<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
FORM 10-KSB
----------------
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE YEAR ENDED DECEMBER 31, 1997
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM ______________ TO _____________
COMMISSION FILE NO. 0-27692
----------------
ORCAD, INC.
(EXACT NAME OF SMALL REGISTRANT IN ITS CHARTER)
DELAWARE 5045 93-1062832
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
9300 S.W. NIMBUS AVENUE, BEAVERTON, OREGON 97008
(503) 671-9500
(ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, $.01
PAR VALUE.
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this form 10-KSB [X]
State Registrant's revenues for its most recent fiscal year: $25,880,889
The aggregate market value of the voting stock held by non-affiliates of the
Registrant was $70,324,722 as of March 25, 1998 based upon the last sales
price as reported by Nasdaq.
The number of common shares outstanding of the Registrant's Common Stock as
of March 25, 1998 was 9,265,002 shares.
----------------
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's Proxy Statement for the annual meeting of
stockholders to be held May 22, 1998 are incorporated by reference into Part
III of this Report.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ORCAD, INC.
1997 FORM 10-KSB
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
PART I
<C> <S> <C>
Item 1. Business.................................................... 3
Item 2. Properties.................................................. 7
Item 3. Legal Proceedings........................................... 8
Item 4. Submission of Matters to a Vote of Security Holders......... 8
PART II
Market for Registrant's Common Equity and Related
Item 5. Stockholder Matters 9
Item 6. Selected Financial Data..................................... 10
Management's Discussion and Analysis of Financial Condition
Item 7. and Results of Operations................................... 11
Item 8. Financial Statements and Supplementary Data................. 19
Item 9. Financial Disclosure........................................ 35
PART III
Item 10. Directors and Executive Officers of the Registrant.......... 35
Item 11. Executive Compensation...................................... 35
Security Ownership of Certain Beneficial Owners and
Item 12. Management.................................................. 35
Item 13. Certain Relationships and Related Transactions.............. 35
PART IV
Exhibits, Financial Statement Schedules and Reports on Form
Item 14. 8-K......................................................... 35
Signatures............................................................ II-1
</TABLE>
<PAGE>
PART I
ITEM 1. BUSINESS
OVERVIEW
OrCAD develops, markets and supports Microsoft Windows-based electronic
design automation ("EDA") software products that assist electronics designers
in designing printed circuit boards ("PCBs"), field-programmable gate arrays
("FPGAs") and complex programmable logic devices ("CPLDs"), and, in the
simulation of analog and analog/digital electronic circuits. PCBs, FPGAs and
CPLDs are found in a majority of today's electronic products, and are often
referred to as "mainstream" components. OrCAD's products enable electronics
designers working on personal computers ("PCs") to reduce time to market,
improve product capability, and reduce design costs. OrCAD's Windows-based EDA
solutions support the design process for mainstream components, from schematic
capture to programmable logic design and verification to circuit simulation
and printed circuit board layout. Over 210,000 products bearing the OrCAD name
have been sold worldwide since 1986.
INDUSTRY BACKGROUND
Advances in electronics technology have enabled the development of products
with significantly greater functionality, lower cost, and smaller size. The
electronic functionality of these products today is contained in multiple,
diverse integrated circuits ("ICs") combined into electronic subsystems on one
or more PCBs. While extremely complex components such as microprocessors,
memory, and custom digital signal processors are central to a number of these
subsystems, most subsystems are primarily composed of mainstream components.
Competitive pressures and the proliferation of programmable logic devices
and PCBs in product design have led to increasing demand for lower cost,
easier-to-use solutions for design engineers creating mainstream components.
The complexity of FPGAs and PCBs is continuously increasing as electronics
manufacturers seek to increase functionality and reduce product cost and size.
FPGAs are now full-scale systems on chips, with up to 100,000 gates and
operating at 75 to 125 MHz and 3.3 volts.
Today's mainstream PCBs may be multi-layer boards containing up to a
thousand components and driven by high speed (>100MHz) microprocessors. OrCAD
believes that the majority of manufacturers' electronic design-starts today
involve these mainstream types of FPGAs, CPLDs, and PCBs. In addition, the
latest Intel PCs running Windows NT continue to offer increased processing
power and ease of use. More than ever, these machines are ideal for most of
today's electronics design activities.
PRODUCTS
OrCAD's software products are designed as 32-bit applications, each of which
operates in an integrated fashion with other applications for Microsoft
Windows.
OrCAD Capture is a 32-bit schematic capture tool that enables the
acceleration of the engineer's overall design process for both FPGA and PCB
design. Its integrated design management tools allow design engineers to
browse their schematic database to find and edit objects, and to reuse
portions of their designs. OrCAD Capture includes: (i) a schematic editor
designed to speed the drawing of complex schematics; (ii) a part editor that
allows designers to modify any of the more than 20,000 included parts or to
create new ones easily; (iii) an electrical rules checking program that
detects and flags common design errors on the schematic page; and (iv)
features to produce output such as net-lists, bills of materials and design
documentation.
Capture Enterprise Edition adds to OrCAD Capture a design data and library
management tool. This tool links parts placed in an OrCAD Capture design with
the information in the manufacturers' in-house part databases and a selection
of those found on the Internet. This increases the ease and efficiency of part
selection
3
<PAGE>
for the designer and transfers all information necessary to create correct
bills of material and net-lists to the schematics.
OrCAD Layout family of products allows rapid completion of most mainstream
PCBs. OrCAD Layout's 16-layer auto-router applies proprietary "push-and-shove"
technology to enable high density routing. OrCAD's interactive routing gives
design engineers the power of "user-assisted" auto-routing to precisely
control critical routes. OrCAD Layout Plus adds shape-based auto-routing,
automatic cluster placement, component push-and-shove, auto-interactive
placement, auto-path completion and single-layer auto-routing. OrCAD Layout
Engineers Edition is suitable for use by engineers, PCB designers and
technicians who do not require an auto-router.
OrCAD Express Enterprise Edition is an integrated design environment for the
design of FPGAs and CPLDs. It integrates VHDL, schematic, and mixed-mode
design entry, simulation, and synthesis into a single application. With OrCAD
Express, engineers can design board-level systems with FPGAs and CPLDs from
OrCAD Solution Partners Actel Corporation, Altera Corporation, Lattice
Semiconductor Corporation, Lucent Technologies, Inc., Vantis Corporation, and
Xilinx, Inc.
OrCAD Express Enterprise Edition adds to Express a design data and library
management tool. This tool links parts placed in an OrCAD schematic design
with the information in the manufacturers' in-house part databases and a
selection of those found on the Internet. This increases the ease and
efficiency of part selection for the designer and transfers all information
necessary to create correct bills of material and net-lists to the schematics.
OrCAD's integrated solutions address the entire process for designing PCBs
and programmable logic devices. OrCAD's products are intended to be intuitive
and relatively easy to use by a broad range of electronics designers. OrCAD's
products include on-line help and tutorials to help design engineers become
productive quickly, often within just a few days. In addition, OrCAD's
products feature a familiar Windows user interface and can be used with other
Windows applications, such as Microsoft Word and Microsoft Excel. This
eliminates the need for separate platforms for design and office automation
applications. In addition, OrCAD software can be linked to place-and-route
software from the leading vendors of programmable logic devices.
OrCAD believes that the EDA market is trending toward greater use of the
Microsoft Windows NT operating system, and anticipates that the use of Windows
NT-based products in such market will grow and expand. Accordingly, all of the
new products introduced by OrCAD (and its acquired companies) during its
preceding and current fiscal year, and all of the products OrCAD is currently
developing, are designed for use on Microsoft's Windows NT operating systems.
Any factor adversely affecting the demand for or use of the Microsoft Windows
operating systems, for EDA applications or in general, could result in a
material adverse effect on OrCAD's business, financial condition and results
of operations.
Software products as complex as those offered by OrCAD may contain defects
or failures when introduced or when the new versions are released. OrCAD has
in the past discovered software defects in certain of its products and may
experience delays or lost revenue to correct such defects in the future. There
can be no assurance that, despite testing by OrCAD, errors will not be found
in new products or versions after commencement of commercial shipments,
resulting in loss of market share or failure to achieve market acceptance. Any
such occurrence could have a material adverse effect upon OrCAD's business,
financial condition or results of operations.
MARKETING AND SALES
OrCAD markets and sells its products in North America directly through its
marketing and telesales organizations which are supplemented by a field sales
force. OrCAD designs its marketing programs to reinforce the recognition of
its brand through integrated advertising, direct mail, electronic marketing,
and other promotional activities. OrCAD's sales effort is designed to capture,
qualify and respond effectively to the leads generated by the marketing
programs. OrCAD also generates leads through customer and consultant
referrals.
4
<PAGE>
To effectively target and measure all of these efforts, OrCAD has invested in
an information system that tracks contacts with customers and prospects.
OrCAD's distribution strategy is intended to address the mainstream electronic
design market in a productive, cost-effective manner. OrCAD believes that its
direct field sales force will allow it to better meet the unique buying
requirements of management in large organizations. OrCAD intends to use its
penetration at the individual and group level in large organizations to help
achieve enterprise-wide standardization on its products.
OrCAD maintains an ongoing program of market research based on industry
reports, customer input, surveys, and frequent communication with value-added
resellers (VARs). This research helps OrCAD to set priorities for product
development, technical support, and other functional areas. Trade shows and
OrCAD's training classes provide additional means of soliciting customer
feedback.
Direct Sales. OrCAD's direct sales effort consists primarily of a telesales
force supplemented with a targeted field sales presence. Telesales are
typically generated by inbound inquiries stimulated by OrCAD's marketing
programs, additional sales to existing customers, and references from
customers. OrCAD believes telesales has been a cost-effective means of
distributing its products and gaining customer acceptance. OrCAD believes that
its direct field sales force will allow it to better meet the unique
requirements of selling directly to management at large organizations.
Indirect Sales. OrCAD's VARs are key components of OrCAD's sales and
marketing strategy in international markets, outside of Japan. VARs provide
local technical support and local language documentation, and run a variety of
direct marketing programs that build on materials developed for the North
American direct marketing efforts. OrCAD derived approximately $7.8 million ,
$8.2 million, and $4.1 million, or approximately 30%, 39%, and 30% of its
total revenue, from international sales in 1997, 1996 and 1995, respectively.
Substantially all of OrCAD's international revenue to date has been derived
from indirect sales made by its VARS and Japanese distributor. OrCAD purchased
its Japanese distributor in 1995 to increase its direct presence in that
country. Beyond North America and Japan, OrCAD distributes its products
through leading EDA VARs.
Because OrCAD's products are used by professional engineers and other
technical personnel, effective VARs must possess sufficient technical,
marketing and sales resources and must devote these resources to sales
efforts, customer education, training, consulting and support. Only a limited
number of potential VARs possess these criteria. There can be no assurance
that OrCAD will be able to attract and retain a sufficient number of qualified
VARs to successfully market OrCAD's products, and the failure to do so would
have a material adverse effect on OrCAD's business, financial condition and
results of operations. OrCAD's relationship with its VARs is usually
established through a formal reseller agreement, which generally may be
terminated by either party at any time without cause. There can be no
assurance that any VAR will continue to represent OrCAD's products, and the
inability to retain VARs could have a material adverse effect on OrCAD's
business, financial condition and results of operations.
Strategic Relationships. OrCAD has strategic relationships with and works
closely with other companies to develop and market their products and to
provide customers with application-specific solutions. In addition, OrCAD has
developed relationships with a number of FPGA and CPLD vendors such as Actel
Corporation, Altera Corporation, Lattice Semiconductor Corporation, Lucent
Technologies Inc., Vantis Corporation, and Xilinx, Inc. for the purpose of
marketing integrated solutions to joint prospects and customers.
SERVICE AND SUPPORT
OrCAD believes that to compete in the desktop EDA marketplace, it must
provide a unique variety of support services, including customer service,
software implementation, technical support, training and consulting service
referrals.
OrCAD offers product support agreements that include product updates, access
to electronic bulletin board services, newsletters and technical support
available by telephone, fax, electronic mail and through its World
5
<PAGE>
Wide Web page. OrCAD has created programs for both in-house and on-site
training for all products. In North America, OrCAD has developed a strong
technical support capability comprised primarily of electrical engineers who
understand the customers' design processes and OrCAD's products.
Internationally, OrCAD Japan, independent VARs and distributors provide
support to OrCAD customers. In addition, OrCAD's domestic technical support
resources are available to support OrCAD Japan, and VARs.
PRODUCT DEVELOPMENT
OrCAD's product development process is customer-centric, led by a product
marketing group which researches customer requirements, and supported by
research and development, test, and documentation teams which develop OrCAD's
products. General technology directions for OrCAD's future developments
include productivity improvements for target applications; language-based
design and synthesis; component-information systems development and support
for advanced PCB routing technology. OrCAD has a highly productive Windows C++
development environment, in which it develops its products using Microsoft
Foundation Class UI objects. As of December 31, 1997, there were 57 people in
the above mentioned groups. In 1997, 1996, and 1995, OrCAD invested 22%, 21%
and 26% of revenue, respectively, in research and development. All software
development costs are expensed as incurred.
The EDA industry is characterized by rapid technological change, frequent
new product introductions, evolving industry standards, and changing customer
requirements. The introduction of products embodying new technologies and the
emergence of new industry standards can render existing products obsolete and
un-marketable. OrCAD believes that it must continue to commit substantial
resources to product development and, that its future success will depend on
its continued ability to enhance its current products and to develop or
acquire new products that keep pace with technological developments, emerging
industry standards and changing customer requirements. There can be no
assurance that OrCAD will be successful in developing and marketing any such
new products or product enhancements, or that such new products and
enhancements will adequately meet the requirements of the marketplace and
achieve market acceptance. In the past, OrCAD has experienced delays in its
introduction of product enhancements and new products. If OrCAD is unable, for
technological or other reasons, to develop and introduce products in a timely
manner in response to changing market conditions or customer requirements,
OrCAD's business, financial condition and results of operations will be
materially and adversely affected.
COMPETITION
The EDA industry is highly competitive. OrCAD currently competes in the
desktop EDA market directly with Viewlogic Systems Inc., a wholly-owned
subsidiary of Synopsys, Inc., which offers Windows and UNIX-based products.
OrCAD also faces competition from larger vendors of traditional UNIX-based EDA
products. Some of these companies, such as Cadence Design Systems, Inc.,
Synopsys, Inc., Mentor Graphics Corp. and others, have announced or released
Windows-based products. OrCAD also competes with smaller, privately held
companies. A number of OrCAD's competitors have significantly greater
financial, technical and marketing resources than OrCAD, and strong name
recognition. There can be no assurance that these competitors will not use
their superior resources and visibility, and installed customer bases, to
successfully develop better products and/or market their products more
effectively than those of OrCAD. In particular, as a result of the wide
acceptance of UNIX-based EDA tools, vendors of such tools have established
long-term relationships with many of OrCAD's current and potential customers,
and may have the ability to offer these customers a broad suite of Windows and
UNIX-based products to satisfy the entire range of their design needs.
Finally, in addition to competition from EDA software vendors, OrCAD faces
competition from the internal design groups of many of its customers, who
design and develop their own customized schematic capture, simulation or
synthesis tools for their own particular needs and therefore may be reluctant
to purchase products offered by OrCAD or other independent vendors. There can
be no assurance that OrCAD will be able to convert such internal design groups
into users of OrCAD's products. More generally, there can be no assurance that
OrCAD will be able to compete
6
<PAGE>
successfully against current and future competitors, both direct and indirect,
or that competitive pressures faced by OrCAD will not materially adversely
affect its business, financial condition and results of operations.
PROPRIETARY RIGHTS
OrCAD's success is heavily dependent upon its proprietary software
technology. OrCAD currently relies on a combination of trade secret, copyright
and trademark laws, and contractual provisions to protect its proprietary
rights in its software products. OrCAD also ships its software with security
devices to all customers outside the U.S. and Canada. OrCAD generally enters
into proprietary information and confidentiality agreements with its employees
and distributors, and limits access to and distribution of its software,
documentation and other proprietary information. OrCAD does not license or
release the source code for its proprietary software to its customers, except
in connection with OEM development agreements. Despite these precautions,
there can be no assurance that a third party will not copy or otherwise obtain
and use OrCAD's products or technology without authorization, or develop
similar or superior technology independently. In particular, OrCAD distributes
its products pursuant to "shrink-wrap" licenses. There can be no assurance
that such licenses are enforceable.
In addition, effective copyright and trade secret protection may be
unavailable or limited in certain foreign countries. Although OrCAD believes
that its products do not infringe on the proprietary rights of third parties,
and although OrCAD has received no communications from third parties alleging
the infringement of the proprietary rights of such parties, there can be no
assurance that infringement claims will not be asserted against OrCAD in the
future and that any such claims will not require OrCAD to enter into costly
litigation. Irrespective of the validity or the successful assertion of such
claims, any such litigation could result in significant diversions of effort
by OrCAD's technical and management personnel, as well as OrCAD's incurring
significant costs with respect to the defense thereof, and could have a
material adverse effect on OrCAD's business, financial condition and results
of operations. In addition, if any claims or actions are asserted against
OrCAD, OrCAD may choose to or be required to obtain a license under a third
party's intellectual property rights. There can be no assurance that under
such circumstances a license would be available upon reasonable terms or at
all.
EMPLOYEES
As of December 31, 1997, OrCAD had 148 employees, including 64 in marketing
and sales, 57 in research and development and 27 in general and administrative
capacities. Of these, 135 are located at OrCAD headquarters in Beaverton,
Oregon, and 13 are located at OrCAD's subsidiary in Yokohama, Japan. None of
OrCAD's employees is represented by a labor union or is subject to a
collective bargaining agreement. OrCAD believes that its employee relations
are good.
OrCAD's future success depends in significant part upon the continued
service of its key senior management, professional and technical personnel.
OrCAD's future success also depends on its continuing ability to attract and
retain highly qualified technical, professional and managerial personnel.
Competition for such personnel is intense, and there can be no assurance that
OrCAD can retain its key employees or that it can attract, assimilate or
retain other highly qualified personnel in the future.
ITEM 2. PROPERTIES
OrCAD occupies approximately 39,000 square feet of space at its headquarters
in Beaverton, Oregon under a lease expiring in 2001, subject to OrCAD's right
to extend. In addition, OrCAD occupies approximately 43,000 square feet of
space at a product development facility in Irvine, California under a lease
expiring in 2004, subject to OrCAD's right to extend. OrCAD's subsidiary in
Japan leases approximately 3,000 square feet for its office in Yokohama. OrCAD
believes that its existing facilities, including expansion options, are
adequate for its current needs and that suitable additional space will be
available as needed.
7
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
From time to time, OrCAD becomes involved in ordinary, routine or regulatory
legal proceedings incidental to the business of OrCAD. OrCAD is not presently
a party to any litigation, the outcome of which would have a material adverse
effect on OrCAD's business, financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A special meeting of the stockholders of OrCAD was held on December 30, 1997
to consider a proposal to issue shares of OrCAD common stock in connection
with a proposed merger (the "Merger") with MicroSim Corporation of Irvine,
California. A counterpart meeting of the shareholders of MicroSim common stock
was held the same day. By a vote of 3,981,563 to 9,411 (with 2,000 abstentions
and no Broker Non-votes), the issuance of additional shares of OrCAD common
stock to effect the Merger was approved. The transaction was consummated on
January 20, 1998, and will be accounted for as a pooling of interests for
accounting and financial reporting purposes.
8
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
OrCAD's Common Stock commenced trading on the Nasdaq National Market System
under the symbol "OCAD" on March 1, 1996. As of March 25, 1998 there were
2,481 stockholders of record of OrCAD's Common Stock. OrCAD has never declared
or paid cash dividends on its Common Stock. OrCAD currently intends to retain
the earnings from operations for use in the operation and expansion of its
business and does not anticipate paying cash dividends with respect to the
Common Stock in the foreseeable future. The following table sets forth, for
the quarterly periods shown, the range of high and low closing prices for
OrCAD's Common Stock on the Nasdaq National Market System.
<TABLE>
<CAPTION>
QUARTERS ENDED
---------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1996 1996 1996 1996
COMMON STOCK PRICE RANGE: --------- -------- ------------- ------------
<S> <C> <C> <C> <C>
High......................... $13.00 $16.25 $15.00 $11.50
Low.......................... $10.75 $11.00 $ 8.38 $ 8.38
<CAPTION>
QUARTERS ENDED
---------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31,
1997 1997 1997 1997
COMMON STOCK PRICE RANGE: --------- -------- ------------- ------------
<S> <C> <C> <C> <C>
High......................... $11.00 $11.38 $14.56 $14.75
Low.......................... $ 6.38 $ 6.13 $10.25 $ 7.23
</TABLE>
During the three months ended December 31, 1997 OrCAD sold securities
without registration under the Securities Act of 1933 (the "Securities Act")
upon the exercise of stock options granted under OrCAD's stock option plans.
An aggregate of 40,801 shares of Common Stock were issued at exercise prices
ranging from $.35 to $7.88. These transactions were effected in reliance upon
Rule 701 promulgated pursuant to the authority of the Securities and Exchange
Commission under Section 3(b) of the Securities Act.
9
<PAGE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------ -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF
OPERATIONS:
Revenue:
Products........................... $20,938 $17,822 $10,627 $8,020 $ 7,874
Service............................ 4,943 3,085 3,032 1,792 662
------- ------- ------- ------ -------
Total revenue.................... 25,881 20,907 13,659 9,812 8,536
Cost and expenses:
Cost of revenue products........... 2,537 1,771 1,587 1,713 1,708
Cost of revenue service............ 798 727 488 387 347
Research and development........... 5,648 4,286 3,561 2,907 4,140
Marketing and sales................ 10,811 7,079 4,934 3,569 3,442
General and administrative......... 3,095 3,063 1,904 1,363 962
In-process research and develop-
ment.............................. 2,203 -- 971 -- --
------- ------- ------- ------ -------
Total cost and expenses.......... 25,092 16,926 13,445 9,939 10,599
------- ------- ------- ------ -------
Income (loss) from operations........ 789 3,981 214 (127) (2,063)
------- ------- ------- ------ -------
Other income (expense):
Interest income.................... 1,505 1,207 53 (62) (24)
------- ------- ------- ------ -------
Other, net......................... (10) 65 52 218 146
------- ------- ------- ------ -------
1,495 1,272 105 156 122
------- ------- ------- ------ -------
Income (loss) before income taxes.... 2,284 5,253 319 29 (1,941)
Income taxes......................... 687 1,051 4 -- --
------- ------- ------- ------ -------
Net income (loss).................... $ 1,597 $ 4,202 $ 315 $ 29 $(1,941)
======= ======= ======= ====== =======
Basic net income per share........... $ 0.24 $ 0.68 $ 0.20 $ 0.02 $ (1.21)
======= ======= ======= ====== =======
Diluted net income per share......... $ 0.23 $ 0.63 $ 0.07 $ 0.01 $ (1.21)
======= ======= ======= ====== =======
Shares used in basic net income per
share calculation................... 6,737 6,190 1,584 1,554 1,610
======= ======= ======= ====== =======
Shares used in diluted net income per
share calculation................... 7,018 6,618 4,425 3,861 1,610
======= ======= ======= ====== =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments........... $27,028 $29,272
Working capital............................................. 28,646 29,645
Total assets................................................ 42,772 38,250
Total stockholders' equity.................................. 36,212 33,934
</TABLE>
10
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Management's Discussion and Analysis of Financial Condition and Results
of Operations and other sections of this Annual Report contain forward-looking
statements within the meaning of the Securities Litigation Reform Act of 1995
that involve risks and uncertainties. Words such as "expects," "anticipates,"
"intends," "plans," "believes," "seeks," "estimates" and variations of such
words and similar expressions are intended to identify such forward-looking
statements. OrCAD's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in "Quarterly Results of
Operations" as well as those discussed in this section and elsewhere in this
Annual Report, and other risks detailed from time to time in OrCAD's
Securities and Exchange Commission reports.
The industry in which OrCAD competes and the markets that it serves are
highly cyclical. OrCAD is dependent upon the semiconductor and, more
generally, the computer and electronics industries. Each of these industries
is characterized by rapid technological change, short product life cycles,
fluctuations in manufacturing capacity and pricing and gross margin pressures.
Segments of these industries, in each of the United States, Europe and Asia,
have from time to time experienced significant economic downturns
characterized by decreased product demand, reductions in capital expenditures,
production over-capacity, price erosion, work slowdowns and layoffs. In
addition, portions of these industries have experienced downturns at different
times. Over the past few years, these industries have experienced an extended
period of economic growth in North America, some growth in Europe, a recession
in Japan and recent large fluctuations in the value of Asian currencies in
relation to the U.S. dollar.
There can be no assurance that such economic growth in North America will
continue, and if it does not, any downturn could be especially severe. OrCAD's
operations may in the future reflect substantial fluctuations from period to
period as a consequence of such industry patterns, general economic conditions
affecting the timing of orders from major customers, and other factors
affecting capital spending. There can be no assurance that such factors will
not have a material adverse effect upon OrCAD's business, financial condition
and results of operations.
OVERVIEW
OrCAD was formed in September 1991 as the successor to prior entities
engaged in developing electronic design automation (EDA) tools. From its
inception, OrCAD has been engaged in the development and marketing of a broad
family of EDA products including schematic capture, digital simulation,
programmable logic design and printed circuit board layout. From 1993 to 1994,
OrCAD upgraded its entire DOS product family to the 386+ series, intended for
optimal performance with PCs based on Intel 386 and 486 microprocessors. In
1995, OrCAD introduced OrCAD Design Desktop for Windows, a new product family
designed for the 32-bit Windows operating system that includes OrCAD Capture
for Windows, OrCAD Simulate for Windows, OrCAD Layout for Windows, OrCAD
Layout Ltd. for Windows and OrCAD Layout Plus for Windows. In 1997, OrCAD
introduced OrCAD Express for Windows, OrCAD Express Enterprise Edition, OrCAD
Capture Enterprise Edition, OrCAD Layout Engineers' Edition, and OrCAD
Enterprise Bridge. From OrCAD's inception through the first six months of
1995, OrCAD earned substantially all of its revenue from its DOS-based EDA
products. For the year ended December 31, 1996, and thereafter, Windows-based
products have accounted for more than 90% of OrCAD's product revenue.
In June 1995, OrCAD acquired Massteck Ltd., a developer of Windows-based PCB
layout technology. This acquisition enabled OrCAD to introduce the OrCAD
Layout for Windows product family in June 1995, simultaneously with the
release of OrCAD Capture for Windows. In December 1995, OrCAD acquired
Intelligent Systems Japan (ISJ), OrCAD's distributor in Japan since 1991. The
entity is now known as OrCAD Japan, K.K., and operates as a wholly-owned
subsidiary of OrCAD.
In April 1997, OrCAD acquired certain technology and sales personnel from
TEAM Corporation for approximately $1.9 million. The cost of the acquisition
was allocated on the basis of the fair value of the assets acquired. This
allocation resulted in a charge for in-process research and development of
$1.8 million and goodwill of $126,000 at the purchase date. The charge for in-
process research and development resulted from
11
<PAGE>
allocating a portion of the acquisition cost to TEAM's in-process product
development that had not reached technological feasibility. In addition, there
are certain contingent amounts payable over the next three years based on the
achievement of specific revenue milestones. The Company is amortizing the
goodwill over a period of three years.
In June 1997, OrCAD acquired certain technology and development personnel
from Q Point Technology for approximately $720,000. The cost of the
acquisition was allocated on the basis of the fair value of the assets
acquired. This allocation resulted in a charge for in-process research and
development of $433,000, purchased technology capitalization of $248,000 and
goodwill of $39,000 at the purchase date. The charge for in-process research
and development resulted from allocating a portion of the purchase price to Q
Point's in-process product development that had not reached technological
feasibility. OrCAD is amortizing the goodwill and purchased technology over
periods of three years and five years, respectively.
In October 1997, OrCAD entered into an Agreement and Plan of Merger with
MicroSim Corporation (MicroSim), a privately held California Corporation,
providing for the merger of OCA Merger Corporation, a wholly-owned subsidiary
of OrCAD, with and into MicroSim (the "Merger"). The Merger was consummated on
January 20, 1998, at which time all of the issued and outstanding shares of
MicroSim Common Stock and all of the outstanding options and other rights to
acquire MicroSim Common Stock were converted into and exchanged for 2,427,632
shares of OrCAD Common Stock. The Merger was accounted for as a pooling of
interests. Since the Merger was not consummated as of December 31, 1997, the
results of MicroSim are not included in the accompanying consolidated
financial statements. The combined financial statements of OrCAD and MicroSim
will be included in the Company's 1998 Form 10-Q's and Form 10-K, and all
prior periods presented in OrCAD's historical financial statements will be
restated to reflect the Merger.
As a result of the Merger with MicroSim, the Company expects to incur a one-
time charge totaling approximately $4.1 million in the first quarter of 1998,
relating primarily to financial advisory fees, legal and accounting services
for both parties, personnel severance costs, the cancellation and continuation
of contractual obligations and other integration costs.
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated selected items of
OrCAD's statements of operations as a percentage of its total revenue:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1997 1996 1995
----------- ----------- -----------
(AS A PERCENTAGE OF TOTAL REVENUE)
<S> <C> <C> <C>
Revenue:
Products........................ 81% 85% 78%
Service......................... 19 15 22
----------- ----------- -----------
Total revenue................. 100% 100% 100%
Cost and expenses:
Cost of Revenue products........ 10 8 11
Cost of Revenue service......... 3 3 4
Research and development........ 22 21 26
Marketing and sales............. 42 34 36
General and administrative...... 12 15 14
In-process research and develop-
ment........................... 8 -- 7
----------- ----------- -----------
Total cost and expenses....... 97 81 98
----------- ----------- -----------
Income from operations............ 3 19 2
Other income, net................. 6 6 --
----------- ----------- -----------
Income before income taxes........ 9 25 2
Income taxes...................... 3 5 --
----------- ----------- -----------
Net income........................ 6% 20% 2%
=========== =========== ===========
</TABLE>
12
<PAGE>
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
Revenue
OrCAD derives revenue from the licensing of its software products and from
the provision of maintenance, training, and consulting services to customers.
OrCAD recognizes revenue from software licenses after shipment of product and
when no significant contractual obligations remain outstanding. Service
revenue is derived primarily from product support agreements that provide
customers access to product enhancements, technical support, bulletin board
services and a subscription to the OrCAD Design Desktop Quarterly, a
newsletter produced by OrCAD. Revenue from each product support agreement is
deferred and recognized ratably over the term of the product support
agreement. Revenue from customer training and consulting is recognized as
services are performed.
Total revenue increased 24% in 1997 to $25.9 million from $20.9 million in
1996. Total revenue increased in 1996 by 53% from $13.7 million in 1995. Total
revenue increased during both years due to growth in both product revenue and
service revenue. As a percentage of total revenue, product revenue decreased
to 81% in 1997 from 85% in 1996 and increased in 1996 from 78% in 1995.
Conversely, service revenue increased as a percentage of total revenue to 19%
in 1997 from 15% in 1996 and decreased in 1996 from 22% in 1995.
Product revenue increased 17% in 1997 to $20.9 million from $17.8 million in
1996. Product revenue increased 68% in 1996 from $10.6 million in 1995. The
increased revenue for 1997 is attributable to the successful introduction of
OrCAD Capture Enterprise Edition, OrCAD Express, OrCAD Express Enterprise
Edition, OrCAD Layout Engineer's Edition and OrCAD Enterprise Bridge and the
addition of a field sales and support organization acquired from TEAM
Corporation. The acquisition of OrCAD Japan and increased sales of the OrCAD
Design Desktop for Windows product family, particularly in the Layout and
Simulate product lines, accounted for the reported increase in sales for 1996.
Service revenue increased 60% in 1997 to $4.9 million from $3.1 million in
1996. Service revenue increased 2% in 1996 from $3.0 million in 1995. The
increase in service revenue in 1997 as compared to 1996 was primarily
attributable to the formation of a maintenance sales group and increased
training and consulting revenue. Sales of higher priced Windows-based
applications in 1996 accounted for a larger increase in product revenue as
compared to the increase in service revenue for that year. The higher
percentage of service revenue as a percentage of total revenue in 1995 was
attributed to a shift from new product sales to upgrade sales of which a
higher proportion of revenue is generally allocated and deferred as service
revenue.
