Agreement Date,
and a true and accurate list of such personal property of
material value, not materially varying from the attached, will
be updated as of the Closing Date and will be attached to the
Bill of Sale delivered to Transferee Party at Closing. All of
such personal property of material value is owned by Transferor
Party in its own name. As of the Closing, none of such personal
property of material value will be leased or be subject to any
liens or conditional sales contracts (personal property
complying with such representations and warranties is referred
to herein as the "Personal Property");
(2) Qualified Representations and Warranties. The representations and
warranties set forth below in this Section 2.01(2) are given by
Transferor Party pursuant to their terms and to the best knowledge of
Transferor Party:
(a) Leases. To the best of Transferor Party's knowledge, the
schedule of the leases, the separate schedule of security
deposits and a separate delinquency report for the Property
(collectively, the "Lease Reports"), all attached as Schedules
to Exhibit H hereto, are materially true and accurate as of the
Agreement Date. New Lease Reports, all updated as of the Closing
Date will be delivered to Transferee Party at Closing, and will
be materially true and accurate to the best of Transferor
Party's knowledge. Except as otherwise expressly disclosed on
the Lease Reports and updated Lease Reports to be delivered at
Closing, to the best of Transferor Party's knowledge: (a) no
advance payment or prepayment of rents, fees, or
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other charges for more than the current month have been made
under the Leases, (b) there are no security deposits (whether in
the form of cash or other forms of deposits) or other monies
being held by or on behalf of Transferor Party for the account
of the Tenants pursuant to the Leases, (c) the Tenants are not
in arrears in the payment of any rent or any sum due under the
Leases, (d) all rents and other sums payable under the Leases
are being paid without offset, concession, rebate, abatement,
deduction, or allowance, and (e) no written claim has been
received by Transferor Party from any of the tenants in
Transferor Party's Property;
(b) No Actions. To the best of Transferor Party's knowledge, there
are no pending, threatened or contemplated actions, suits,
arbitrations, claims or proceedings, at law or in equity,
affecting Transferor Party's Property or in which Transferor
Party is, or will be, a party by reason of Transferor Party's
ownership of Transferor Party's Property, including, but not
limited to, judicial, municipal or administrative proceedings in
eminent domain, alleged building code, health and safety or
zoning violations, reassessment of the real estate taxes on
Transferor Party's Property, employment discrimination or unfair
labor practices, or worker's compensation, personal injuries or
property damages alleged to have occurred at Transferor Party's
Property or by reason of the condition or use of Transferor
Party's Property.;
(c) Environmental Laws. To the best of Transferor Party's knowledge,
except as disclosed in any report, study, audit, or other
materials delivered to Transferee Party by Transferor Party or
Discovered by Transferee Party and in Schedule 2A: (a) no
Hazardous Materials (as defined below) are located on Transferor
Party's Property in violation of Environmental Law; (b) no
underground storage tanks are located on Transferor Party's
Property; (c) Transferor Party's Property has never been used as
a dump for waste material; (d) Transferor Party's Property
complies with all applicable Environmental Laws; and (e) the
materials, incorporated into the Improvements (including, but
not limited to, any landfill) do not include asbestos, urea
formaldehyde, lead or other Hazardous Materials in violation of
any Environmental Law. The term "Environmental Laws" shall mean
all statutes specifically described in the definition of
"Hazardous Materials" in Schedule 1 and all federal, state, and
local environmental health and safety statutes, ordinances,
codes, rules, regulations, orders, and decrees regulating,
relating to, or imposing liability or standards concerning or in
connection with Hazardous Materials, in each case as codified as
of the date the foregoing representation and warranty is made;
(d) Operations Permitted. To the best of Transferor Party's
knowledge, the operation (and except as otherwise described on
Schedule 2A or Schedule 2B) and current use of the Property by
Transferor Party are permitted under all applicable zoning
statutes, ordinances, regulations, and laws
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(collectively, the "Classification") and restrictions,
covenants, easements, and cross-easements affecting Transferor
Party's Property. To the best of Transferor Party's knowledge,
as of the Closing Date, the Classification is not subject to any
conditional variance or conditional permit granted with respect
to Transferor Party's Property, and does not require any further
approval nor any other action. Transferor Party shall have no
liability with respect to this Section (d) to the extent of
information that was available to Transferee Party from public
records, Title Commitment or Survey on the date on which
Transferee Party conducted its due diligence or is Discovered by
Transferee Party or its consultants at any time prior to Closing
or is actually known by the Transferee Party as of the Agreement
Date;
(e) Utilities. To the best of Transferor Party's knowledge, all
utilities required for the use, operation, maintenance, and
management of Transferor Party's Property either enter
Transferor Party's Property through adjoining public streets or,
if they pass through adjoining private land, do so in accordance
with valid public easements or private easements inuring to the
benefit of the Transferee Party;
(f) Property Documents. To the best of Transferor Party's knowledge,
all of the Property Documents delivered to Transferee Party by
or on behalf of Transferor Party which were prepared by or on
behalf of Transferor Party constitute books, records and other
materials prepared by or on behalf of Transferor Party, in good
faith, in connection with Transferor Party's actual development
or operation of Transferor Party's Property. Transferor Party
makes no other representations or warranties of any kind to
Transferee Party as to the accuracy or completeness of the
content of the Property Documents, any other documents or other
information delivered to Transferee Party pursuant to this
Agreement; and
(3) No Other Representations or Warranties by Transferor Party. Transferor
Party makes no representations and warranties other than those contained
in the Agreement to which this Schedule is attached and this Schedule
"2."
(4) Actual Knowledge. Any and all representations and warranties by
Transferor Party to its best knowledge, actual knowledge, knowledge,
that Transferor Party has no knowledge (and any other similar conditions
or expressions contained in other provisions of the Agreement applicable
to Transferor Party) are hereby expressly limited to matters within the
actual, not the imputed or constructive, knowledge of, with respect to
CCC5 and WHQ, Marcia Cohen, John Sorci, and the WHQ Building Manager and
with respect to CCC2, Thomas M. Shapiro.
(5) True Now and at Closing. The truth of the foregoing representations and
warranties in all material respects on and as of the date hereof and on
and as of the Closing (updated for changes between the date hereof and
the Closing Date) shall be a condition precedent to Transferee Party's
obligations to close the transaction
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contemplated under this Agreement. Other than updates required by this
Agreement, such as the "Lease Reports" defined below, if any updates to
the representations and warranties disclose issues that would have a
material adverse impact on Transferee Party's purchase, such updates
must be approved by Transferee Party as a condition to Closing. Subject
to and in accordance with the provisions of Section 6.4 of the
Agreement, Transferor Party's representations and warranties shall
survive the Closing and the delivery of the Grant Deed.
2.02 Transferee Party's Independent Investigation.
(a) Transferee Party acknowledges and agrees that it has
been given or expects to be given, a full opportunity to
inspect and investigate each and every aspect of
Transferor Party's Property, either independently or
through agents of Transferee Party's choosing,
including, without limitation:
(l) All matters relating to title, together with all
governmental and other legal requirements such
as taxes, assessments, zoning, use permit
requirements and building codes.
(2) The physical condition and aspects of Transferor
Party's Property, including, without limitation,
the utilities, and all other physical and
functional aspects of Transferor Party's
Property. Such examination of the physical
condition of Transferor Party's Property shall
include an examination for the presence or
absence of Hazardous Materials, which shall be
performed or arranged by Transferee Party at
Transferee Party's sole expense.
(3) Any easements and/or access rights affecting
Transferor Party's Property.
(4) The service contracts and any other documents or
agreements of significance affecting Transferor
Party's Property which have been provided by
Transferor Party or otherwise made available to
Transferee Party or which have been Discovered
by Transferee Party through any means in
connection with its or its consultants'
investigation with respect to Transferor party's
Property.
(5) All other matters of material significance
affecting Transferor Party's Property.
(b) "AS IS WITH ALL FAULTS".
TRANSFEREE PARTY SPECIFICALLY ACKNOWLEDGES AND AGREES THAT
TRANSFEROR PARTY IS TRANSFERRING AND TRANSFEREE PARTY IS
ACQUIRING TRANSFEROR PARTY'S
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PROPERTY ON AN "AS IS WITH ALL FAULTS" BASIS AND THAT TRANSFEREE
PARTY IS NOT RELYING ON ANY REPRESENTATIONS OR WARRANTIES OF ANY
KIND WHATSOEVER, EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY OF FITNESS OR FITNESS FOR A PARTICULAR
PURPOSE, FROM TRANSFEROR PARTY, ITS AGENTS, OR BROKERS AS TO ANY
MATTERS CONCERNING THE PROPERTY EXCEPT AS EXPRESSLY SET FORTH IN
SCHEDULE "2," AND THE AGREEMENT TO WHICH THIS SCHEDULE IS
ATTACHED.
2.03 Transferee Party's Representations and Warranties. In addition to the
representations and warranties made by Transferee Party in Section 2.02
of this Schedule 2, Transferee Party hereby makes the following
representations and warranties to Transferor Party:
(a) Execution. The execution and delivery of the Agreement will not
constitute a breach of or a default under any agreement or other
instrument to which the Transferee Party is a party which would
have a materially adverse affect on the Transferee Party's
ability to fulfill its obligations under this Agreement.
(b) No Other Representations or Warranties. Transferee Party
acknowledges that Transferor Party has made no other
representations or warranties other than those contained in this
Schedule "2" and in the Agreement to which this Schedule "2" is
attached.