Total North American revenue increased 42% in 1997 to $18.0 million from
$12.7 million in 1996. Total revenue generated outside of North America
decreased 4% in 1997 to $7.8 million from $8.2 million in 1996. Total North
American revenue increased 33% in 1996 from $9.5 million in 1995. Total
revenue generated outside North America increased 98% in 1996 from $4.1
million in 1995. As a percentage of the Company's total revenue, North
American revenue increased to 70% in 1997 from 61% in 1996 and decreased to
61% in 1996 from 70% in 1995. The increase in the proportion of revenue
generated in North America in 1997 was principally attributable to the
formation and integration of a field sales force into the North American sales
territory and the introduction of five new products; OrCAD Capture Enterprise
Edition, OrCAD Express, OrCAD Express Enterprise Edition, OrCAD Layout
Engineer's Edition and OrCAD Enterprise Bridge. The decrease in the proportion
of revenue generated outside of North America during 1997 was due in part to
exchange rate fluctuations in Japan and the typically slower initial adoption
rate for new products in Europe and Asia. The decrease in the proportion of
North American revenue to total revenue in 1996 was primarily attributable to
the acquisition of OrCAD Japan. In 1995 OrCAD's sales to OrCAD Japan, which
was OrCAD's distributor until December 2, 1995, amounted to approximately 8%
of total revenue. In 1996, sales by OrCAD Japan amounted to approximately 21%
of total revenue. This increase in revenue attributable to OrCAD Japan as a
percentage of total revenue was primarily the result of OrCAD recognizing the
full selling price of products sold by OrCAD Japan, whereas in 1995, prior to
the acquisition, OrCAD's products were sold to OrCAD Japan at prices
reflecting a substantial discount from OrCAD Japan's selling prices. The
greater proportion of North American
13
<PAGE>
revenue to total revenue in 1995 was attributable to the earlier releases of
OrCAD's new Windows-based products in the North American market. In addition,
OrCAD's North American customer base traditionally has adopted new products
earlier than its international customer base.
Cost of Revenue
The cost of product revenue represents the costs associated with the
licensing of OrCAD's products, such as expenses of reproducing product
documentation, disks and packaging, hardware locks, shipping costs and
royalties paid to external developers. The cost of product revenue increased
43% in 1997 to $2.5 million from $1.8 million in 1996. The cost of product
revenue increased 12% in 1996 from $1.6 million in 1995. The increase in cost
of product revenue in 1997 was primarily attributable to an increased level of
product sales, higher royalty costs prior to the acquisition of assets from Q-
point Technology, associated with OrCAD Capture Enterprise Edition and OrCAD
Express Enterprise Edition relative to other product lines and certain
commissions paid to North American value-added resellers. The increase in cost
of product revenue in 1996 was the result of an increase in product revenue
offset by lower royalty, software documentation and packaging costs. As a
percentage of product revenue, cost of product revenue increased to 12% in
1997 from 10% in 1996, and decreased in 1996 from 15% in 1995. Increased
royalty costs associated with OrCAD Capture Enterprise Edition and OrCAD
Express Enterprise Edition and commissions paid to North American resellers
account for the increase in cost of product revenue in 1997. The decrease in
cost of product revenue in 1996 reflects lower royalty payments resulting from
the purchase of software source code previously licensed, a focus on the use
of internal development resources as opposed to outside developers, and
decreased software documentation and packaging costs.
The cost of service revenue includes the costs of providing software
maintenance, such as technical support, software revision releases and updated
user documentation, and the costs of providing consulting and training. Cost
of service revenue increased 10% in 1997 to $798,000 from $727,000 in 1996.
Cost of service revenue increased 49% in 1996 from $488,000 in 1995. The
increases in cost of service revenue in 1997 and 1996 reflect increased
service obligations resulting from increased training, product, upgrade,
extended support agreement, and consulting service sales. As a percentage of
service revenue, the cost of service revenue decreased to 16% in 1997 from 24%
in 1996, and increased in 1996 from 16% in 1995. The decrease in cost of
service revenue during 1997 reflected the absorption of relatively fixed costs
over the increased service revenue base. The increase in 1996 resulted from
the absorption of costs associated with an increase in the number of technical
support personnel over a relatively constant revenue base.
Research and Development
Research and development expenses include the costs of developing new
products and enhancements to existing products. Software development costs are
generally expensed as incurred, in that technological feasibility is generally
not established until shortly before the release of a new product and no
material development costs are incurred after establishment of technological
feasibility. Research and development expenses increased 32% to $5.6 million
in 1997 from $4.3 million in 1996 and increased 20% in 1996 from $3.6 million
in 1995. The increase in research and development expenses for 1997 was
attributable to increased personnel costs, including costs associated with
increased headcount, recruiting, third party engineering and the engagement of
contract testers. The increase in research and development expenses in 1996
was primarily attributable to increased headcount resulting from the
acquisitions of OrCAD Japan and Massteck partially offset by a decrease in
costs for engineering consultants. As a percentage of total revenue, research
and development expenses increased in 1997 to 22% from 21% in 1996 and
decreased in 1996 from 26% in 1995. OrCAD expects research and development
expenses to continue to increase in absolute terms.
Marketing and Sales
Marketing and sales expenses include salaries, commissions and related
personnel costs, and other sales and promotional expenses. Marketing and sales
expenses increased 53% in 1997 to $10.8 million from $7.1 million
14
<PAGE>
in 1996 and increased 43% in 1996 from $4.9 million in 1995. Marketing and
sales expenses increased in 1997 as a result of the addition of a field sales
staff, increased personnel costs, including costs associated with increased
headcount, recruiting, and promotional expenses associated with the
introduction of OrCAD Capture Enterprise Edition, OrCAD Express, OrCAD Express
Enterprise Edition, OrCAD Layout Engineer's Edition and OrCAD Enterprise
Bridge products. The growth in marketing and sales expenses in 1996 was
primarily attributable to increased personnel costs, including costs
associated with increased marketing headcount, resulting from the acquisitions
of OrCAD Japan and Massteck, and a general increase in marketing activities.
As a percentage of total revenue, marketing and sales expenses increased in
1997 to 42% from 34% in 1996 and decreased in 1996 from 36% in 1995. OrCAD
expects marketing and sales expenses to continue to increase in absolute
terms.
General and Administrative
General and administrative expenses include the costs associated with
OrCAD's executive office, human resources, finance, information systems and
operations functions. General and administrative expenses were relatively
constant at $3.1 million in both 1997 and 1996. General and administrative
expenses increased 61% to $3.1 million in 1996 from $1.9 million in 1995.
General and administrative expenses increased in 1996 as a result of the
acquisition of OrCAD Japan, increased personnel costs, including costs
associated with increased headcount to support the growth in operations and
the additional costs associated with being a public company. As a percentage
of total revenue, general and administrative expenses decreased in 1997 to 12%
from 14% in both 1996 and 1995. This decrease reflects the absorption of
essentially unchanged general and administrative costs in 1997 over a higher
revenue base. OrCAD expects general and administrative expenses to continue to
increase in absolute terms to support the growth in operations.
In-Process Research and Development
In connection with the Company's acquisition of certain software technology
of TEAM Corporation and Q Point Technology in the second quarter of 1997, the
Company expensed approximately $2.2 million of in-process research and
development costs associated with certain technology which had not yet reached
technological feasibility. There were no in-process research and development
costs incurred in 1996.
In connection with the Company's acquisition of Massteck in 1995, the
Company expensed approximately $971,000 of in-process research and development
costs associated with certain Windows-based PCB layout technology which had
not yet reached technological feasibility.
Other Income, Net
Other income, net consists of interest income, gains and losses on the
disposal of fixed assets, sublease income, royalty income and foreign currency
gains and losses. Interest income consists primarily of the earnings on
available cash balances and marketable securities, which have generally been
invested in short-term money market investments, treasury bills and corporate
debt securities. Other income increased in 1997 to $1.5 million from $1.3
million in 1996, and increased in 1996 from $105,000 in 1995. Other income,
net increased in 1997 and 1996 due primarily to higher interest income earned
on increased cash, cash equivalents and investment balances resulting from
cash generated from operations and the proceeds of the Company's initial
public offering completed in March 1996.
Income Taxes
OrCAD's effective tax rate for 1997 was 30%, which differs from the combined
federal and state statutory rate of approximately 38% primarily due to the
decrease in the valuation allowance for deferred tax assets and the benefit of
research and experimentation tax credits. OrCAD's effective tax rate for 1996
was 20%. The increase in the Company's effective tax rate during 1997 resulted
from the use of all available net operating loss carryforwards in 1996. Income
tax expense was $687,000 in 1997 as compared to $1.1 million in 1996. Federal
15
<PAGE>
and state net operating loss carryforwards were used to offset taxes payable
on 1995 net income and consequently only minimal income tax was due for 1995.
Quarterly Results of Operations
The Company's quarterly operating results have in the past varied and may in
the future vary significantly depending on factors such as increased
competition, timing of new product announcements, releases and pricing changes
by the Company or its competitors, length of sales cycles, market acceptance
or delays in the introduction of new or enhanced versions of OrCAD's products,
timing of significant orders, seasonal factors, mix of direct and indirect
sales, product mix, and economic conditions generally and in the EDA industry
specifically. In particular, the Company's quarterly operating results have in
the past fluctuated as a result of the timing of the introduction of new
products to the market, with customers waiting to place orders until new
products became available. Quarterly operating results have also fluctuated as
a result of seasonality of customer buying patterns. A substantial portion of
OrCAD's revenue in each quarter results from orders booked in that quarter.
Revenue from quarter to quarter is difficult to forecast, as minimal backlog
exists at the end of any quarter because OrCAD's products typically are
shipped and revenue recognized promptly after receipt of customers' orders.
The Company's expense levels are based, in part, on its expectations as to
future revenue. If revenue levels are below expectations, operating results
are likely to be adversely affected. In particular, net income may be
disproportionately affected by a reduction in revenue because only a small
portion of expenses vary with its revenue. The Company has recently
experienced rapid growth and expansion. There can be no assurance that the
Company will be able to grow in future periods, that it will be able to
sustain its historical rate of revenue growth, or that its operations will
remain profitable. Due to the foregoing factors, the Company believes that
period-to-period comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as indications of future performance.
16
<PAGE>
SELECTED UNAUDITED QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
THREE-MONTH PERIODS ENDED
------------------------------------------------------------------
1997 1996
--------------------------------- --------------------------------
MAR. 31 JUNE 30 SEPT. 30 DEC. 31 MAR. 31 JUNE 30 SEPT. 30 DEC. 31
------- ------- -------- ------- ------- ------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Products.............. $4,967 $ 5,846 $4,477 $5,648 $4,248 $4,579 $4,537 $4,458
Service............... 935 1,157 1,363 1,488 677 730 786 892
------ ------- ------ ------ ------ ------ ------ ------
Total revenue....... 5,902 7,003 5,840 7,136 4,925 5,309 5,323 5,350
Cost and expenses:
Cost of revenue prod-
ucts................. 615 786 585 551 447 395 468 461
Cost of revenue serv-
ice.................. 171 175 205 247 165 192 171 199
Research and develop-
ment................. 1,284 1,385 1,505 1,474 1,005 1,150 1,067 1,064
Marketing and sales... 2,032 2,799 2,780 3,200 1,695 1,813 1,829 1,742
General and adminis-
trative.............. 765 750 719 861 756 741 743 823
In-process R & D...... -- 2,203 -- -- -- -- -- --
------ ------- ------ ------ ------ ------ ------ ------
Total cost and ex-
penses............. 4,867 8,098 5,794 6,333 4,068 4,291 4,278 4,289
------ ------- ------ ------ ------ ------ ------ ------
Income (loss) from oper-
ations................. 1,035 (1,095) 46 803 857 1,018 1,045 1,061
Other income, net....... 367 391 352 385 110 367 411 384
------ ------- ------ ------ ------ ------ ------ ------
Income(loss) before in-
come taxes............. 1,402 (704) 398 1,188 967 1,385 1,456 1,445
Income taxes............ 491 (247) 139 304 184 310 306 251
------ ------- ------ ------ ------ ------ ------ ------
Net income(loss)........ $ 911 $ (457) $ 259 $ 884 $ 783 $1,075 $1,150 $1,194
====== ======= ====== ====== ====== ====== ====== ======
Basic net income per
share.................. $ .14 $ (.07) $ .04 $ .13 $ .16 $ .16 $ .17 $ .18
====== ======= ====== ====== ====== ====== ====== ======
Diluted net income per
share.................. $ .13 $ (.07) $ .04 $ .13 $ .14 $ .15 $ .16 $ .17
====== ======= ====== ====== ====== ====== ====== ======
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
In 1997, the acquisitions of certain assets of TEAM Corporation and Q Point
Technology and significant investments in fixed assets resulted in a $1.0
million decrease in working capital to $28.6 million at December 31, 1997 from
$29.6 million at December 31, 1996. The Company's current ratio at December
31, 1997 was 5.4:1. The completion of the initial public offering of common
stock in March 1996 and the exercise of OrCAD's underwriters' over-allotment
option in April 1996 resulted in net proceeds of $23.3 million.
OrCAD has available borrowing capacity consisting of a $3.0 million line of
credit from a commercial bank. As of December 31, 1997, there was no
indebtedness outstanding under this facility. OrCAD believes that current cash
and investment balances, cash flows from operations and the unused line of
credit are sufficient to meet current and anticipated future capital
requirements for at least the next twelve months. OrCAD currently has no
significant capital commitments other than commitments under facility
operating leases. OrCAD has from time to time evaluated and continues to
evaluate opportunities for acquisitions and expansion and, consistent with
this practice, is currently engaged in preliminary discussions with other
parties regarding possible acquisitions. Any such transactions, if
consummated, may use a portion of OrCAD's working capital or necessitate
additional bank borrowings. No assurance can be given that additional
borrowing capacity will be available or that, if available, such financing
will be obtainable on terms favorable to OrCAD or its stockholders.
The Company is aware of the issues associated with the programming code in
existing computer systems as the millennium (year 2000) approaches. The "year
2000" issue is not expected to have a material adverse effect on the business,
financial condition or results of operations of the Company.
17
<PAGE>
Increases and decreases in cash and cash equivalents are the result of the
generation or use of cash in operating, investing and financing activities.
Cash and cash equivalents increased $3.3 million in 1997 to $23.6 million from
$20.3 million at December 31, 1996. Cash and cash equivalents increased $18.2
million in 1996 from $2.1 million in 1995.
Cash provided by operating activities decreased $417,000 to $4.4 million in
1997 from $4.9 million in 1996. Cash provided by operating activities
increased $3.3 million in 1996 from $1.6 million in 1995. Cash provided by
operating activities decreased in 1997 primarily due to a decrease in net
income, partially offset by charges related to in-process research and
development incurred as a result of the purchases of certain assets of TEAM
Corporation and Q Point Technology. Net income accounted for a substantial
portion of the increased cash provided by operating activities for 1996.
Cash used in investing activities in 1997 was $1.4 million and was primarily
comprised of the purchase of software technology and the acquisition of fixed
assets offset by proceeds from the maturity of investment securities. Cash
used in investing activities in 1996 was $9.9 million and was primarily due to
the purchase of investment securities with the proceeds of the Company's
initial public offering in March of that year.
Cash provided by financing activities in 1997 was $290,000 resulting from
issuance of common stock through employee stock purchase plans and the
exercise of stock options. The initial public offering of the Company's common
stock in 1996 accounted for the $23.3 million of cash provided by financing
activities in that year.
The functional currency of OrCAD Japan is the Japanese yen which must be
translated to U.S. dollars for consolidated financial reporting. Generally,
Japanese sales are denominated in the Japanese yen. During the years ended
December 31, 1997 and 1996 the U.S. dollar strengthened by approximately 13%
and 12%, respectively, against the Japanese yen. This strengthening of the
U.S. dollar resulted in lower reported revenues and operating expenses due to
translation of the Japanese yen to U.S. dollars for consolidated financial
reporting. As such, OrCAD's business and operating results will be impacted by
the effects of future U.S. dollar and Japanese yen currency fluctuations.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income." This Statement establishes standards for the reporting
and display of comprehensive income and its components. OrCAD plans to adopt
SFAS No. 130 on January 1, 1998. The impact on OrCAD's Financial Statements is
not expected to be material.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information." This Statement establishes standards
for reporting operating segments in annual Financial Statements and requires
selected information about operating segments in interim Financial Statements.
OrCAD plans to adopt SFAS No. 131 on January 1, 1998. The impact on OrCAD's
Financial Statements is not expected to be material.
In October 1997, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 97-2 "Software Revenue Recognition"
which provides guidance on applying generally accepted accounting principles
in recognizing revenue on software transactions. OrCAD plans to adopt SOP 97-2
on January 1, 1998. The impact on OrCAD's Financial Statements is not expected
to be material.
18
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL DATA
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
OrCAD, Inc.:
We have audited the accompanying consolidated balance sheets of OrCAD, Inc.
and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations, stockholders' equity, and cash flows
for each of the years in the three year period ended December 31, 1997. These
consolidated financial statements are the responsibility of OrCAD's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of OrCAD,
Inc. and subsidiaries as of December 31, 1997 and 1996, and the results of
their operations, and their cash flows for each of the years in the three year
period ended December 31, 1997 in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Portland, Oregon
January 27, 1998
19
<PAGE>
ORCAD, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1996
------- -------
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents.................................. $23,620 $20,308
Short-term investments..................................... 3,408 8,964
Trade accounts receivable, net of valuation allowances of
$639 and $ 637, respectively.............................. 5,320 3,081
Inventory, net............................................. 451 504
Royalty receivable......................................... -- 193
Other current assets....................................... 2,407 911
------- -------
Total current assets..................................... 35,206 33,961
------- -------
Investments, long-term....................................... 2,722 --
Fixed assets, net............................................ 1,880 1,018
Purchased software technology, net........................... 474 429
Goodwill and intangible assets, net.......................... 2,378 2,704
Other assets................................................. 112 138
------- -------
Total assets............................................. $42,772 $38,250
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable........................................... $ 402 $ 484
Accrued payroll and related liabilities.................... 1,574 936
Accrued liabilities........................................ 1,370 857
Accrued income taxes....................................... 553 607
Deferred revenue........................................... 2,661 1,432
------- -------
Total current liabilities................................ 6,560 4,316
------- -------
Stockholders' equity:
Common stock, par value $.01; 16,000,000 shares authorized;
6,811,407 and 6,681,902 shares issued and outstanding at
December 31, 1997 and 1996................................ 68 67
Additional paid-in capital................................. 36,716 35,992
Accumulated deficit........................................ (494) (2,091)
Unrealized gain on investments, net........................ 5 9
Foreign currency translation adjustment.................... (83) (43)
------- -------
Total stockholders' equity............................... 36,212 33,934
------- -------
Total liabilities and stockholders' equity............. $42,772 $38,250
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
20
<PAGE>
ORCAD, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Revenue:
Products............................................ $20,938 $17,822 $10,627
Service............................................. 4,943 3,085 3,032
------- ------- -------
Total revenue..................................... 25,881 20,907 13,659
Cost and expenses:
Cost of revenue products............................ 2,537 1,771 1,587
Cost of revenue service............................. 798 727 488
Research and development............................ 5,648 4,286 3,561
Marketing and sales................................. 10,811 7,079 4,934
General and administrative.......................... 3,095 3,063 1,904
In-process research and development................. 2,203 -- 971
------- ------- -------
Total cost and expenses........................... 25,092 16,926 13,445
------- ------- -------
Income from operations................................ 789 3,981 214
------- ------- -------
Other income (expense):
Interest income..................................... 1,505 1,207 53
Other, net.......................................... (10) 65 52
------- ------- -------
1,495 1,272 105
------- ------- -------
Income before income taxes............................ 2,284 5,253 319
Income taxes.......................................... 687 1,051 4
------- ------- -------
Net income............................................ $ 1,597 $ 4,202 $ 315
======= ======= =======
Basic net income per share............................ $ 0.24 $ 0.68 $ 0.20
======= ======= =======
Diluted net income per share.......................... $ 0.23 $ 0.63 $ 0.07
======= ======= =======
Shares used in basic net income per share calculation. 6,737 6,190 1,584
======= ======= =======
Shares used in diluted net income per share calcula-
tion................................................. 7,018 6,618 4,425
======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE>
ORCAD, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREFERRED NET FOREIGN
STOCK COMMON STOCK ADDITIONAL UNREALIZED CURRENCY TOTAL
-------------- ------------- PAID-IN ACCUMULATED GAIN ON TRANSLATION STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT INVESTMENTS ADJUSTMENT EQUITY
------ ------ ------ ------ ---------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1994................... 8,076 $ 81 647 $ 6 $ 7,305 $(6,608) $-- $-- $ 784
Issuance of common
stockupon option
exercises.............. -- -- 199 2 68 -- -- -- 70
Issuance of common stock
inMassteck merger...... -- -- 510 5 1,958 -- -- -- 1,963
Issuance of common stock
inISJ merger........... -- -- 427 5 2,981 -- -- -- 2,986
Foreign currency
translation adjustment. -- -- -- -- -- -- -- (4) (4)
Net income.............. -- -- -- -- -- 315 -- -- 315
------ ----- ----- ---- ------- ------- ---- ---- -------
Balance, December 31,
1995................... 8,076 81 1,783 18 12,312 (6,293) -- (4) 6,114
Issuance of common stock
upon option exercises.. -- -- 195 2 81 -- -- -- 83
Issuance of common stock
under employee stock
purchase plan.......... -- -- 11 -- 88 -- -- -- 88
Issuance of common stock
net of offering costs
of $2,951.............. -- -- 2,382 24 23,230 -- -- -- 23,254
Issuance of common stock
upon exercise of stock
warrants............... -- -- 4 -- -- -- -- -- --
Issuance of common stock
upon conversion of
preferred shares....... (8,076) (81) 2,307 23 58 -- -- -- --
Unrealized gain on
investments............ -- -- -- -- -- -- 9 -- 9
Tax benefit from stock
option exercises....... -- -- -- -- 223 -- -- -- 223
Foreign currency
translation adjustment. -- -- -- -- -- -- -- (39) (39)
Net income.............. -- -- -- -- -- 4,202 -- -- 4,202
------ ----- ----- ---- ------- ------- ---- ---- -------
Balance, December 31,
1996................... -- -- 6,682 67 35,992 (2,091) 9 (43) 33,934
Issuance of common stock
upon option exercises.. -- -- 100 1 82 -- -- -- 83
Issuance of common stock
under employee stock
purchase plan.......... -- -- 29 -- 207 -- -- -- 207
Unrealized loss on
investments............ -- -- -- -- -- -- (4) -- (4)
Tax benefit from stock
option exercises....... -- -- -- -- 435 -- -- -- 435
Foreign currency
translation adjustment. -- -- -- -- -- -- -- (40) (40)
Net income.............. -- -- -- -- -- 1,597 -- -- 1,597
------ ----- ----- ---- ------- ------- ---- ---- -------
Balance, December 31,
1997................... -- $ -- 6,811 $ 68 $36,716 $ (494) $ 5 $(83) $36,212
====== ===== ===== ==== ======= ======= ==== ==== =======
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE>
ORCAD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
------------------------
1997 1996 1995
------- ------- ------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income......................................... $ 1,597 $ 4,202 $ 315
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................... 1,418 1,103 591
Provision for losses on receivables and sales
returns......................................... 28 220 (47)
Provision for inventory reserves................. 21 9 (20)
Deferred income taxes............................ (443) 64 --
Write-off of research and development costs
acquired........................................ 2,203 -- 971
(Gain) loss on disposal of fixed assets.......... 19 23 (2)
Changes in assets and liabilities:
Trade accounts receivable........................ (2,218) (703) (338)
Inventory........................................ 22 (84) (25)
Royalty receivable............................... 193 245 133
Lease receivable................................. 7 -- --
Other current assets............................. (1,077) (421) (137)
Accounts payable................................. (170) (437) 141
Accrued payroll and related liabilities.......... 641 123 359
Accrued liabilities.............................. 577 (500) 70
Deferred revenue................................. 1,237 276 (438)
Accrued income taxes............................. 388 740 --
------- ------- ------
Total adjustments.............................. 2,846 658 1,258
------- ------- ------
Net cash provided by operating activities.......... 4,443 4,860 1,573
------- ------- ------
Cash flows from investing activities:
Cash acquired in mergers......................... -- -- 503
Acquisition of fixed assets...................... (1,597) (658) (409)
Acquisition of software technology............... (2,450) (300) (73)
Proceeds from sale of fixed assets............... -- 24 --
Intangible assets acquired....................... (165) -- --
Maturity (purchase) of investments, net.......... 2,829 (8,964) --
------- ------- ------
Net cash provided (used) by investing activities... (1,383) 9,898 21
Cash flows from financing activities:
Payments on capital leases....................... -- (119) (157)
Proceeds from issuance of common stock, net...... 290 23,425 70
------- ------- ------
Net cash provided (used) by financing activities... 290 23,306 (87)
Effects of exchange rate on cash..................... (38) (40) (9)
Net increase in cash and cash equivalents.......... 3,312 18,228 1,498
Cash and cash equivalents at beginning of period..... 20,308 2,080 582
------- ------- ------
Cash and cash equivalents at end of period........... $23,620 $20,308 $2,080
Supplemental disclosures of cash flow information:
Interest paid...................................... $ 5 $ 10 $ 26
Income taxes paid.................................. $ 861 $ 377 $ --
Non-cash investing and financing activities:
Net assets acquired in mergers..................... $ -- $ -- $4,949
</TABLE>
See accompanying notes to consolidated financial statements
23
<PAGE>
ORCAD, INC.
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
NOTE 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
OrCAD, Inc. ("OrCAD," or the "Company") develops, markets and supports
software products that assist electronics designers in developing field-
programmable gate arrays, including complex programmable logic devices, and
printed circuit boards. OrCAD operates in a single business segment,
comprising the electronic design automation industry.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
OrCAD and its subsidiaries, Massteck Ltd. (Massteck) and OrCAD Japan K.K.,
formerly Intelligent Systems Japan K.K. (ISJ) from the date of inception or
acquisition. All intercompany balances have been eliminated in consolidation.
In December 1995, OrCAD acquired ISJ in a transaction accounted for as a
purchase. In June 1995, OrCAD acquired Massteck in a transaction accounted for
as a purchase.
Cash and Cash Equivalents
For purposes of the accompanying consolidated statements of cash flows,
OrCAD considers all highly liquid investments with an original maturity of
three months or less to be cash equivalents. Cash equivalents are stated at
cost and consist primarily of money market funds, commercial paper, municipal
bonds and municipal auction preferred stock. The carrying amount of cash and
cash equivalents approximates fair value.
Investments
Investments, which consist of debt securities and U.S. Treasury Notes, are
reported at fair value, and are classified as available-for-sale securities.
The cost of securities sold is determined using the specific identification
method when computing realized gains and losses. Fair value is determined
using available market information.
At December 31, 1997, the contractual maturities of available-for-sale
investments ranged from thirty-six days to less than one and one-half years.
OrCAD received net proceeds from the maturity or sale of investments of
$2,829, $2,000, and $0, for the years ended December 31, 1997, 1996 and 1995,
respectively.
Inventory
Inventory consists primarily of packaging materials, diskettes, compact
disks, hardware locks, and printed documentation. Inventory is carried at the
lower of cost or market determined on a first-in, first-out basis.
Fixed Assets
Fixed asset acquisitions are recorded at cost. Depreciation is calculated
using the straight-line method over the estimated useful lives of the assets,
generally three to seven years. Amortization of leasehold improvements and
assets under capital leases is calculated using the straight-line method over
the shorter of the related lease term or economic life of the leased asset.
Concentration of Credit Risk
Financial instruments which potentially subject OrCAD to concentrations of
credit risk consist principally of cash, cash equivalents, investments and
accounts receivable. Management believes the credit risk associated with cash,
cash equivalents and investments is minimal. OrCAD sells its products to
customers who are primarily designers and manufacturers of electronic
components. OrCAD's accounts receivable are derived primarily from customers
located in North America, Europe and Japan. Management believes that the risk
of credit loss is substantially reduced due to the diversity of its customers
and their dispersion across many geographic areas and electronic industries.
24
<PAGE>
ORCAD, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
Revenue Recognition
Revenue primarily includes revenue from software product shipments and
revenue from extended support agreements. OrCAD recognizes revenue from
software licenses after shipment of product and when no significant
contractual obligations remain outstanding. When OrCAD receives payment prior
to shipment or fulfillment of a significant obligation to the customer, such
payments are recorded as deferred revenue and recognized as revenue upon
shipment or fulfillment of such obligation. A portion of revenue from product
sales is deferred and recognized ratably over the maintenance period,
generally three months. Deferred revenue on extended support agreements that
are sold separately from product sales is recognized ratably over the contract
period, generally one year. Revenue from customer training, support and other
services is recognized as the services are performed.
Software Development Costs
Under Statement of Financial Accounting Standards No. 86 (SFAS 86), software
development costs are to be capitalized beginning when a product's
technological feasibility has been established and ending when a product is
made available for general release to customers. To date, the establishment of
technological feasibility of the Company's products has occurred shortly
before general release, and accordingly no costs have been capitalized.
Purchased Software Technology
OrCAD has acquired technologies in connection with certain business
combinations and licensing agreements. The cost of such purchased technology
is generally amortized using the straight-line method over its estimated
useful life. Amortization expense for the years ended December 31, 1997, 1996
and 1995 was $203, $92 and $77 respectively.
Foreign Currency
The local currency of OrCAD Japan is the functional currency. Assets and
liabilities of OrCAD Japan are translated into U.S. dollars using exchange
rates in effect at the translation date, and revenue and expenses are
translated into U.S. dollars using average exchange rates. The effects of
foreign currency translation adjustments are included as a component of
stockholders' equity. Gains or losses occurring on transactions, which have
been insignificant, are included in the consolidated statements of operations
as other income (expense).
Goodwill and Intangible Assets
The Company has recorded goodwill and intangible assets in connection with
its business combinations and certain asset acquisitions. Goodwill and
intangible assets are being amortized over their estimated useful lives,
ranging from three to ten years. Goodwill and intangible asset amortization
was $491, $452, and $79 for the years ended December 31, 1997, 1996 and 1995,
respectively.
Income Taxes
Deferred tax assets and liabilities are recognized for future tax
consequences attributable to differences between the financial statements
carrying amounts of existing assets and liabilities and their respective tax
bases and operating losses and tax credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected
to be recovered or settled. The effect on deferred tax assets and liabilities
of a change in tax rates is recognized in
25
<PAGE>
ORCAD, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
income in the period that includes the enactment date. Valuation allowances
are established when necessary to reduce deferred tax assets to the amounts
expected to be realized.
Net Income Per Share
On January 1, 1997 the Company adopted SFAS No. 128 "Earnings Per Share".
Accordingly, "basic net income per share" and "diluted net income per share"
for the year ended December 31, 1997 and for all prior periods presented were
computed using the weighted average number of common shares outstanding during
each year, with diluted net income per share including the effect of
potentially dilutive common shares. The weighted average number of common
shares outstanding for basic net income per share computations for the years
ended December 31, 1997, 1996 and 1995 were 6,737, 6,190 and 1,584,
respectively. For diluted net income per share, 281, 428 and 534 shares were
added to the weighted average number of common shares outstanding for 1997,
1996 and 1995, respectively, representing potential dilution for stock options
outstanding, calculated using the treasury stock method. Additionally, in
1995, diluted net income per share included 2,307 shares of Series A preferred
stock which were automatically converted into the same number of shares of
common stock at the completion of the Company's initial public offering in
March 1996. Basic and diluted net income per share for the year ended December
31, 1995, and prior years have been restated to reflect the adoption of the
Securities and Exchange Commission's Staff Accounting Bulletin No. 98.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable, and
accounts payable approximate fair value due to the short-term nature of these
instruments. The fair value of investments is based on current market values.
Fair value estimates are made at a specific point in time, based on relevant
market information about the financial instrument when available. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore, cannot be determined with precision.
Changes in assumptions could significantly affect the estimates.
Use of Estimates
Generally accepted accounting principles require management to make
estimates and assumptions that affect the reported amount of assets,
liabilities and contingencies at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.
Reclassifications
Certain reclassifications have been made in the accompanying consolidated
financial statements for 1996 and 1995 to conform with the 1997 presentation.
NOTE 2. ACQUISITIONS
In October 1997, OrCAD entered into an Agreement and Plan of Merger (the
"Merger Agreement") with MicroSim Corporation, a privately held California
Corporation. On January 20, 1998 OCA Merger Corporation was merged with and
into MicroSim and all of the issued and outstanding shares of MicroSim Common
Stock and all of the outstanding options and other rights to acquire MicroSim
Common Stock were converted into and exchanged for 2,427,714 shares of OrCAD
Common Stock (the "Merger"). The Merger will be accounted for as a pooling of
interests in 1998. Since the Merger was not consummated as of December 31,
1997, the results of MicroSim are not included in the accompanying
consolidated financial statements. The combined financial statements of OrCAD
and MicroSim will be included in the Company's 1998 Form 10-Q's and Form 10-K,
and all prior periods presented in OrCAD's historical financial statements
will be restated to reflect the Merger.
26
<PAGE>
ORCAD, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
The following unaudited pro forma data summarizes the combined results of
operations of OrCAD and MicroSim as if the Merger had been consummated on
January 1, 1995.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Revenue........................................... $43,995 $37,034 $28,317
======= ======= =======
Net income........................................ $ 3,904 $ 5,266 $ 1,633
======= ======= =======
Basic net income per share........................ $ .43 $ .61 $ .41
======= ======= =======
Diluted net income per share...................... $ .41 $ .58 $ .24
======= ======= =======
</TABLE>
The unaudited pro forma information is presented for illustrative purposes
only and is not necessarily indicative of the operating results that would
have occurred if the Merger had been consummated at the beginning of the
periods presented, nor is it necessarily indicative of future operating
results.