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SCHEDULE 2A
EXCEPTIONS TO SYMANTEC'S REPRESENTATIONS AND WARRANTIES
A. CCC5.
- At the time of the acquisition of the CCC5 Property by
Symantec's designee in 1997, the Property was used as a surface parking
area by users within Cupertino City Center.
- As a condition to the acquisition of the Property, Symantec made
various commitments to other owners or property within Cupertino City
Center (and certain of their lenders) to provide extra parking
facilities within the parking structure to be built on the Property as
part of the Building CCC5 project to accommodate the parking needs of
such other owners and users.
- Among other documents evidencing the right of such other owners
and users, is that certain Parking Easement and Relocation Agreement
recorded February 5, 1997 as Document #13602281 in the Official Records
and Santa Clara County (the "Parking Easement and Relocation
Agreement").
- In addition, to the Parking Easement and Relocation Agreement,
certain parking rights have been granted pursuant to recorded easements
in favor of the apartment project located across the entry driveway to
Building CCC5 and in favor of the WHQ Property.
- In order to accommodate the various parking requirements, the
parking structure was expanded below ground beyond the parcel boundaries
for the Property. Various easements and other agreements were obtained
from affected parties in order to authorize such expansion of the
parking structure and the installation and maintenance of (i) electrical
and communications infrastucture within such expanded area and (ii)
landscaping treatments.
- In order to facilitate the construction process, a "tie-back
easement" was obtained from a neighboring property owner.
- The foregoing is not intended to be a comprehensive list or to
serve as substitute for TST's thorough investigation of title and all
other matters relating to the CCC5 Property.
A. WHQ.
The following statements describe relevant information relating
to WHQ of which TST should be aware as TST conducts its investigations
during the Feasibility Period:
- 3rd Floor, South Wing has several roof leaks
- 3rd Floor, North Wing A/C system has a large pressure drop
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<PAGE> 50
- Building carpets need replacing
- Parking lot stall lines need repainting
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SCHEDULE 2B
EXCEPTIONS TO TST'S REPRESENTATIONS AND WARRANTIES
Cupertino City Center Buildings ("Buildings") and its affiliates own
certain properties within the, Cupertino City Center, and is effectively by
succession the Declarant under that certain Declaration of Covenants, Conditions
and Restrictions and Grant of Easements for Cupertino City Center dated October
2, 1985 (the "Original Declaration").
Pursuant to the terms of the Original Declaration a Parking Structure
was designated for Lot 3 of Tract 7734, to contain 1,232 spaces, to be used by
the owners of Lots 1, 2, and 4. CCC2 is located on Lot 2. The original
Declaration also provided that the owner of each Lot would be allocated a
non-exclusive easement for the use of "such a number of parking spaces therein
as are reasonably necessary to satisfy the Minimum Parking Ratio applicable to
each such Lot." TST believes that the contemplated number of parking spaces in
the Original Declaration is not sufficient to satisfy the Minimum Parking Ratio
for the building to be built on Lots 1, 2, and 4 at such time as all three Lots
are fully developed. As of the Agreement Date, Lot 4 remains undeveloped. A
Parking Structure has been built on Lot 3, which contains approximately 1,265
spaces.
On February 2, 1987, through a recorded Deed of Trust, Buildings granted
to the Travelers Insurance Company ("Travelers"), the present fee owner of CCC2,
a non-exclusive easement to park 494 automobiles in the Parking Structure. In
that Deed of Trust, Buildings warranted and represented that it would not grant
easements for the benefit of other properties for parking in the Parking
Structure that would overburden the Parking Structure or would violate
applicable zoning laws.
On April 15, 1987, Buildings granted to the owner of Lot I in Tract 7734
a non-exclusive easement for parking 580 automobiles in the Parking Structure
pursuant to an Agreement and Grant of Permanent Easement, Thereafter, on August
28, 1987, the Original Declaration was amended by a First Amendment to
Declaration (the "First Amendment") to incorporate nine additional Lots in the
adjoining Tract 7953 into the Cupertino City Center complex. The First Amendment
restricted the Declarant's right to grant further parking rights in the Parking
Structure without the consent of the owners and mortgagees of Lots 1 and 2 of
Tract 7734, which would include Travelers as the then mortgagee of Lot 2.
On November 1, 1989, in a Deed of Trust for the benefit of Teachers
Insurance & Annuity Association of America ("TIAA"), Buildings granted a
non-exclusive easement for parking 193 automobiles within the Parking Structure
for the benefit of Lots 2 and 3 of Tract 7953 This increased the parking
allocation within the Parking Structure to 1,267 spaces. The subject TIAA Deed
of Trust provided in part that the grant of easement had received all necessary
approvals and consents, including the consents of owners and mortgagees of Lots
I and 2 of Tract 7734. TST has no knowledge whether Travelers was consulted or
provided any consent in this regard.
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On or about October 3, 1996, a Parking Easement and Relocation
Agreement (the "Relocation Agreement") was entered into between Buildings, TIAA,
and several other parties (and which was approved and consented to by Symantec
on September 30, 1996), under which certain parking rights benefiting Lots 2 and
3 in Tract 7953 can be temporarily relocated either to the Parking Structure or
to alternate parcels (Lots 1 and 6 in Tract 7953), The Relocation Agreement
relates to parking rights for a total of 255 additional automobiles, The term of
this temporary parking easement is three years from the date that Buildings
sends a notice to the applicable parties designating which area is to be
burdened with temporary additional parking. As of the Agreement Date, TST
believes that Travelers has not received any such notice, so it is presumed that
temporary parking rights in the Parking Structure have not been granted by
Buildings pursuant to the Relocation Agreement.
TST further believes that Travelers is not aware of any effort to gain
Travelers consent to the Relocation Agreement, as required under the First
Amendment. However, TST is aware that on February 7, 1997, in a document
entitled Second Amendment to Declaration (the "Second Amendment"), Buildings
purported to modify the First Amendment by retroactively providing that the
consent and approval requirements for the granting of additional parking rights
shall not apply to the Relocation Agreement and "any parking temporarily
relocated after the date hereof from Lot 4 of Tract 7734 on terms and conditions
which are similar to those contained in the [Relocation Agreement.]"
TST believes that Travelers was not consulted and did not consent to the
Second Amendment. While the original Declaration specifies that Buildings (as
the Class B member) has the sole right to amend the Declaration, it also states
that any amendment that would have a materially adverse effect on any mortgagee
requires the consent of such mortgagee. TST is not aware of mortgagee consent to
the Second Amendment. Moreover, according to the Declaration, in the event a
mortgagee succeeds to the ownership interest of any so-called Class B member's
voting rights, then that Mortgagee also succeeds to the Class B member's voting
rights. Accordingly, Travelers, upon its foreclosure of CCC2 arguably succeeded
to the Class B member voting rights of the original owner of Lot 2. Travelers
was not given the opportunity to vote in connection with the Second Amendment.
TST HEREBY DISCLAIMS ANY REPRESENTATION OR WARRANTY THAT THE PURCHASER
OF LOT 2 AND CCC2 WILL HOLD AN IRREVOCABLE EASEMENT TO PARK 494 AUTOMOBILES
WITHIN THE PARKING STRUCTURE OR ANY REPRESENTATION OR WARRANTY THAT THE PARKING
STRUCTURE IS ADEQUATE TO SATISFY THE MINIMUM PARKING REQUIREMENTS FOR EACH LOT
WITH RIGHTS TO PARK THEREIN.
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SCHEDULE 3
SPECIFIC ESCROW INSTRUCTIONS
3.01 Conditions to Closing.
(a) Conditions for the Benefit of Transferee Party. In addition to
any other obligations contained in this Agreement, the following
shall constitute covenants of Transferor Party and conditions to
Transferee Party's obligation to purchase the Property from
Transferor Party and are for the benefit of Transferee Party,
the failure of any of which shall constitute a default by
Transferor Party in Closing.
(i) Transferor Party Closing Covenant Items. The following
items are conditions for the Benefit of Transferee
Party, and are covenants of Transferor Party:
(1) Grant Deed. Transferor Party shall have
delivered to Escrow Holder prior to the time set
for Closing a duly executed and acknowledged
Grant Deed in the form attached hereto as
Exhibit "B."
(2) Non-Foreign Status Affidavit. Transferor Party
shall have delivered to Escrow Holder prior to
the time set for Closing a Non-Foreign Status
Affidavit executed by Transferor Party in the
form attached hereto as Exhibit "C" as well as
any similar Affidavit required by the State of
California.
(3) Assignment. Transferor Party shall have
delivered to Escrow Holder prior to the time set
for Closing a duly executed Assignment in the
form attached hereto as Exhibit "H."
(4) Bill of Sale. Transferor Party shall have
delivered to Escrow Holder prior to the time set
for Closing, a duly executed Bill of Sale in the
form attached hereto as Exhibit R.
(5) Other Documents and Sums. Transferor Party shall
deliver to Escrow Holder all other documents and
sums reasonably required of Transferor Party to
carry out the Closing, including, without
limitation, the Closing Statement and Closing
Instructions.
(ii) Other Transferee Party Closing Conditions. The following
items are conditions for the benefit of Transferee
Party, but are NOT covenants of Transferor Party:
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<PAGE> 54
(1) Transferor Party's Representations and
Warranties are True and Correct. Transferor
Party shall have delivered to Escrow Holder on
or before the time set for Closing a certificate
of Transferor Party stating either (i) that all
of the representations and warranties made by
Transferor Party in this Agreement remain true
and correct as of the Closing and that
Transferor Party has complied with all of the
covenants of Transferor Party contained therein
or (ii) that (i) is true but listing any
exceptions thereto that have occurred since the
date of this Agreement.
(2) Title Policy. The Title Insurer shall agree in
writing that it will in fact issue the Title
Policy from Title Insurer subject only to the
Permitted Exceptions.
(b) Conditions for the Benefit of Transferor Party. In addition to
any other obligations contained in this Agreement, the following
shall constitute conditions to Transferor Party's obligation to
sell the Property to Transferee Party and shall be for the
benefit of Transferor Party, the failure of any of which shall
allow Transferor Party to terminate this Agreement:
(i) Delivery of Consideration. Transferee Party shall
deliver the Consideration to Escrow Holder prior to the
time set for Closing.
(ii) Other Documents and Sums. Transferee Party shall deliver
to Escrow Holder all other documents and sums reasonably
required of Transferee Party to carry out the Closing,
including, without limitation, the Closing Statement and
Closing Instructions.
(iii) Transferee Party's Representations and Warranties are
True and Correct. Transferee Party shall have delivered
to Escrow Holder on or before the time set for Closing a
certificate of Transferee Party stating that all of the
representations and warranties made by Transferee Party
in this Agreement remain true and correct as of the
Closing and that Transferee Party has complied with all
of the covenants of Transferee Party contained therein.
3.02 Recordation of Grant Deed and Delivery of Funds. Upon receipt of the
funds and instruments described in this Schedule "3," and upon the
satisfaction (or deemed satisfaction as the case may be) or waiver of
the conditions specified in this Schedule "3," Escrow Holder shall cause
the Grant Deed to be recorded in the official records of the County
Recorder of the County (with documentary transfer tax information to be
affixed by separate affidavit) and shall deliver the proceeds of this
escrow (as set forth on the Closing Statement delivered by Transferee
Party and Transferor Party) to Transferor Party. All sums to be
disbursed to Transferor Party by Escrow Holder shall be in cash, by wire
transfer, or in other immediately available funds.
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<PAGE> 55
3.03 Prorations. All items of revenue and expense from the Projects shall be
prorated as of the Closing Date. Without limiting the foregoing:
(a) All prorations shall be based on a 30-day month and a 360-day
year. All items of income and expense for the date on which
Closing occurs shall be allocated to Transferee Party.
(b) Real property taxes and assessments shall be prorated between
Transferee Party and Transferor Party based on the latest
available tax information. In the event any supplemental tax
bill is issued following the Closing Date, Transferor Party
shall pay to Transferee Party all additional amounts applicable
to the time prior to the Closing Date upon written request of
Transferee Party.
(c) The present insurance coverage on the Property shall be
terminated as of the Closing Date and final bills shall be
issued as of the Closing Date for all public utility services on
the Property and there shall be no proration of insurance
premiums or public utility bills. Any deposits on utilities paid
by Transferor Party shall be returned to Transferor Party.
Transferee Party shall cause all utilities to be placed in
Transferee Party's name on and after the Close of Escrow.
(d) Rental income actually received from the Property shall be
prorated as of the Closing Date. Past due rentals shall be
handled as follows: Transferor Party shall retain the right to
collect receivables from former tenants who are no longer in
residence at the Property as of the Closing Date, but Transferee
Party shall have the right to collect and retain all receivables
from tenants still in residence on the Closing Date. Transferor
Party shall receive a credit from Transferee Party at Closing
for: (1) 100% of receivables less than thirty (30) days past due
from Tenants that are still in residency at the Property as of
the Closing Date; and (2) 60% of receivables less than sixty
(60) days but thirty (30) or more days past due from Tenants
that are still in residency at the Property as of the Closing
Date. The amount of all security deposits shall be deducted from
Transferor Party's account at Closing. By execution of the
Closing Statement, Transferor Party shall be deemed to have
represented and warranted that the amount of security deposits
so deducted from Transferor Party's accounts constitutes the
entire amount of security deposits from tenants in the Property.
3.04 Costs of Escrow.
(a) Transferor Party shall pay the documentary transfer tax and;
(i) All costs not specifically referenced herein customarily
allocated to Transferor Party in the County;
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<PAGE> 56
(ii) [Intentionally Omitted];
(iii) The cost of any of Transferor Party's other obligations
hereunder.
(b) Transferee Party shall pay:
(i) All costs not specifically referenced herein customarily
allocated to Transferee Party in the County;
(ii) The cost of title coverage for the Property being
acquired by such Transferee Party pursuant to Section
5.2.2.2.3 of the Agreements;
(iii) The cost of any of Transferee Party's other obligations
hereunder.
3.05 Escrow Cancellation Charges. In the event that any Closing shall fail to
occur by reason of the default of either party, the defaulting party
shall be liable for all escrow cancellation charges. In the event that
any Closing shall fail to occur for any other reason, Transferee Party
and Transferor Party shall each be liable for one-half of any escrow
cancellation charges.
3.06 Default. TIME IS OF THE ESSENCE in this Agreement and if Transferee
Party or Transferor Party (the "Defaulting Party") fails to deposit any
of the amounts due pursuant to this Agreement, or to perform any other
act when due, then the other party (the "Non-Defaulting Party") may give
notice to the Defaulting Party demanding that such failed performance be
completed and if such failed performance has not been completed within
five (5) days following such notice, the Non-Defaulting Party may
terminate this Agreement by notice in writing to the Defaulting Party
and Escrow Holder at which time Escrow Holder shall cancel this escrow
and the Non-Defaulting Party shall thereupon be released from its
obligations under this Agreement except for any liability under any
indemnity in the Agreement which expressly survives termination of this
Agreement and Transferee Party's liability for Transferee Party's Work
Product (if, and only if, Transferee Party was the Defaulting Party).
3.07 Additional Escrow Instructions. If required by Escrow Holder, Transferee
Party and Transferor Party shall execute Escrow Holder's usual form of
supplemental escrow instructions for transactions of this type,
provided, however, that (a) in the event that any portion of such
additional escrow instructions shall be inconsistent with the provisions
of this Agreement, the provisions of this Agreement shall prevail to the
extent of any such inconsistency; and (b) no provision thereof shall
have the effect of modifying this Agreement unless it is expressly so
stated and such express statement is initialed by Transferee Party and
Transferor Party.
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SCHEDULE 4
MISCELLANEOUS PROVISIONS
4.01 No Brokers. Except for a Broker identified in the Specific Terms as a
"Broker-Symantec Corporation" or "Broker-TST Development, L.L.C.," each
party represents to the other that it has not had any contact or
dealings regarding the Property, or any communication in connection with
the subject matter of this transaction, through any real estate broker
or other person who can claim a right to a commission or finder's fee.
If any broker or finder makes a claim for a commission or finder's fee
based upon a contact, dealings, or communications, the party through
whom the broker or finder makes this claim shall indemnify, defend with
counsel of the indemnifying party's choice (subject to the reasonable
approval of the indemnified party), and hold the indemnified party
harmless from all expense, loss, damage, liability and claims, including
the indemnified party's attorneys' fees, if necessary, arising out of
the broker's or finder's claim
4.02 Attorneys' Fees. In any legal proceeding between the parties to this
Agreement, each party shall be responsible for its own attorneys fees
and any other costs of such proceeding and neither party shall be
entitled to recover any such attorneys fees or other costs from the
other party.
4.03 Notices. Any notice, request, demand or other communication given or
required to be given hereunder ("notice") shall be given in writing and
personally delivered, or sent by United States registered or certified
mail, return receipt requested, postage prepaid, or sent by a nationally
recognized courier service such as Federal Express, addressed to the
party to receive such notice as specified in the Agreement. Delivery of
any notice shall be deemed made on the date of actual delivery thereof
to the address of the addressee, if personally delivered, and on the
date indicated in the return receipt or courier's records as the date of
delivery or first attempted delivery to the address of the addressee, if
sent by mail or courier. Notice may also be given by telecopier to any
party having a telecopier machine compatible with the telecopier machine
of the party sending the notice. Any notice given by telecopier shall be
deemed delivered when received by the party to whom the telecopy was
addressed. Any party may change its address or telecopier number for
notice purposes by giving notice to the other party and to Escrow
Holder.
4.04 Determination of Dates. If performance under the Agreement is required
on or before a specific day on the calendar, such date shall be
determined as set forth in this Section. If a number of days is the
listed measure for determining a date, "days" shall mean calendar days
(unless otherwise specified). If the determined date falls on a
Saturday, Sunday or a United States national holiday, the determined
date shall be the next succeeding calendar day that is not a Saturday,
Sunday or United States national holiday.
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4.05 Assignment. Subject to any terms and conditions respecting assignability
elsewhere specified, this Agreement shall not be assignable without the
written consent of the other Party, and, to the extent assigned in
accordance with the terms of this Agreement, shall be binding upon the
parties hereto and their respective heirs, successors or
representatives. Unless otherwise specified elsewhere in this Agreement,
any permitted assignment shall not relieve the assignor of assignor's
obligations under this Agreement and no such assignment shall be
effective unless such assignee assumes each and every obligation of
assignor hereunder.
4.06 Relationship of Parties. The relationship of the parties to this
Agreement shall be solely that of Transferee Party and Transferor Party,
and nothing herein contained shall be construed otherwise.
4.07 Governing Law. This Agreement shall be construed in accordance with the
laws of the State of California.
4.08 Pronouns. All pronouns and any variations thereof shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the
identity of the parties may require.
4.09 Headings. All headings of this Agreement are for purposes of reference
only and shall not limit or define the meaning of the provisions of this
Agreement.
4.10 Severability. If any paragraph, section, sentence, clause or phrase
contained in this Agreement shall become illegal, null or void against
public policy, or otherwise unenforceable, for any reason, or shall be
held by any court of competent jurisdiction to be illegal, null or void,
against public policy, or otherwise unenforceable, the remaining
paragraphs, sections, sentences, clauses or phrases contained in this
Agreement shall not be affected thereby.