In June 1997, the Company acquired certain technology and development
personnel from Q Point Technology for approximately $720. The cost of the
acquisition was allocated on the basis of the fair value of the assets
acquired. This allocation resulted in a charge for in-process research and
development of $433, purchased technology capitalization of $248, and goodwill
of $39 at the purchase date. The charge for in-process research and
development resulted from allocating a portion of the purchase price to Q
Point's in-process product development that had not reached technological
feasibility. The Company is amortizing the goodwill and purchased technology
over a period of three years and five years, respectively.
In April 1997, the Company acquired certain technology and sales personnel
from TEAM Corporation for approximately $1,900. The cost of the acquisition
was allocated on the basis of the fair value of the assets acquired. This
allocation resulted in a charge for in-process research and development of
$1,800, and goodwill of $126 at the purchase date. The charge for in-process
research and development resulted from allocating a portion of the acquisition
cost to TEAM's in-process product development that had not reached
technological feasibility. In addition, there are certain contingent amounts
payable over the next three years based on the achievement of specific revenue
milestones.
In December 1995, the Company issued 426,468 shares of common stock in
exchange for all of the outstanding common stock of ISJ. The acquisition was
accounted for as a purchase, and the financial results of ISJ have been
included in the accompanying consolidated financial statements since the date
of acquisition. The cost of the acquisition was allocated on the basis of the
estimated fair value of the assets acquired and the liabilities assumed.
Intangible assets of $2,685 and $300 represent the estimated fair value of the
customer list and goodwill acquired from ISJ.
In June 1995, the Company issued 510,031 shares of common stock and reserved
50,717 common shares for issuance upon exercise of vested common stock options
in exchange for all of the outstanding common and preferred stock and vested
stock options of Massteck. The acquisition was accounted for as a purchase,
and the financial results of Massteck have been included in the accompanying
consolidated financial statements since the date of acquisition. The cost of
the acquisition was allocated on the basis of the estimated fair value of the
assets acquired and liabilities assumed. This allocation resulted in an in-
process research and development charge of $971, because certain acquired
technology had not reached technological feasibility. The excess of the
aggregate purchase price over the fair value of net assets acquired of
approximately $250 was recognized as goodwill and is being amortized on a
straight-line basis over three years.
27
<PAGE>
ORCAD, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
NOTE. 3 BALANCE SHEET COMPONENTS
Other Current Assets
OrCAD's other current assets include the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1997 1996
------ ------
<S> <C> <C>
Deferred income taxes, net................................ $ 513 $ 80
Prepaid expenses and other................................ 1,894 831
------ ------
$2,407 $ 911
====== ======
Fixed Assets
OrCAD's fixed assets include the following:
<CAPTION>
DECEMBER 31,
--------------
1997 1996
------ ------
<S> <C> <C>
Vehicles.................................................. $ 43 $ 48
Furniture & Fixtures...................................... 888 386
Computer Equipment........................................ 2,173 1,576
Leasehold Improvements.................................... 81 49
Software.................................................. 802 688
------ ------
3,987 2,747
Less Accumulated depreciation and amortization............ (2,107) (1,729)
------ ------
$1,880 $1,018
====== ======
Depreciation and amortization expense was approximately $705, $542, and $428
for the years ended December 31, 1997, 1996, and 1995, respectively.
Accrued Liabilities
OrCAD's accrued liabilities include the following:
<CAPTION>
DECEMBER 31,
--------------
1997 1996
------ ------
<S> <C> <C>
Accrued director and officer insurance.................... $ -- $ 227
Accrued sales expenses.................................... 364 --
Other..................................................... 1,006 630
------ ------
$1,370 $ 857
====== ======
</TABLE>
NOTE 4. NOTE PAYABLE AND LINE OF CREDIT
On September 5, 1996, OrCAD entered into a Business Loan Agreement with a
commercial bank for a $3,000 line of credit to be used for operating needs.
The line of credit bears interest at the bank's prime rate plus .50%. The
Agreement is secured by all assets of OrCAD. There were no outstanding
borrowings under the agreement at December 31, 1997 or December 31, 1996.
28
<PAGE>
ORCAD, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
NOTE 5. 5. TAXES
Domestic and foreign pre-tax income (loss) is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1997 1996 1995
------ ------ -----
<S> <C> <C> <C>
Domestic............................................. $2,576 $5,007 $ 343
Foreign.............................................. (292) 246 (24)
------ ------ -----
Total.............................................. $2,284 $5,253 $ 319
====== ====== =====
The provision for income taxes is as follows:
<CAPTION>
YEAR ENDED DECEMBER
31,
--------------------
1997 1996 1995
------ ------ -----
<S> <C> <C> <C>
Current:
Federal............................................ $ 934 $ 306 $ --
State.............................................. 157 4 --
Foreign............................................ 29 677 5
------ ------ -----
1,120 987 5
------ ------ -----
Deferred:
Federal............................................ (364) -- --
State.............................................. (76) -- --
Foreign............................................ 7 64 (1)
------ ------ -----
(433) 64 (1)
------ ------ -----
Total............................................ $ 687 $1,051 $ 4
====== ====== =====
</TABLE>
The actual income tax expense for the years ended December 31, 1997, 1996 and
1995 differs from the expected tax expense computed by applying the U.S.
federal corporate income tax rate of 34% to net income before income taxes as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1997 1996 1995
------- -------- -------
<S> <C> <C> <C>
Expected income tax expense..................... $ 777 $ 1,786 $ 108
State income tax expense........................ 121 234 61
Decrease in the valuation allowance for deferred
tax assets..................................... (261) (749) (321)
Benefit of research and experimentation tax
credit......................................... (247) (128) (59)
Goodwill amortization and in-process costs
attributable to the Massteck acquisition....... 154 154 347
Differences between financial and tax reporting
for common stock option exercises.............. 89 (646) (71)
Foreign tax rate differential................... 7 546 --
Foreign sales corporation benefit............... (89) (67) --
Other........................................... 136 (79) (61)
------- -------- -------
Actual expense.................................. $ 687 $ 1,051 $ 4
======= ======== =======
</TABLE>
29
<PAGE>
ORCAD, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
The income tax effects of temporary differences and carryforwards which give
rise to significant portions of deferred tax assets and liabilities are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1997 1996
------- -------
<S> <C> <C>
Deferred tax assets:
Accounts receivable, due to allowance for doubtful ac-
counts................................................. $ 131 $ 174
Inventory, due to reserve for obsolescence.............. 67 93
Accrued vacation pay.................................... 136 135
Purchased technology, due to differences in amortiza-
tion................................................... -- 24
In-process research and development, due to amortization
differences............................................ 804 --
Research and experimentation credit carryforwards....... 491 601
Sales return allowances................................. 91 40
Net operating loss carryforwards........................ -- 549
Other................................................... 327 213
------- -------
Total gross deferred tax assets....................... 2,047 1,829
Less valuation allowance.................................. (1,474) (1,735)
------- -------
Net deferred tax assets............................... 573 94
Deferred tax liabilities:
Other................................................... 60 14
------- -------
Total gross deferred tax liabilities.................. 60 14
------- -------
Net deferred tax assets............................... $ 513 $ 80
======= =======
</TABLE>
The valuation allowance for deferred tax assets as of January 1, 1995 was
$2,805. The net change in the valuation allowance for the years ended December
31, 1997, 1996 and 1995 was a decrease of $261, $749, and $321, respectively.
In addition, the portion of the valuation allowance for deferred tax assets
for which subsequently recognized tax benefits were applied directly to
contributed capital was $435 and $223 at December 31, 1997 and 1996,
respectively. These amounts were attributable to differences between financial
and tax reporting for employee stock option exercises.
At December 31, 1997, the Company had unused research and experimentation
credits of $445, which expire in 2011 through 2012.
NOTE 6. LEASE COMMITMENTS
OrCAD leases office space under various noncancelable operating lease
agreements. Lease expense was $389, $370 and $382 for the years ended December
31, 1997, 1996 and 1995, respectively.
Future minimum lease payments under noncancelable leases are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, OPERATING
----------------------- ---------
<S> <C>
1998............................................................ $ 423
1999............................................................ 444
2000............................................................ 371
2001............................................................ 118
Thereafter...................................................... --
------
Total......................................................... $1,356
======
</TABLE>
30
<PAGE>
ORCAD, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
NOTE 7. FOREIGN OPERATIONS AND GEOGRAPHIC INFORMATION
OrCAD's subsidiary in Japan accounted for $4,013, $4,332 and $361 of total
revenue and had net losses of ($329), ($51) and ($27) for the years ended
December 31, 1997, 1996 and 1995, respectively. Identifiable assets of this
subsidiary were $1,148 and $922 at December 31, 1997 and 1996, respectively.
Revenue by geographical area is provided below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
United States..................................... $16,975 $11,638 $ 9,045
Canada............................................ 1,071 1,081 484
------- ------- -------
North America................................... 18,046 12,719 9,529
Europe............................................ 2,755 3,048 2,121
Japan............................................. 4,013 4,332 1,102
Other international............................... 1,067 808 907
------- ------- -------
$25,881 $20,907 $13,659
======= ======= =======
</TABLE>
NOTE 8. STOCKHOLDERS' EQUITY
Common Stock
On March 1, 1996, OrCAD completed a public offering of 3,200,0000 shares of
common stock which generated net proceeds of approximately $19,400 after
deducting applicable issuance costs and expenses. On April 4, 1996, OrCAD's
underwriters' exercised their over-allotment option resulting in the issuance
of an additional 382,299 shares of common stock which generated net proceeds
of approximately $3,900 after deducting applicable issuance costs and
expenses.
Preferred Stock
In connection with the completion of OrCAD's initial public offering in
March 1996, all of the outstanding Series A preferred stock was automatically
converted into 2,307,397 shares of OrCAD's common stock.
Reserved Common Stock
At December 31, 1997, OrCAD had 2,896,364 shares of common stock reserved
for future issuance under all stock option plans.
NOTE 9. STOCK OPTION PLANS
1995 Stock Incentive Plan
Under the 1995 Stock Incentive Plan, OrCAD may sell shares of common stock
and grant either incentive stock options or non-qualified stock options to
certain employees and consultants at the discretion of the Board of Directors.
OrCAD has reserved 2,000,000 shares of common stock which may be optioned
and/or sold under the 1995 Incentive Plan. The 1995 Incentive Plan provides
that (i) the exercise price of an incentive stock option must be no less than
the fair market value of OrCAD's common stock at the date of grant, (ii) the
exercise price of a non-qualified stock option must be no less than 85% of the
fair market value, and (iii) the exercise price to an optionee who possesses
more than 10% of the total combined voting power of all classes of stock must
be no less than 110% of the fair market value, all as determined by the Board
of Directors. The Board of Directors has the authority to set expiration dates
no longer than ten years from the date of grant (or five years for an optionee
who meets the 10% criteria), payment terms and other provisions for each
grant. Shares associated with unexercised options are generally canceled no
more than 90 days after termination of employment and become available for
grant under the 1995 Incentive Plan.
31
<PAGE>
ORCAD, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
1995 Stock Option Plan
Under the 1995 Stock Option Plan, OrCAD may grant incentive stock options or
nonqualified stock options up to a maximum of 51,699 shares of common stock to
directors, officers, employees and consultants.
Nonqualified stock options must be granted at not less than 85% of the fair
market value, and incentive stock options must be granted at not less than the
fair market value, at the date of grant. The exercise price to an optionee who
possesses more than 10% of the total combined voting power of all classes of
stock must be no less than 110% of the fair market value at the date of grant.
The Board of Directors has authority to set expiration dates no longer than
ten years from the date of grant (or five years for an optionee who meets the
10% criteria), payment terms and other provisions for each grant.
1995 Stock Option Plan for Nonemployee Directors
Under the 1995 Stock Option Plan for Nonemployee Directors, OrCAD may grant
non-qualified stock options up to a maximum of 500,000 shares of common stock.
The exercise price of options granted under the Plan may not be less than the
fair market value of common stock on the date of grant. All options granted
under the Plan will be non-qualified and expire ten years from the date of
grant. Shares that are associated with options that are forfeited or
terminated will again be available for grant.
1991 Non-Qualified Stock Option Plan
Under the 1991 Non-Qualified Stock Option Plan, OrCAD may grant non-
qualified stock options up to a maximum of 962,238 shares of common stock.
Options may be granted at the Board of Directors' discretion at not less than
85% of the fair market value of the common stock at the date of such grant.
Options shall expire on the date specified by the Board of Directors but this
date shall in no event exceed ten years from the date of grant.
Stock option activity under the foregoing plans is summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED-
SHARES AVERAGE
UNDER EXERCISE
OPTION PRICE
-------- ---------
<S> <C> <C>
Outstanding at December 31, 1994....................... 619,188 $ .35
Granted................................................ 276,217 2.87
Exercised.............................................. (199,202) .35
Canceled............................................... (14,646) .35
--------
Outstanding at December 31, 1995....................... 681,557 1.36
--------
Granted................................................ 128,427 11.70
Exercised.............................................. (194,828) .42
Canceled............................................... (9,927) 1.94
--------
Outstanding at December 31, 1996....................... 605,229 3.86
--------
Granted................................................ 525,756 8.74
Exercised.............................................. (99,657) .84
Canceled............................................... (97,231) 9.66
--------
Outstanding at December 31, 1997....................... 934,097 $6.33
========
</TABLE>
32
<PAGE>
ORCAD, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
The weighted-average fair value of options granted during 1997, 1996 and
1995 was $5.34, $6.78 and $1.08, respectively.
At December 31, 1997 OrCAD had four stock-based compensation plans, which
are described above and an employee stock purchase plan which is discussed in
note 10. OrCAD applies APB No. 25 and related Interpretations in accounting
for its plans. Accordingly, no compensation cost has been recognized for its
fixed stock option plans and its stock purchase plan. For SFAS No. 123
purposes, the fair value of each option grant has been estimated as of the
date of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions for grants and purchase rights in 1997, 1996 and
1995, respectively: dividend yield of 0% for all years; expected volatility of
76%, 49% and 0%; risk-free interest rate ranging from 5.3% to 5.8% in 1997;
5.3% to 6.4% in 1996 and from 5.3% to 6.7% in 1995 for all plans; and expected
lives of five years for all Plans except the 1995 Stock Option Plan and the
1996 Employee Stock Purchase Plan, which are estimated at 2 years and .5
years, respectively. Had compensation expense been determined consistent with
SFAS No. 123, utilizing the assumptions detailed above, OrCAD's net income and
net income per share for the years ended December 31, 1997, 1996 and 1995,
would have been reduced to the following pro forma amounts:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ----
<S> <C> <C> <C>
Net income:
As reported.......................................... $1,597 $4,202 $315
Pro forma............................................ $1,104 $3,772 $288
Basic net income per share:
As reported.......................................... $ .24 $ .68 $.20
Pro Forma............................................ $ .16 $ .61 $.18
Diluted net income per share
As reported.......................................... $ .23 $ .63 $.07
Pro forma............................................ $ .16 $ .57 $.07
</TABLE>
The resulting pro forma compensation costs may not be representative of that
expected in future years.
The following table summarizes information about fixed stock options
outstanding at December 31, 1997.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXCERCISABLE
-----------------------------------------------------------------------
NUMBER WEIGHTED- NUMBER
OUTSTANDING AVERAGE WEIGHTED- EXERCISABLE WEIGHTED-
RANGE OF AT REMAINING AVERAGE AT AVERAGE
EXERCISE DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
PRICE 1997 LIFE PRICE 1997 PRICE
-------- ------------ ----------- --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
$ .35 204,692 5.7 years $ .35 169,010 $ .35
.88 1,077 7.7 years .88 496 .88
3.50 129,244 7.8 years 3.50 66,977 3.50
7.25-- 9.00 469,474 8.4 years 8.36 94,162 8.29
9.13--12.00 99,910 8.8 years 10.21 6,013 9.95
12.13--15.50 29,700 8.9 years 8.90 20,370 15.46
$ .35--15.50 934,097 7.8 years $6.33 357,028 $4.06
</TABLE>
NOTE 10. EMPLOYEE BENEFIT PLANS
401(k) Plan
OrCAD has a 401(k) retirement savings plan covering substantially all
employees, excluding employees of OrCAD Japan. Contributions to the plan were
matched at the discretion of the Board of Directors. The matching
contributions amounted to $199, $151 and $41 for 1997, 1996 and 1995,
respectively.
33
<PAGE>
ORCAD, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE AND SHARE AMOUNTS)
1996 Employee Stock Purchase Plan
Under the 1996 Employee Stock Purchase Plan, which became effective May 1,
1996, eligible employees of OrCAD are permitted to purchase common stock
through payroll deductions at a price equal to 85% of the fair market value of
the common stock at the beginning of each offering period or the end of each
offering period, whichever is lower. No employee is entitled to purchase
shares of common stock having a value (determined on the first day of the
offering period) of more than $25,000 in any calendar year. At December 31,
1997, 159,466 of the 200,000 shares of OrCAD common stock originally reserved
for issuance under the plan remained available. There were 29,848 and 10,686
shares issued under the plan in 1997 and 1996, respectively.
NOTE 11. SUBSEQUENT EVENT (UNAUDITED)
In February 1998, the Company entered into a noncancelable operating lease
for a new facility. The Company intends to move into the new facility in the
summer of 1999. Future minimum lease payments under such lease are as follows
(in thousands):
<TABLE>
<S> <C>
1998......................................... $ --
1999......................................... 593
2000......................................... 1,186
2001......................................... 1,186
2002......................................... 1,186
Thereafter................................... 11,969
-------
Total........................................ $16,120
=======
</TABLE>
34
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There has been no change of accountants nor any disagreements with
accountants on any matter of accounting principles or practices or financial
statement disclosure required to be reported under this Item.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item is included under the captions
"Directors," "Management" and "Section 16(a) Beneficial Ownership Reporting
Compliance" in OrCAD's Proxy Statement for its annual meeting of stockholders
to be held May 22, 1998 and is incorporated by reference herein.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is included under the caption
"Executive Compensation" in OrCAD's Proxy Statement for its annual meeting of
stockholders to be held May 22, 1998 and is incorporated by reference herein.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is included under the caption "Stock
Owned by Management and Principal Stockholders" in OrCAD's Proxy Statement for
its annual meeting of stockholders to be held May 22, 1998 and is incorporated
by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is included under the caption "Certain
Relationships and Related Transactions" in OrCAD's Proxy Statement for its
annual meeting of stockholders to be held May 22, 1998 and is incorporated by
reference herein.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
A. (1) Financial Statements
The following financial statements are set forth in Item 8 of this Annual
Report:
Report of Independent Auditors
Consolidated Balance Sheets, December 31, 1997 and 1996
Consolidated Statements of Operations, Years Ended December 31, 1997, 1996
and 1995
Consolidated Statements of Stockholders' Equity, Years Ended December 31,
1997, 1996 and 1995
Consolidated Statements of Cash Flows, Years Ended December 31, 1997, 1996
and 1995
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
FORM 10-KSB
PAGE NO.
-----------
<S> <C>
A. (2) FINANCIAL STATEMENT SCHEDULES:
(a) VIII--Valuation and Qualifying Accounts..................... S-1
(b) Report of Independent Auditors.............................. S-2
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or
notes thereto.
35
<PAGE>
3. EXHIBITS
<TABLE>
<C> <S>
2.0 Agreement and Plan of Merger dated as of October 13, 1997, by and
among OrCAD, Inc., OCA Merger Corporation and MicroSim Corporation.**
3.1 Restated Certificate of Incorporation of OrCAD, Inc.*
3.2 Restated Bylaws of OrCAD, Inc.*
4.3 Rights Agreement dated September 18, 1992*
4.4 Restricted Stock and Registration Rights Agreement dated May 30, 1995*
4.5 Piggyback Registration Rights Agreement dated December 1, 1995*
10.1 Form of Indemnity Agreement between OrCAD, Inc. and each of its
executive officers and directors*
10.2 1991 Non-Qualified Stock Option Plan*
10.3 1995 Stock Option Plan*
10.4 1995 Stock Option Plan for Nonemployee Directors*
10.5 1995 Stock Incentive Plan*
10.6 Stock Exchange Agreement dated December 2, 1995 by and among OrCAD,
Inc., Intelligent Systems Corporation, Stuart A. Harrington, Michael
A. Burton, J. Leland Strang, Bonnie L. Herron, Francis A. Marks and
Takeo Maruichi.*
10.7 Lease between Pen Nom I Corp. and OrCAD, Inc. dated May 21, 1993*
10.8 Lease Agreement dated as of January 31, 1995 by and between Kurian
Limited Partnership and Massteck Ltd.*
10.9 1996 Employee Stock Purchase Plan*
10.10 Lease between Magellan Irvine Oaks Limited Partnership and MicroSim
Corporation, dated February 5, 1997.
10.11 Lease between Tigard Triangle I, LLC and OrCAD, Inc., dated February
20, 1998.
11.0 Statement regarding earnings per share computation
21.0 Subsidiaries of the Registrant
23.1 Consent of KPMG Peat Marwick LLP
27.1 Financial Data Schedule for Fiscal Year Ended December 31, 1997
27.2 Financial Data Schedule for Fiscal Year Ended December 31, 1996
</TABLE>
* Incorporated by reference to Exhibits of OrCAD's Registration Statement
on Form SB-2 as amended, effective March 1, 1996 (Commission
Registration No. 333-00198-LA).
** Incorporated herein by reference to the Company's Registration Statement
on Form S-4 dated December 12, 1997, File No. 333-38395.
(b) No reports on Form 8-K have been filed by the Registrant during the
fourth quarter of calendar 1997.
36
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
Dated March 30, 1998 OrCAD, Inc.
/s/ Michael F. Bosworth
By___________________________________
MICHAEL F. BOSWORTH CHAIRMAN OF
THE BOARD ANDCHIEF EXECUTIVE
OFFICER AND PRESIDENT
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURES TITLE DATE
PRINCIPAL FINANCIAL OFFICER AND DIRECTOR:
/s/ Michael F. Bosworth Chairman of the March 30, 1998
- ------------------------------------- Board Chief
MICHAEL F. BOSWORTH Executive Officer
and President
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
/s/ P. David Bundy Vice-President and March 30, 1998
- ------------------------------------- Chief Financial
P. DAVID BUNDY Officer
DIRECTORS:
/s/ Wolfram H. Blume Director March 30, 1998
- -------------------------------------
WOLFRAM H. BLUME
/s/ Stephen W. Director Director March 30, 1998
- -------------------------------------
STEPHEN W. DIRECTOR
/s/ Richard P. Magnuson Director March 30, 1998
- -------------------------------------
RICHARD P. MAGNUSON
/s/ James B. Moon Director March 30, 1998
- -------------------------------------
JAMES B. MOON
/s/ John C. Savage Director March 30, 1998
- -------------------------------------
JOHN C. SAVAGE
II-1
<PAGE>
SCHEDULE VIII
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
----------------------- OTHER
CHARGED TO CHANGES
BALANCE, CHARGED TO OTHER ADD BALANCE,
BEGINNING COSTS ACCOUNTS (DEDUCT) END OF
YEAR DESCRIPTION OF YEAR AND EXPENSES (DESCRIBE) (DESCRIBE) YEAR
---- ----------- --------- ------------ ---------- ---------- --------
<C> <S> <C> <C> <C> <C> <C>
1997 Allowance for doubtful
accounts and sales
returns................... $ 637 $1,058 $ -- $(1,056)(a) $639
Allowance for obsolete
inventory................. 49 156 -- (144)(b) 61
1996 Allowance for doubtful
accounts and sales
returns................... 422 921 -- (706)(a) 637
Allowance for obsolete
inventory................. 40 50 -- (41)(b) 49
1995 Allowance for doubtful
accounts and sales
returns................... 338 564 131(c) (611)(a) 422
Allowance for obsolete
inventory................. 60 51 -- (71)(b) 40
</TABLE>
- --------
(a) Write-off of accounts receivable against allowance account.
(b) Write-off of obsolete inventory.
(c) Addition to allowance for doubtful accounts as part of acquisitions.
S-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
OrCAD, Inc.:
Under date of January 27, 1998, we reported on the consolidated balance
sheets of OrCAD, Inc. and subsidiaries as of December 31, 1997 and 1996, and
the related consolidated statements of operations, stockholders' equity and
cash flows for each of the years in the three-year period ended December 31,
1997, which are included in the 1997 Annual Report to stockholders. These
consolidated financial statements and our report thereon are included in the
Annual Report on Form 10-KSB for the year 1997. In connection with our audits
of the aforementioned consolidated financial statements, we also have audited
the related consolidated financial statement schedule as listed in the
accompanying index. This financial statement schedule is the responsibility of
OrCAD's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KMPG PEAT MARWICK LLP
Portland, Oregon
January 27, 1998
S-2
<PAGE>
EXHIBIT 10.10
IRVINE OAKS EXECUTIVE PARK
--------------------------
OFFICE LEASE
------------
This Office Lease (the "LEASE"), dated as of the date set forth in Section
1 of the Summary of Basic Lease Information (the "SUMMARY"), below, is made by
and between MAGELLAN IRVINE OAKS LIMITED PARTNERSHIP, an Arizona limited
partnership ("LANDLORD"), and MICROSIM CORPORATION, a California corporation
("TENANT").
SUMMARY OF BASIC LEASE INFORMATION
----------------------------------
TERMS OF LEASE DESCRIPTION
- -------------- --------------------------------------------
1. Date: February 5, 1997
2. Premises
(Article 1).
2.1 Building: That certain building to be constructed by
Landlord in accordance with the terms of the
Tenant Work Letter, which is to be located at
16275 Laguna Canyon Road, Irvine, California
2.2 Premises: Approximately 42,756 rentable square feet of
space (subject to adjustment as set forth in
Section 1.2 of this Lease) comprising the
entire Building, as further set forth in
EXHIBIT A to the Office Lease.
2.3 Project: Irvine Oaks Executive Park
16251 - 16277 Laguna Canyon Road
Irvine, California 92618
3. Lease Term
(Article 2).
3.1 Length of Term: Seven (7) years.
-1-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
3.2 Lease Commencement
Date: The earlier to occur of (i) the date upon
which Tenant first commences to conduct
business in the Premises (not including
Tenant's 30-day move-in and fixturization
period as set forth in Section 5.1 of the
Tenant Work Letter), and (ii) the date upon
which the Premises are "Ready for Occupancy,"
at that term is defined in the Tenant Work
Letter (and which date is contingent upon
Landlord receiving a certificate of occupancy
or its legal equivalent allowing occupancy of
the Premises), which date is anticipated to
be August 1, 1997.
3.3 Lease Expiration Date: The date immediately preceding the 7th
anniversary of the Lease Commencement Date.
4. Base Rent (Article 3): (Subject to adjustment as set forth in
Section 1.2 of the Lease).
<TABLE>
<CAPTION>
Monthly
Monthly Rental Rate
Installment per Rentable
Lease Year of Base Rent Square Foot
---------- ------------ ------------
<S> <C> <C>
1 - 2 $44,893.80 $ 1.05
3 - 5 $47,031.60 $ 1.10
6 - 7 $51,734.76 $ 1.21
</TABLE>
(Note: Tenant has no obligation to pay any Base Rent
attributable to the first (1st) month of the Lease Term)
5. Tenant's Share
(Article 4):
5.1 Tenant's Building
Share: 100%.
-2-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
5.2 Tenant's Project
Share: Approximately 14%. (Subject to adjustment as
set forth in Section 1.2 of the Lease).
6. Permitted Use
(Article 5): General office use, software design,
duplication and shipment, and any other
legally permitted use consistent with a
first-class office park and in compliance
with any covenants, conditions and
restrictions recorded against the Project.
7. Security Deposit; Letter
of Credit
(Article 21): $51,734.76.
8. Parking Ratio
(Article 28): Four (4) parking spaces for every 1,000
rentable square feet of the Premises, of
which up to one (1) parking space for every
3,000 rentable square feet of the Premises
shall be a reserved parking space.
9. Address of Tenant
(Section 29.18): MicroSim Corporation
20 Fairbanks
Irvine, California 92718
Attention: Ms. Wendi Hall
(Prior to Lease Commencement Date)
and
Irvine Oaks Executive Park, Bldg. No. 3
16275 Laguna Canyon Road
Irvine, California
Attention: Ms. Wendi Hall
(After Lease Commencement Date)
in either case with a copy to:
McDermott, Will & Emery
2049 Century Park East
Los Angeles, California 90067
Attention: Joel M. Bernstein, Esq.
-3-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
10. Address of Landlord
(Section 29.18): Magellan-New America Asset Management, Inc.
16261 Laguna Canyon Road
Irvine, California 92718
Attention: Property Manager
and
Magellan Corporations
2198 East Camelback Road
Suite 325
Phoenix, Arizona 85016
Attention: Ms. Ulrike Gross
and
(only as to notices of default and other
legal notices)
Allen, Matkins, Leck, Gamble & Mallory
1999 Avenue of the Stars, Suite 1800
Los Angeles, California 90067
Attention: Anton N. Natsis, Esq.
11. Broker(s)
(Section 29.24): Matlow-Kennedy Commercial Real Estate Services
4510 East Pacific Coast Highway
Suite 100
Long Beach, California 90804
and
Cushman & Wakefield of California, Inc.
1920 Main Street
Suite 100
Irvine, California 92614
-4-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
12. Additional Tenant Rights: A. One (1) Option to Expand into
approximately 10,000 square feet in the
Project, between the 60th and 68th months of
the Lease Term, pursuant to the terms of
Section 1.3 of this Lease.
B. Two (2) Options to Extend the Lease Term
for a period of five (5) years each, pursuant
to the terms of Section 2.2 of this Lease.
13. Tenant Improvement Allowance
(Exhibit B, Section 2.1): $25.00 per usable square foot of the Premises.
-5-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
ARTICLE 1
---------
PREMISES, BUILDING, PROJECT, AND COMMON AREAS
---------------------------------------------
1.1 PREMISES, BUILDING, PROJECT AND COMMON AREAS.
--------------------------------------------
1.1.1 THE PREMISES. Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord the premises set forth in Section 2.2 of the Summary
(the "PREMISES"). The outline of the Premises is set forth in EXHIBIT A
attached hereto and each floor or floors of the Premises has the number of
rentable square feet as set forth in Section 2.2 of the Summary. The parties
hereto agree that the lease of the Premises is upon and subject to the terms,
covenants and conditions herein set forth, and Tenant covenants as a material
part of the consideration for this Lease to keep and perform each and all of
such terms, covenants and conditions by it to be kept and performed and that
this Lease is made upon the condition of such performance. The parties hereto
hereby acknowledge that the purpose of EXHIBIT A is to show the approximate
location of the Premises in the "Building," as that term is defined in Section
1.1.2, below, only, and such Exhibit is not meant to constitute an agreement,
representation or warranty as to the construction of the Premises, the precise
area thereof or the specific location of the "Common Areas," as that term is
defined in Section 1.1.3, below, or the elements thereof or of the accessways to
the Premises or the "Project," as that term is defined in Section 1.1.2, below.
Except as specifically set forth in this Lease and in the Tenant Work Letter
attached hereto as EXHIBIT B (the "TENANT WORK LETTER"), Landlord shall not be
obligated to provide or pay for any improvement work or services related to the
improvement of the Premises. Tenant also acknowledges that neither Landlord nor
any agent of Landlord has made any representation or warranty regarding the
condition of the Premises, the Building or the Project or with respect to the
suitability of any of the foregoing for the conduct of Tenant's business, except
as specifically set forth in this Lease and the Tenant Work Letter. The taking
of possession of the Premises by Tenant shall conclusively establish that the
Premises and the Building were at such time in good and sanitary order,
condition and repair, subject to Landlord's obligation to repair, reasonably
promptly, (a) any outstanding "punch-list" items, and (b) any latent defects in
the Building.
1.1.2 THE BUILDING AND THE PROJECT. The Premises are a part of the
building set forth in Section 2.1 of the Summary (the "BUILDING"). The Building
shall be constructed by Landlord in accordance with the terms of the Tenant Work
Letter, and shall be part of an office project known as "IRVINE OAKS EXECUTIVE
PARK." The term "PROJECT," as used in this Lease, shall mean (i) the Building
and the Common Areas, (ii) the land (which is improved with landscaping, parking
areas and other improvements) upon which the Building and the Common Areas are
located, (iii) the other office buildings located within the Project and the
land upon which such adjacent office buildings are located, and (iv) at
Landlord's discretion, any additional real property, areas, land, buildings or
other improvements added thereto outside of the Project.
1.1.3 COMMON AREAS. Tenant shall have the non-exclusive right to use
in common with other tenants in the Project, and subject to the rules and
regulations referred to in Article 5 of this Lease, those portions of the
Project which are provided, from time to time, for use in common by Landlord,
Tenant and any other tenants of the Project (such areas, together
-6-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
with such other portions of the Project designated by Landlord, in its
discretion, including certain areas designated for the exclusive use of certain
tenants, or to be shared by Landlord and certain tenants, are collectively
referred to herein as the "COMMON AREAS"). The manner in which the Common Areas
are maintained and operated shall be at the sole discretion of Landlord and the
use thereof shall be subject to such rules, regulations and restrictions as
Landlord may make from time to time. Landlord reserves the right to close
temporarily, make alterations or additions to, or change the location of
elements of the Project and the Common Areas.