4.11 Waiver. The waiver of any breach of any provision hereunder by
Transferee Party or Transferor Party shall not be deemed to be a waiver
of any preceding or subsequent breach hereunder. No failure or delay of
any party in the exercise of any right given hereunder shall constitute
a waiver thereof nor shall any partial exercise of any right preclude
further exercise thereof.
4.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original but all of which shall
constitute one and the same instrument.
4.13 Time of Day. When any performance required under the Agreement is
required to be completed by a particular time of day, the time then
applicable to the time zone in which the Property is located shall be
assumed unless otherwise specified.
4.14 No Recordation. Neither this Agreement, nor any memorandum of this
Agreement may be recorded without the execution by Transferor Party of a
separate written document in the form to be recorded, provided that at
the First
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Closing, TST shall have the right to record a memorandum of this
Agreement against WHQ and CCC2 with respect to the rights of first
refusal and first offer. Transferor Party acknowledges and agrees that
recordation of such a memorandum is a condition to release of any of the
Deposit to Transferor Party in accordance with the terms of this
Agreement. If such a memorandum is so recorded, Transferee Party agrees
to execute for recording a release of such memorandum upon demand by
Transferor Party after the expiration or earlier termination of the
rights described therein.
4.15 Construction. The parties hereto acknowledge that each party and its
counsel have reviewed and revised this Agreement and that the normal
rule of construction to the effect that any ambiguities are to be
resolved against the drafting party shall not be employed in the
interpretation of this Agreement or any amendments or exhibits thereto.
4.16 [Intentionally Omitted]
4.17 [Intentionally Omitted]
4.18 Transferee Party Work Product. In the event the Closing does not occur
and this Agreement is terminated as a result of the default by
Transferee Party under this Agreement, Transferor Party may elect that
Transferee Party deliver to Transferor Party copies, at no charge to
Transferor Party, of Transferee Party's Work Product. Transferor Party
acknowledges that Transferee Party's only obligation is to make copies
of Transferee Party's Work Product and that Transferor Party may not be
able to legally rely on any of the same. As used herein, Transferee
Party Work Product shall mean the following, and only the following: a
copy of any architectural review which has been performed for Transferee
Party by an third party consultant, a copy of any environmental review
which has been performed for Transferee Party by an third party
consultant, and copy of any survey which has been performed for
Transferee Party by a third party surveyor.
4.19 Time of Essence. TIME IS OF THE ESSENCE in this Agreement as to all
dates and time periods set forth herein.
4.20 Payments. All payments required pursuant to this Agreement shall be paid
in immediately available US Dollars.
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LIST OF EXHIBITS
EXHIBIT LIST
LIST OF EXHIBITS TO BE ATTACHED TO
AGREEMENT FOR EXCHANGE AND PURCHASE AND ESCROW INSTRUCTIONS
EXHIBIT TITLE
A Legal Descriptions
B Forms of Grant Deed
C Non-Foreign Status Affidavits
D Form of Elections to Proceed
E Building CCC5 Plans and Architect's Contract
F [Intentionally Omitted]
G List of Property Documents
H Assignment and Assumption of Apple Lease
I Forms of Assignment and Assumption of Obligations
J Forms of Buyer's Certificate
K Personal Property List
L Condition of Title at Closing
M Building CCC5 Preliminary Acceptance Form
N Certificate of Substantial Completion
O Building CCC5 General Contract
P Acknowledgements of HOK and Webcor
Q Form of Apple Computer Estoppel Certificate
R Bill of Sale
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EXHIBIT A
LEGAL DESCRIPTION
(CCC5)
Real property in the City of Cupertino, County of Santa Clara, State of
California, described as follows:
PARCEL ONE:
Lot 5 as shown on that certain Map of Tract No. 7953 Cupertino City
Center Phase III, which Map was filed for record in the Office of the Recorder
of the County of Santa Clara, State of California on February 27, 1987, in Book
571 of Maps, Pages 36 and 37, and all easements, rights, benefits and privileges
appurtenant thereto.
PARCEL TWO:
Easements as described in the Section entitled "Easements and Rights
Reserved for Owners" of the Article entitled "Easements and Rights of Entry" of
the Declaration of Covenants, Conditions and Restrictions and Grant of Easements
for Cupertino City Center recorded October 9, 1985, in Book J482, page 1907, as
amended by that certain First Amendment to Declaration of Covenants, Conditions
and Restrictions and Grant of Easements recorded September 2, 1987, in Book
K281, page 2071, each in the Official Records of Santa Clara County, California.
PARCEL THREE:
Easements for parking, landscaping, support, settlement and encroachment
as granted to Cupertino City Center Buildings, a California Limited Partnership,
in the Grant of Easement (Cupertino City Center 5) recorded February 5, 1997
under Series No. 13602286.
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EXHIBIT "A"
LEGAL DESCRIPTION CCC2
TS# 74432
PARCEL ONE:
Lot 2 as shown on that certain Map of Tract No. 7734 filed October 9, 1985 in
Book 550 of Maps, Pages 24, 25 and 26, Official Records of Santa Clara County.
Excepting therefrom the underground water rights conveyed to California Water
Service Company, a California corporation, by Deeds recorded July 11, 1984 in
Book I 709, Page 320, Official Records and September 7, 1984 in Book I 858, Page
185, Official Records.
PARCEL TWO:
A non-exclusive easement for the benefit of Parcel One, its owners, successors,
assigns, employees, tenants, and invitees, for the parking of 494 automobiles in
the commercial parking structure located on Lot 3 as shown on that certain map
of Tract No. 7734 recorded in Book 550, Pages 24, 25 and 26, Official Records of
the County of Santa Clara, and more particularly described as Parcel A of that
certain Map of Tract No. 7870, a subdivision of Lot 3 of Map of Tract No. 7734
for condominium purposes, to be recorded in the Official Records of such County,
prepared by Brian Kangas Foulk & Associates, and attached hereto as Exhibit A-2,
together with a non-exclusive easement for vehicular ingress to and egress from
such parking structure.
PARCEL THREE:
An easement for the benefit of Parcel One over that certain real property
described as Lot 5 as shown on that certain Map of Tract No. 7734 filed October
9, 1985, in Book 550 of Maps, Pages 24, 25 and 26, Official Records of Santa
Clara County, for an encroachment of certain improvements, all as more
particularly described in that certain Grant of Encroachment Easement between
Cupertino City Center Owners Association, as grantor, and Cupertino City Center
Associates D, as grantee, recorded on February 26, 1987 in Book K 052, Page 518,
Official Records of Santa Clara County.
Property Address: 20330 Torre Avenue, aka 20330 Stevens Creek Boulevard,
Cupertino, California
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EXHIBIT A
LEGAL DESCRIPTION
(WHQ)
PARCEL ONE:
All of Parcel 2, as shown upon that certain Map entitled, "Parcel Map being a
Subdivision of Lot 9 of Tract 3743 (186-MAPS-36 & 37)" which Map was filed for
record in the Office of the Recorder of the County of Santa Clara, State of
California on December 12, 1978 in Book 432, of Maps, at page 3.
PARCEL TWO AND PARCEL THREE:
Appurtenant easements
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EXHIBIT B-1
GRANT DEED (CCC5)
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
- ---------------------------------
- ---------------------------------
- ---------------------------------
Attention:
-----------------------
MAIL TAX STATEMENTS TO:
- ---------------------------------
- ---------------------------------
- ---------------------------------
Attention:
-----------------------
- --------------------------------------------------------------------------------
(Space Above This Line for Recorder's Use)
GRANT DEED
Amount of Documentary Transfer
Tax shown on attached paper -- not
for public record.
FOR A VALUABLE CONSIDERATION, receipt of this is hereby
acknowledged, hereby grants to , a ,
the following described real property in the City of Cupertino, County of Santa
Clara, State of California:
PARCEL ONE: See Exhibit "A" which is attached hereto and
incorporated by this reference;
PARCEL TWO: All rights, if any, to park one or more vehicles
anywhere within Cupertino City Center; and
PARCEL THREE: All easements appurtenant to PARCEL ONE or
PARCEL TWO.
Subject to: 1. Current taxes and assessments.
2. [Permitted Exceptions]
IN WITNESS WHEREOF, the parties hereto have executed this Grant
Deed as of this day of , 19 .
------------ ---------------- ----
"SELLER"
SUMITOMO BANK LEASING AND FINANCING, INC., a
Delaware corporation
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By:
------------------------------
***SellerProperty1SignatoryParty1***,
***SellerProperty1SignatoryParty1Capacity***, a General Partner
By:
-----------------------------
***SellerProperty1SignatoryParty2***,
***SellerProperty1SignatoryParty2Capacity***, a General Partner
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EXHIBIT B-2
GRANT DEED (CCC2)
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
- ---------------------------------
- ---------------------------------
- ---------------------------------
Attention:
-----------------------
MAIL TAX STATEMENTS TO:
- ---------------------------------
- ---------------------------------
- ---------------------------------
Attention:
-----------------------
- --------------------------------------------------------------------------------
(Space Above This Line for Recorder's Use)
GRANT DEED
Amount of Documentary Transfer
Tax shown on attached paper -- not
for public record.
FOR A VALUABLE CONSIDERATION, receipt of this is hereby
acknowledged, hereby grants to , a ,
the following described real property in the City of Cupertino, County of Santa
Clara, State of California:
PARCEL ONE: See Exhibit "A" which is attached hereto and
incorporated by this reference;
PARCEL TWO: All rights, if any, to park one or more vehicles
anywhere within Cupertino City Center; and
PARCEL THREE: All easements appurtenant to PARCEL ONE or
PARCEL TWO.