1.2 VERIFICATION OF RENTABLE SQUARE FEET OF PREMISES, BUILDING, AND
PROJECT. For purposes of this Lease, "RENTABLE SQUARE FEET" shall be calculated
based on the "drip line" area of the Building, as measured to the exterior walls
on each floor of the Building, without exclusions for any soffits or
penetrations. The "USABLE SQUARE FEET" of the Premises shall be determined
pursuant the Standard Method For Measuring Office Buildings, ANSI Z65.1989
("BOMA"). The rentable square footage of the Project shall include all of the
Building Common Areas. Prior to the "Lease Commencement Date," as that terms is
defined in Article 3, below, a space planner or architect, mutually agreed upon
by Landlord and Tenant, shall determine the rentable square footage of Premises
in accordance with the terms of this Section 1.2. The parties agree that the
determination of the rentable square footage of the Premises made by such space
planner or architect shall be binding upon the parties, and shall not be subject
to further verification during the Lease Term. In the event that the rentable
area of the Project shall change due to subsequent alterations and/or other
modifications to the Project, the rentable area of the Project shall be
appropriately adjusted as of the date of such alteration and/or other
modification, based upon the written verification by Landlord's space planner of
such revised rentable area. In the event of any such adjustment to the rentable
area of the Project, all amounts, percentages and figures appearing or referred
to in this Lease based upon such rentable area (including, without limitation,
the amount of the "Tenant's Project Share," as that term is defined in Section
4.2.10, below) shall be modified in accordance with such determination.
1.3 EXPANSION SPACE. Landlord hereby grants to the originally named
Tenant herein ("Original Tenant") the right to lease up to 10,000 rentable
square feet of space in the Project (the "EXPANSION SPACE"), the location or
locations of which Expansion Space shall be designated by Landlord, upon the
terms and conditions set forth in this Section 1.3 and this Lease.
1.3.1 METHOD OF EXERCISE. The expansion option contained in this
Section 1.3 shall be exercised only by Original Tenant and only in the following
manner: (i) Tenant shall deliver notice to Landlord not more than ten (10)
months nor less than four (4) months prior to the first day of the 5th Lease
Year, (a) stating that Tenant is interested in exercising its option and (b)
setting forth the required total size (not to exceed 10,000 rentable square
feet) of the desired Expansion Space; (ii) Landlord, after receipt of Tenant's
notice, shall deliver notice (the "EXPANSION RENT NOTICE") to Tenant not less
than three (3) months prior to the first day of the 5th Lease Year, setting
forth the "Expansion Rent," as that term is defined in Section 1.3 of this Lease
and describing the Expansion Space, including its location and the improvements
contained therein, with reasonable particularity; and (iii) if Tenant wishes to
exercise its expansion option, Tenant shall, on or before the later of (A) the
date occurring two (2) months prior to the first day of the 5th Lease Year, and
(B) the date occurring thirty (30) days after
-7-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
Tenant's receipt of the Expansion Rent Notice, exercise the option by delivering
written notice thereof to Landlord.
1.3.2 DELIVERY OF THE EXPANSION SPACE. Landlord shall deliver the
Expansion Space (which shall be equal to the amount of space desired by Tenant
plus or minus up to 1,000 rentable square feet) to Tenant at any time prior to
the end of the eighth (8th) month of the 5th Lease Year, at Landlord's option
(the "Delivery Period"). The delivery of the Expansion Space may, at Landlord's
option, be in increments, and the Expansion Space may consist of one or more
(but no more than three (3)) separate spaces in one or more buildings of the
Project.
1.3.3 EXPANSION RENT. The Rent payable by Tenant for Expansion Space
leased by Tenant (the "EXPANSION RENT") shall be equal to the rent including all
escalations, at which, as of the commencement of Tenant's proposed lease of the
Expansion Space, tenants are leasing non-sublease, non-encumbered, non-equity
space comparable in size, location and quality to the Premises, for a term equal
to the then remaining Lease Term, which comparable space is located in the
Project, taking into consideration the following concessions: (a) rental
abatement concessions, if any, being granted such tenants in connection with
such comparable space; (b) tenant improvements or allowances provided or to be
provided for such comparable space, taking into account, and deducting the value
of, the existing improvements in the such space, such value to be based upon the
age, quality and layout of the improvements and the extent to which the same can
be utilized by a general office user, and further provided that any such
allowances shall be prorated to reflect the actual term of Tenant's lease of the
Expansion Space.
1.3.4 CONSTRUCTION OF EXPANSION SPACE. Tenant shall take the
Expansion Space in its "as is" condition, and the construction of improvements
in the Expansion Space shall comply with the terms of Article 8 of this Lease.
1.3.5 AMENDMENT TO LEASE. If Tenant timely exercises Tenant's right
to lease Expansion Space as set forth herein, Landlord and Tenant shall within
fifteen (15) days thereafter execute an amendment adding such Expansion Space to
the Lease upon the same terms and conditions as the initial Premises, except as
otherwise set forth in this Section 1.3, and provided that the terms of the
Tenant Work Letter shall not apply with respect to the Expansion Space. Tenant
shall commence payment of Rent for the Expansion Space and the term of the
Expansion Space shall commence upon the date of delivery of the Expansion Space
to Tenant (the "Expansion Space Commencement Date"). The lease term of the
Expansion Space shall expire on the Lease Expiration Date.
1.3.6 NO DEFAULTS. The rights contained in this Section 1.3 shall be
personal to Original Tenant, may only be exercised by Original Tenant (and not
any assignee, sublessee or other transferee of Tenant's interest in this Lease)
if Original Tenant continues to directly lease (i.e., has not sublet) the entire
Premises. Tenant shall not have the right to lease Expansion Space as provided
in this Section 1.3, if, as of the date of the attempted exercise of the
expansion option by Tenant, or as of the scheduled date of delivery of such
Expansion Space to Tenant, Tenant is in default under this Lease or Tenant has
previously been in default under this Lease more than once.
-8-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
ARTICLE 2
---------
LEASE TERM; OPTION TERMS; OUTSIDE DELIVERY DATE
-----------------------------------------------
2.1 INITIAL TERM. The terms and provisions of this Lease shall be
effective as of the date of this Lease. The term of this Lease (the "LEASE
TERM") shall be as set forth in Section 3.1 of the Summary, shall commence on
the date set forth in Section 3.2 of the Summary (the "LEASE COMMENCEMENT
DATE"), and shall terminate on the date set forth in Section 3.3 of the Summary
(the "LEASE EXPIRATION DATE") unless this Lease is sooner terminated as
hereinafter provided. For purposes of this Lease, the term "LEASE YEAR" shall
mean each consecutive twelve (12) month period during the Lease Term. At any
time during the Lease Term, Landlord may deliver to Tenant a notice in the form
as set forth in EXHIBIT C, attached hereto, as a confirmation only of the
information set forth therein, which Tenant shall execute and return to Landlord
within five (5) days of receipt thereof.
2.2 OPTION TERM.
2.2.1 OPTION RIGHT. Landlord hereby grants the Original Tenant two
(2) options to extend the Lease Term for a period of five (5) years each (each,
an "OPTION TERM"), which options shall be exercisable only by written notice
delivered by Tenant to Landlord as provided below, provided that, as of the date
of delivery of such notice, Tenant is not in default under this Lease and Tenant
has not previously been properly declared in default under this Lease more than
once. Upon the proper exercise of any such option to extend, and provided that,
as of the end of the initial Lease Term or initial Option Term, as the case may
be, Tenant is not in default under this Lease and Tenant has not previously been
properly declared in default under this Lease more than once, the Lease Term, as
it applies to the Premises, shall be extended for a period of five (5) years.
The rights contained in this Section 2.2 shall be personal to the Original
Tenant and may only be exercised by the Original Tenant (and not any assignee,
sublessee or other transferee of Tenant's interest in this Lease) if the
Original Tenant occupies the entire Premises.
2.2.2 OPTION RENT. The rent payable by Tenant during the Option Term
(the "OPTION RENT") shall be equal to the greater of (i) the Rent being paid by
Tenant as of the expiration of the initial Lease Term or initial Option Term, as
the case may be, and (ii) the rent including all escalations, at which, as of
the commencement of the Option Term, tenants are leasing non-sublease, non-
encumbered, non-equity space comparable in size, location and quality to the
Premises, for a term of five (5) years, which comparable space is located in the
Project, taking into consideration the following concessions: (a) rental
abatement concessions, if any, being granted such tenants in connection with
such comparable space; and (b) tenant improvements or allowances provided or to
be provided for such comparable space, taking into account, and deducting the
value of, the existing improvements in the Premises, such value to be based upon
the age, quality and layout of the improvements and the extent to which the same
can be utilized by Tenant based upon the fact that the precise tenant
improvements existing in the Premises are specifically suitable to Tenant.
-9-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
2.2.3 EXERCISE OF OPTION. The options contained in this Section 2.2
shall be exercised by Tenant, if at all, only in the following manner: (i)
Tenant shall deliver written notice to Landlord not more than fourteen (14)
months nor less than thirteen (13) months prior to the expiration of the initial
Lease Term or initial Option Term, as applicable, stating that Tenant is
interested in exercising its option; (ii) Landlord, after receipt of Tenant's
notice, shall deliver notice (the "OPTION RENT NOTICE") to Tenant not less than
eleven (11) months prior to the expiration of the initial Lease Term or initial
Option Term, as applicable, setting forth the Option Rent; and (iii) if Tenant
wishes to exercise such option, Tenant shall, on or before the earlier of (A)
the date occurring ten (10) months prior to the expiration of the initial Lease
Term or initial Option Term, as applicable, and (B) the date occurring thirty
(30) days after Tenant's receipt of the Option Rent Notice, exercise the option
by delivering written notice thereof to Landlord.
2.3 OCCURRENCE OF LEASE COMMENCEMENT DATE. Landlord shall cause the Lease
Commencement Date to occur on or before December 31, 1997 (the "OUTSIDE DATE").
2.3.1 OUTSIDE DATE OF LEASE COMMENCEMENT DATE. If Landlord does not
cause the Lease Commencement Date to occur by the Outside Date, then the sole
remedy of Tenant for such failure shall be the right to deliver a notice to
Landlord (a "TERMINATION NOTICE") electing to terminate this Lease effective
upon the date occurring five (5) business days following receipt by Landlord of
the Termination Notice (the "EFFECTIVE DATE"). The Termination Notice must be
delivered by Tenant to Landlord, if at all, not earlier than the Outside Date
nor later than five (5) business days after the Outside Date. The effectiveness
of any such Termination Notice delivered by Tenant to Landlord shall be governed
by the terms of this Section 2.3.
2.3.2 OTHER TERMS. The Effective Date and the Outside Date shall be
extended to the extent of any delays beyond the reasonable control of Landlord,
including "Force Majeure Delays", as that term is defined in Section 29.16 of
this Lease, and any delay or delays encountered by Landlord affecting the work
of construction of the Tenant's improvements in the Premises because of delays
due to excess waiting periods for obtaining governmental permits or approval
beyond the time periods normally required to obtain such permits or approvals.
Upon any termination as set forth in this Section 2.3, Landlord and Tenant shall
be relieved from any and all liability to each other resulting hereunder.
ARTICLE 3
---------
BASE RENT
---------
Tenant shall pay, without prior notice or demand, to Landlord or Landlord's
agent at the management office of the Project, or, at Landlord's option, at such
other place as Landlord may from time to time designate in writing, by a check
for currency which, at the time of payment, is legal tender for private or
public debts in the United States of America, base rent ("BASE RENT") as set
forth in Section 4 of the Summary, payable in equal monthly installments as set
forth in Section 4 of the Summary in advance on or before the first day of each
and every calendar month during the Lease Term, without any setoff or deduction
whatsoever. Landlord agrees that
-10-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
it shall invoice Tenant monthly for such amounts. Notwithstanding the foregoing,
Tenant shall have no obligation to pay any Base Rent which is attributable to
the first (1st) month of the Lease Term. The Base Rent for the first full month
of the Lease Term which occurs after the expiration of any free rent period
shall be paid at the time of Tenant's execution of this Lease. If any Rent
payment date (including the Lease Commencement Date) falls on a day of the month
other than the first day of such month or if any payment of Rent is for a period
which is shorter than one month, the Rent for any fractional month shall accrue
on a daily basis for the period from the date such payment is due to the end of
such calendar month or to the end of the Lease Term at a rate per day which is
equal to 1/365 of the applicable annual Rent. All other payments or adjustments
required to be made under the terms of this Lease that require proration on a
time basis shall be prorated on the same basis.
ARTICLE 4
---------
ADDITIONAL RENT
---------------
4.1 GENERAL TERMS. In addition to paying the Base Rent specified in
Article 3 of this Lease, Tenant shall pay "Tenant's Building Share" of the
annual "Building Direct Expenses," as those terms are defined in Sections 4.2.9
and 4.2.2 of this Lease, respectively, and "Tenant's Project Share" of the
annual "Project Direct Expenses", as those terms are defined in Sections 4.2.10
and 4.2.1 of this Lease, respectively. Such payments by Tenant, together with
any and all other amounts payable by Tenant to Landlord pursuant to the terms of
this Lease, are hereinafter collectively referred to as the "ADDITIONAL RENT",
and the Base Rent and the Additional Rent are herein collectively referred to as
"RENT." All amounts due under this Article 4 as Additional Rent shall be
payable for the same periods and in the same manner as the Base Rent. Without
limitation on other obligations of Tenant which survive the expiration of the
Lease Term, the obligations of Tenant to pay the Additional Rent provided for in
this Article 4 shall survive the expiration of the Lease Term.
4.2 DEFINITIONS OF KEY TERMS RELATING TO ADDITIONAL RENT. As used in this
Article 4, the following terms shall have the meanings hereinafter set forth:
4.2.1 "PROJECT DIRECT EXPENSES" shall mean the portion of "Operating
Expenses," as that term is defined in Section 4.2.7 below, which is not
attributable to any particular Building in the Project, but which instead
relates to the Project as a whole.
4.2.2 "BUILDING DIRECT EXPENSES" shall mean "Building Operating
Expenses" and "Building Tax Expenses", as those terms are defined in Sections
4.2.3 and 4.2.4, below, respectively.
4.2.3 "BUILDING OPERATING EXPENSES" shall mean the portion of
"Operating Expenses," as that term is defined in Section 4.2.7 below, allocated
to the tenants of the Building pursuant to the terms of Section 4.3.1 below.
-11-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
4.2.4 "BUILDING TAX EXPENSES" shall mean that portion of "Tax
Expenses", as that term is defined in Section 4.2.8 below, allocated to the
tenants of the Building pursuant to the terms of Section 4.3.1 below.
4.2.5 "DIRECT EXPENSES" shall mean "Operating Expenses" and "Tax
Expenses."
4.2.6 "EXPENSE YEAR" shall mean each calendar year in which any
portion of the Lease Term falls, through and including the calendar year in
which the Lease Term expires, provided that Landlord, upon notice to Tenant, may
change the Expense Year from time to time to any other twelve (12) consecutive
month period, and, in the event of any such change, Tenant's Share of Building
Direct Expenses shall be equitably adjusted for any Expense Year involved in any
such change.
4.2.7 "OPERATING EXPENSES" shall mean all expenses, costs and amounts
of every kind and nature which Landlord pays or accrues during any Expense Year
because of or in connection with the management, maintenance, security, repair,
replacement or operation of the Project, or any portion thereof. Without
limiting the generality of the foregoing, Operating Expenses shall specifically
include any and all of the following: (i) the cost of supplying all utilities,
the cost of operating, repairing, maintaining, and renovating the utility,
telephone, mechanical, sanitary, storm drainage, and elevator systems, and the
cost of maintenance and service contracts in connection therewith; (ii) the cost
of licenses, certificates, permits and inspections and the cost of contesting
any governmental enactments which may affect Operating Expenses, and the costs
incurred in connection with a transportation system management program or
similar program; (iii) the cost of all insurance carried by Landlord in
connection with the Project as reasonably determined by Landlord; (iv) the cost
of landscaping, relamping, and all supplies, tools, equipment and materials used
in the operation, repair and maintenance of the Project, or any portion thereof;
(v) the cost of parking area repair, restoration, and maintenance ; (vi) fees
and other costs, including management fees, consulting fees, legal fees and
accounting fees, of all contractors and consultants in connection with the
management, operation, maintenance and repair of the Project; (vii) payments
under any equipment rental agreements and the fair rental value of any
management office space (provided that such space is not in excess of 1,000
rentable square feet); (viii) the allocable portion of wages, salaries and other
compensation and benefits, including taxes levied thereon, of all persons
engaged in the operation, maintenance and security of the Project; (ix) costs
under any instrument pertaining to the sharing of costs by the Project; (x)
operation, repair, maintenance and replacement of all systems and equipment and
components thereof of the Building (provided that any such costs which are
capital in nature shall be included under item (xiii), below); (xi) the cost of
janitorial, alarm, security and other services, replacement of wall and floor
coverings, ceiling tiles and fixtures in common areas, maintenance and
replacement of curbs and walkways, repair to roofs and re-roofing; (xii)
amortization (including interest on the unamortized cost), on a straight-line
basis, of the cost of acquiring or the rental expense of personal property used
in the maintenance, operation and repair of the Project, or any portion thereof;
(xiii) the cost of capital improvements or other costs incurred in connection
with the Project (A) which are intended to effect economies in the operation or
maintenance of the Project, or any portion thereof, (B) that are required to
comply with present or anticipated conservation programs, (C) which are
replacements or modifications
-12-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
of nonstructural items located in the Common Areas required to keep the Common
Areas in good order or condition, (D) that are required under any governmental
law or regulation or (E) which are reasonably determined by Landlord to be in
the best interests of the Building and/or the Project; provided, however, that
any capital expenditure shall be amortized on a straight-line basis over its
reasonable useful life; and (xiv) costs, fees, charges or assessments imposed
by, or resulting from any mandate imposed on Landlord by, any federal, state or
local government for fire and police protection, trash removal, community
services, or other services which do not constitute "Tax Expenses" as that term
is defined in Section 4.2.8, below (provided that any assessments relating to
capital improvements to the Project or Building shall be included only to the
extent such costs would be includable under item (xiii), above). Notwithstanding
the foregoing, Operating Expenses shall not include any amounts for services
for which Tenant or other tenants of the Project contract directly with Landlord
or another service provider, and for which services Tenant or such other tenants
or occupants pay Landlord or such service provider directly.
If the Project is not at least ninety-five percent (95%) occupied during
all or a portion of or any Expense Year, Landlord may elect to make an
appropriate adjustment to the components of Operating Expenses for such year to
determine the amount of Operating Expenses that would have been paid had the
Project been ninety-five percent (95%) occupied; and the amount so determined
shall be deemed to have been the amount of Operating Expenses for such year.
Landlord agrees that no such adjustment shall result in Landlord being
reimbursed for Operating Expenses by all tenants of the Project in an amount
which is in excess of the Operating Expenses actually paid by Landlord in
connection with the operation of the Project.
4.2.8 TAXES.
4.2.8.1 "TAX EXPENSES" shall mean all federal, state, county, or
local governmental or municipal taxes, fees, charges or other impositions of
every kind and nature, whether general, special, ordinary or extraordinary,
(including, without limitation, real estate taxes, general and special
assessments, transit taxes, leasehold taxes or taxes based upon the receipt of
rent, including gross receipts or sales taxes applicable to the receipt of rent,
unless required to be paid by Tenant, personal property taxes imposed upon the
fixtures, machinery, equipment, apparatus, systems and equipment, appurtenances,
furniture and other personal property used in connection with the Project, or
any portion thereof), which shall be paid or accrued during any Expense Year
(without regard to any different fiscal year used by such governmental or
municipal authority) because of or in connection with the ownership, leasing and
operation of the Project, or any portion thereof.
4.2.8.2 Tax Expenses shall include, without limitation: (i) Any
tax on the rent, right to rent or other income from the Project, or any portion
thereof, or as against the business of leasing the Project, or any portion
thereof; (ii) Any assessment, tax, fee, levy or charge in addition to, or in
substitution, partially or totally, of any assessment, tax, fee, levy or charge
previously included within the definition of real property tax, it being
acknowledged by Tenant and Landlord that Proposition 13 was adopted by the
voters of the State of California in the June 1978 election ("PROPOSITION 13")
and that assessments, taxes, fees, levies and charges
-13-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
may be imposed by governmental agencies for such services as fire protection,
street, sidewalk and road maintenance, refuse removal and for other governmental
services formerly provided without charge to property owners or occupants, and,
in further recognition of the decrease in the level and quality of governmental
services and amenities as a result of Proposition 13, Tax Expenses shall also
include any governmental or private assessments or the Project's contribution
towards a governmental or private cost-sharing agreement for the purpose of
augmenting or improving the quality of services and amenities normally provided
by governmental agencies; (iii) Any assessment, tax, fee, levy, or charge
allocable to or measured by the area of the Premises or the Rent payable
hereunder, including, without limitation, any business or gross income tax or
excise tax with respect to the receipt of such rent, or upon or with respect to
the possession, leasing, operating, management, maintenance, alteration, repair,
use or occupancy by Tenant of the Premises, or any portion thereof; and (iv) Any
assessment, tax, fee, levy or charge, upon this transaction or any document to
which Tenant is a party, creating or transferring an interest or an estate in
the Premises.
4.2.8.3 Any costs and expenses (including, without limitation,
reasonable attorneys' fees) incurred in attempting to protest, reduce or
minimize Tax Expenses shall be included in Tax Expenses in the Expense Year such
expenses are paid. Tax refunds shall be credited against Tax Expenses and
refunded to Tenant regardless of when received, based on the Expense Year to
which the refund is applicable, provided that in no event shall the amount to be
refunded to Tenant for any such Expense Year exceed the total amount paid by
Tenant as Additional Rent under this Article 4 for such Expense Year. If Tax
Expenses for any period during the Lease Term or any extension thereof are
increased after payment thereof for any reason, including, without limitation,
error or reassessment by applicable governmental or municipal authorities,
Tenant shall pay Landlord upon demand Tenant's Share of any such increased Tax
Expenses included by Landlord as Building Tax Expenses pursuant to the terms of
this Lease. Notwithstanding anything to the contrary contained in this Section
4.2.8 (except as set forth in Section 4.2.8.1, above), there shall be excluded
from Tax Expenses (i) all excess profits taxes, franchise taxes, gift taxes,
capital stock taxes, inheritance and succession taxes, estate taxes, federal and
state income taxes, and other taxes to the extent applicable to Landlord's
general or net income (as opposed to rents, receipts or income attributable to
operations at the Project), (ii) any items included as Operating Expenses, and
(iii) any items paid by Tenant under Section 4.5 of this Lease.
4.2.9 "TENANT'S BUILDING SHARE" shall mean the percentage set forth
in Section 6.1 of the Summary.
4.2.10 "TENANT'S PROJECT SHARE" "Tenant's Project Share" shall mean
the percentage set forth in Section 6.2 of the Summary.
4.3 ALLOCATION OF DIRECT EXPENSES.
4.3.1 METHOD OF ALLOCATION. The parties acknowledge that the
Building is a part of a multi-building project and that the Project Direct
Expenses should be shared between the tenants of the Building and the tenants of
the other buildings in the Project. Accordingly, as
-14-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
set forth in Section 4.2 above, Direct Expenses (which consists of Operating
Expenses and Tax Expenses) are determined annually for the Project as a whole,
and a portion of the Direct Expenses, which portion shall be determined by
Landlord on an equitable basis, shall be allocated to the tenants of the
Building (as opposed to the tenants of any other buildings in the Project) and
such portion shall be the Building Direct Expenses for purposes of this Lease.
Building Direct Expenses shall include all Direct Expenses attributable solely
to the Building.
4.3.2 COST POOLS. Landlord shall have the right, from time to time,
to equitably allocate some or all of the Project Direct Expenses among different
portions or occupants of the Project (the "COST POOLS"), on a commercially
reasonable basis. Such Cost Pools may include, but shall not be limited to, the
office space tenants of a building of the Project or of the Project, and the
retail space tenants of a building of the Project or of the Project. The Direct
Expenses within each such Cost Pool shall be allocated and charged to the
tenants within such Cost Pool in an equitable manner.
4.4 CALCULATION AND PAYMENT OF ADDITIONAL RENT. For each Expense Year
ending or commencing within the Lease Term, Tenant shall pay to Landlord, in the
manner set forth in Section 4.4.1, below, and as Additional Rent, an amount
equal to the sum of (i) Tenant's Building Share of Building Direct Expenses for
such Expense Year and (ii) Tenant's Project Share of Project Direct Expenses for
such Expense Year (collectively, the "EXPENSE PAYMENT").
4.4.1 STATEMENT OF ACTUAL DIRECT EXPENSES AND PAYMENT BY TENANT.
Landlord shall endeavor to give to Tenant following the end of each Expense
Year, a statement (the "STATEMENT") which shall state the Building Direct
Expenses and Project Direct Expenses incurred or accrued for such preceding
Expense Year, and which shall indicate the amount of the Expense Payment. Upon
receipt of the Statement for each Expense Year commencing or ending during the
Lease Term, Tenant shall pay, with its next installment of Base Rent due, the
full amount of the Expense Payment for such Expense Year (prorated to reflect
the period of the Lease Term included in such Expense Year), less the amounts,
if any, paid during such Expense Year as an "Estimated Payment," as that term is
defined in Section 4.4.2, below. The failure of Landlord to timely furnish the
Statement for any Expense Year shall not prejudice Landlord or Tenant from
enforcing its rights under this Article 4. Even though the Lease Term has
expired and Tenant has vacated the Premises, when the final determination is
made of Tenant's Building Share of Building Direct Expenses and Tenant's Project
Share of Project Direct Expenses for the Expense Year in which this Lease
terminates, Tenant shall immediately pay to Landlord such amount. The
provisions of this Section 4.4.1 shall survive the expiration or earlier
termination of the Lease Term.
4.4.2 STATEMENT OF ESTIMATED DIRECT EXPENSES. In addition, Landlord
shall endeavor to give Tenant a yearly expense estimate statement (the "ESTIMATE
STATEMENT") which shall set forth Landlord's reasonable estimate (the
"ESTIMATE") of what the total amount of Building Direct Expenses and Project
Direct Expenses for the then-current Expense Year shall be and the estimated
payment (the "ESTIMATED PAYMENT") which shall be based upon the Estimate. The
failure of Landlord to timely furnish the Estimate Statement for any Expense
Year shall not preclude Landlord from enforcing its rights to collect any
Estimated Payment under this
-15-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
Article 4, nor shall Landlord be prohibited from revising any Estimate Statement
or Estimated Payment theretofore delivered to the extent necessary. Thereafter,
Tenant shall pay, with its next installment of Base Rent due, a fraction of the
Estimated Payment for the then-current Expense Year (reduced by any amounts paid
pursuant to the next to last sentence of this Section 4.4.2). Such fraction
shall have as its numerator the number of months which have elapsed in such
current Expense Year, including the month of such payment, and twelve (12) as
its denominator. Until a new Estimate Statement is furnished (which Landlord
shall have the right to deliver to Tenant at any time), Tenant shall pay
monthly, with the monthly Base Rent installments, an amount equal to one-twelfth
(1/12) of the total Estimated Payment set forth in the previous Estimate
Statement delivered by Landlord to Tenant. Landlord shall maintain books and
records with respect to Building Direct Expenses and Project Direct Expenses in
accordance with generally accepted accounting and management practices,
consistently applied.
4.5 TAXES AND OTHER CHARGES FOR WHICH TENANT IS DIRECTLY RESPONSIBLE.
4.5.1 PERSONAL PROPERTY TAXES. Tenant shall be liable for and shall
pay at least ten (10) days before delinquency, taxes levied against Tenant's
equipment, furniture, fixtures and any other personal property located in or
about the Premises. If any such taxes on Tenant's equipment, furniture,
fixtures and any other personal property are levied against Landlord or
Landlord's property or if the assessed value of Landlord's property is increased
by the inclusion therein of a value placed upon such equipment, furniture,
fixtures or any other personal property and if Landlord pays the taxes based
upon such increased assessment, which Landlord shall have the right to do
regardless of the validity thereof but only under proper protest if requested by
Tenant, Tenant shall upon demand repay to Landlord the taxes so levied against
Landlord or the proportion of such taxes resulting from such increase in the
assessment, as the case may be.
4.5.2 "ABOVE-STANDARD" IMPROVEMENTS. If the tenant improvements in
the Premises, whether installed and/or paid for by Landlord or Tenant and
whether or not affixed to the real property so as to become a part thereof, are
assessed for real property tax purposes at a valuation higher than the valuation
at which tenant improvements conforming to Landlord's "building standard" in
other space in the Building are assessed, then the Tax Expenses levied against
Landlord or the property by reason of such excess assessed valuation shall be
deemed to be taxes levied against personal property of Tenant and shall be
governed by the provisions of Section 4.5.1, above.
4.5.3 OTHER TAXES. Notwithstanding any contrary provision herein,
Tenant shall pay prior to delinquency any (i) rent tax or sales tax, service
tax, transfer tax or value added tax, or any other applicable tax on the rent or
services herein or otherwise respecting this Lease, (ii) taxes assessed upon or
with respect to the possession, leasing, operation, management, maintenance,
alteration, repair, use or occupancy by Tenant of the Premises or any portion of
the Project, including the Project parking facility; or (iii) taxes assessed
upon this transaction or any document to which Tenant is a party creating or
transferring an interest or an estate in the Premises.
-16-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
4.5.4 SERVICE CHARGES. To the extent that, at Tenant's request,
Landlord provides any services directly to Tenant, including, without
limitation, janitorial, locksmithing, lamp replacement, or repair and
maintenance services, Tenant shall pay to Landlord, as Additional Rent and
concurrently with Tenant's payment of Base Rent to Landlord, the sum of all
costs of Landlord of such services (which cost may include an administration
fee).
ARTICLE 5
---------
USE OF PREMISES
---------------
5.1 PERMITTED USE. Tenant shall use the Premises solely for the Permitted
Use set forth in Section 6 of the Summary (provided that Tenant agrees that,
except for the designated warehouse space shown on the "Final Space Plan," as
defined in the Tenant Work Letter, and except for normal storage uses compatible
with the Permitted Use, the Premises shall not be used as warehouse or storage
space) and Tenant shall not use or permit the Premises or the Project to be used
for any other purpose or purposes whatsoever without the prior written consent
of Landlord, which may be withheld in Landlord's sole discretion.
5.2 PROHIBITED USES. Tenant further covenants and agrees that Tenant
shall not use, or suffer or permit any person or persons to use, the Premises or
any part thereof for any use or purpose contrary to the provisions of the Rules
and Regulations set forth in EXHIBIT D, attached hereto, or in violation of the
laws of the United States of America, the State of California, or the
ordinances, regulations or requirements of the local municipal or county
governing body or other lawful authorities having jurisdiction over the Project)
including, without limitation, any such laws, ordinances, regulations or
requirements relating to hazardous materials or substances, as those terms are
defined by applicable laws now or hereafter in effect. Tenant shall not do or
permit anything to be done in or about the Premises which will in any way damage
the reputation of the Project or obstruct or interfere with the rights of other
tenants or occupants of the Project, or injure or annoy them or use or allow the
Premises to be used for any improper, unlawful or objectionable purpose, nor
shall Tenant cause, maintain or permit any nuisance in, on or about the
Premises. Tenant shall comply with all recorded covenants, conditions, and
restrictions now or hereafter affecting the Project with respect to Tenant's use
of the Premises.
ARTICLE 6
---------
SERVICES AND UTILITIES
----------------------
6.1 STANDARD TENANT SERVICES. Landlord shall provide the following
services on all days (unless otherwise stated below) during the Lease Term.
6.1.1 Landlord shall provide adequate electrical wiring and
facilities for connection to Tenant's lighting fixtures and incidental use
equipment, provided that the combined connected electrical load of the
incidental use equipment and lighting fixtures does not exceed eight (8) watts
per usable square foot of the Premises, and the electricity so furnished will be
at a nominal one hundred twenty (120) volts and no electrical circuit for the
supply of such
-17-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
incidental use equipment will require a current capacity exceeding twenty (20)
amperes, which electrical usage shall be subject to applicable laws and
regulations, including Title 24. Tenant shall bear the cost of replacement of
lamps, starters and ballasts for lighting fixtures within the Premises.
6.1.2 Landlord shall provide city water from the regular Building
outlets for drinking, lavatory and toilet purposes in the Building Common Areas.
6.1.3 Landlord shall provide exterior window washing services in a
manner consistent with other comparable buildings in the vicinity of the
Building.
6.1.4 Landlord shall not provide janitorial services for the
Premises. Tenant shall be solely responsible maintaining the Premises in a
manner consistent with a first-class office building, including, without
limitation, the following.
6.1.4.1 Tenant shall cause the carpets or other floor coverings
in the Premises to be professionally cleaned at least once every six (6) months
during the Lease Term.
6.1.4.2 Tenant shall cause to be provided (i) semi-annual
interior window washing, and (ii) daily sweeping and cleaning of the Premises.
Tenant shall cooperate fully with Landlord at all times and abide by all
regulations and requirements that Landlord may reasonably prescribe for the
proper functioning and protection of the HVAC, electrical, mechanical and
plumbing systems.