Subject to: 1. Current taxes and assessments.
2. [Permitted Exceptions]
IN WITNESS WHEREOF, the parties hereto have executed this Grant
Deed as of this day of , 19 .
----------- ----- ---
"SELLER"
***SellerNameProperty2***, a
66
<PAGE> 67
***SellerProperty2EntityState***
***SellerProperty2EntityType***
By:
------------------------------
***SellerProperty2SignatoryParty1***,
***SellerProperty2SignatoryParty1Capacity***, a General
Partner
By:
-----------------------------
***SellerProperty2SignatoryParty2***,
***SellerProperty2SignatoryParty2Capacity***, a General
Partner
67
<PAGE> 68
EXHIBIT B-3
GRANT DEED (WHQ)
RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:
- ---------------------------------
- ---------------------------------
- ---------------------------------
Attention:
-----------------------
MAIL TAX STATEMENTS TO:
Attention:
-----------------------
- --------------------------------------------------------------------------------
(Space Above This Line for Recorder's Use)
GRANT DEED
Amount of Documentary Transfer
Tax shown on attached paper -- not
for public record.
FOR A VALUABLE CONSIDERATION, receipt of this is hereby
acknowledged, hereby grants to , a ,
the following described real property in the City of Cupertino, County of Santa
Clara, State of California:
PARCEL ONE: See Exhibit "A" which is attached hereto and
incorporated by this reference;
PARCEL TWO: All rights, if any, to park one or more vehicles
anywhere within Cupertino City Center; and
PARCEL THREE: All easements appurtenant to PARCEL ONE or PARCEL
TWO.
Subject to: 1. Current taxes and assessments.
2. [Permitted Exceptions]
IN WITNESS WHEREOF, the parties hereto have executed this Grant
Deed as of this day of , 19 .
------------ ---------------- ----
"SELLER"
SUMITOMO BANK LEASING AND FINANCE, INC., a Delaware corporation
68
<PAGE> 69
By:
-----------------------------
***SellerProperty1SignatoryParty1***,
***SellerProperty1SignatoryParty1Capacity***, a General Partner
By:
-----------------------------
***SellerProperty1SignatoryParty2***,
***SellerProperty1SignatoryParty2Capacity***, a General Partner
69
<PAGE> 70
EXHIBIT C
FORM OF NON-FOREIGN STATUS AFFIDAVIT
To inform ____________________. a _____________________ (the "Transferee") that
withholding of tax under Section 1445 of the Internal Revenue Code of 1986, as
amended ("Code") and under Section 18805(a)(2) of the California Revenue and
Taxation Code will not be required upon the transfer of certain real property to
the Transferee by ______________________ (the "Transferor"), the undersigned
hereby certifies the following on behalf of the Transferor:
1. The Transferor is not a foreign corporation, foreign partnership,
foreign trust, or foreign estate (as those terms are defined in the
Code and the Income Tax Regulations promulgated thereunder);
2. The Transferor's U.S. employer identification number is
***SellerProperty1TaxIDNo***; and
3. The Transferor's office address is ***SellerAddress1***,
***SellerAddress2***, ***SellerAddressCity***, ***SellerAddressState***
***SellerAddressPostalCode***.
The Transferor understands that this Certification may be disclosed to the
Internal Revenue Service by the Transferee and that any false statement
contained herein could be punished by fine, imprisonment, or both.
Under penalty of perjury I declare that I have examined this Certification and
to the best of my knowledge and belief it is true, correct and complete, and I
further declare that I have authority to sign this document on behalf of the
Transferor.
Date , 19 .
-------------------- ------
"TRANSFEROR"
, a
- ------------------- -----------------------
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
70
<PAGE> 71
EXHIBIT D-1
ELECTION TO PROCEED
(CCC5)
To: First American Title Guaranty Company [Escrow Holder]
Re: Election to Proceed for Escrow No. ***EscrowNumber*** and the
Property Known as CCC5
Ladies and Gentlemen:
Symantec Corporation is "Symantec" and TST Development, L.L.C. is "TST" under
that certain Agreement of Exchange and Purchase and Escrow Instructions (the
"Agreement") dated ***DateAgreement*** ("Agreement Date"). All capitalized terms
defined in the Agreement shall have the same meanings when capitalized in this
letter.
Pursuant to the Agreement, TST has had the right to purchase the Property since
the Agreement Date and during the Feasibility Period, TST has been permitted to
inspect conditions with regard to the Property by reviewing matters affecting
entitlements to develop the Property and by conducting such feasibility
investigations, studies and analyses thereon or thereabout as TST in TST's sole
discretion has deemed appropriate and, without limiting the generality of the
foregoing, the condition of title of the Property.
Based upon all such review and such feasibility investigations, studies and
analyses conducted by TST, TST hereby elects to proceed with the purchase of the
Property pursuant to the Agreement in accordance with and subject to the terms
thereof, and TST hereby agrees at the Closing, and, subject to the terms of the
Agreement, to accept title to the Property in the condition of the Pro Forma
Title Policy issued by First American Title Insurance Company under its order
number ***TitleNumberProperty1*** and dated ***DateTitlePolicyProFormaProp1***.
Very truly yours,
71
<PAGE> 72
EXHIBIT D-2
ELECTION TO PROCEED
(CCC2)
To: First American Title Guaranty Company [Escrow Holder]
Re: Election to Proceed for Escrow No. ***EscrowNumber*** and the
Property Known as CCC2
Ladies and Gentlemen:
The undersigned Symantec Corporation is "Symantec" and TST Development, L.L.C.
is "TST" under that certain Agreement of Exchange and Purchase and Escrow
Instructions (the "Agreement") dated ***DateAgreement*** ("Agreement Date"). All
capitalized terms defined in the Agreement shall have the same meanings when
capitalized in this letter.
Pursuant to the Agreement, Symantec has had the right to purchase the Property
since the Agreement Date and during the Feasibility Period, Symantec has been
permitted to inspect conditions with regard to the Property by reviewing matters
affecting entitlements to develop the Property and by conducting such
feasibility investigations, studies and analyses thereon or thereabout as
Symantec in Symantec's sole discretion has deemed appropriate and, without
limiting the generality of the foregoing, the condition of title of the
Property.
Based upon all such review and such feasibility investigations, studies and
analyses conducted by Symantec, Symantec hereby elects to proceed with the
purchase of the Property pursuant to the Agreement in accordance with and
subject to the terms thereof, and Symantec hereby agrees at the Closing, and,
subject to the terms of the Agreement, to accept title to the Property in the
condition of the Pro Forma Title Policy issued by First American Title Insurance
Company under its order number ***TitleNumberProperty2*** and dated
***DateTitlePolicyProFormaProp2***.
Very truly yours,
72
<PAGE> 73
EXHIBIT D-3
ELECTION TO PROCEED
(WHQ)
To: First American Title Guaranty Company [Escrow Holder]
Re: Election to Proceed for Escrow No. ***EscrowNumber*** and the
Property Known as WHQ
Ladies and Gentlemen:
Symantec Corporation is "Symantec" and TST Development, L.L.C. is "TST" under
that certain Agreement of Exchange and Purchase and Escrow Instructions (the
"Agreement") dated ***DateAgreement*** ("Agreement Date"). All capitalized terms
defined in the Agreement shall have the same meanings when capitalized in this
letter.
Pursuant to the Agreement, TST has had the right to purchase the Property since
the Agreement Date and during the Feasibility Period, TST has been permitted to
inspect conditions with regard to the Property by reviewing matters affecting
entitlements to develop the Property and by conducting such feasibility
investigations, studies and analyses thereon or thereabout as TST in TST's sole
discretion has deemed appropriate and, without limiting the generality of the
foregoing, the condition of title of the Property.
Based upon all such review and such feasibility investigations, studies and
analyses conducted by TST, TST hereby elects to proceed with the purchase of the
Property pursuant to the Agreement in accordance with and subject to the terms
thereof, and TST hereby agrees at the Closing, and, subject to the terms of the
Agreement, to accept title to the Property in the condition of the Pro Forma
Title Policy issued by First American Title Insurance Company under its order
number ***TitleNumberProperty3*** and dated ***DateTitlePolicyProFormaProp2***.
Very truly yours,
73
<PAGE> 74
EXHIBIT E
BUILDING CCC5 PLANS AND ARCHITECT'S CONTRACT
A. CONTRACT:
Original contract dated June 1, 1996 by and between Symantec Corporation, as
"Owner" and HOK Architects as "Architect" delivered to TST pursuant to
Transmittal dated June 19, 1998 as shown on Exhibit G;
Change Order #1 dated September 26, 1997 documenting HOK Additional Services
#1-#6;
Change Order #2 dated August 20, 1998 documenting HOK Additional Services #7
B. PLANS AND SPECIFICATIONS:
Those plans as listed on HOK Architects "Drawing Index" Sheet 1, 1A, 01 dated
April 6, 1998
Those specifications as listed on HOK Architects "Index of Sections" dated
August 5, 1998 (consisting of 3 pages) for Divisions 1 thru 16
Such plans and specifications will be transmitted to TST as soon as possible
following the Agreement Date
74
<PAGE> 75
EXHIBIT F
[INTENTIONALLY OMITTED]
75
<PAGE> 76
EXHIBIT G
LIST OF PROPERTY DOCUMENTS
Following is a description of the Transmittals pursuant to which those Property
Documents identified on such Transmittals were delivered to TST.