6.2 OVERSTANDARD TENANT USE. Tenant shall not, without Landlord's prior
written consent, use heat-generating machines, machines other than normal
fractional horsepower office machines, or equipment or lighting other than
Building standard lights in the Premises, which may affect the temperature
otherwise maintained by the air conditioning system or increase the water
normally furnished for the Premises by Landlord pursuant to the terms of Section
6.1 of this Lease. If Tenant uses water, electricity, heat or air conditioning
in excess of that supplied by Landlord pursuant to Section 6.1 of this Lease,
Tenant shall pay to Landlord, upon billing, the cost of such excess consumption,
the cost of the installation, operation, and maintenance of equipment which is
installed in order to supply such excess consumption, and the cost of the
increased wear and tear on existing equipment caused by such excess consumption;
and Landlord may install devices to separately meter any increased use and in
such event Tenant shall pay the increased cost directly to Landlord, on demand,
at the rates charged by the public utility company furnishing the same,
including the cost of such additional metering devices. Tenant's use of
electricity shall never exceed the capacity of the feeders to the Project or the
risers or wiring installation.
6.3 INTERRUPTION OF USE. Tenant agrees that Landlord shall not be liable
for damages, by abatement of Rent or otherwise, for failure to furnish or delay
in furnishing any service (including telephone and telecommunication services),
or for any diminution in the quality or quantity thereof, when such failure or
delay or diminution is occasioned, in whole or in part, by
-18-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
breakage, repairs, replacements, or improvements, by any strike, lockout or
other labor trouble, by inability to secure electricity, gas, water, or other
fuel at the Building or Project after reasonable effort to do so, by any riot or
other dangerous condition, emergency, accident or casualty whatsoever, by act or
default of Tenant or other parties, or by any other cause beyond Landlord's
reasonable control; and such failures or delays or diminution shall never be
deemed to constitute an eviction or disturbance of Tenant's use and possession
of the Premises or relieve Tenant from paying Rent or performing any of its
obligations under this Lease. Furthermore, Landlord shall not be liable under
any circumstances for a loss of, or injury to, property (except, with respect to
property damage or personal injury only, to the extent caused by Landlord's
negligence or wilful misconduct) or for injury to, or interference with,
Tenant's business, including, without limitation, loss of profits, however
occurring, through or in connection with or incidental to a failure to furnish
any of the services or utilities as set forth in this Article 6.
6.4 SUBMETERING UTILITIES. In the event that the Premises are separately
metered for electricity, water, or any other utility service, Landlord shall
have the right to bill Tenant directly the cost of such utility, and Tenant
shall pay such costs directly to Landlord at the rates charged by the public
utility company furnishing the same, or to require Tenant to contract directly
with the applicable public utility for such service. Any such costs paid by
Tenant or any other tenant of the Building shall not be included in Operating
Expenses.
ARTICLE 7
---------
MAINTENANCE AND REPAIRS
-----------------------
7.1 MAINTENANCE OBLIGATIONS. Landlord shall maintain and repair the
structural portions of the Building, including the foundation, floor/ceiling
slabs, roof, curtain wall, exterior glass and mullions, columns, beams, shafts
(including elevator shafts), stairs, stairwells, and elevator cabs
(collectively, "Building Structure") and the mechanical, electrical, life
safety, plumbing, sprinkler systems and HVAC systems which are not part of the
"Tenant Improvements", as that term is defined in Section 2.1 of the Tenant Work
Letter (the "Building Systems"). Tenant shall, at Tenant's own expense, keep
the Premises, including all improvements, fixtures and furnishings therein, in
good order, repair and condition at all times during the Lease Term. In
addition, Tenant shall, at Tenant's own expense, but under the supervision and
subject to the prior approval of Landlord, and within any reasonable period of
time specified by Landlord, promptly and adequately repair all damage to the
Premises and replace or repair all damaged, broken, or worn fixtures and
appurtenances, except for damage caused by ordinary wear and tear or beyond the
reasonable control of Tenant; provided however, that, at Landlord's option, or
if Tenant fails to make such repairs, Landlord may, but need not, make such
repairs and replacements, and Tenant shall pay Landlord the cost thereof,
including a percentage of the cost thereof (to be uniformly established for the
Project) sufficient to reimburse Landlord for all overhead, general conditions,
fees and other costs or expenses arising from Landlord's involvement with such
repairs and replacements forthwith upon being billed for same. Landlord may,
but shall not be required to, enter the Premises at all reasonable times to make
such repairs, alterations, improvements or additions to the Premises or to the
Project or to any equipment located in the Project as Landlord shall desire or
deem necessary or as Landlord may
-19-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
be required to do by governmental or quasi-governmental authority or court order
or decree. Tenant hereby waives any and all rights under and benefits of
subsection 1 of Section 1932 and Sections 1941 and 1942 of the California Civil
Code or under any similar law, statute, or ordinance now or hereafter in effect.
7.2 TENANT'S RIGHT TO MAKE REPAIRS. In lieu of finding Landlord in
default under Section 19.6 of this Lease, if Tenant provides written notice to
Landlord of an event or circumstance which requires the action of Landlord
pursuant to the terms of this Lease, and Landlord fails to provide or commence
to provide (and thereafter make commercially reasonably good faith efforts to
diligently proceed with such efforts to completion), such action as required by
the terms of this Lease within twenty-five (25) days after receipt of such
written notice (or, in the event of an "Emergency," as that term is defined
below, two (2) business days), Tenant may proceed to take the required action
upon delivery of an additional five (5) business days (or in the case of an
Emergency, two (2) business days) notice to Landlord specifying that Tenant is
taking such required action, and if such action was required under the terms of
this Lease to be taken by Landlord, then Tenant shall be entitled to prompt
reimbursement by Landlord of Tenant's costs and expenses incurred in taking such
action during the period from the date Tenant incurs such costs and expenses
until such time as payment is made by Landlord. For such work that affects the
Building structure, or the Building systems and equipment or the exterior
appearance of the Building, Tenant shall use only qualified contractors which
normally and regularly performs similar work in the Project. Further, if
Landlord does not deliver a detailed written objection to Tenant within ten (10)
business days after receipt of an invoice from Tenant of its costs of taking
action which Tenant claims should have been taken by Landlord, which invoice
from Tenant sets forth a reasonably particularized breakdown of its costs and
expenses in connection with taking such action on behalf of Landlord, then
Tenant shall be entitled to deduct from Rent becoming payable by Tenant under
this Lease, the amount set forth in such invoice. If, however, Landlord in good
faith delivers to Tenant, within ten (10) business days after receipt of
Tenant's invoice, a written objection to the payment of such invoice, setting
forth with reasonable particularity Landlord's reasons for its claim that such
action did not have to be taken by Landlord pursuant to the terms of this Lease
or that the charges are excessive (in which case Landlord shall pay,
concurrently with Landlord's delivery of such written objection, the amount it
contends would not have been excessive), then Tenant shall not be entitled to
such deduction from Rent, but Tenant may proceed to institute arbitration
proceedings against Landlord pursuant to the terms of Article 29.32, below, to
determine that portion, if any, of the amounts so incurred by Tenant which
Landlord is required to reimburse Tenant under this Section 7.2. Tenant may
deduct the amount of any final, non-appealable arbitration award, not to exceed
the amount of the unpaid portion of the relevant invoice, together with interest
thereon at the Interest Rate from the Base Rent next due and owing under this
Lease. For the purposes of this Section 7.2, the term "Emergency" shall mean a
condition that creates an imminent, material threat to life or of material
damage to property.
-20-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
ARTICLE 8
---------
ADDITIONS AND ALTERATIONS
-------------------------
8.1 LANDLORD'S CONSENT TO ALTERATIONS. Tenant may not make any
improvements, alterations, additions or changes to the Premises or any
mechanical, plumbing or HVAC facilities or systems pertaining to the Premises
(collectively, the "ALTERATIONS") without first procuring the prior written
consent of Landlord to such Alterations, which consent shall be requested by
Tenant not less than thirty (30) days prior to the commencement thereof, and
which consent shall not be unreasonably withheld by Landlord, provided it shall
be deemed reasonable for Landlord to withhold its consent to any Alteration
which adversely affects the structural portions or the systems or equipment of
the Building or is visible from the exterior of the Building. The term
"Alterations" shall not include the initial construction of the Tenant
Improvements in the Premises in accordance with the terms of the Tenant Work
Letter. Notwithstanding the foregoing, Tenant shall have the right, without
Landlord's consent but upon five (5) business days prior notice to Landlord, to
make strictly non-structural additions and alterations ("Cosmetic Alterations")
to the Premises that do not (i) involve the expenditure of more than $5,000.00
in the aggregate, (ii) affect the exterior appearance of the Building, (iii)
affect the mechanical, electrical, life safety, plumbing, sprinkler systems and
HVAC systems in the Building or any structural portions of the Building, or (iv)
violate law. The construction of the initial improvements to the Premises shall
be governed by the terms of the Tenant Work Letter and not the terms of this
Article 8.
8.2 MANNER OF CONSTRUCTION. Landlord may impose, as a condition of its
consent to any and all Alterations or repairs of the Premises or about the
Premises, made at the time of Tenant's request for such Alterations or repairs,
such requirements as Landlord in its sole discretion may deem desirable,
including, but not limited to, the requirement that Tenant utilize for such
purposes only contractors, subcontractors, materials, mechanics and materialmen
approved in advance by Landlord (which approval shall not be unreasonably
withheld), the requirement that upon Landlord's request, Tenant shall, at
Tenant's expense, remove such Alterations upon the expiration or any early
termination of the Lease Term. Tenant shall construct such Alterations and
perform such repairs in a good and workmanlike manner, in conformance with any
and all applicable federal, state, county or municipal laws, rules and
regulations and pursuant to a valid building permit, issued by the City of
Irvine, all in conformance with Landlord's construction rules and regulations.
In the event Tenant performs any Alterations in the Premises which require or
give rise to governmentally required changes to the "Base Building," as that
term is defined below, then Landlord shall, at Tenant's expense, make such
changes to the Base Building. The "BASE BUILDING" shall include the structural
portions of the Building, and the public restrooms and the systems and equipment
located in the internal core of the Building on the floor or floors on which the
Premises are located. In performing the work of any such Alterations, Tenant
shall have the work performed in such manner so as not to obstruct access to the
Project or any portion thereof, by any other tenant of the Project, and so as
not to obstruct the business of Landlord or other tenants in the Project.
Tenant shall not use (and upon notice from Landlord shall cease using)
contractors, services,
-21-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
workmen, labor, materials or equipment that, in Landlord's reasonable judgment,
would disturb labor harmony with the workforce or trades engaged in performing
other work, labor or services in or about the Building or the Common Areas. In
addition to Tenant's obligations under Article 9 of this Lease, upon completion
of any Alterations, Tenant agrees to cause a Notice of Completion to be recorded
in the office of the Recorder of the County of Orange in accordance with Section
3093 of the Civil Code of the State of California or any successor statute, and
Tenant shall deliver to the Project management office a reproducible copy of the
"as built" drawings of the Alterations as well as all permits, approvals and
other documents issued by any governmental agency in connection with the
Alterations.
8.3 PAYMENT FOR IMPROVEMENTS. If payment is made directly to contractors,
Tenant shall comply with Landlord's requirements for final lien releases and
waivers in connection with Tenant's payment for work to contractors. Whether or
not Tenant orders any work directly from Landlord, Tenant shall pay to Landlord
a percentage (not to exceed 5%) of the cost of such work sufficient to
compensate Landlord for all overhead, general conditions, fees and other costs
and expenses arising from Landlord's involvement with such work.
8.4 CONSTRUCTION INSURANCE. In connection with the construction of any
Alterations, Tenant shall comply with the terms of Section 10.3.4 regarding
Tenant's and its agents' insurance obligations.
8.5 LANDLORD'S PROPERTY. All Alterations, improvements, fixtures and/or
appurtenances which may be installed or placed in or about the Premises, from
time to time, shall be at the sole cost of Tenant and shall be and become the
property of Landlord, except that Tenant may remove any Alterations,
improvements and/or fixtures which Tenant can substantiate to Landlord have not
been paid for with any Tenant improvement allowance funds provided to Tenant by
Landlord, provided Tenant repairs any damage to the Premises and Building caused
by such removal and returns the affected portion of the Premises to a building
standard tenant improved condition as determined by Landlord. Furthermore, if
Landlord, as a condition to Landlord's consent to any Alteration, requires that
Tenant remove any Alteration upon the expiration or early termination of the
Lease Term, Landlord may, by written notice to Tenant prior to the end of the
Lease Term, or given following any earlier termination of this Lease, require
Tenant, at Tenant's expense, to remove such Alterations and to repair any damage
to the Premises and Building caused by such removal and returns the affected
portion of the Premises to a building standard tenant improved condition as
determined by Landlord. If Tenant fails to complete such removal and/or to
repair any damage caused by the removal of any Alterations and returns the
affected portion of the Premises to a building standard tenant improved
condition as determined by Landlord, Landlord may do so and may charge the cost
thereof to Tenant. Tenant hereby protects, defends, indemnifies and holds
Landlord harmless from any liability, cost, obligation, expense or claim of lien
in any manner relating to the installation, placement, removal or financing of
any such Alterations, improvements, fixtures and/or equipment in, on or about
the Premises, which obligations of Tenant shall survive the expiration or
earlier termination of this Lease.
-22-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
ARTICLE 9
---------
COVENANT AGAINST LIENS
----------------------
Tenant shall keep the Project and Premises free from any liens or
encumbrances arising out of the work performed, materials furnished or
obligations incurred by or on behalf of Tenant, and shall protect, defend,
indemnify and hold Landlord harmless from and against any claims, liabilities,
judgments or costs (including, without limitation, reasonable attorneys' fees
and costs) arising out of same or in connection therewith. Tenant shall give
Landlord notice at least twenty (20) days prior to the commencement of any such
work on the Premises (or such additional time as may be necessary under
applicable laws) to afford Landlord the opportunity of posting and recording
appropriate notices of non-responsibility. Tenant shall remove any such lien or
encumbrance by bond or otherwise within five (5) days after notice by Landlord,
and if Tenant shall fail to do so, Landlord may pay the amount necessary to
remove such lien or encumbrance, without being responsible for investigating the
validity thereof. The amount so paid shall be deemed Additional Rent under this
Lease payable upon demand, without limitation as to other remedies available to
Landlord under this Lease. Nothing contained in this Lease shall authorize
Tenant to do any act which shall subject Landlord's title to the Building or
Premises to any liens or encumbrances whether claimed by operation of law or
express or implied contract. Any claim to a lien or encumbrance upon the
Building or Premises arising in connection with any such work or respecting the
Premises not performed by or at the request of Landlord shall be null and void,
or at Landlord's option shall attach only against Tenant's interest in the
Premises and shall in all respects be subordinate to Landlord's title to the
Project, Building and Premises.
ARTICLE 10
----------
INSURANCE
---------
10.1 INDEMNIFICATION AND WAIVER. Except to the extent caused by the
negligence or wilful misconduct of Landlord, Tenant hereby assumes all risk of
damage to property or injury to persons in, upon or about the Premises from any
cause whatsoever and agrees that Landlord, its partners, subpartners and their
respective officers, agents, servants, employees, and independent contractors
(collectively, "LANDLORD PARTIES") shall not be liable for, and are hereby
released from any responsibility for, any damage either to person or property or
resulting from the loss of use thereof, which damage is sustained by Tenant or
by other persons claiming through Tenant. Tenant shall indemnify, defend,
protect, and hold harmless the Landlord Parties from any and all loss, cost,
damage, expense and liability (including without limitation court costs and
reasonable attorneys' fees) incurred in connection with or arising from any
cause in, on or about the Premises, any acts, omissions or negligence of Tenant
or of any person claiming by, through or under Tenant, or of the contractors,
agents, servants, employees, invitees, guests or licensees of Tenant or any such
person (collectively, "TENANT PARTIES"), in, on or about the Project or any
breach of the terms of this Lease, either prior to, during, or after the
expiration of the Lease Term, provided that the terms of the foregoing indemnity
shall not apply to the negligence or willful misconduct of Landlord. Landlord
shall indemnify, defend, protect, and hold harmless Tenant and the Tenant
Parties from any and all loss, cost, damage, expense and liability
-23-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
(including without limitation reasonable attorneys' fees) arising from the
negligence or wilful misconduct of the Landlord Parties in, on or about the
Project, except to the extent caused by the negligence or wilful misconduct of
the Tenant Parties. Notwithstanding anything to the contrary set forth in this
Lease, either party's agreement to indemnify the other party as set forth in
this Article 10, above, shall be ineffective to the extent the matters for which
such party agreed to indemnify the other party are covered by insurance required
to be carried by the other party pursuant to this Lease. Further, Tenant's
agreement to indemnify Landlord and Landlord's agreement to indemnify Tenant
pursuant to this Article 10 are not intended and shall not relieve any insurance
carrier of its obligations under policies required to be carried pursuant to the
provisions of this Lease, to the extent such policies cover subject to the
parties' respective indemnification obligations; nor shall they supersede any
inconsistent agreement of the parties set forth in any other provision of this
Lease. Should Landlord be named as a defendant in any suit brought against
Tenant in connection with or arising out of Tenant's occupancy of the Premises,
Tenant shall pay to Landlord its costs and expenses incurred in such suit,
including without limitation, its actual professional fees such as appraisers',
accountants' and attorneys' fees. In addition, Tenant shall pay to Landlord any
costs and expenses, including without limitation, its actual attorney's fees,
incurred by Landlord in successfully enforcing Tenant's indemnity obligations
set forth in this Section 10.1. The provisions of this Section 10.1 shall
survive the expiration or sooner termination of this Lease with respect to any
claims or liability arising in connection with any event occurring prior to such
expiration or termination.
10.2 TENANT'S COMPLIANCE WITH LANDLORD'S PROPERTY AND CASUALTY INSURANCE.
Tenant shall, at Tenant's expense, comply with all insurance company
requirements pertaining to the use of the Premises. If Tenant's conduct or use
of the Premises causes any increase in the premium for such insurance policies
then Tenant shall reimburse Landlord for any such increase.
10.3 TENANT'S INSURANCE. Tenant shall maintain the following coverages in
the following amounts.
10.3.1 Commercial General Liability Insurance covering the insured
against claims of bodily injury, personal injury and property damage (including
loss of use thereof) arising out of Tenant's operations, actions, and
contractual liabilities (covering the performance by Tenant of its indemnity
agreements) including a Broad Form endorsement covering the insuring provisions
of this Lease and the performance by Tenant of the indemnity agreements set
forth in Section 10.1 of this Lease, for limits of liability (with a
commercially reasonable deductible) not less than:
Bodily Injury $1,000,000 each occurrence
Property Damage $10,000,000 annual aggregate
and Personal Injury Liability
10.3.2 All Risk Property Insurance covering (i) all office furniture,
business and trade fixtures, office equipment, free-standing cabinet work,
movable partitions, merchandise and all other items of Tenant's property on the
Premises installed by, for, or at the expense of Tenant, (ii) the "Tenant
Improvements", as that term is defined in Section 2.1 of the Tenant Work Letter
-24-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
and any other improvements which exist in the Premises as of the Lease
Commencement Date (excluding the Base Building) (the "ORIGINAL IMPROVEMENTS"),
(iii) the Tenant's business interruption and extra expense in an amount equal to
one (1) year of Rent due under this Lease and (iv) all other improvements,
alterations and additions to the Premises. Such insurance shall be written on
an "all risks" of physical loss or damage basis, for the full replacement cost
value (subject to reasonable deductible amounts) and with an agreed amount
endorsement, and shall include coverage for damage or other loss caused by fire
or other peril including, but not limited to, vandalism and malicious mischief,
theft, water damage, including sprinkler leakage, earthquake sprinkler leakage,
bursting or stoppage of pipes, and explosion.
10.3.3 Worker's Compensation and Employer's Liability in an amount no
less than $1,000,000.00 or other similar insurance pursuant to all applicable
state and local statutes and regulations.
10.3.4 Prior to commencing any construction in the Premises, either
in connection with the initial construction of the Tenant Improvements, or in
connection with any Alterations, Tenant shall provide Landlord with evidence
that any contractors, subcontractors, architects or engineers engaged in such
construction carry insurance of the type and in the amount required to be
carried by Tenant pursuant to Sections 10.3.1 and 10.3.2, above. In addition,
any general contractor's policy of insurance shall contain an owner's contractor
protective endorsement, and coverage for work performed by others, and any
contractors or subcontractors insurance shall contain products and completed
operations coverage and said contractor shall warrant that it shall continue to
carry such coverage for a period of not less than ten (10) years. Any
architects or engineers engaged by Tenant in connection with any such
construction shall additionally carry errors and omissions insurance coverage.
In addition, Landlord may, in its discretion in connection with Alterations
costing in excess of $25,000, require that Tenant obtain a lien and completion
bond or some alternate form of security satisfactory to Landlord in an amount
sufficient to ensure the lien-free completion of such Alterations and naming
Landlord as a co-obligee.
10.4 FORM OF POLICIES. The minimum limits of policies of insurance
required of Tenant or its contractors, subcontractors, architects or engineers
under this Lease shall in no event limit the liability of Tenant under this
Lease. Such insurance shall (i) as appropriate name Landlord, and any other
party the Landlord so specifies, as an additional insured, including Landlord's
managing agent, if any; (ii) specifically cover the liability assumed by Tenant
under this Lease, including, but not limited to, Tenant's obligations under
Section 10.1 of this Lease; (iii) be issued by an insurance company having a
rating of not less than A-X in Best's Insurance Guide or which is otherwise
acceptable to Landlord and licensed to do business in the State of California;
(iv) be primary insurance as to all claims thereunder and provide that any
insurance carried by Landlord is excess and is non-contributing with any
insurance requirement of Tenant; (v) be in form and content reasonably
acceptable to Landlord; and (vi) provide that said insurance shall not be
canceled or coverage materially changed unless thirty (30) days' prior written
notice shall have been given to Landlord and any mortgagee of Landlord by the
insurer or the Tenant. Tenant shall deliver said policy or policies or
certificates thereof to Landlord on or before the Lease Commencement Date and at
least thirty (30) days before the expiration dates
-25-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
thereof. In the event Tenant shall fail to procure such insurance, or to deliver
such policies or certificate, within five (5) business days after written demand
from Landlord, Landlord may, at its option, procure such policies for the
account of Tenant, and the cost thereof shall be paid to Landlord within five
(5) days after delivery to Tenant of bills therefor.
10.5 SUBROGATION. Landlord and Tenant intend that their respective
property loss risks shall be borne by reasonable insurance carriers to the
extent above provided, and Landlord and Tenant hereby agree to look solely to,
and seek recovery only from, their respective insurance carriers in the event of
a property loss. The parties each hereby waive all rights and claims against
each other for such losses, and waive all rights of subrogation of their
respective insurers, provided such waiver of subrogation shall not affect the
right to the insured to recover thereunder. The parties agree that their
respective insurance policies are now, or shall be, endorsed such that the
waiver of subrogation shall not affect the right of the insured to recover
thereunder, so long as no material additional premium is charged therefor.
10.6 ADDITIONAL INSURANCE OBLIGATIONS. Tenant shall carry and maintain
during the entire Lease Term, at Tenant's sole cost and expense, increased
amounts of the insurance required to be carried by Tenant pursuant to this
Article 10 and such other reasonable types of insurance coverage and in such
reasonable amounts covering the Premises and Tenant's operations therein, as may
be reasonably requested by Landlord.
ARTICLE 11
----------
DAMAGE AND DESTRUCTION
----------------------
11.1 REPAIR OF DAMAGE TO PREMISES BY LANDLORD. Tenant shall promptly
notify Landlord of any damage to the Premises resulting from fire or any other
loss. If the Premises or any Common Areas serving or providing access to the
Premises shall be damaged by fire or other casualty, Landlord shall promptly and
diligently, subject to reasonable delays for insurance adjustment or other
matters beyond Landlord's reasonable control, and subject to all other terms of
this Article 11, restore the Base Building and such Common Areas. Such
restoration shall be to substantially the same condition of the Base Building
and the Common Areas prior to the casualty, except for modifications required by
zoning and building codes and other laws or by the holder of a mortgage on the
Building or Project or any other modifications to the Common Areas deemed
desirable by Landlord, provided that access to the Premises and any common
restrooms serving the Premises shall not be materially impaired. Upon the
occurrence of any damage to the Premises, Tenant shall assign to Landlord (or to
any party designated by Landlord) all insurance proceeds payable to Tenant under
Tenant's insurance required under Sections 10.3.2 (ii) and (iv) of this Lease,
and Landlord shall repair any injury or damage to the Tenant Improvements and
the Original Improvements installed in the Premises and shall return such Tenant
Improvements and Original Improvements to their original condition; provided
that if the cost of such repair by Landlord exceeds the amount of insurance
proceeds received by Landlord from Tenant's insurance carrier, as assigned by
Tenant, either (i) the cost of such repairs shall be paid by Tenant to Landlord
prior to Landlord's commencement of repair of the damage, or (ii) Landlord shall
rebuild the Premises only to the extent of insurance proceeds received.
Landlord shall not be
-26-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
liable for any inconvenience or annoyance to Tenant or its visitors, or injury
to Tenant's business resulting in any way from such damage or the repair
thereof; provided however, that if such fire or other casualty shall have
damaged the Premises or Common Areas necessary to Tenant's occupancy, Landlord
shall allow Tenant a proportionate abatement of Rent to the extent Landlord is
reimbursed from the proceeds of rental interruption insurance purchased by
Landlord as part of Operating Expenses, during the time and to the extent the
Premises are unfit for occupancy for the purposes permitted under this Lease,
and not occupied by Tenant as a result thereof; provided, further, however, that
if the damage or destruction is due to the negligence or wilful misconduct of
Tenant or any of its agents, employees, contractors, invitees or guests, Tenant
shall be responsible for any reasonable, applicable insurance deductible (which
shall be payable to Landlord upon demand) and there shall be no rent abatement.
11.2 LANDLORD'S OPTION TO REPAIR. Notwithstanding the terms of Section
11.1 of this Lease, Landlord may elect not to rebuild and/or restore the
Premises, Building and/or Project, and instead terminate this Lease, by
notifying Tenant in writing of such termination within sixty (60) days after the
date of the discovery of damage, such notice to include a termination date
giving Tenant sixty (60) days to vacate the Premises, but Landlord may so elect
only if the Building or Project shall be damaged by fire or other casualty or
cause, whether or not the Premises are affected, and one or more of the
following conditions is present: (i) in Landlord's reasonable judgment, repairs
cannot reasonably be completed within ninety (90) days (or in the event of
damage resulting from earthquake, three hundred sixty (360) days) after the date
of damage (when such repairs are made without the payment of overtime or other
premiums); (ii) the holder of any mortgage on the Building or Project or ground
lessor with respect to the Building or Project shall require that the insurance
proceeds or any portion thereof be used to retire the mortgage debt, or shall
terminate the ground lease, as the case may be; (iii) the damage is not fully
covered, except for deductible amounts, by Landlord's insurance policies; (iv)
Landlord decides to rebuild the Building or Common Areas so that they will be
substantially different structurally or architecturally; (v) the damage occurs
during the last twelve (12) months of the Lease Term; or (vi) any owner of any
other portion of the Project, other than Landlord, does not intend to repair the
damage to such portion of the Project. If Landlord does not elect to terminate
this Lease pursuant to Landlord's termination right as provided above, and the
repairs cannot, in the reasonable opinion of an architect or contractor selected
by Landlord and reasonably approved by Tenant, be completed within one (1) year
after being commenced, Tenant may elect, no earlier than sixty (60) days after
the date of the damage and not later than ninety (90) days after the date of
such damage, to terminate this Lease by written notice to Landlord effective as
of the date specified in the notice.
11.3 WAIVER OF STATUTORY PROVISIONS. The provisions of this Lease,
including this Article 11, constitute an express agreement between Landlord and
Tenant with respect to any and all damage to, or destruction of, all or any part
of the Premises, the Building or the Project, and any statute or regulation of
the State of California, including, without limitation, Sections 1932(2) and
1933(4) of the California Civil Code, with respect to any rights or obligations
concerning damage or destruction in the absence of an express agreement between
the parties, and any other statute or regulation, now or hereafter in effect,
shall have no
-27-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
application to this Lease or any damage or destruction to all or any part of the
Premises, the Building or the Project.
ARTICLE 12
----------
NONWAIVER
---------
No provision of this Lease shall be deemed waived by either party hereto
unless expressly waived in a writing signed thereby. The waiver by either party
hereto of any breach of any term, covenant or condition herein contained shall
not be deemed to be a waiver of any subsequent breach of same or any other term,
covenant or condition herein contained. The subsequent acceptance of Rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any term, covenant or condition of this Lease, other than the
failure of Tenant to pay the particular Rent so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
Rent. No acceptance of a lesser amount than the Rent herein stipulated shall be
deemed a waiver of Landlord's right to receive the full amount due, nor shall
any endorsement or statement on any check or payment or any letter accompanying
such check or payment be deemed an accord and satisfaction, and Landlord may
accept such check or payment without prejudice to Landlord's right to recover
the full amount due. No receipt of monies by Landlord from Tenant after the
termination of this Lease shall in any way alter the length of the Lease Term or
of Tenant's right of possession hereunder, or after the giving of any notice
shall reinstate, continue or extend the Lease Term or affect any notice given
Tenant prior to the receipt of such monies, it being agreed that after the
service of notice or the commencement of a suit, or after final judgment for
possession of the Premises, Landlord may receive and collect any Rent due, and
the payment of said Rent shall not waive or affect said notice, suit or
judgment.
ARTICLE 13
----------
CONDEMNATION
------------
If the whole or any part of the Premises, Building or Project shall be
taken by power of eminent domain or condemned by any competent authority for any
public or quasi-public use or purpose, or if any adjacent property or street
shall be so taken or condemned, or reconfigured or vacated by such authority in
such manner as to require the use, reconstruction or remodeling of any part of
the Premises, Building or Project, or if Landlord shall grant a deed or other
instrument in lieu of such taking by eminent domain or condemnation, Landlord
shall have the option to terminate this Lease effective as of the date
possession is required to be surrendered to the authority. If more than twenty-
five percent (25%) of the rentable square feet of the Premises is taken, or if
access to the Premises is substantially impaired, in each case for a period in
excess of one hundred eighty (180) days, Tenant shall have the option to
terminate this Lease effective as of the date possession is required to be
surrendered to the authority. Tenant shall not because of such taking assert
any claim against Landlord or the authority for any compensation because of such
taking and Landlord shall be entitled to the entire award or payment in
connection therewith, except that Tenant shall have the right to file any
separate claim available to Tenant
-28-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
for any taking of Tenant's personal property and fixtures belonging to Tenant
and removable by Tenant upon expiration of the Lease Term pursuant to the terms
of this Lease, for moving expenses, and for any loss of business or business
interruption or "goodwill," so long as such claim is payable separately to
Tenant. All Rent shall be apportioned as of the date of such termination. If any
part of the Premises shall be taken, and this Lease shall not be so terminated,
the Rent shall be proportionately abated. Tenant hereby waives any and all
rights it might otherwise have pursuant to Section 1265.130 of The California
Code of Civil Procedure. Notwithstanding anything to the contrary contained in
this Article 13, in the event of a temporary taking of all or any portion of the
Premises for a period of one hundred and eighty (180) days or less, then this
Lease shall not terminate but the Base Rent and the Additional Rent shall be
abated for the period of such taking in proportion to the ratio that the amount
of rentable square feet of the Premises taken bears to the total rentable square
feet of the Premises. Landlord shall be entitled to receive the entire award
made in connection with any such temporary taking.
ARTICLE 14
----------
ASSIGNMENT AND SUBLETTING
-------------------------
14.1 TRANSFERS. Tenant shall not, without the prior written consent of
Landlord, assign, mortgage, pledge, hypothecate, encumber, or permit any lien to
attach to, or otherwise transfer, this Lease or any interest hereunder, permit
any assignment, or other transfer of this Lease or any interest hereunder by
operation of law, sublet the Premises or any part thereof, or enter into any
license or concession agreements or otherwise permit the occupancy or use of the
Premises or any part thereof by any persons other than Tenant and its employees
and contractors (all of the foregoing are hereinafter sometimes referred to
collectively as "TRANSFERS" and any person to whom any Transfer is made or
sought to be made is hereinafter sometimes referred to as a "TRANSFEREE"). If
Tenant desires Landlord's consent to any Transfer, Tenant shall notify Landlord
in writing, which notice (the "TRANSFER NOTICE") shall include (i) the proposed
effective date of the Transfer, which shall not be less than thirty (30) days
nor more than one hundred eighty (180) days after the date of delivery of the
Transfer Notice, (ii) a description of the portion of the Premises to be
transferred (the "SUBJECT SPACE"), (iii) all of the terms of the proposed
Transfer and the consideration therefor, including calculation of the "Transfer
Premium", as that term is defined in Section 14.3 below, in connection with such
Transfer, the name and address of the proposed Transferee, and a copy of all
existing executed and/or proposed documentation pertaining to the proposed
Transfer, including all existing operative documents to be executed to evidence
such Transfer or the agreements incidental or related to such Transfer, provided
that Landlord shall have the right to require Tenant to utilize Landlord's
standard Transfer documents in connection with the documentation of such
Transfer and (iv) financial statements for the prior two (2) fiscal years of the
proposed Transferee certified by an officer, partner or owner thereof, business
credit and personal references and history of the proposed Transferee and any
other information required by Landlord which will enable Landlord to determine
the financial responsibility, character, and reputation of the proposed
Transferee, nature of such Transferee's business and proposed use of the Subject
Space. Any Transfer made without Landlord's prior written consent shall, at
Landlord's option, be null, void and of no
-29-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
effect, and shall, at Landlord's option, constitute a default by Tenant under
this Lease. Whether or not Landlord consents to any proposed Transfer, Tenant
shall pay Landlord's review and processing fees, as well as any reasonable
professional fees (including, without limitation, attorneys', accountants',
architects', engineers' and consultants' fees) incurred by Landlord, within
thirty (30) days after written request by Landlord.
14.2 LANDLORD'S CONSENT. Landlord shall not unreasonably withhold its
consent to any proposed Transfer of the Subject Space to the Transferee on the
terms specified in the Transfer Notice. Without limitation as to other
reasonable grounds for withholding consent, the parties hereby agree that it
shall be reasonable under this Lease and under any applicable law for Landlord
to withhold consent to any proposed Transfer where one or more of the following
apply:
14.2.1 The Transferee is of a character or reputation or engaged in a
business which is not consistent with the quality of the Project, or would be a
significantly less prestigious occupant of the Building than Tenant;
14.2.2 The Transferee intends to use the Subject Space for purposes
which are not permitted under this Lease;
14.2.3 The Transferee is either a governmental agency or
instrumentality thereof;
14.2.4 The Transferee is not a party of reasonable financial worth
and/or financial stability in light of the responsibilities to be undertaken in
connection with the Transfer on the date consent is requested;
14.2.5 The proposed Transfer would cause a violation of another lease
for space in the Project, or would give an occupant of the Project a right to
cancel its lease;
14.2.6 The terms of the proposed Transfer will allow the Transferee
to exercise a right of renewal, right of expansion, right of first offer, or
other similar right held by Tenant (or will allow the Transferee to occupy space
leased by Tenant pursuant to any such right); or
14.2.7 Either the proposed Transferee, or any person or entity which
directly or indirectly, controls, is controlled by, or is under common control
with, the proposed Transferee, is negotiating or has negotiated with Landlord to
lease space in the Project.
If Landlord consents to any Transfer pursuant to the terms of this Section
14.2 (and does not exercise any recapture rights Landlord may have under Section
14.4 of this Lease), Tenant may within six (6) months after Landlord's consent,
but not later than the expiration of said six-month period, enter into such
Transfer of the Premises or portion thereof, upon substantially the same terms
and conditions as are set forth in the Transfer Notice furnished by Tenant to
Landlord pursuant to Section 14.1 of this Lease, provided that if there are any
changes in the terms and conditions from those specified in the Transfer Notice
(i) such that Landlord would initially have been entitled to refuse its consent
to such Transfer under this Section 14.2, or (ii) which would cause the proposed
Transfer to be more favorable to the Transferee than the terms set forth in
-30-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
Tenant's original Transfer Notice, Tenant shall again submit the Transfer to
Landlord for its approval and other action under this Article 14 (including
Landlord's right of recapture, if any, under Section 14.4 of this Lease).
Notwithstanding anything to the contrary in this Lease, if Tenant or any
proposed Transferee claims that Landlord has unreasonably withheld or delayed
its consent under Section 14.2 or otherwise has breached or acted unreasonably
under this Article 14, their sole remedies shall be a declaratory judgment and
an injunction for the relief sought without any monetary damages, and Tenant
hereby waives all other remedies, including, without limitation, any right at
law or equity to terminate this Lease, on its own behalf and, to the extent
permitted under all applicable laws, on behalf of the proposed Transferee.
14.3 TRANSFER PREMIUM. If Landlord consents to a Transfer, as a condition
thereto which the parties hereby agree is reasonable, Tenant shall pay to
Landlord fifty percent (50%) of any "Transfer Premium," as that term is defined
in this Section 14.3, received by Tenant from such Transferee. "TRANSFER
PREMIUM" shall mean all rent, additional rent or other consideration payable by
such Transferee in connection with the Transfer in excess of the Rent and
Additional Rent payable by Tenant under this Lease during the term of the
Transfer on a per rentable square foot basis if less than all of the Premises is
transferred, after deducting the reasonable expenses incurred by Tenant for (i)
any changes, alterations and improvements to the Premises in connection with the
Transfer, (ii) any free base rent reasonably provided to the Transferee, and
(iii) any brokerage commissions in connection with the Transfer (collectively,
"TENANT'S SUBLEASING COSTS"). "Transfer Premium" shall also include, but not be
limited to, key money, bonus money or other cash consideration paid by
Transferee to Tenant in connection with such Transfer, and any payment in excess
of fair market value for services rendered by Tenant to Transferee or for
assets, fixtures, inventory, equipment, or furniture transferred by Tenant to
Transferee in connection with such Transfer. The determination of the amount of
Landlord's applicable share of the Transfer Premium shall be made on a monthly
basis as rent or other consideration is received by Tenant under the Transfer.
For purposes of calculating the Transfer Premium on a monthly basis, (i)
Tenant's Subleasing Costs shall be deemed to be expended by Tenant in equal
monthly amounts over the entire term of the Transfer and (ii) the Rent paid for
the Subject Space by Tenant shall be computed after adjusting such rent to the
actual effective rent to be paid, taking into consideration any and all
leasehold concessions granted in connection therewith, including, but not
limited to, any rent credit and tenant improvement allowance. For purposes of
calculating any such effective rent all such concessions shall be amortized on a
straight-line basis over the relevant term.
14.4 LANDLORD'S OPTION AS TO SUBJECT SPACE. Notwithstanding anything to
the contrary contained in this Article 14, Landlord shall have the option, by
giving written notice to Tenant within thirty (30) days after receipt of any
Transfer Notice, to recapture the Subject Space. Such recapture notice shall
cancel and terminate this Lease with respect to the Subject Space as of the date
stated in the Transfer Notice as the effective date of the proposed Transfer
until the last day of the term of the Transfer as set forth in the Transfer
Notice (or at Landlord's option, shall cause the Transfer to be made to Landlord
or its agent, in which case the parties shall execute the Transfer documentation
promptly thereafter). In the event of a recapture by Landlord, if this Lease
shall be canceled with respect to less than the entire Premises, the Rent
-31-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
reserved herein shall be prorated on the basis of the number of rentable square
feet retained by Tenant in proportion to the number of rentable square feet
contained in the Premises, and this Lease as so amended shall continue
thereafter in full force and effect, and upon request of either party, the
parties shall execute written confirmation of the same. If Landlord declines,
or fails to elect in a timely manner to recapture the Subject Space under this
Section 14.4, then, provided Landlord has consented to the proposed Transfer,
Tenant shall be entitled to proceed to transfer the Subject Space to the
proposed Transferee, subject to provisions of this Article 14.
14.5 EFFECT OF TRANSFER. If Landlord consents to a Transfer, (i) the
terms and conditions of this Lease shall in no way be deemed to have been waived
or modified, (ii) such consent shall not be deemed consent to any further
Transfer by either Tenant or a Transferee, (iii) Tenant shall deliver to
Landlord, promptly after execution, an original executed copy of all
documentation pertaining to the Transfer in form reasonably acceptable to
Landlord, (iv) Tenant shall furnish upon Landlord's request a complete
statement, certified by an independent certified public accountant, or Tenant's
chief financial officer, setting forth in detail the computation of any Transfer
Premium Tenant has derived and shall derive from such Transfer, and (v) no
Transfer relating to this Lease or agreement entered into with respect thereto,
whether with or without Landlord's consent, shall relieve Tenant or any
guarantor of the Lease from any liability under this Lease, including, without
limitation, in connection with the Subject Space. Landlord or its authorized
representatives shall have the right at all reasonable times to audit the books,
records and papers of Tenant relating to any Transfer, and shall have the right
to make copies thereof. If the Transfer Premium respecting any Transfer shall
be found understated, Tenant shall, within thirty (30) days after demand, pay
the deficiency, and if understated by more than two percent (2%), Tenant shall
pay Landlord's costs of such audit.
14.6 ADDITIONAL TRANSFERS. For purposes of this Lease, the term
"TRANSFER" shall also include (i) if Tenant is a partnership, the withdrawal or
change, voluntary, involuntary or by operation of law, of fifty percent (50%) or
more of the partners, or transfer of fifty percent (50%) or more of partnership
interests, within a twelve (12)-month period, or the dissolution of the
partnership without immediate reconstitution thereof, and (ii) if Tenant is a
closely held corporation (i.e., whose stock is not publicly held and not traded
through an exchange or over the counter), (A) the dissolution, merger,
consolidation or other reorganization of Tenant or (B) the sale or other
transfer of an aggregate of fifty percent (50%) or more of the voting shares of
Tenant (other than to immediate family members by reason of gift or death),
within a twelve (12)-month period, or (C) the sale, mortgage, hypothecation or
pledge of an aggregate of fifty percent (50%) or more of the value of the
unencumbered assets of Tenant within a twelve (12)-month period.
14.7 OCCURRENCE OF DEFAULT. Any Transfer hereunder shall be subordinate
and subject to the provisions of this Lease, and if this Lease shall be
terminated during the term of any Transfer, Landlord shall have the right to:
(i) treat such Transfer as cancelled and repossess the Subject Space by any
lawful means, or (ii) require that such Transferee attorn to and recognize
Landlord as its landlord under any such Transfer. If Tenant shall be in default
under this Lease, Landlord is hereby irrevocably authorized, as Tenant's agent
and attorney-in-fact, to direct any Transferee to make all payments under or in
connection with the Transfer directly to Landlord
-32-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
(which Landlord shall apply towards Tenant's obligations under this Lease) until
such default is cured. Such Transferee shall rely on any representation by
Landlord that Tenant is in default hereunder, without any need for confirmation
thereof by Tenant. Upon any assignment, the assignee shall assume in writing all
obligations and covenants of Tenant thereafter to be performed or observed under
this Lease. No collection or acceptance of rent by Landlord from any Transferee
shall be deemed a waiver of any provision of this Article 14 or the approval of
any Transferee or a release of Tenant from any obligation under this Lease,
whether theretofore or thereafter accruing. In no event shall Landlord's
enforcement of any provision of this Lease against any Transferee be deemed a
waiver of Landlord's right to enforce any term of this Lease against Tenant or
any other person. If Tenant's obligations hereunder have been guaranteed,
Landlord's consent to any Transfer shall not be effective unless the guarantor
also consents to such Transfer.
14.8 NON-TRANSFERS. Notwithstanding anything to the contrary contained in
Article 14 of this Lease, an assignment or subletting of all or a portion of the
Premises to an affiliate of Tenant (an entity which is controlled by, controls,
or is under common control with, Tenant, or which results from a merger with
Tenant, or which has purchased Tenant or substantially all of Tenant's assets),
shall not be deemed a Transfer under Article 14 of this Lease, provided that
Tenant notifies Landlord of any such assignment or sublease and promptly
supplies Landlord with any documents or information requested by Landlord
regarding such assignment or sublease or such affiliate, and further provided
that such assignment or sublease is not a subterfuge by Tenant to avoid its
obligations under this Lease. "Control," as used in this Section 14.8, shall
mean the ownership, directly or indirectly, of at least fifty-one percent (51%)
of the voting securities of, or possession of the right to vote, in the ordinary
direction of its affairs, of at least fifty-one percent (51%) of the voting
interest in, an person or entity.
ARTICLE 15
----------
SURRENDER OF PREMISES; OWNERSHIP AND
------------------------------------
REMOVAL OF TRADE FIXTURES
-------------------------
15.1 SURRENDER OF PREMISES. No act or thing done by Landlord or any agent
or employee of Landlord during the Lease Term shall be deemed to constitute an
acceptance by Landlord of a surrender of the Premises unless such intent is
specifically acknowledged in writing by Landlord. The delivery of keys to the
Premises to Landlord or any agent or employee of Landlord shall not constitute a
surrender of the Premises or effect a termination of this Lease, whether or not
the keys are thereafter retained by Landlord, and notwithstanding such delivery
Tenant shall be entitled to the return of such keys at any reasonable time upon
request until this Lease shall have been properly terminated. The voluntary or
other surrender of this Lease by Tenant, whether accepted by Landlord or not, or
a mutual termination hereof, shall not work a merger, and at the option of
Landlord shall operate as an assignment to Landlord of all subleases or
subtenancies affecting the Premises or terminate any or all such sublessees or
subtenancies.
15.2 REMOVAL OF TENANT PROPERTY BY TENANT. Upon the expiration of the
Lease Term, or upon any earlier termination of this Lease, Tenant shall, subject
to the provisions of this
-33-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
Article 15, quit and surrender possession of the Premises to Landlord in as good
order and condition as when Tenant took possession and as thereafter improved by
Landlord and/or Tenant, reasonable wear and tear and repairs which are
specifically made the responsibility of Landlord hereunder excepted. Upon such
expiration or termination, Tenant shall, without expense to Landlord, remove or
cause to be removed from the Premises all debris and rubbish, and such items of
furniture, equipment, business and trade fixtures, free-standing cabinet work,
movable partitions and other articles of personal property owned by Tenant or
installed or placed by Tenant at its expense in the Premises, and such similar
articles of any other persons claiming under Tenant, as Landlord may, in its
sole discretion, require to be removed, and Tenant shall repair at its own
expense all damage to the Premises and Building resulting from such removal.
ARTICLE 16
----------
HOLDING OVER
------------
If Tenant holds over after the expiration of the Lease Term or earlier
termination thereof, with or without the express or implied consent of Landlord,
such tenancy shall be from month-to-month only, and shall not constitute a
renewal hereof or an extension for any further term, and in such case Rent shall
be payable at a monthly rate equal to 200% of the Rent applicable during the
last rental period of the Lease Term under this Lease. Such month-to-month
tenancy shall be subject to every other applicable term, covenant and agreement
contained herein. Nothing contained in this Article 16 shall be construed as
consent by Landlord to any holding over by Tenant, and Landlord expressly
reserves the right to require Tenant to surrender possession of the Premises to
Landlord as provided in this Lease upon the expiration or other termination of
this Lease. The provisions of this Article 16 shall not be deemed to limit or
constitute a waiver of any other rights or remedies of Landlord provided herein
or at law. If Tenant fails to surrender the Premises upon the termination or
expiration of this Lease, in addition to any other liabilities to Landlord
accruing therefrom, Tenant shall protect, defend, indemnify and hold Landlord
harmless from all loss, costs (including reasonable attorneys' fees) and
liability resulting from such failure, including, without limiting the
generality of the foregoing, any claims made by any succeeding tenant founded
upon such failure to surrender and any lost profits to Landlord resulting
therefrom.
ARTICLE 17
----------
ESTOPPEL CERTIFICATES
---------------------
Within ten (10) days following a request in writing by Landlord, Tenant
shall execute, acknowledge and deliver to Landlord an estoppel certificate,
which, as submitted by Landlord, shall be substantially in the form of EXHIBIT
E, attached hereto (or such other form as may be required by any prospective
mortgagee or purchaser of the Project, or any portion thereof), indicating
therein any exceptions thereto that may exist at that time, and shall also
contain any other information reasonably requested by Landlord or Landlord's
mortgagee or prospective mortgagee. Any such certificate may be relied upon by
any prospective mortgagee or purchaser of all or any portion of the Project.
Tenant shall execute and deliver whatever other instruments
-34-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
may be reasonably required for such purposes within ten (10) days after receipt
of a request by Landlord. At any time during the Lease Term, and provided that
Landlord agrees in writing to keep the same reasonably confidential, Landlord
may require Tenant to provide Landlord within ten (10) days after receipt of a
request by Landlord with a current financial statement and financial statements
of the two (2) years prior to the current financial statement year. Such
statements shall be prepared in accordance with generally accepted accounting
principles and, if such is the normal practice of Tenant, shall be audited by an
independent certified public accountant. Failure of Tenant to timely execute,
acknowledge and deliver such estoppel certificate or other instruments shall
constitute an acceptance of the Premises and an acknowledgment by Tenant that
statements included in the estoppel certificate are true and correct, without
exception.
ARTICLE 18
----------
SUBORDINATION
-------------
Landlord agrees that it shall use reasonable efforts to obtain a
commercially reasonable non-disturbance and attornment agreement in favor of
Tenant from the currently existing trust deed holder on the Project. This Lease
shall be subject and subordinate to all present and future ground or underlying
leases of the Building or Project and to the lien of any mortgage, trust deed or
other encumbrances now or hereafter in force against the Building or Project or
any part thereof, if any, and to all renewals, extensions, modifications,
consolidations and replacements thereof, and to all advances made or hereafter
to be made upon the security of such mortgages or trust deeds, unless the
holders of such mortgages, trust deeds or other encumbrances, or the lessors
under such ground lease or underlying leases (collectively, "MORTGAGEES"),
require in writing that this Lease be superior thereto. Landlord agrees that it
shall use reasonable efforts to obtain a commercially reasonable non-disturbance
agreement from any existing Mortgagees in favor of Tenant. Tenant covenants and
agrees in the event any proceedings are brought for the foreclosure of any such
mortgage or deed in lieu thereof (or if any ground lease is terminated), to
attorn, without any deductions or set-offs whatsoever, to the lienholder or
purchaser or any successors thereto upon any such foreclosure sale or deed in
lieu thereof (or to the ground lessor), if so requested to do so by such
purchaser or lienholder or ground lessor, and to recognize such purchaser or
lienholder or ground lessor as the lessor under this Lease, provided such
lienholder or purchaser or ground lessor shall agree to accept this Lease and
not disturb Tenant's occupancy, so long as Tenant timely pays the rent and
observes and performs the terms, covenants and conditions of this Lease to be
observed and performed by Tenant. Landlord's interest herein may be assigned as
security at any time to any lienholder. Tenant shall, within five (5) days of
request by Landlord, execute such further instruments or assurances as Landlord
may reasonably deem necessary to evidence or confirm the subordination or
superiority of this Lease to any such mortgages, trust deeds, ground leases or
underlying leases. Tenant waives the provisions of any current or future
statute, rule or law which may give or purport to give Tenant any right or
election to terminate or otherwise adversely affect this Lease and the
obligations of the Tenant hereunder in the event of any foreclosure proceeding
or sale.
-35-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
ARTICLE 19
----------
DEFAULTS; REMEDIES
------------------
19.1 EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute a default of this Lease by Tenant:
19.1.1 Any failure by Tenant to pay any Rent or any other charge
required to be paid under this Lease, or any part thereof, when due unless such
failure is cured within three (3) days after notice; or
19.1.2 Except where a specific time period is otherwise set forth for
Tenant's performance in this Lease, in which event the failure to perform by
Tenant within such time period shall be a default by Tenant under this Section
19.1.2, any failure by Tenant to observe or perform any other provision,
covenant or condition of this Lease to be observed or performed by Tenant where
such failure continues for ten (10) days after written notice thereof from
Landlord to Tenant; provided that if the nature of such default is such that the
same cannot reasonably be cured within a ten (10) day period, Tenant shall not
be deemed to be in default if it diligently commences such cure within such
period and thereafter diligently proceeds to rectify and cure such default, but
in no event exceeding a period of time in excess of thirty (30) days after
written notice thereof from Landlord to Tenant (which 30-day period shall be
extended for any Force Majeure) unless the nature of Tenant's obligation is such
that more than thirty (30) days are required for its performance, in which case
Tenant shall not be in default under this Lease if it shall commence such
performance within such thirty (30) day period and thereafter diligently pursue
the same to completion; or
19.1.3 Abandonment or vacation of any material portion of the
Premises by Tenant other than in the normal course of business for company
holidays; or
19.1.4 The failure by Tenant to observe or perform according to the
provisions of Articles 5, 14, 17 or 18 of this Lease where such failure
continues for more than five (5) business days after notice from Landlord; or
19.1.5 Tenant's failure to occupy the Premises within thirty (30)
days after the Lease Commencement Date.
The notice periods provided herein are in lieu of, and not in addition to,
any notice periods provided by law.
19.2 REMEDIES UPON DEFAULT. Upon the occurrence of any event of default
by Tenant, Landlord shall have, in addition to any other remedies available to
Landlord at law or in equity (all of which remedies shall be distinct, separate
and cumulative), the option to pursue any one or more of the following remedies,
each and all of which shall be cumulative and nonexclusive, without any notice
or demand whatsoever.
-36-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
19.2.1 Terminate this Lease, in which event Tenant shall immediately
surrender the Premises to Landlord, and if Tenant fails to do so, Landlord may,
without prejudice to any other remedy which it may have for possession or
arrearages in rent, enter upon and take possession of the Premises and expel or
remove Tenant and any other person who may be occupying the Premises or any part
thereof, without being liable for prosecution or any claim or damages therefor;
and Landlord may recover from Tenant the following:
(i) The worth at the time of any unpaid rent which has been
earned at the time of such termination; plus
(ii) The worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time
of award exceeds the amount of such rental loss that Tenant proves could
have been reasonably avoided; plus
(iii) The worth at the time of award of the amount by which the
unpaid rent for the balance of the Lease Term after the time of award
exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; plus
(iv) Any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom; and
(v) At Landlord's election, such other amounts in addition to or
in lieu of the foregoing as may be permitted from time to time by
applicable law.
The term "rent" as used in this Section 19.2 shall be deemed to be and to
mean all sums of every nature required to be paid by Tenant to Landlord pursuant
to the terms of this Lease. As used in Paragraphs 19.2.1(i) and (ii), above,
the "worth at the time of award" shall be computed by allowing interest at the
rate set forth in Article 25 of this Lease, but in no case greater than the
maximum amount of such interest permitted by law. As used in Paragraph
19.2.1(iii) above, the "worth at the time of award" shall be computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award plus one percent (1%). If Landlord terminates
this Lease or Tenant's right to possession, Landlord shall use reasonable
efforts to mitigate Landlord's damages, and Tenant shall be entitled to submit
proof of such failure to mitigate as a defense to Landlord's claims hereunder,
if mitigation of damages by Landlord is required by applicable law.
19.2.2 Landlord shall have the remedy described in California Civil
Code Section 1951.4 (lessor may continue lease in effect after lessee's breach
and abandonment and recover rent as it becomes due, if lessee has the right to
sublet or assign, subject only to reasonable limitations). Accordingly, if
Landlord does not elect to terminate this Lease on account of any default by
Tenant, Landlord may, from time to time, without terminating this Lease, enforce
all of its rights and remedies under this Lease, including the right to recover
all rent as it becomes due.
-37-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
19.2.3 Landlord shall at all times have the rights and remedies
(which shall be cumulative with each other and cumulative and in addition to
those rights and remedies available under Sections 19.2.1 and 19.2.2, above, or
any law or other provision of this Lease), without prior demand or notice except
as required by applicable law, to seek any declaratory, injunctive or other
equitable relief, and specifically enforce this Lease, or restrain or enjoin a
violation or breach of any provision hereof.
19.3 FORM OF PAYMENT AFTER DEFAULT. Following the occurrence of more than
two (2) events of default by Tenant in any twelve (12) month period, Landlord
shall have the right to require that any or all subsequent amounts paid by
Tenant to Landlord hereunder, whether to cure the default in question or
otherwise, be paid in the form of cash, money order, cashier's or certified
check drawn on an institution acceptable to Landlord, or by other means approved
by Landlord, notwithstanding any prior practice of accepting payments in any
different form.
19.4 EFFORTS TO RELET. No re-entry or repossession, repairs, maintenance,
changes, alterations and additions, reletting, appointment of a receiver to
protect Landlord's interests hereunder, or any other action or omission by
Landlord shall be construed as an election by Landlord to terminate this Lease
or Tenant's right to possession, or to accept a surrender of the Premises, nor
shall same operate to release Tenant in whole or in part from any of Tenant's
obligations hereunder, unless express written notice of such intention is sent
by Landlord to Tenant. Tenant hereby irrevocably waives any right otherwise
available under any law to redeem or reinstate this Lease.
19.5 ABATEMENT OF RENT. In the event that Tenant is prevented from using,
and does not use, the Premises or any portion thereof, as a result of (i) any
alteration performed by Landlord after the Lease Commencement Date and required
by the Lease, which substantially interferes with Tenant's use of the Premises,
or (ii) any failure to provide services, utilities or access to the Premises as
required of Landlord pursuant to the terms hereof (either such set of
circumstances as set forth in items (i) or (ii), above, to be known as an
"ABATEMENT EVENT"), then Tenant shall give Landlord notice of such Abatement
Event, and if such Abatement Event continues for three (3) consecutive business
days after Landlord's receipt of any such notice (the "ELIGIBILITY PERIOD"),
then the Base Rent and Tenant's Share of Building Direct Expenses shall be
abated or reduced, as the case may be, after expiration of the Eligibility
Period for such time that Tenant continues to be so prevented from using, and
does not use, the Premises or a portion thereof, in the proportion that the
rentable area of the portion of the Premises that Tenant is prevented from
using, and does not use, bears to the total rentable area of the Premises;
provided, however, in the event that Tenant is prevented from using, and does
not use, a portion of the Premises for a period of time in excess of the
Eligibility Period and the remaining portion of the Premises is not sufficient
to allow Tenant to effectively conduct its business therein, and if Tenant does
not conduct its business from such remaining portion, then for such time after
expiration of the Eligibility Period during which Tenant is so prevented from
effectively conducting its business therein, the Base Rent and Tenant's Share of
Building Direct Expenses for the entire Premises shall be abated for such time
as Tenant continues to be so prevented from using, and does not use, the
Premises. If, however, Tenant reoccupies any portion of the Premises during
such period, the rent allocable to such reoccupied portion, based on the
-38-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
proportion that the rentable area of such reoccupied portion of the Premises
bears to the total rentable area of the Premises, shall be payable by Tenant
from the date Tenant reoccupies such portion of the Premises. Such right to
abate Base Rent and Tenant's Share of Building Direct Expenses shall be Tenant's
sole and exclusive remedy at law or in equity for an Abatement Event. Except as
provided in this Section 19.5, nothing contained herein shall be interpreted to
mean that Tenant is excused from paying Rent due hereunder.
19.6 LANDLORD DEFAULT. Notwithstanding anything to the contrary set forth
in this Lease, Landlord shall not be in default in the performance of any
obligation required to be performed by Landlord pursuant to this Lease unless
(i) in the event such default is with respect to the payment of money, Landlord
fails to pay such unpaid amounts within five (5) business days of written notice
from Tenant that the same was not paid when due, or (ii) in the event such
default is other than the obligation to pay money, Landlord fails to perform
such obligation within thirty (30) days after the receipt of notice from Tenant
specifying in detail Landlord's failure to perform; provided, however, if the
nature of Landlord's obligation is such that more than thirty (30) days are
required for its performance, then Landlord shall not be in default under this
Lease if it shall commence such performance within such thirty (30) day period
and thereafter diligently pursue the same to completion. Upon any such default
by Landlord under this Lease, Tenant may, except as otherwise specifically
waived in this Lease, exercise any of its rights provided at law or in equity.
ARTICLE 20
----------
COVENANT OF QUIET ENJOYMENT
---------------------------
Landlord covenants that Tenant, on paying the Rent, charges for services
and other payments herein reserved and on keeping, observing and performing all
the other terms, covenants, conditions, provisions and agreements herein
contained on the part of Tenant to be kept, observed and performed, shall,
during the Lease Term, peaceably and quietly have, hold and enjoy the Premises
subject to the terms, covenants, conditions, provisions and agreements hereof
without interference by any persons lawfully claiming by or through Landlord.
The foregoing covenant is in lieu of any other covenant express or implied.
ARTICLE 21
----------
SECURITY DEPOSIT
----------------
21.1 SECURITY DEPOSIT. Concurrent with Tenant's execution of this Lease,
Tenant shall deposit with Landlord a security deposit (the "SECURITY DEPOSIT")
in the amount set forth in Section 7 of the Summary, as security for the
faithful performance by Tenant of all of its obligations under this Lease. If
Tenant defaults with respect to any provisions of this Lease, including, but not
limited to, the provisions relating to the payment of Rent, the removal of
property and the repair of resultant damage, Landlord may, without notice to
Tenant, but shall not be required to, apply all or any part of the Security
Deposit for the payment of any Rent or any other sum in default and Tenant
shall, upon demand therefor, restore the Security Deposit to
-39-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
its original amount. Any unapplied portion of the Security Deposit shall be
returned to Tenant, or, at Landlord's option, to the last assignee of Tenant's
interest hereunder, within sixty (60) days following the expiration of the Lease
Term. Tenant shall not be entitled to any interest on the Security Deposit.
Tenant hereby waives the provisions of Section 1950.7 of the California Civil
Code, or any successor statute.
21.2 LETTER OF CREDIT. In lieu of depositing with Landlord the Security
Deposit, as provided for in Section 21.1 above, Tenant shall have the option, to
deliver to Landlord concurrent with Tenant's execution of this Lease, an
unconditional, clean, irrevocable letter of credit (the "L-C") in the amount of
$54,450.00, which L-C shall be issued by a money-center bank (a bank which
accepts deposits, maintains accounts, has a local Los Angeles office which will
negotiate a letter of credit, and whose deposits are insured by the FDIC)
reasonably acceptable to Landlord, and which L-C shall be in a form and content
reasonably acceptable to Landlord. Tenant shall pay all expenses, points and/or
fees incurred by Tenant in obtaining the L-C.
21.2.1 APPLICATION OF THE L-C. The L-C shall be held by Landlord as
security for the faithful performance by Tenant of all the terms, covenants, and
conditions of this Lease to be kept and performed by Tenant during the Lease
Term. The L-C shall not be mortgaged, assigned or encumbered in any manner
whatsoever by Tenant without the prior written consent of Landlord. If Tenant
defaults with respect to any provisions of this Lease, including, but not
limited to, the provisions relating to the payment of Rent, or if Tenant fails
to renew the L-C at least thirty (30) days before its expiration, Landlord may,
but shall not be required to, draw upon all or any portion of the L-C for the
payment of any Rent or any other sum in default, or for the payment of any
amount that Landlord may reasonably spend or may become obligated to spend by
reason of Tenant's default, or to compensate Landlord for any other loss or
damage that Landlord may suffer by reason of Tenant's default. The use,
application or retention of the L-C, or any portion thereof, by Landlord shall
not prevent Landlord from exercising any other right or remedy provided by this
Lease or by law, it being intended that Landlord shall not first be required to
proceed against the L-C and shall not operate as a limitation on any recovery to
which Landlord may otherwise be entitled. Any amount of the L-C which is drawn
upon by Landlord, but is not used or applied by Landlord, shall be returned to
the bank by Landlord, unless drawn as a result of Tenant's failure to renew the
L-C at least thirty (30) days prior to its expiration, in which case such
amounts shall be returned to Tenant upon Tenant's provision to Landlord of a new
L-C. If any portion of the L-C is drawn upon, Tenant shall, within five (5)
days after written demand therefor, reinstate the L-C to the amount then
required under this Lease, , and Tenant's failure to do so shall be a default
under this Lease. Tenant acknowledges that Landlord has the right to transfer
or mortgage its interest in the Real Property and the Building and in this Lease
and Tenant agrees that in the event of any such transfer or mortgage, Landlord
shall have the right to transfer or assign the L-C to the transferee or
mortgagee, and in the event of such transfer, Tenant shall look solely to such
transferee or mortgagee for the return of the L-C. If Tenant shall fully and
faithfully perform every provision of this Lease to be performed by it, the L-C,
or any balance thereof, shall be returned to Tenant within thirty (30) days
following the expiration of the Lease Term.
-40-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
ARTICLE 22
----------
INTENTIONALLY OMITTED
---------------------
ARTICLE 23
----------
SIGNS
-----
23.1 EXTERIOR SIGNAGE. Subject to Landlord's prior written approval, in
its sole discretion, and provided that any sign is in keeping with the quality,
design and style of the Building and Project and is in compliance with all
covenants, conditions or restrictions affecting the Project, and all applicable
law, Tenant, at its sole cost and expense, shall have the exclusive right to
install identification signage on the Building in accordance with the Project
standard signage program.
23.2 PROHIBITED SIGNAGE AND OTHER ITEMS. Any signs, notices, logos,
pictures, names or advertisements which are installed and that have not been
separately approved by Landlord may be removed without notice by Landlord at the
sole expense of Tenant. Except as is set forth in Section 23.1, above, Tenant
may not install any signs on the exterior or roof of the Building or the Common
Areas. Any signs, window coverings, or blinds (even if the same are located
behind the Landlord-approved window coverings for the Building), or other items
visible from the exterior of the Premises or Building, shall be subject to the
prior approval of Landlord, in its sole discretion.
ARTICLE 24
----------
COMPLIANCE WITH LAW
-------------------
Tenant shall not do anything or suffer anything to be done in or about the
Premises or the Project which will in any way conflict with any law, statute,
ordinance or other governmental rule, regulation or requirement now in force or
which may hereafter be enacted or promulgated. At its sole cost and expense,
Tenant shall promptly comply with all such governmental measures relating to the
Premises and Building, other than the making of changes to the Base Building.