Each of such Transmittals was sent by Todd Arris of Sares-Regis Group of
Northern California and addressed to:
Ms. Debbie Proskurniak
Tishman Speyer Properties L.P.
520 Madison Avenue
New York, NY 10022
1. Transmittal dated June 19, 1998;
2. Transmittal dated July 1, 1998; and
3. Transmittal dated July 20, 1998.
Reference is made to the content of such Transmittals for the purpose of
identifying each of the Property Documents so delivered to TST.
76
<PAGE> 77
EXHIBIT H
ASSIGNMENT AND ASSUMPTION OF APPLE LEASE
CITY CENTER 2
For good and valuable consideration, the receipt of which is hereby
acknowledged, this Assignment is given as of the Closing of that certain
Agreement of Exchange and Purchase and Escrow Instructions dated
***DateAgreement***______________ (the "Agreement") by and between SYMANTEC
CORPORATION, a Delaware corporation as "Symantec" ("Assignee" herein) and TST
DEVELOPMENT, L.L.C., a Delaware corporation as "TST" ("Assignor" herein).
Assignor hereby irrevocably assigns, transfers and sets over to Assignee all of
Assignor's right, title and interest in and to the following:
(i) The lease of the entire CCC2 Building with Apple Computer, Inc.
as "Tenant" (the "Apple Lease"),
(ii) all tenant security deposits held by Assignor, if any, under the
Apple Lease,
(iii) all rent payable under the Apple Lease accruing from and after
the Closing, provided that Assignor hereby reserves the right to
collect and retain delinquent rentals under the Apple Lease, but
Assignor may not bring an unlawful detainer proceeding against
such Tenant or otherwise disturb such Tenant's occupancy; and
(iv) Assignor, as "Landlord" under said Apple Lease, hereby elects to
transfer such security deposits to Assignee pursuant to
California Civil Code Section 1950.5(g)(1).
From and after the date hereof, Assignee shall have all of the rights and
obligations of the Landlord under the Apple Lease, including, without
limitation, all obligations to the Tenant under such Apple Lease with respect to
such security deposits, as successor in interest to the Landlord's position
under said Apple Lease as provided in California Civil Code Section 1950.5(j),
but only to the extent of security deposits actually received by Assignee.
Subject to the terms and conditions set forth herein, Assignee hereby assumes
all of the obligations in connection with the Apple Lease arising or first
becoming due after the date hereof. Assignee hereby indemnifies and holds
Assignor harmless from and against any and all loss, cost, damage or liability
arising with respect to the items so assumed by Assignee.
Assignor hereby indemnifies and holds Assignee harmless from and against any and
all loss, cost, damage or liability arising under the Apple Lease prior to the
date hereof.
Any rents or other revenues owing under the Apple Lease for periods prior to the
Closing Date shall be prorated between Assignor and Assignee pursuant to the
Agreement.
Without limiting the representations and warranties otherwise given by Assignor
with respect to the Apple Lease pursuant to the Agreement, Assignor hereby
represents and warrants that (i) the Apple Lease has not previously been
assigned and (ii) the Apple Lease is free from any encumbrance done, made or
suffered by Assignor, or
77
<PAGE> 78
any person claiming under Assignor or under Assignor's predecessor in interest,
except only for the Permitted Exceptions (as defined in the Agreement).
All terms of this Agreement shall be binding upon, inure to the benefit of and
be enforceable by, the parties hereto and their respective legal
representatives, successors and assigns.
No modification, waiver, amendment, discharge or change of this Assignment shall
be valid unless the same is in writing and signed by the Party against which the
enforcement of such modification, waiver, amendment, discharge or change is or
may be sought.
This Assignment shall be construed and enforced in accordance with the laws of
the State of California.
IN WITNESS WHEREOF, Assignor and Assignee have each executed this Assignment on
this ___ day of ___________, _______. [SIGNATURES ON FOLLOWING PAGE]
78
<PAGE> 79
[THIS IS THE SIGNATURE PAGE FOR the ASSIGNMENT AND ASSUMPTION OF LEASES by and
between SYMANTEC CORPORATION as "ASSIGNOR" and TST DEVELOPMENT, L.L.C. as
"ASSIGNEE" with respect to the Property known as CITY CENTER 5
<TABLE>
<S> <C>
"ASSIGNOR" "ASSIGNEE"
SYMANTEC CORPORATION, a TST DEVELOPMENT, L.L.C., a
***SellerProperty1EntityState*** ***BuyerEntityState***
***SellerProperty1EntityType*** ***BuyerEntityType***
By: By:
--------------------------------------------- ------------------------------
***SellerProperty1SignatoryParty1***, ***BuyerSignatoryPartyName1***
***SellerProperty1SignatoryParty1Capacity***, a Its ***BuyerSignatoryPartyTitle1***
General Partner
By:
--------------------------------------------
***SellerProperty1SignatoryParty2***,
***SellerProperty1SignatoryParty2Capacity***, a
General Partner
</TABLE>
79
<PAGE> 80
SCHEDULE A TO
ASSIGNMENT AND ASSUMPTION OF LEASES
RENT ROLL
[CCC5]
Rent Roll
80
<PAGE> 81
EXHIBIT I
FORM OF ASSIGNMENT AND ASSUMPTION OF OBLIGATIONS
For good and valuable consideration, the receipt of which is hereby
acknowledged, this Assignment is given as of the Closing of that certain
Agreement of Exchange and Purchase and Escrow Instructions dated ________ (the
"Agreement") by and between SYMANTEC CORPORATION, a Delaware corporation as
Symantec and TST DEVELOPMENT, L.L.C., a Delaware limited liability company as
TST.
_________________ as "Assignor" herein hereby irrevocably assigns, transfers and
sets over to ________________ as "Assignee" herein, all of Assignor's right,
title and interest in and to the following with respect to the Property known as
- ------------------:
(i) the contracts (the "Contracts") enumerated in Schedule A
attached hereto and made a part hereof,
(ii) any and all intangible rights and property now or hereafter
owned by Assignor in connection with the Property, and
(iii) to the extent assignable, all permits, licenses, certificates of
occupancy use and operating permits and licenses and all other
licenses, permits, approvals and certificates obtained or held
in connection with the ownership or use of the Property.
Assignee hereby assumes all obligations first becoming due and payable after the
date hereof in connection with all of the Contracts enumerated in Schedule A and
the permits and approvals enumerated in Schedule B.
Assignor hereby indemnifies and holds Assignee harmless from and against any and
all loss, cost, damage or liability arising under the Contracts prior to the
date hereof.
Assignor hereby represents and warrants only that (i) it has not previously
assigned the contracts, governmental permits and approvals, and (ii) that the
contracts, governmental permits and approvals are free from any encumbrance
done, made or suffered by Assignor, or any person claiming under him, except
only for the Permitted Exceptions (as defined in the Agreement).
Except as set forth in the Agreement, Assignor makes no other representation or
warranty in connection with this Assignment and, except for the foregoing, this
Assignment is made without recourse to Assignor.
All terms of this Agreement shall be binding upon, inure to the benefit of and
be enforceable by, the parties hereto and their respective legal
representatives, successors and assigns.
81
<PAGE> 82
No modification, waiver, amendment, discharge or change of this Assignment shall
be valid unless the same is in writing and signed by the Party against which the
enforcement of such modification, waiver, amendment, discharge or change is or
may be sought. This Assignment shall be construed and endorsed in accordance
with the laws of the State of California. IN WITNESS WHEREOF, Assignor and
Assignee have each executed this Assignment on this ___ day of ________, _____.
<TABLE>
<S> <C>
"ASSIGNOR" "ASSIGNEE"
, a , a
- ------------------- ----------------- --------------------- -----------
By: By:
------------------------------------- ---------------------------------
Name: Name:
----------------------------------- -------------------------------
Title: Title:
---------------------------------- ------------------------------
</TABLE>
82
<PAGE> 83
SCHEDULE A TO
ASSIGNMENT AND ASSUMPTION OF OBLIGATIONS
CONTRACTS
83
<PAGE> 84
SCHEDULE B TO
ASSIGNMENT AND ASSUMPTION OF OBLIGATIONS
PERMITS AND APPROVALS:
84
<PAGE> 85
EXHIBIT J-1
BUYERS CERTIFICATE
(CCC2)
The undersigned hereby affirms its agreement to the terms and conditions
specified in Section 6.2.5 and Section 2.02 of Schedule 2 of the Agreement for
Purchase and Sale and Escrow Instructions dated ***DateAgreement***
__________________ by and between the TST DEVELOPMENT, L.L.C. as "TST" and
SYMANTEC CORPORATION as Symantec ("Agreement").
Symantec acknowledges that notwithstanding the fact that TST may have discussed
the condition of the Property or other matters related to the Property with
Symantec during Symantec's inspection of the Property or at any other time, the
terms of Section 6.2.5 of the Agreement remain controlling.
The Property is being sold by TST "AS IS" and Symantec accepts the Property "AS
IS" and hereby acknowledges and agrees that TST is making NO WARRANTIES, EXPRESS
OR IMPLIED, other than expressly stated in the Agreement and in any documents
delivered by TST at Closing regarding any aspect of the Property. THERE ARE
ABSOLUTELY NO IMPLIED WARRANTIES OF ANY KIND COVERING THE PROPERTY.
Date:
--------------------
"SYMANTEC"
SYMANTEC CORPORATION.,
a Delaware corporation
By:
- -----------------------------------
***BuyerSignatoryPartyName1***
Its ***BuyerSignatoryPartyTitle1***
85
<PAGE> 86
EXHIBIT J-2
BUYERS CERTIFICATE
(CCC5, WHQ)
The undersigned hereby affirms its agreement to the terms and conditions
specified in Section 6.2.5 and Section 2.02 of Schedule 2 of the Agreement for
Purchase and Sale and Escrow Instructions dated ***DateAgreement*** by and
between the TST DEVELOPMENT, L.L.C. as "TST" and SYMANTEC CORPORATION as
Symantec ("Agreement").
TST acknowledges that notwithstanding the fact that Symantec may have discussed
the condition of the Property or other matters related to the Property with TST
during TST's inspection of the Property or at any other time, the terms of
Section 6.2.5 of the Agreement remain controlling.
The Property is being sold by Symantec "AS IS" and TST accepts the Property "AS
IS" and hereby acknowledges and agrees that Symantec is making NO WARRANTIES,
EXPRESS OR IMPLIED, other than expressly stated in the Agreement and in any
documents delivered by Symantec at Closing regarding any aspect of the Property.
THERE ARE ABSOLUTELY NO IMPLIED WARRANTIES OF ANY KIND COVERING THE PROPERTY.
Date:
--------------------------------------
"TST"
TST Development, L.L.C., a Delaware limited
liability company
By:
----------------------------------------
***BuyerSignatoryPartyName1***
Its ***BuyerSignatoryPartyTitle1***
86
<PAGE> 87
EXHIBIT K
PERSONAL PROPERTY LIST
[ONE FOR EACH PROPERTY TO BE ATTACHED WITHIN
THIRTY (30) DAYS AFTER AGREEMENT DATE]
87
<PAGE> 88
EXHIBIT L
CONDITION OF TITLE
AT CLOSING
TST and Symantec agree that the condition of title described below with respect
to each Property shall be acceptable at Closing.
The issuance by the Title Insurer in favor of TST and Symantec (as applicable)
of an Owner's Policy of Title Insurance Form B, 1970 for each Property in the
amounts and subject to the conditions with respect to each Property set forth
below.
CCC5 IN THE AMOUNT OF _________________
In the form of the Pro Forma Policy attached hereto for
Policy/File No. __________________.
CCC2 IN THE AMOUNT OF _________________
In the form of the Pro Forma Policy attached hereto for
Policy/File No. ___________________.
WHQ IN THE AMOUNT OF $17,500,000
In the form of the Pro Forma Policy attached hereto for Policy/File No.
***TitleNumberProperty3***.
88
<PAGE> 89
EXHIBIT M
BUILDING CCC5 PRELIMINARY ACCEPTANCE
EXHIBIT A TO: SYMANTEC CORPORATION
FROM: TST
DATE:
------------------
This Building CCC5 Preliminary Acceptance is given pursuant to Section 5.3.2.1.1
of that certain Agreement for Purchase and Sale and Escrow Instructions dated
________ by and between Symantec Corporation and TST (the "Agreement").
Following notice from Symantec that Substantial Completion of Building CCC5 has
occurred, TST has (i) reviewed the Certificate of Substantial Completion
including the Punchlist attached thereto, if any and (ii) had the opportunity to
walk through and otherwise investigate the condition of Building CCC5 utilizing
such personnel and consultants as TST has deemed appropriate.
Based upon such review and investigation, TST hereby acknowledges TST's
acceptance of Building CCC5 subject to Final Completion pursuant to the
Agreement and the fulfillment of the following Additional Completion
Requirements (if none, state "None"):
TST DEVELOPMENT, L.L.C., a Delaware limited liability company
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
89
<PAGE> 90
EXHIBIT N
CERTIFICATE OF OWNER __
SUBSTANTIAL COMPLETION ARCHITECT __
CONTRACTOR __
AIA DOCUMENT G704 (Modified) FIELD __
(Instructions on reverse side) OTHER __
- -------------------------------------------------------------------------------
PROJECT. PROJECT NO.:
(Name and address)
CONTRACT FOR:
CONTRACT DATE:
TO OWNER: TO CONTRACTOR:
(Name and address) (Name and address)
DATE OF ISSUANCE:
PROJECT OR DESIGNATED PORTION SHALL INCLUDE:
The Work performed under this Contract has been reviewed and found, to the
Architect's best knowledge, information and belief, to be substantially
complete. Substantial Completion is the stage in the progress of the Work when
the Work or designated portion thereof is sufficiently complete in accordance
with the Contract Documents so the Owner can occupy or utilize the Work for its
intended use. The date of Substantial Completion of the Project or portion
thereof designated above is hereby established as which is also the date of
commencement of applicable warranties required by the Contract Documents, except
as stated below:
A list of items to be completed or corrected is attached hereto. The failure to
include any items on such list does not alter the responsibility of the
Contractor to complete all Work in accordance with the Contract Documents.
ARCHITECT BY
DATE
The Contractor will complete or correct the Work on the list of items attached
hereto within days from the above date of Substantial Completion.
CONTRACTOR BY
DATE
The responsibilities of the ________ and the Contractor for security,
maintenance, heat, utilities, damage to the Work and insurance shall be as
follows: (Note-Owner's and Contractor's legal and insurance counsel should
determine and review, insurance requirements and coverage.)
CAUTION: YOU SHOULD USE AN ORIGINAL AIA DOCUMENT WHICH HAS THIS CAUTION PRINTED
IN RED. AN ORIGINAL ASSURES THAT CHANGES WILL NOT BE OBSCURED AS MAY OCCUR WHEN
DOCUMENTS ARE REPRODUCED.
AIA DOCUMENT G704 * CERTIFICATE OF SUBSTANTIAL COMPLETION - 1992 EDITION -
AIA9 - @1992 0 THE AMERICAN INSTITUTE OF ARCHITECTS, 1735 NEW YORK AVENUE,
NW, WASHINGTON, D.C. 20006-529
90
<PAGE> 91
EXHIBIT O
BUILDING CCC5 GENERAL CONTRACT
Original contract dated May 5, 1997 by and between Symantec Corporation as
"Owner" and Webcor Builders as "Contractor" delivered to TST with June 19, 1998
Transmittal as identified on Exhibit G;
Change Order #1 dated 7/22/97 delivered to TST with June 19, 1998 Transmittal as
identified on Exhibit G.
91
<PAGE> 92
EXHIBIT P-1
SYMANTEC CORPORATION
10201 TORRE AVENUE
CUPERTINO, CA 95014
___________, 199____
Webcor Builders
2755 Campus Drive, Suite 175
San Mateo, CA 94403
Attention: Andrew Ball
Re: Agreement Between Owner and Contractor, dated May 5, 1997,
respecting Cupertino City Center V (the "Construction Contract")
Dear Mr. Ball:
Symantec Corporation has agreed to sell and convey its interest
in Cupertino City Center V to TST __________________, L.L.C. ("TST"), and is
required to assign its warranties under the Construction Contract. Therefore, we
ask that you sign below to memorialize your agreement with the following terms
of the assignment of the Construction Contract.
1. Webcor Builders, under the Construction Contract, shall
warrant and correct all identified construction defects
for a period of eighteen (18) months following the date of
Substantial Completion in accordance with Section 3.5 of
the Construction Contract;
2. Webcor Builders hereby consents to Symantec Corporation's
assignment of its interest under the Construction
Contract, as well as in and to the warranty set forth in
Paragraph 1 above, to TST at the close of escrow;
92
<PAGE> 93
Please call if you have any questions.
Very truly yours,
SYMANTEC CORPORATION
By:
--------------------------
Its:
-------------------------
Agreed to this ____ day of __________, 199___:
WEBCOR BUILDERS
By:
-------------------------------------------
Its:
------------------------------------------
93
<PAGE> 94
EXHIBIT P-2
CONSENT TO ASSIGNMENT OF ARCHITECT'S AGREEMENT
CUPERTINO CITY CENTER V
This Consent to Assignment of Architect's Agreement is in
reference to that certain Agreement Between Owner and Architect, dated June 1,
1996 (the "Architect's Agreement"), by and between Symantec, a Delaware
corporation ("Owner") and Hellmuth, Obata & Kassabaum, Inc., a California
corporation ("Architect").
Architect hereby consents to the assignment by Owner of its
right, title and interest in and to the Architect's Agreement to TST
___________________, L.L.C. at the close of escrow of the purchase and sale of
Cupertino City Center V; it being understood, however, that in no event shall
TST _______________, L.L.C. be deemed to have assumed Owner's duties,
obligations and liabilities as set forth in the Architect's Agreement.
Agreed to this _____ day of ____________, 1998.
HELLMUTH, OBATA & KASSABAUM,
INC., a California corporation
By:
-----------------------------------
Its:
----------------------------------
94
<PAGE> 95
EXHIBIT Q
FORM OF APPLE COMPUTER ESTOPPEL CERTIFICATE
[TO BE AGREED DURING FEASIBILITY PERIOD]
95
<PAGE> 96
EXHIBIT R
FORM OF BILL OF SALE AND GENERAL ASSIGNMENT
[ONE FOR EACH PROPERTY]
Concurrently with the execution and delivery hereof, _______________, a
_______________ ("Assignor"), is conveying to ____________________________, a
___________________ ("Assignee"), by Grant Deed, that certain tract of land
together with the improvements thereon (the "Property") lying and being situated
in the City of Cupertino, California and being more particularly described in
Exhibit A, attached hereto and made a part hereof. Such conveyance is made
pursuant to that certain Agreement for Exchange and Purchase and Escrow
Instructions dated ____________ by and between Symantec Corporation as
"Symantec" and TST Development, L.L.C. as "TST" (the "Agreement").