Should any standard or regulation now or hereafter be imposed on Landlord or
Tenant by a state, federal or local governmental body charged with the
establishment, regulation and enforcement of occupational, health or safety
standards for employers, employees, landlords or tenants, then Tenant agrees, at
its sole cost and expense, to comply promptly with such standards or
regulations. The judgment of any court of competent jurisdiction or the
admission of Tenant in any judicial action, regardless of whether Landlord is a
party thereto, that Tenant has violated any of said governmental measures, shall
be conclusive of that fact as between Landlord and Tenant.
-41-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
ARTICLE 25
----------
LATE CHARGES
------------
If any installment of Rent or any other sum due from Tenant shall not be
received by Landlord or Landlord's designee within five (5) days after said
amount is due, then Tenant shall pay to Landlord a late charge equal to five
percent (5%) of the overdue amount plus any attorneys' fees incurred by Landlord
by reason of Tenant's failure to pay Rent and/or other charges when due
hereunder. The late charge shall be deemed Additional Rent and the right to
require it shall be in addition to all of Landlord's other rights and remedies
hereunder or at law and shall not be construed as liquidated damages or as
limiting Landlord's remedies in any manner. In addition to the late charge
described above, any Rent or other amounts owing hereunder which are not paid
within ten (10) days after the date they are due shall bear interest from the
date when due until paid at a rate per annum equal to the lesser of (i) the
annual "Bank Prime Loan" rate cited in the Federal Reserve Statistical Release
Publication G.13(415), published on the first Tuesday of each calendar month (or
such other comparable index as Landlord and Tenant shall reasonably agree upon
if such rate ceases to be published) plus four (4) percentage points, and (ii)
the highest rate permitted by applicable law.
ARTICLE 26
----------
LANDLORD'S RIGHT TO CURE DEFAULT; PAYMENTS BY TENANT
----------------------------------------------------
26.1 LANDLORD'S CURE. All covenants and agreements to be kept or
performed by Tenant under this Lease shall be performed by Tenant at Tenant's
sole cost and expense and without any reduction of Rent, except to the extent,
if any, otherwise expressly provided herein. If Tenant shall fail to perform
any obligation under this Lease, and such failure shall continue in excess of
the time allowed under Section 19.1.2, above, unless a specific time period is
otherwise stated in this Lease, Landlord may, but shall not be obligated to,
make any such payment or perform any such act on Tenant's part without waiving
its rights based upon any default of Tenant and without releasing Tenant from
any obligations hereunder.
26.2 TENANT'S REIMBURSEMENT. Except as may be specifically provided to
the contrary in this Lease, Tenant shall pay to Landlord, upon delivery by
Landlord to Tenant of statements therefor: (i) sums equal to expenditures
reasonably made and obligations incurred by Landlord in connection with the
remedying by Landlord of Tenant's defaults pursuant to the provisions of Section
26.1; (ii) sums equal to all losses, costs, liabilities, damages and expenses
referred to in Article 10 of this Lease; and (iii) sums equal to all
expenditures made and obligations incurred by Landlord in collecting or
attempting to collect the Rent or in enforcing or attempting to enforce any
rights of Landlord under this Lease or pursuant to law, including, without
limitation, all legal fees and other amounts so expended. Tenant's obligations
under this Section 26.2 shall survive the expiration or sooner termination of
the Lease Term.
-42-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
ARTICLE 27
----------
ENTRY BY LANDLORD
-----------------
Landlord reserves the right at all reasonable times and upon reasonable
notice to Tenant (except in the case of an emergency) to enter the Premises to
(i) inspect them; (ii) show the Premises to prospective purchasers, mortgagees
or tenants, or to current or prospective mortgagees, ground or underlying
lessors or insurers; (iii) post notices of nonresponsibility; or (iv) alter,
improve or repair the Premises or the Building, or for structural alterations,
repairs or improvements to the Building or the Building's systems and equipment.
Notwithstanding anything to the contrary contained in this Article 27, Landlord
may enter the Premises at any time to (A) perform services required of Landlord,
including janitorial service; (B) take possession due to any breach of this
Lease in the manner provided herein; and (C) perform any covenants of Tenant
which Tenant fails to perform. Landlord may make any such entries without the
abatement of Rent and may take such reasonable steps as required to accomplish
the stated purposes. Tenant hereby waives any claims for damages or for any
injuries or inconvenience to or interference with Tenant's business, lost
profits, any loss of occupancy or quiet enjoyment of the Premises, and any other
loss occasioned thereby. For each of the above purposes, Landlord shall at all
times have a key with which to unlock all the doors in the Premises, excluding
Tenant's vaults, safes and special security areas designated in advance by
Tenant. In an emergency, Landlord shall have the right to use any means that
Landlord may deem proper to open the doors in and to the Premises. Any entry
into the Premises by Landlord in the manner hereinbefore described shall not be
deemed to be a forcible or unlawful entry into, or a detainer of, the Premises,
or an actual or constructive eviction of Tenant from any portion of the
Premises. No provision of this Lease shall be construed as obligating Landlord
to perform any repairs, alterations or decorations except as otherwise expressly
agreed to be performed by Landlord herein.
ARTICLE 28
----------
TENANT PARKING
--------------
Tenant shall have the right, during the Lease Term, to use up to the number
of parking spaces in the Project parking areas as set forth in Section 9 of the
Summary. Such use shall be free of charge during the initial Lease Term.
Landlord agrees that, out of the space available to Tenant, ten (10) spaces
located adjacent to the Building shall be reserved for Tenant's exclusive use.
Tenant's continued right to use the parking areas is conditioned upon Tenant
abiding by all rules and regulations which are prescribed from time to time for
the orderly operation and use of such areas, including any sticker or other
identification system established by Landlord, Tenant's cooperation in seeing
that Tenant's employees and visitors also comply with such rules and regulations
and Tenant not being in default under this Lease. Landlord specifically
reserves the right to change the size, configuration, design, layout and all
other aspects of the Project parking areas at any time (without reducing the
number of parking spaces for use by Tenant) and Tenant acknowledges and agrees
that Landlord may, without incurring any liability to Tenant and without any
abatement of Rent under this Lease, from time to time, close-off or restrict
access to
-43-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
the Project areas facility for purposes of permitting or facilitating any such
construction, alteration or improvements. Landlord may delegate its
responsibilities hereunder to a parking operator in which case such parking
operator shall have all the rights of control attributed hereby to the Landlord.
ARTICLE 29
----------
MISCELLANEOUS PROVISIONS
------------------------
29.1 TERMS; CAPTIONS. The words "Landlord" and "Tenant" as used herein
shall include the plural as well as the singular. The necessary grammatical
changes required to make the provisions hereof apply either to corporations or
partnerships or individuals, men or women, as the case may require, shall in all
cases be assumed as though in each case fully expressed. The captions of
Articles and Sections are for convenience only and shall not be deemed to limit,
construe, affect or alter the meaning of such Articles and Sections.
29.2 BINDING EFFECT. Subject to all other provisions of this Lease, each
of the covenants, conditions and provisions of this Lease shall extend to and
shall, as the case may require, bind or inure to the benefit not only of
Landlord and of Tenant, but also of their respective heirs, personal
representatives, successors or assigns, provided this clause shall not permit
any assignment by Tenant contrary to the provisions of Article 14 of this Lease.
29.3 NO AIR RIGHTS. No rights to any view or to light or air over any
property, whether belonging to Landlord or any other person, are granted to
Tenant by this Lease. If at any time any windows of the Premises are
temporarily darkened or the light or view therefrom is obstructed by reason of
any repairs, improvements, maintenance or cleaning in or about the Project, the
same shall be without liability to Landlord and without any reduction or
diminution of Tenant's obligations under this Lease.
29.4 MODIFICATION OF LEASE. Should any current or prospective mortgagee
or ground lessor for the Building or Project require a modification of this
Lease, which modification will not cause an increased cost or expense to Tenant
or in any other way materially and adversely change the rights and obligations
of Tenant hereunder, then and in such event, Tenant agrees that this Lease may
be so modified and agrees to execute whatever documents are reasonably required
therefor and to deliver the same to Landlord within ten (10) days following a
request therefor. At the request of Landlord or any mortgagee or ground lessor,
Tenant agrees to execute a short form of Lease and deliver the same to Landlord
within ten (10) days following the request therefor.
29.5 TRANSFER OF LANDLORD'S INTEREST. Tenant acknowledges that Landlord
has the right to transfer all or any portion of its interest in the Project or
Building and in this Lease, and Tenant agrees that in the event of any such
transfer, Landlord shall automatically be released from all liability under this
Lease and Tenant agrees to look solely to such transferee for the performance of
Landlord's obligations hereunder after the date of transfer and such transferee
shall be deemed to have fully assumed and be liable for all obligations of this
Lease to be
-44-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
performed by Landlord, including the return of any Security Deposit, and Tenant
shall attorn to such transferee.
29.6 PROHIBITION AGAINST RECORDING. Except as provided in Section 29.4 of
this Lease, neither this Lease, nor any memorandum, affidavit or other writing
with respect thereto, shall be recorded by Tenant or by anyone acting through,
under or on behalf of Tenant.
29.7 LANDLORD'S TITLE. Landlord's title is and always shall be paramount
to the title of Tenant. Nothing herein contained shall empower Tenant to do any
act which can, shall or may encumber the title of Landlord (except in connection
with mechanics' or materialmen's liens in connection with Tenant construction in
the Building pursuant to the terms of this Lease).
29.8 RELATIONSHIP OF PARTIES. Nothing contained in this Lease shall be
deemed or construed by the parties hereto or by any third party to create the
relationship of principal and agent, partnership, joint venturer or any
association between Landlord and Tenant.
29.9 APPLICATION OF PAYMENTS. Landlord shall have the right to apply
payments received from Tenant pursuant to this Lease, regardless of Tenant's
designation of such payments, to satisfy any obligations of Tenant hereunder, in
such order and amounts as Landlord, in its sole discretion, may elect.
29.10 TIME OF ESSENCE. Time is of the essence with respect to the
performance of every provision of this Lease in which time of performance is a
factor.
29.11 PARTIAL INVALIDITY. If any term, provision or condition contained
in this Lease shall, to any extent, be invalid or unenforceable, the remainder
of this Lease, or the application of such term, provision or condition to
persons or circumstances other than those with respect to which it is invalid or
unenforceable, shall not be affected thereby, and each and every other term,
provision and condition of this Lease shall be valid and enforceable to the
fullest extent possible permitted by law.
29.12 NO WARRANTY. In executing and delivering this Lease, Tenant has not
relied on any representations, including, but not limited to, any representation
as to the amount of any item comprising Additional Rent or the amount of the
Additional Rent in the aggregate or that Landlord is furnishing the same
services to other tenants, at all, on the same level or on the same basis, or
any warranty or any statement of Landlord which is not set forth herein or in
one or more of the exhibits attached hereto.
29.13 LANDLORD EXCULPATION. The liability of Landlord or the Landlord
Parties to Tenant for any default by Landlord under this Lease or arising in
connection herewith or with Landlord's operation, management, leasing, repair,
renovation, alteration or any other matter relating to the Project or the
Premises shall be limited solely and exclusively to an amount which is equal to
the interest of Landlord in the Project, provided that in no event shall such
liability extend to any sales or insurance proceeds received by Landlord or the
Landlord Parties in connection with the Project, Building or Premises. The
parties agree that the terms of this
-45-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
Section 29.13 are not intended and shall not relieve any insurance carrier of
its obligations under any insurance policies carried by Landlord or Tenant in
connection with the Project, the Building or the Premises. Neither Landlord, nor
any of the Landlord Parties shall have any personal liability therefor, and
Tenant hereby expressly waives and releases such personal liability on behalf of
itself and all persons claiming by, through or under Tenant. The limitations of
liability contained in this Section 29.13 shall inure to the benefit of
Landlord's and the Landlord Parties' present and future partners, beneficiaries,
officers, directors, trustees, shareholders, agents and employees, and their
respective partners, heirs, successors and assigns. Under no circumstances shall
any present or future partner of Landlord (if Landlord is a partnership), or
trustee or beneficiary (if Landlord or any partner of Landlord is a trust), have
any liability for the performance of Landlord's obligations under this Lease.
Notwithstanding any contrary provision herein, neither Landlord nor the Landlord
Parties shall be liable under any circumstances for injury or damage to, or
interference with, Tenant's business, including but not limited to, loss of
profits, loss of rents or other revenues, loss of business opportunity, loss of
goodwill or loss of use, in each case, however occurring.
29.14 ENTIRE AGREEMENT. It is understood and acknowledged that there are
no oral agreements between the parties hereto affecting this Lease and this
Lease constitutes the parties' entire agreement with respect to the leasing of
the Premises and supersedes and cancels any and all previous negotiations,
arrangements, brochures, agreements and understandings, if any, between the
parties hereto or displayed by Landlord to Tenant with respect to the subject
matter thereof, and none thereof shall be used to interpret or construe this
Lease. None of the terms, covenants, conditions or provisions of this Lease can
be modified, deleted or added to except in writing signed by the parties hereto.
29.15 RIGHT TO LEASE. Landlord reserves the absolute right to effect such
other tenancies in the Project as Landlord in the exercise of its sole business
judgment shall determine to best promote the interests of the Building or
Project. Tenant does not rely on the fact, nor does Landlord represent, that
any specific tenant or type or number of tenants shall, during the Lease Term,
occupy any space in the Building or Project.
29.16 FORCE MAJEURE. Any prevention, delay or stoppage due to strikes,
lockouts, labor disputes, acts of God, inability to obtain services, labor, or
materials or reasonable substitutes therefor, governmental actions, civil
commotions, fire or other casualty, and other causes beyond the reasonable
control of the party obligated to perform, except with respect to the
obligations imposed with regard to Rent and other charges to be paid by Tenant
pursuant to this Lease (collectively, a "FORCE MAJEURE"), notwithstanding
anything to the contrary contained in this Lease, shall excuse the performance
of such party for a period equal to any such prevention, delay or stoppage and,
therefore, if this Lease specifies a time period for performance of an
obligation of either party, that time period shall be extended by the period of
any delay in such party's performance caused by a Force Majeure.
29.17 WAIVER OF REDEMPTION BY TENANT. Tenant hereby waives, for Tenant
and for all those claiming under Tenant, any and all rights now or hereafter
existing to redeem by order or
-46-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
judgment of any court or by any legal process or writ, Tenant's right of
occupancy of the Premises after any termination of this Lease.
29.18 NOTICES. All notices, demands, statements, designations, approvals
or other communications (collectively, "NOTICES") given or required to be given
by either party to the other hereunder or by law shall be in writing, shall be
(A) sent by United States certified or registered mail, postage prepaid, return
receipt requested ("MAIL"), (B) transmitted by telecopy, if such telecopy is
promptly followed by a Notice sent by Mail, (C) delivered by a nationally
recognized overnight courier, or (D) delivered personally. Any Notice shall be
sent, transmitted, or delivered, as the case may be, to Tenant at the
appropriate address set forth in Section 10 of the Summary, or to such other
place as Tenant may from time to time designate in a Notice to Landlord, or to
Landlord at the addresses set forth in Section 11 of the Summary, or to such
other places as Landlord may from time to time designate in a Notice to Tenant.
Any Notice will be deemed given (i) three (3) days after the date it is posted
if sent by Mail, (ii) the date the telecopy is transmitted, (iii) the date the
overnight courier delivery is made, or (iv) the date personal delivery is made
29.19 JOINT AND SEVERAL. If there is more than one Tenant, the
obligations imposed upon Tenant under this Lease shall be joint and several.
29.20 AUTHORITY. If Tenant is a corporation, trust or partnership, each
individual executing this Lease on behalf of Tenant hereby represents and
warrants that Tenant is a duly formed and existing entity qualified to do
business in California and that Tenant has full right and authority to execute
and deliver this Lease and that each person signing on behalf of Tenant is
authorized to do so. In such event, Tenant shall, within ten (10) days after
execution of this Lease, deliver to Landlord satisfactory evidence of such
authority and, if a corporation, upon demand by Landlord, also deliver to
Landlord satisfactory evidence of (i) good standing in Tenant's state of
incorporation and (ii) qualification to do business in California.
29.21 ATTORNEYS' FEES. In the event that either Landlord or Tenant should
bring suit for the possession of the Premises, for the recovery of any sum due
under this Lease, or because of the breach of any provision of this Lease or for
any other relief against the other, then all costs and expenses, including
reasonable attorneys' fees, incurred by the prevailing party therein shall be
paid by the other party, which obligation on the part of the other party shall
be deemed to have accrued on the date of the commencement of such action.
29.22 GOVERNING LAW; WAIVER OF TRIAL BY JURY. This Lease shall be
construed and enforced in accordance with the laws of the State of California.
IN ANY ACTION OR PROCEEDING ARISING HEREFROM, LANDLORD AND TENANT HEREBY CONSENT
TO (I) THE JURISDICTION OF ANY COMPETENT COURT WITHIN THE STATE OF CALIFORNIA,
(II) SERVICE OF PROCESS BY ANY MEANS AUTHORIZED BY CALIFORNIA LAW, AND (III) IN
THE INTEREST OF SAVING TIME AND EXPENSE, TRIAL WITHOUT A JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE
OTHER OR THEIR SUCCESSORS IN RESPECT OF ANY MATTER ARISING OUT OF OR IN
CONNECTION
-47-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OR
OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY
EMERGENCY OR STATUTORY REMEDY.
29.23 SUBMISSION OF LEASE. Submission of this instrument for examination
or signature by Tenant does not constitute a reservation of, option for or
option to lease, and it is not effective as a lease or otherwise until execution
and delivery by both Landlord and Tenant.
29.24 BROKERS. Landlord and Tenant hereby warrant to each other that they
have had no dealings with any real estate broker or agent in connection with the
negotiation of this Lease, excepting only the real estate brokers or agents
specified in Section 12 of the Summary (the "BROKERS"), and that they know of no
other real estate broker or agent who is entitled to a commission in connection
with this Lease. Each party agrees to indemnify and defend the other party
against and hold the other party harmless from any and all claims, demands,
losses, liabilities, lawsuits, judgments, costs and expenses (including without
limitation reasonable attorneys' fees) with respect to any leasing commission or
equivalent compensation alleged to be owing on account of any dealings with any
real estate broker or agent, other than the Brokers, occurring by, through, or
under the indemnifying party.
29.25 INDEPENDENT COVENANTS. This Lease shall be construed as though the
covenants herein between Landlord and Tenant are independent and not dependent
and Tenant hereby expressly waives the benefit of any statute to the contrary
and agrees that if Landlord fails to perform its obligations set forth herein,
Tenant shall not be entitled to make any repairs or perform any acts hereunder
at Landlord's expense or to any setoff of the Rent or other amounts owing
hereunder against Landlord.
29.26 PROJECT OR BUILDING NAME AND SIGNAGE. Landlord shall have the right
at any time to change the name of the Project or Building and to install, affix
and maintain any and all signs on the exterior and on the interior of the
Project or, except with respect to other tenant signage, Building as Landlord
may, in Landlord's sole discretion, desire. Tenant shall not use the words
"Irvine Oaks" or the name of the Project or Building or use pictures or
illustrations of the Project or Building in advertising or other publicity or
for any purpose other than as the address of the business to be conducted by
Tenant in the Premises, without the prior written consent of Landlord.
29.27 COUNTERPARTS. This Lease may be executed in counterparts with the
same effect as if both parties hereto had executed the same document. Both
counterparts shall be construed together and shall constitute a single lease.
29.28 CONFIDENTIALITY. The parties acknowledge that the content of this
Lease and any related documents are confidential information. The parties shall
keep such confidential information strictly confidential and shall not disclose
such confidential information to any person or entity as reasonably necessary.
-48-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
29.29 DEVELOPMENT OF THE PROJECT.
29.29.1 SUBDIVISION. Landlord reserves the right to further
subdivide all or a portion of the Project. Tenant agrees to execute and
deliver, upon demand by Landlord and in the form requested by Landlord, any
additional documents needed to conform this Lease to the circumstances resulting
from such subdivision.
29.29.2 THE OTHER IMPROVEMENTS. If portions of the Project or
property adjacent to the Project (collectively, the "OTHER IMPROVEMENTS") are
owned by an entity other than Landlord, Landlord, at its option, may enter into
an agreement with the owner or owners of any or all of the Other Improvements to
provide (i) for reciprocal rights of access and/or use of the Project and the
Other Improvements, (ii) for the common management, operation, maintenance,
improvement and/or repair of all or any portion of the Project and the Other
Improvements, (iii) for the allocation of a portion of the Direct Expenses to
the Other Improvements and the operating expenses and taxes for the Other
Improvements to the Project, and (iv) for the use or improvement of the Other
Improvements and/or the Project in connection with the improvement,
construction, and/or excavation of the Other Improvements and/or the Project.
Nothing contained herein shall be deemed or construed to limit or otherwise
affect Landlord's right to convey all or any portion of the Project or any other
of Landlord's rights described in this Lease.
29.29.3 CONSTRUCTION OF PROJECT AND OTHER IMPROVEMENTS. Tenant
acknowledges that portions of the Project and/or the Other Improvements may be
under construction following Tenant's occupancy of the Premises, and that such
construction may result in levels of noise, dust, obstruction of access, etc.
which are in excess of that present in a fully constructed project. Provided
that Landlord shall not materially obstruct Tenant's access to the Premises, and
except as otherwise expressly provided herein, Tenant hereby waives any and all
rent offsets or claims of constructive eviction which may arise in connection
with such construction.
29.30 BUILDING RENOVATIONS. It is specifically understood and agreed that
Landlord has no obligation and has made no promises to alter, remodel, improve,
renovate, repair or decorate the Premises, Building, or any part thereof and
that no representations respecting the condition of the Premises or the Building
have been made by Landlord to Tenant except as specifically set forth herein or
in the Tenant Work Letter. However, Tenant hereby acknowledges that Landlord is
currently renovating or may during the Lease Term renovate, improve, alter, or
modify (collectively, the "RENOVATIONS") the Project, the Building and/or the
Premises. Tenant hereby agrees that such Renovations shall in no way constitute
a constructive eviction of Tenant nor entitle Tenant to any abatement of Rent.
Landlord shall have no responsibility and shall not be liable to Tenant for any
injury to or interference with Tenant's business arising from the Renovations,
nor shall Tenant be entitled to any compensation or damages from Landlord for
loss of the use of the whole or any part of the Premises or of Tenant's personal
property or improvements resulting from the Renovations, or for any
inconvenience or annoyance occasioned by such Renovations.
-49-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
29.31 NO VIOLATION. Tenant hereby warrants and represents that neither
its execution of nor performance under this Lease shall cause Tenant to be in
violation of any agreement, instrument, contract, law, rule or regulation by
which Tenant is bound, and Tenant shall protect, defend, indemnify and hold
Landlord harmless against any claims, demands, losses, damages, liabilities,
costs and expenses, including, without limitation, reasonable attorneys' fees
and costs, arising from Tenant's breach of this warranty and representation.
29.32 Arbitration.
29.32.1 Submittals to Arbitration. The submittal of all matters to
arbitration in accordance with the terms of this Section 29.32 is the sole and
exclusive method, means and procedure to resolve any and all claims, disputes or
disagreements arising under Section 7.2 of this Lease. The parties hereby
irrevocably waive any and all rights to the contrary and shall at all times
conduct themselves in strict, full, complete and timely accordance with the
terms of this Section 29.32. As to any matter submitted to arbitration with
respect to the payment of money, to determine whether a matter would, with the
passage of time, constitute a default, such passage of time shall not commence
to run in the event that the party which is obligated to make the payment does
in fact make the payment to the other party. Such payment can be made "under
protest," which shall occur when such payment is accompanied by a good faith
notice stating the reasons that the party has elected to make a payment under
protest. Such protest will be deemed waived unless the subject matter
identified in the protest is submitted to arbitration as set forth in this
Section 29.32.
29.32.2 JAMS. Any dispute to be arbitrated pursuant to the
provisions of this Section 29.32 shall be determined by binding arbitration
before a retired judge of the Superior Court of the State of California (the
"Arbitrator") under the auspices of Judicial Arbitration & Mediation Services,
Inc. ("JAMS"). Such arbitration shall be initiated by the parties, or either of
them, within ten (10) days after either party sends written notice (the
"Arbitration Notice") of a demand to arbitrate by registered or certified mail
to the other party and to JAMS. The Arbitration Notice shall contain a
description of the subject matter of the arbitration, the dispute with respect
thereto, the amount involved, if any, and the remedy or determination sought.
The parties may agree on a retired judge from the JAMS panel. If they are
unable to promptly agree, JAMS will provide a list of three available judges and
each party may strike one. The remaining judge (or if there are two, the one
selected by JAMS) will serve as the Arbitrator. In the event that JAMS shall no
longer exist or if JAMS fails or refuses to accept submission of such dispute,
then the dispute shall be resolved by binding arbitration before the American
Arbitration Association ("AAA") under the AAA's commercial arbitration rules
then in effect.
29.32.3 Arbitration Procedure.
29.32.3.1 Pre-Decision Actions. The Arbitrator shall schedule a
pre-hearing conference to resolve procedural matters, arrange for the exchange
of information, obtain stipulations, and narrow the issues. The parties will
submit proposed discovery schedules to the Arbitrator at the pre-hearing
conference. The scope and duration of discovery will be within the sole
discretion of the Arbitrator. The Arbitrator shall have the discretion to order
a pre-hearing
-50-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
exchange of information by the parties, including, without limitation,
production of requested documents, exchange of summaries of testimony of
proposed witnesses, and examination by deposition of parties and third-party
witnesses. This discretion shall be exercised in favor of discovery reasonable
under the circumstances.
29.32.3.2 The Decision. The arbitration shall be conducted in Orange
County, California. Any party may be represented by counsel or other authorized
representative. In rendering a decision(s), the Arbitrator shall determine the
rights and obligations of the parties according to the substantive and
procedural laws of the State of California and the terms and provisions of this
Lease. The Arbitrator's decision shall be based on the evidence introduced at
the hearing, including all logical and reasonable inferences therefrom. The
Arbitrator may make any determination, and/or grant any remedy or relief that is
just and equitable. The decision must be based on, and accompanied by, a
written statement of decision explaining the factual and legal basis for the
decision as to each of the principal controverted issues. The decision shall be
conclusive and binding, and it may thereafter be confirmed as a judgment by the
Superior Court of the State of California, subject only to challenge on the
grounds set forth in the California Code of Civil Procedure Section 1286.2. The
validity and enforceability of the Arbitrator's decision is to be determined
exclusively by the California courts pursuant to the provisions of this Lease.
The Arbitrator may award costs, including without limitation attorneys' fees,
and expert and witness costs, to the prevailing party, if any, as determined by
the Arbitrator in his discretion. The Arbitrator's fees and costs shall be paid
by the non-prevailing party as determined by the Arbitrator in his discretion.
A party shall be determined by the Arbitrator to be the prevailing party if its
proposal for the resolution of dispute is the closer to that adopted by the
Arbitrator.
-51-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have caused this Lease to be
executed the day and date first above written.
"LANDLORD":
MAGELLAN IRVINE OAKS LIMITED PARTNERSHIP,
an Arizona limited partnership
By: _____________________________________
Its:__________________________________
"TENANT":
MICROSIM CORPORATION,
a California corporation
By: _____________________________________
Its:_____________________________________
By: _____________________________________
Its:_____________________________________
-52-
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
EXHIBIT A
---------
IRVINE OAKS EXECUTIVE PARK
--------------------------
OUTLINE OF PREMISES
-------------------
EXHIBIT A - Page 1
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
Blank Page
EXHIBIT A - Page 2
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
EXHIBIT B
---------
IRVINE OAKS EXECUTIVE PARK
--------------------------
TENANT WORK LETTER
------------------
This Tenant Work Letter shall set forth the terms and conditions relating
to the construction of the tenant improvements in the Premises. This Tenant
Work Letter is essentially organized chronologically and addresses the issues of
the construction of the Premises, in sequence, as such issues will arise during
the actual construction of the Premises. All references in this Tenant Work
Letter to Articles or Sections of "this Lease" shall mean the relevant portion
of Articles 1 through 29 of the Office Lease to which this Tenant Work Letter is
attached as Exhibit B and of which this Tenant Work Letter forms a part, and all
references in this Tenant Work Letter to Sections of "this Tenant Work Letter"
shall mean the relevant portion of Sections 1 through 6 of this Tenant Work
Letter.
SECTION 1
---------
LANDLORD'S INITIAL CONSTRUCTION IN THE PREMISES
-----------------------------------------------
Landlord shall construct, at its sole cost and expense, the base, shell,
and core (i) of the Premises and (ii) of the Building (collectively, the "Base,
Shell, and Core" or "Base Building") in accordance with the plans and
specifications described on Schedule 2 attached hereto (the "Design Plans"),
provided that Landlord may make changes to the Design Plans as reasonably deemed
necessary or desirable by Landlord, or as required by law. Landlord agrees
that, as of the date of substantial completion of the Base Building, the same
shall be in material compliance with applicable building codes, including
handicap access and Title 24 (collectively, "Code"), applicable to the Building
as of such date on an unoccupied basis. Landlord will use commercially
reasonable efforts to complete the various phases of construction in accordance
with the time deadlines set forth in Schedule 1 attached hereto.
SECTION 2
---------
TENANT IMPROVEMENTS
-------------------
2.1 Tenant Improvement Allowance. Tenant shall be entitled to a one-time
tenant improvement allowance (the "Tenant Improvement Allowance") in the amount
of $25.00 per usable square foot of the Premises for the costs relating to the
initial design and construction of Tenant's improvements which are permanently
affixed to the Premises (the "Tenant Improvements"). In no event shall Landlord
be obligated to make disbursements pursuant to this Tenant Work Letter in a
total amount which exceeds the Tenant Improvement Allowance. All Tenant
Improvements for which the Tenant Improvement Allowance has been made available
shall be deemed Landlord's property under the terms of the Lease.
EXHIBIT B - Page 1
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
2.2 Disbursement of the Tenant Improvement Allowance. Concurrently with
the execution of this Lease, Landlord and Tenant are entering into that certain
Agreement Re Letter of Credit (the "LC Agreement") pursuant to which Landlord
has agreed to deposit the Tenant Improvement Allowance into the "Project
Account," as defined in such LC Agreement. The Tenant Improvement Allowance
shall be disbursed by Landlord in accordance with the terms of the LC Agreement.
Except as otherwise set forth in this Tenant Work Letter, the Tenant Improvement
Allowance shall be disbursed for costs related to the construction of the Tenant
Improvements and for the following items and costs (collectively, the "Tenant
Improvement Allowance Items"): (i) payment of the fees of the "Tenant's
Architect", "Architect" and the "Engineers," as those terms are defined in
Section 3.1 of this Tenant Work Letter, and payment of the fees incurred by, and
the cost of documents and materials supplied by, Landlord and Landlord's
consultants in connection with the preparation and review of the "Construction
Drawings," as that term is defined in Section 3.1 of this Tenant Work Letter;
(ii) the cost of any changes in the Base, Shell and Core when such changes are
required by the Construction Drawings; (iii) the cost of any changes to the
Construction Drawings or Tenant Improvements required by Code; (iv) the cost of
Tenant's relocation into the Premises, up to a maximum amount equal to $1.00 per
rentable square foot of the Premises; and (v) the "Landlord Supervision Fee", as
that term is defined in Section 4.3.2 of this Tenant Work Letter.
2.3 Standard Tenant Improvement Package. Landlord has established
specifications (the "Specifications") for the Building standard components to be
used in the construction of the Tenant Improvements in the Premises
(collectively, the "Standard Improvement Package"), which Specifications are set
forth on Schedule 3 attached hereto. The quality of Tenant Improvements shall
be equal to or of greater quality than the quality of the Specifications,
provided that Landlord may, at Landlord's option, require the Tenant
Improvements to comply with certain Specifications. Landlord may make changes
to the Specifications for the Standard Improvement Package from time to time.
SECTION 3
---------
CONSTRUCTION DRAWINGS
---------------------
3.1 Selection of Architect/Construction Drawings. Tenant has retained
Tsutsumida and Associates ("Tenant's Architect") to prepare the "Final Space
Plan," as that term is defined in Section 3.2, below. Landlord shall retain an
architect/space planner selected by Landlord (the "Architect") to prepare the
"Construction Drawings," as that term is defined in this Section 3.1, and
engineering consultants selected by Landlord (the "Engineers") to prepare all
plans and engineering working drawings relating to the structural, mechanical,
electrical, plumbing, HVAC, lifesafety, and sprinkler work of the Tenant
Improvements, based on the Final Space Plan. The plans and drawings to be
prepared by Architect and the Engineers hereunder shall be known collectively as
the "Construction Drawings."
3.2 Final Space Plan. Tenant and the Tenant's Architect have prepared the
final space plan for Tenant Improvements in the Premises (collectively, the
"Final Space Plan"), which Final Space Plan has been approved by Landlord.