It is the desire of Assignor to hereby assign, transfer, set over and
deliver to Assignee all furnishings, fixtures, fittings, appliances, apparatus,
equipment, machinery and other items of personal property, if any, affixed or
attached to, or placed or situated upon, the Property, except those not owned by
Assignor and any and all other incidental rights and appurtenances relating
thereto, all as more fully described below (such properties being collectively
called the "Assigned Properties").
NOW, THEREFORE, in consideration of the receipt of Ten Dollars ($10.00) and
other good and valuable consideration in hand paid by Assignee to Assignor, the
receipt and sufficiency of which are hereby acknowledged and confessed by
Assignor, Assignor does hereby ASSIGN, TRANSFER, SET OVER to Assignee, its
successors and assigns, all of the Assigned Properties, without warranty
(whether statutory, express or implied, except as set forth in Seller's
representations and warranties in the Agreement), including, without limitation
the following:
1. All furnishings, fittings, equipment, appliances, apparatus, machinery
fixtures and all other personal property of every kind and character owned by
Assignor and affixed or attached to, or placed or situated upon the Property;
2. To the extent assignable, all of Assignor's interest in and to all
use, occupancy, building and operating permits, licenses and approvals, if any,
issued from time to time with respect to the Property or the Assigned
Properties;
3. All of Assignor's interest in and to all maintenance, service and
supply contracts, if any, that Assignee has specifically elected to assume,
relating to the Property or the Assigned Properties (to the full extent same are
assignable);
4. All of Assignor's interest in and to all existing and assignable
guaranties and warranties (express or implied), if any, related in any way to
the Property, to the extent assignable, or in connection with the construction,
alteration and repair of the Property and/or the purchase, installation or the
repair of the Assigned Properties;
96
<PAGE> 97
5. All rights which Assignor may have to use any names commonly used in
connection with the Property, if any; and
6. All rights, which Assignor may have, if any, in and to any tenant
data, telephone numbers and listings, all master keys and keys to common areas,
all good will, if any, and any and all other rights, privileges and
appurtenances owned by Assignor and related to or used in connection with the
existing business operation of the Property.
EXCEPT AS SPECIFICALLY SET FORTH IN SELLER'S REPRESENTATIONS AND
WARRANTIES IN THE AGREEMENT, ASSIGNOR MAKES NO REPRESENTATIONS OR WARRANTIES AS
TO THE PHYSICAL CONDITION OF THE PROPERTY OR THE ASSIGNED PROPERTIES OR THE
SUITABILITY THEREOF FOR ANY PURPOSE THAT ASSIGNEE MAY DESIRE TO USE IT. ASSIGNOR
HEREBY EXPRESSLY DISCLAIMS ANY WARRANTIES AS TO MERCHANTABILITY AND/OR FITNESS
FOR A PARTICULAR PURPOSE AND ANY OTHER WARRANTIES OR REPRESENTATIONS AS TO THE
PHYSICAL CONDITION OF THE ASSIGNED PROPERTIES. ASSIGNEE ACKNOWLEDGES AND AGREES
THAT IT HAS INSPECTED THE ASSIGNED PROPERTIES AND ACCEPTS SAME IN THEIR PRESENT
CONDITION, "AS IS" AND "WITH ALL FAULTS."
Assignor on behalf of itself and its successors and assigns does hereby
agree to indemnify and hold Assignee, its successors and assigns, harmless from
all obligations accruing under the maintenance, service and supply contract
assigned hereby and any liabilities arising thereunder, prior to the date hereof
but not thereafter.
Assignee on behalf of itself, its successors and assigns, hereby agrees
to assume and perform all obligations accruing under those maintenance, service
and supply contracts that Assignee has specifically elected to assume from and
after the date hereof, and Assignee on behalf of itself, its successors and
assigns does hereby agree to indemnify and hold Assignor, its successors and
assigns, harmless from all such obligations and any liabilities arising
thereunder from and after the date hereof.
If either party hereto fails to perform any of its obligations under this
Bill of Sale and General Assignment or if any dispute arises between the parties
hereto concerning the meaning or interpretation of any provision of this Bill of
Sale and General Assignment, then the defaulting party or the party not
prevailing in such dispute, as the case may be, shall pay any and all costs and
expenses incurred by the other party on account of such default and/or in
enforcing or establishing its rights hereunder, including, without limitation,
court costs and reasonable attorneys' fees and disbursements. Any such
attorneys' fees and other expenses incurred by either party in enforcing a
judgment in its favor under this Bill of Sale and General Assignment shall be
recoverable separately from and in addition to any other amount included in such
judgment, and such attorneys' fees obligation is intended to be severable from
the other provisions of this Bill of Sale and General Assignment and to survive
and not be merged into any such judgment.
97
<PAGE> 98
This document may be executed in any number of counterparts, each of
which may be executed by any one or more of the parties hereto, but all of which
shall constitute one instrument, and shall be binding and effective when all
parties hereto have executed at least one counterpart.
IN WITNESS WHEREOF, Assignor and Assignee have caused this Assignment to
be executed as of _______________.
"ASSIGNOR"
a
- -------------------, ----------------
By:
------------------------------------
- ---------------------------------------
By:
------------------------------------
- ---------------------------------------
"ASSIGNEE"
- -------------------, ------------------
By:
------------------------------------
- ---------------------------------------
Its
------------------------------------
98
<PAGE> 1
EXHIBIT 10.07
AMENDMENT NO. 1
TO
AGREEMENT FOR EXCHANGE AND PURCHASE AND ESCROW INSTRUCTIONS
This AMENDMENT NO. 1 TO AGREEMENT FOR EXCHANGE AND PURCHASE AND ESCROW
INSTRUCTIONS ("Amendment No. 1") is made as of November 4, 1998 by and between
SYMANTEC CORPORATION, a Delaware corporation ("Symantec") and TST DEVELOPMENT,
L.L.C., a Delaware limited liability company ("TST") with reference to the
following:
A. Symantec and TST are parties to that certain Agreement for Exchange and
Purchase and Escrow Instructions dated as of September 22, 1998 (the
"Agreement").
B. The parties now desire to amend the Agreement to extend the end of the
Feasibility Period.
C. All capitalized terms used in this Amendment No. 1 shall have the same
meaning as defined in the Agreement unless separately defined herein.
AGREEMENT
1. Notwithstanding anything to the contrary in the Agreement the end of the
Feasibility Period is hereby extended to 5:00 p.m. PST on November 20,
1998.
2. This Amendment may be executed in one or more counterparts pursuant to the
Agreement.
3. Except as herein amended, the Agreement remains unchanged and in full
force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1 as of
November 4, 1998.
<TABLE>
<S> <C>
"SYMANTEC" "TST"
SYMANTEC CORPORATION, TST DEVELOPMENT, L.L.C., a
A Delaware corporation Delaware limited liability company
By: _/s/ Derek P. Witte________________ By: /s/ Andrew J. Nathan____________
Name: __Derek P. Witte_______________ Name: _Andrew J. Nathan__________
Its __Vice President, General Counsel & Its__Vice_President____________
Secretary________________
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SYMANTEC
CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE SIX MONTH PERIOD ENDED
SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-02-1999
<PERIOD-START> APR-04-1998
<PERIOD-END> OCT-02-1998
<CASH> 82,315
<SECURITIES> 93,088
<RECEIVABLES> 71,809
<ALLOWANCES> (4,618)
<INVENTORY> 4,526
<CURRENT-ASSETS> 284,005
<PP&E> 173,043
<DEPRECIATION> (121,051)
<TOTAL-ASSETS> 467,936
<CURRENT-LIABILITIES> 175,879
<BONDS> 14,284
0
0
<COMMON> 563
<OTHER-SE> 280,088
<TOTAL-LIABILITY-AND-EQUITY> 467,936
<SALES> 293,152
<TOTAL-REVENUES> 293,152
<CGS> 41,817
<TOTAL-COSTS> 41,817
<OTHER-EXPENSES> 255,813
<LOSS-PROVISION> 444
<INTEREST-EXPENSE> 651
<INCOME-PRETAX> 5,432
<INCOME-TAX> 8,439
<INCOME-CONTINUING> (3,007)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,007)
<EPS-PRIMARY> (0.05)<F1>
<EPS-DILUTED> (0.05)
<FN>
<F1>FOR PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
SYMANTEC CORPORATION'S QUARTERLY REPORT ON FORM 10-Q FOR THE SIX MONTH PERIOD
ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-03-1998
<PERIOD-START> MAR-29-1997
<PERIOD-END> OCT-03-1997
<CASH> 106,592
<SECURITIES> 70,113
<RECEIVABLES> 56,904
<ALLOWANCES> (4,327)
<INVENTORY> 2,310
<CURRENT-ASSETS> 257,734
<PP&E> 148,523
<DEPRECIATION> (96,763)
<TOTAL-ASSETS> 398,953
<CURRENT-LIABILITIES> 122,311
<BONDS> 15,107
0
0
<COMMON> 562
<OTHER-SE> 260,973
<TOTAL-LIABILITY-AND-EQUITY> 398,953
<SALES> 274,029
<TOTAL-REVENUES> 274,029
<CGS> 43,309
<TOTAL-COSTS> 43,309
<OTHER-EXPENSES> 186,164
<LOSS-PROVISION> 508
<INTEREST-EXPENSE> 579
<INCOME-PRETAX> 50,799
<INCOME-TAX> 11,684
<INCOME-CONTINUING> 39,115
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,115
<EPS-PRIMARY> 0.70<F1>
<EPS-DILUTED> 0.67
<FN>
<F1>FOR PURPOSES OF THIS EXHIBIT, PRIMARY MEANS BASIC.
</FN>
</TABLE>