EXHIBIT B - Page 2
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
3.3 Final Working Drawings. The Architect and the Engineers shall
complete the architectural and engineering drawings for the Premises, and the
final architectural working drawings in a form which is complete to allow
subcontractors to bid on the work and to obtain all applicable permits
(collectively, the "Final Working Drawings") and shall submit the same to Tenant
for Tenant's reasonable approval, which approval shall be given within fifty-
three (53) business days after Landlord's delivery of the same to Tenant.
Landlord agrees that the Tenant's Architect may be involved in such approval,
and that any costs relating to such involvement may, at Tenant's option, be
deducted from the Tenant Improvement Allowance.
3.4 Permits. Landlord shall submit the Final Working Drawing as approved
by Tenant (the "Approved Working Drawings") to the appropriate municipal
authorities for all applicable building permits necessary to allow "Contractor,"
as that term is defined in Section 4.1, below, to commence and fully complete
the construction of the Tenant Improvements (the "Permits").
3.5 Time Deadlines. Tenant shall use its best, good faith, efforts and
all due diligence to cooperate with the Architect, the Engineers, and Landlord
to complete all phases of the Construction Drawings and the permitting process
and to receive the permits, and with Contractor for approval of the "Cost
Proposal," as that term is defined in Section 4.2 of this Tenant Work Letter, as
soon as possible after the execution of the Lease, and, in that regard, shall
meet with Landlord on a scheduled basis to be determined by Landlord, to discuss
Tenant's progress in connection with the same. The applicable dates for
approval of items, plans and drawings as described in this Section 3, Section 4,
below, and in this Tenant Work Letter are set forth and further elaborated upon
in Schedule 1 (the "Time Deadlines"), attached hereto. Tenant agrees to comply
with the Time Deadlines. Schedule 1 also contains Landlord's proposed schedule
for the construction of the Building and the Tenant Improvements.
SECTION 4
---------
CONSTRUCTION OF THE TENANT IMPROVEMENTS
---------------------------------------
4.1 Contractor. A contractor selected by Landlord ("Contractor") shall
construct the Tenant Improvements. Landlord agrees that one (1) contractor
designated by Tenant will be considered for selection by Landlord as the
Contractor.
4.2 Cost Proposal. After the Approved Working Drawings are signed by
Landlord and Tenant, Landlord shall provide Tenant with a cost proposal in
accordance with the Approved Working Drawings, which cost proposal shall
include, as nearly as possible, the cost of all Tenant Improvement Allowance
Items to be incurred by Tenant in connection with the design and construction of
the Tenant Improvements (the "Cost Proposal"). Tenant shall approve and deliver
the Cost Proposal to Landlord within five (5) business days of the receipt of
the same, and upon receipt of the same by Landlord, Landlord shall be released
by Tenant to purchase the items set forth in the Cost Proposal and to commence
the construction relating to such items. The date by which Tenant must approve
and deliver the Cost Proposal to Landlord shall be known hereafter as the "Cost
Proposal Delivery Date".
EXHIBIT B - Page 3
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
4.3 Construction of Tenant Improvements by Contractor under the
Supervision of Landlord.
4.3.1 Over-Allowance Amount. If the Cost Proposal shows costs
greater than the amount of the Tenant Improvement Allowance (after deducting
from the Tenant Improvement Allowance any amounts expended in connection with
the preparation of the Construction Drawings, and the cost of all other Tenant
Improvement Allowance Items incurred prior to the commencement of construction
of the Tenant Improvements) (the "Over-Allowance Amount") then Tenant shall to
pay a percentage of each amount disbursed by Escrow Holder to the Contractor or
otherwise disbursed under this Tenant Work Letter, which percentage shall be
equal to the Over-Allowance Amount divided by the amount of the Final Costs, and
such payment by Tenant ("Over-Allowance Payment") shall be a condition to
Landlord's obligation to pay any amounts of Tenant Improvement Allowance. In
the event that, after the Cost Proposal Delivery Date, any revisions, changes,
or substitutions shall be made to the Construction Drawings or the Tenant
Improvements by Tenant, any additional costs which arise in connection with such
revisions, changes or substitutions or any other additional costs shall be paid
by Tenant to Landlord immediately upon Landlord's request as an addition to the
Over-Allowance Amount.
4.3.2 Landlord's Retention of Contractor. Landlord shall
independently retain Contractor to construct the Tenant Improvements in
accordance with the Approved Working Drawings and the Cost Proposal and Landlord
shall supervise the construction by Contractor, and Tenant shall pay a
construction supervision and management fee (the "Landlord Supervision Fee") to
Landlord in an amount equal to the product of (i) three percent (3%) and (ii) an
amount equal to the Tenant Improvement Allowance plus the Over-Allowance Amount
(as such Over-Allowance Amount may increase pursuant to the terms of this Tenant
Work Letter), but not including reimbursable amounts payable to the Architects
or Engineers.
4.3.3 Contractor's Warranties and Guaranties. Landlord hereby
assigns to Tenant all warranties and guaranties by Contractor relating to the
Tenant Improvements and to those portions of the Base Building which Tenant is
required to maintain pursuant to the terms of the Lease, and Tenant hereby
waives all claims against Landlord relating to, or arising out of the
construction of, the Tenant Improvements.
4.3.4 Tenant's Covenants. Tenant hereby indemnifies Landlord for any
loss, claims, damages or delays arising from the actions of Tenant's Architect
on the Premises or in the Building.
SECTION 5
---------
COMPLETION OF THE TENANT IMPROVEMENTS;
--------------------------------------
LEASE COMMENCEMENT DATE
-----------------------
5.1 Ready for Occupancy. Subject to the terms of Section 6.1, below, the
Premises shall be deemed "Ready for Occupancy" upon the Substantial Completion
of the Premises and the issuance of a certificate of occupancy or its legal
equivalent allowing occupancy of the
EXHIBIT B - Page 4
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
Premises. For purposes of this Lease, "Substantial Completion" of the Premises
shall occur upon the completion of construction of the Tenant Improvements in
the Premises pursuant to the Approved Working Drawings, with the exception of
any punch list items and any tenant fixtures, work-stations, built-in furniture,
or equipment to be installed by Tenant.
5.2 Delay of the Substantial Completion of the Premises. Except as
provided in this Section 5.2, the Lease Commencement Date shall occur as set
forth in the Lease and Section 5.1, above. If there shall be a delay or there
are delays in the Substantial Completion of the Premises or in the occurrence of
any of the other conditions precedent to the Lease Commencement Date, as set
forth in the Lease, as a direct, indirect, partial, or total result of:
5.2.1 Tenant's failure to comply with the Time Deadlines;
5.2.2 Tenant's failure to timely approve any matter requiring
Tenant's approval;
5.2.3 A breach by Tenant of the terms of this Tenant Work Letter
or the Lease;
5.2.4 Changes in any of the Construction Drawings after disapproval
of the same by Landlord or because the same do not comply with Code or other
applicable laws;
5.2.5 Tenant's request for changes in the Approved Working
Drawings;
5.2.6 Tenant's requirement for materials, components, finishes or
improvements which are not available in a commercially reasonable time given the
anticipated date of Substantial Completion of the Premises, as set forth in the
Lease, or which are different from, or not included in, the Standard Improvement
Package;
5.2.7 Changes to the Base, Shell and Core required by the
Approved Working Drawings; or
5.2.8 Any other acts or omissions of Tenant, or its agents, or
employees;
then, notwithstanding anything to the contrary set forth in the Lease or this
Tenant Work Letter and regardless of the actual date of the Substantial
Completion of the Premises, the Lease Commencement Date shall be deemed to be
the date the Lease Commencement Date would have occurred if no Tenant delay or
delays, as set forth above, had occurred.
SECTION 6
---------
MISCELLANEOUS
-------------
6.1 Tenant's Entry Into the Premises Prior to Substantial Completion.
Provided that Tenant and its agents do not interfere with Contractor's work in
the Building and the Premises, Contractor shall allow Tenant access to the
Premises prior to the Substantial Completion of the
EXHIBIT B - Page 5
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
Premises for the purpose of Tenant installing overstandard equipment or fixtures
(including Tenant's data and telephone equipment) in the Premises, and,
furthermore, Landlord agrees that in no event shall the Premises be deemed Ready
for Occupancy prior to the date which is thirty (30) days after the date Tenant
is granted such access. Prior to Tenant's entry into the Premises as permitted
by the terms of this Section 6.1, Tenant shall submit a schedule to Landlord and
Contractor, for their approval, which schedule shall detail the timing and
purpose of Tenant's entry. Tenant shall hold Landlord harmless from and
indemnify, protect and defend Landlord against any loss or damage to the
Building or Premises, or damage to Tenant's furniture, fixtures or equipment, or
personal property, and against injury to any persons caused by Tenant's actions
pursuant to this Section 6.1.
6.2 Freight Elevators. Landlord shall make the freight elevator, after
the same has been installed and completed, reasonably available to Tenant in
connection with initial decorating, furnishing and moving into the Premises.
6.3 Tenant's Representative. Tenant has designated Wendi Hall as its sole
representative with respect to the matters set forth in this Tenant Work Letter,
who, until further notice to Landlord, shall have full authority and
responsibility to act on behalf of the Tenant as required in this Tenant Work
Letter.
6.4 Landlord's Representative. Landlord has designated James Dawson as
its sole representatives with respect to the matters set forth in this Tenant
Work Letter, who, until further notice to Tenant, shall have full authority and
responsibility to act on behalf of the Landlord as required in this Tenant Work
Letter.
6.5 Time of the Essence in This Tenant Work Letter. Unless otherwise
indicated, all references herein to a "number of days" shall mean and refer to
calendar days. In all instances where Tenant is required to approve or deliver
an item, if no written notice of approval is given or the item is not delivered
within the stated time period, at Landlord's sole option, at the end of such
period the item shall automatically be deemed approved or delivered by Tenant
and the next succeeding time period shall commence.
6.6 Tenant's Lease Default. Notwithstanding any provision to the contrary
contained in this Lease, if an event of default as described in the Lease, or a
default by Tenant under this Tenant Work Letter, has occurred at any time on or
before the Substantial Completion of the Premises, then (i) in addition to all
other rights and remedies granted to Landlord pursuant to the Lease, Landlord
shall have the right to withhold payment of all or any portion of the Tenant
Improvement Allowance and/or Landlord may cause Contractor to cease the
construction of the Premises (in which case, Tenant shall be responsible for any
delay in the Substantial Completion of the Premises caused by such work stoppage
as set forth in Section 5 of this Tenant Work Letter), and (ii) all other
obligations of Landlord under the terms of this Tenant Work Letter shall be
forgiven until such time as such default is cured pursuant to the terms of the
Lease.
EXHIBIT B - Page 6
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
SCHEDULE 1 TO EXHIBIT B
-----------------------
TIME DEADLINES
--------------
Dates Actions to be Performed
----- -----------------------
A. Completed. Final Space Plan to be completed by
Tenant and delivered to Landlord.
B. Five (5) business days after the Tenant to approve Cost Proposal and
receipt of the Cost Proposal by delivery Cost Proposal to Landlord.
Tenant
SCHEDULE 1 TO EXHIBIT B - Page 1
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
SCHEDULE 2 TO EXHIBIT B
-----------------------
DESIGN PLANS
------------
The Base, Shell and Core of the Building is to be constructed pursuant to
those certain Shell Plans prepared by Datum Architects for Irvine Oaks
Executive Park - MicroSim, and dated November 18, 1996.
SCHEDULE 2 TO EXHIBIT B - Page 1
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
SCHEDULE 3 TO EXHIBIT B
-----------------------
SPECIFICATIONS
--------------
TENANT IMPROVEMENT STANDARDS - IRVINE OAKS
------------------------------------------
DEMISING PARTITION
------------------
a. 4" - 25 gauge metal studs - 16" on center.
b. 5/8" drywall type "x" one layer tenant side only.
c. Height from floor slab to structure above.
d. Partition taped smooth to receive paint.
e. Batt insulation in cavity, R-11 to undersize of structure.
INTERIOR PARTITION OFFICE
-------------------------
a. 2 1/2" - 25 gauge studs - 24" on center.
b. 5/8" drywall - one layer each side of studs.
c. Height from floor slab to ceiling above.
d. Partition taped smooth to receive paint to underside of suspended
ceiling.
e. Brake metal cap with neoprene gasket at exterior glazing.
INTERIOR DOOR ASSEMBLY
----------------------
a. Door 0 3'-0 x 8' x a-3/4" solid core, plain sliced red oak veneer with
matching edge band.
b. Frame - 3'-0" x 8'-0" "TIMELY" black factory painted. Throat size to
fit wall.
c. Latch set - Schlage-Rhodes 10-S 625 lever with matching strike finish
to match existing.
d. Hinges - RC 700 4 x 4 625 hagar or equal (4 per door).
e. Stop - Builders Brass Works #8061 with riser or equal (Floor Stop).
RATED DOOR ASSEMBLIES
---------------------
a. Door - 3"-0" x 8'-0" solid core 20 minute label, plain sliced red oak
veneer w/matching edge band.
b. Frame - 3'-0" x 8'-0" "TIMELY", 20 minute rated, Black factory
painted. Throat size to fit wall.
c. Lock set - Schlage Rhodes D-53 625 lever ""key way with matching
strike.
d. Closer - 4010N x cover c al arm LCN or equal.
e. Hinges - BB RC 700 4x4x625 hagar or equal.
SCHEDULE 3 TO EXHIBIT B - Page 1
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
f. Door Stop - Builders Brass Works #8061 with riser or equal (Floor
Stop).
g. Astrigals - Pemco 355 alm finish. (At pair of doors).
h. Dust proof strikes - D.P.2 Glenn Johnson (At pair of doors).
j. Flush bolts FB8 - Glenn Johnson (At pair of doors).
ACOUSTICAL CEILING
------------------
a. 2' x 2' Donn Meridian intermediate duty T-Bar suspension system, matte
white finish, at approximately 9'-0" AFF.
b. 2' x 2' U.S.G. Auratone #344 "Omni Fissured" 5/8" with grid edge, lay-
in-type with shoulder flush with grid.
c. Wire suspension per code.
Allowance: Ceiling throughout office areas.
FIRE SPRINKLERS
---------------
a. Semi-recessed head, with flush-mounted chrome escutcheon.
b. Drop heads from existing distribution, relocate as required.
c. Engineering as required.
d. Concealed white escutcheons at drywall ceilings.
FLOOR COVERING
--------------
a. *Carpet-1, Mannington Commercial "Intergraph 26" direct glue.
b. Carpet-2, Designweave, "New Temptest" direct glue.
c. Vinyl Composition Tile (VCT) "Armstrong" Imperial Texture
12" x 12" x 1/8".
d. Sheet Vinyl 'Armstrong" Classic Corolon -Suffield.
* Paul Singer is an exclusive provider
RUBBER TOPSET BASE
------------------
a. 4" Rubber topset base, Burke.
b. Any standard commercial color.
PAINTING
--------
a. Two coats flat interior latex paint.
b. Doors stain and lacquer.
EXIT SIGNS
----------
a. "MARCO" universal exit sign with battery pack, white housing with
green letters, ceiling mounted.
SCHEDULE 3 TO EXHIBIT B - Page 2
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
WINDOW COVERING
---------------
a. 1" aluminum mini-blinds - Levelor "Riviera," white (or equal).
Allowance: All exterior building glazing throughout office area.
TENANT SIGNAGE
--------------
a. Signage to be provided by Tenant.
H.V.A.C.
--------
a. Supply registers - Kruger 6500 series, white to match T-bar.
b. Thermostats - Honeywell T-7300 programable.
2' X 4' FLUORESCENT LIGHT FIXTURE
---------------------------------
a. 2' x 4' "Lithonia" lay-in type, 2GT-332-A12-(120V/277V)-GEB-LST.
(3) Fo32-T8 lamps, with electronic ballast, prismatic lens or
approved equal.
b. Wire suspension per code.
c. Switching per Title 24.
d. Design and engineer electrical per Title 24.
e. Connect one fixture per 2,000 sq. ft. to emergency lighting system.
8' FLUORESCENT LIGHT FIXTURE - WAREHOUSE
----------------------------------------
a. 8' "Lithonia", EJA-296-PG 120/277 ES, 2F96 cool white lamps.
b. Wire suspension per code.
c. Switching per Title 24.
d. Design and engineer electrical per Title 24.
e. Connect one fixture per 2,000 sq. ft. to emergency lighting system.
LIGHTING SWITCH ASSEMBLY
------------------------
a. "Leviton," Decora, #5600 Series, or equal, white toggle and cover
plate.
b. Switches paired in double gang box per Title 24 requirements.
(California)
c. Mounted 42" AFF, to center of switch.
ELECTRICAL WALL OUTLET
----------------------
a. "Levitron," #5600-sw or equal, duplex receptacle, 1 each - white
receptacle and cover plate.
b. Mounted vertically.
SCHEDULE 3 TO EXHIBIT B - Page 3
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
c. Outlet height at 15" AFF to underside of outlet.
d. Design and engineer electrical per Title 24. (California)
TELEPHONE WALL OUTLET
---------------------
a. Single gang box in wall - mounted vertically at 15" AFF to underside
of box.
b. 3/4" metal conduit up wall stubbed 6" above ceiling.
c. With pull string and ring.
d. Cover plate by Tenant's telephone company.
SCHEDULE 3 TO EXHIBIT B - Page 4
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
EXHIBIT C
---------
IRVINE OAKS EXECUTIVE PARK
--------------------------
NOTICE OF LEASE TERM DATES
--------------------------
To: _______________________
_______________________
_______________________
_______________________
Re: Office Lease dated ____________, 19__ between ____________________, a
________________________ ("Landlord"), and _______________________, a
______________________ ("Tenant") concerning Suite ______ on floor(s)
__________ of the office building located at ________________________
Los Angeles, California.
Gentlemen:
In accordance with the Office Lease (the "Lease"), we wish to advise you
and/or confirm as follows:
1. The Lease Term shall commence on or has commenced on ______________
for a term of __________________ ending on __________________.
2. Rent commenced to accrue on __________________, in the amount of
________________.
3. If the Lease Commencement Date is other than the first day of the
month, the first billing will contain a pro rata adjustment. Each
billing thereafter, with the exception of the final billing, shall be
for the full amount of the monthly installment as provided for in the
Lease.
4. Your rent checks should be made payable to __________________ at
___________________.
5. The exact number of rentable/usable square feet within the Premises is
____________ square feet.
EXHIBIT C - Page 1
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
6. Tenant's Share as adjusted based upon the exact number of usable
square feet within the Premises is ________%.
"Landlord":
________________________________________
a ______________________________________
By: ____________________________________
Its:_________________________________
Agreed to and Accepted
as of ____________, 19___.
"Tenant":
_____________________________________
a ___________________________________
By: _________________________________
Its:______________________________
EXHIBIT C - Page 2
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
EXHIBIT D
---------
IRVINE OAKS EXECUTIVE PARK
--------------------------
RULES AND REGULATIONS
---------------------
Tenant shall faithfully observe and comply with the following Rules and
Regulations. Landlord shall not be responsible to Tenant for the nonperformance
of any of said Rules and Regulations by or otherwise with respect to the acts or
omissions of any other tenants or occupants of the Project. In the event of
any conflict between the Rules and Regulations and the other provisions of this
Lease, the latter shall control.
1. Tenant shall not alter any lock or install any new or additional locks
or bolts on any doors or windows of the Premises without obtaining Landlord's
prior written consent. Tenant shall bear the cost of any lock changes or
repairs required by Tenant. Two keys will be furnished by Landlord for the
Premises, and any additional keys required by Tenant must be obtained from
Landlord at a reasonable cost to be established by Landlord. Upon the
termination of this Lease, Tenant shall restore to Landlord all keys of stores,
offices, and toilet rooms, either furnished to, or otherwise procured by, Tenant
and in the event of the loss of keys so furnished, Tenant shall pay to Landlord
the cost of replacing same or of changing the lock or locks opened by such lost
key if Landlord shall deem it necessary to make such changes.
2. All doors opening to public corridors shall be kept closed at all
times except for normal ingress and egress to the Premises.
3. Landlord reserves the right to close and keep locked all entrance and
exit doors of the Building non-business hours. Tenant, its employees and agents
must be sure that the doors to the Building are securely closed and locked when
leaving the Premises if it is after the normal hours of business for the
Building. In case of invasion, mob, riot, public excitement, or other commotion,
Landlord reserves the right to prevent access to the Building or the Project
during the continuance thereof by any means it deems appropriate for the safety
and protection of life and property.
4. The requirements of Tenant will be attended to only upon application
at the management office for the Project or at such office location designated
by Landlord. Employees of Landlord shall not perform any work or do anything
outside their regular duties unless under special instructions from Landlord.
5. No sign, advertisement, notice or handbill shall be exhibited,
distributed, painted or affixed by Tenant on any part of the Premises or the
Building without the prior written consent of the Landlord. Tenant shall not
disturb, solicit, peddle, or canvass any occupant of the Project and shall
cooperate with Landlord and its agents of Landlord to prevent same.
6. The toilet rooms, urinals, wash bowls and other apparatus shall not be
used for any purpose other than that for which they were constructed, and no
foreign substance of any
EXHIBIT D - Page 1
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
kind whatsoever shall be thrown therein. The expense of any breakage, stoppage
or damage resulting from the violation of this rule shall be borne by the tenant
who, or whose servants, employees, agents, visitors or licensees shall have
caused same.
7. Except for vending machines intended for the sole use of Tenant's
employees and invitees, no vending machine or machines other than fractional
horsepower office machines shall be installed, maintained or operated upon the
Premises without the written consent of Landlord.
8. Subject to Article 5 of this Lease, Tenant shall not use or keep in or
on the Premises, the Building, or the Project any kerosene, gasoline or other
inflammable or combustible fluid, chemical, substance or material, except in
connection with a propane powered forklift to be kept in the Building by Tenant,
provided that Tenant complies with all applicable laws with respect to the use
and storage of the same.
9. Tenant shall not without the prior written consent of Landlord use any
method of heating or air conditioning other than that supplied by Landlord.
10. Tenant shall not use, keep or permit to be used or kept, any foul or
noxious gas or substance in or on the Premises, or permit or allow the Premises
to be occupied or used in a manner offensive or objectionable to Landlord or
other occupants of the Project by reason of noise, odors, or vibrations, or
interfere with other tenants or those having business therein, whether by the
use of any musical instrument, radio, phonograph, or in any other way. Tenant
shall not throw anything out of doors, windows or skylights or down passageways.
11. Tenant shall not bring into or keep within the Project, the Building
or the Premises any animals, birds, aquariums.
12. No cooking shall be done or permitted on the Premises, nor shall the
Premises be used for the storage of merchandise, for lodging or for any
improper, objectionable or immoral purposes. Notwithstanding the foregoing,
Underwriters' laboratory-approved equipment and microwave ovens may be used in
the Premises for heating food and brewing coffee, tea, hot chocolate and similar
beverages for employees and visitors, provided that such use is in accordance
with all applicable federal, state, county and city laws, codes, ordinances,
rules and regulations.
13. The Premises shall not be used for the storage of merchandise except
as such storage may be incidental to the use of the Premises provided for in the
Summary.
14. Landlord reserves the right to exclude or expel from the Project any
person who, in the judgment of Landlord, is intoxicated or under the influence
of liquor or drugs, or who shall in any manner do any act in violation of any of
these Rules and Regulations.
15. Tenant, its employees and agents shall not loiter in or on the
entrances, corridors, sidewalks, lobbies, courts, halls, stairways, elevators,
vestibules or any Common Areas for the purpose of smoking tobacco products or
for any other purpose, nor in any way obstruct such areas, and shall use them
only as a means of ingress and egress for the Premises.
EXHIBIT D - Page 2
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
16. Tenant shall not waste electricity, water or air conditioning and
agrees to cooperate fully with Landlord to ensure the most effective operation
of the Building's heating and air conditioning system.
17. No material shall be placed in the trash boxes or receptacles if such
material is of such nature that it may not be disposed of in the ordinary and
customary manner of removing and disposing of trash and garbage in Irvine,
California without violation of any law or ordinance governing such disposal.
All trash, garbage and refuse disposal shall be made only through entry-ways and
elevators provided for such purposes as Landlord shall designate.
18. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental agency.
19. Any persons employed by Tenant to do janitorial work shall be subject
to the prior written approval of Landlord.
20. No awnings or other projection shall be attached to the outside walls
of the Building without the prior written consent of Landlord, and no curtains,
blinds, shades or screens shall be attached to or hung in, or used in connection
with, any window or door of the Premises other than Landlord standard drapes.
All electrical ceiling fixtures hung in the Premises or spaces along the
perimeter of the Building must be fluorescent and/or of a quality, type, design
and a warm white bulb color approved in advance in writing by Landlord. Neither
the interior nor exterior of any windows shall be coated or otherwise
sunscreened without the prior written consent of Landlord. Tenant shall abide
by Landlord's regulations concerning the opening and closing of window coverings
which are attached to the windows in the Premises, if any, which have a view of
any interior portion of the Building or Building Common Areas.
21. The sashes, sash doors, skylights, windows, and doors that reflect or
admit light and air into the halls, passageways or other public places in the
Building shall not be covered or obstructed by Tenant, nor shall any bottles,
parcels or other articles be placed on the windowsills.
22. Tenant must comply with requests by the Landlord concerning the
informing of their employees of items of importance to the Landlord.
23. Tenant hereby acknowledges that Landlord shall have no obligation to
provide guard service or other security measures for the benefit of the
Premises, the Building or the Project. Tenant hereby assumes all responsibility
for the protection of Tenant and its agents, employees, contractors, invitees
and guests, and the property thereof, from acts of third parties, including
keeping doors locked and other means of entry to the Premises closed, whether or
not Landlord, at its option, elects to provide security protection for the
Project or any portion thereof. Tenant further assumes the risk that any safety
and security devices, services and programs which Landlord elects, in its sole
discretion, to provide may not be effective, or may malfunction or be
circumvented by an unauthorized third party, and Tenant shall, in addition to
its other insurance obligations under this Lease, obtain its own insurance
coverage to the extent Tenant
EXHIBIT D - Page 3
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
desires protection against losses related to such occurrences. Tenant shall
cooperate in any reasonable safety or security program developed by Landlord or
required by law.
24. All office equipment of any electrical or mechanical nature shall be
placed by Tenant in the Premises in settings approved by Landlord, to absorb or
prevent any vibration, noise and annoyance.
25. Tenant shall not use in any space or in the public halls of the
Building, any hand trucks except those equipped with rubber tires and rubber
side guards.
26. No auction, liquidation, fire sale, going-out-of-business or
bankruptcy sale shall be conducted in the Premises without the prior written
consent of Landlord.
27. No tenant shall use or permit the use of any portion of the Premises
for living quarters, sleeping apartments or lodging rooms.
Landlord reserves the right at any time to change or rescind any one or
more of these Rules and Regulations, or to make such other and further
reasonable Rules and Regulations as in Landlord's judgment may from time to time
be necessary for the management, safety, care and cleanliness of the Premises,
Building, the Common Areas and the Project, and for the preservation of good
order therein, as well as for the convenience of other occupants and tenants
therein. Landlord may waive any one or more of these Rules and Regulations for
the benefit of any particular tenants, but no such waiver by Landlord shall be
construed as a waiver of such Rules and Regulations in favor of any other
tenant, nor prevent Landlord from thereafter enforcing any such Rules or
Regulations against any or all tenants of the Project. Tenant shall be deemed
to have read these Rules and Regulations and to have agreed to abide by them as
a condition of its occupancy of the Premises.
EXHIBIT D - Page 4
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
EXHIBIT E
---------
IRVINE OAKS EXECUTIVE PARK
--------------------------
FORM OF TENANT'S ESTOPPEL CERTIFICATE
-------------------------------------
The undersigned as Tenant under that certain Office Lease (the "Lease")
made and entered into as of ___________, 199 by and between _______________ as
Landlord, and the undersigned as Tenant, for Premises on the ______________
floor(s) of the office building located at ______________, Irvine, California
____________, certifies as follows:
1. Attached hereto as Exhibit A is a true and correct copy of the Lease
and all amendments and modifications thereto. The documents contained in
Exhibit A represent the entire agreement between the parties as to the Premises.
2. The undersigned currently occupies the Premises described in the
Lease, the Lease Term commenced on __________, and the Lease Term expires on
___________.
3. Base Rent became payable on ____________.
4. The Lease is in full force and effect and has not been modified,
supplemented or amended in any way except as provided in Exhibit A.
5. Tenant has not transferred, assigned, or sublet any portion of the
Premises nor entered into any license or concession agreements with respect
thereto except as follows:
6. Tenant shall not modify the rent or insurance provisions of the
documents contained in Exhibit A without the prior written consent of Landlord's
mortgagee.
7. All monthly installments of Base Rent, all Additional Rent and all
monthly installments of estimated Additional Rent have been paid when due
through ___________. The current monthly installment of Base Rent is
$_____________________.
8. All conditions of the Lease to be performed by Landlord necessary to
the enforceability of the Lease have been satisfied and Landlord is not in
default thereunder.
9. No rental has been paid more than thirty (30) days in advance and no
security has been deposited with Landlord except as provided in the Lease.
EXHIBIT E - Page 1
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
10. As of the date hereof, there are no existing defenses or offsets that
the undersigned has against Landlord.
11. If Tenant is a corporation or partnership, each individual executing
this Estoppel Certificate on behalf of Tenant hereby represents and warrants
that Tenant is a duly formed and existing entity qualified to do business in
California and that Tenant has full right and authority to execute and deliver
this Estoppel Certificate and that each person signing on behalf of Tenant is
authorized to do so.
The undersigned acknowledges that this Estoppel Certificate may be
delivered to Landlord or to a prospective mortgagee or prospective purchaser,
and acknowledges that said prospective mortgagee or prospective purchaser will
be relying upon the statements contained herein in making the loan or acquiring
the property of which the Premises are a part and that receipt by it of this
certificate is a condition of making such loan or acquiring such property.
Executed at ______________ on the ____ day of ___________, 19 .
"Tenant":
_________________________________________
a _______________________________________
By:______________________________________
Its:__________________________________
By: _____________________________________
Its:__________________________________
EXHIBIT E - Page 2
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
OFFICE LEASE
------------
IRVINE OAKS EXECUTIVE PARK
--------------------------
MAGELLAN IRVINE OAKS LIMITED PARTNERSHIP,
an Arizona limited partnership,
as Landlord,
and
MICROSIM CORPORATION,
a California corporation,
as Tenant.
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
IRVINE OAKS EXECUTIVE PARK
--------------------------
INDEX
-----
ARTICLE SUBJECT MATTER PAGE
- ------- -------------- ----
ARTICLE 1 PREMISES, BUILDING, PROJECT, AND
COMMON AREAS.......................................... 6
ARTICLE 2 LEASE TERM; OPTION TERMS.............................. 9
ARTICLE 3 BASE RENT............................................. 10
ARTICLE 4 ADDITIONAL RENT....................................... 11
ARTICLE 5 USE OF PREMISES....................................... 17
ARTICLE 6 SERVICES AND UTILITIES................................ 17
ARTICLE 7 MAINTENANCE AND REPAIRS............................... 19
ARTICLE 8 ADDITIONS AND ALTERATIONS............................. 21
ARTICLE 9 COVENANT AGAINST LIENS................................ 23
ARTICLE 10 INSURANCE............................................. 23
ARTICLE 11 DAMAGE AND DESTRUCTION................................ 26
ARTICLE 12 NONWAIVER............................................. 28
ARTICLE 13 CONDEMNATION.......................................... 28
ARTICLE 14 ASSIGNMENT AND SUBLETTING............................. 29
ARTICLE 15 SURRENDER OF PREMISES; OWNERSHIP AND
REMOVAL OF TRADE FIXTURES............................. 33
ARTICLE 16 HOLDING OVER.......................................... 34
ARTICLE 17 ESTOPPEL CERTIFICATES................................. 34
ARTICLE 18 SUBORDINATION......................................... 35
ARTICLE 19 DEFAULTS; REMEDIES.................................... 36
ARTICLE 20 COVENANT OF QUIET ENJOYMENT........................... 39
ARTICLE 21 SECURITY DEPOSIT...................................... 39
ARTICLE 22 INTENTIONALLY OMITTED................................. 41
ARTICLE 23 SIGNS................................................. 41
ARTICLE 24 COMPLIANCE WITH LAW................................... 41
ARTICLE 25 LATE CHARGES.......................................... 42
ARTICLE 26 LANDLORD'S RIGHT TO CURE DEFAULT;
PAYMENTS BY TENANT.................................... 42
ARTICLE 27 ENTRY BY LANDLORD..................................... 43
ARTICLE 28 TENANT PARKING........................................ 43
ARTICLE 29 MISCELLANEOUS PROVISIONS.............................. 44
(ii)
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
EXHIBITS
A OUTLINE OF PREMISES
B TENANT WORK LETTER
C FORM OF NOTICE OF LEASE TERM DATES
D RULES AND REGULATIONS
E FORM OF TENANT'S ESTOPPEL CERTIFICATE
(iii)
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
IRVINE OAKS EXECUTIVE PARK
--------------------------
INDEX OF MAJOR DEFINED TERMS
----------------------------
LOCATION OF
DEFINITION IN
DEFINED TERMS OFFICE LEASE
- ------------- -------------
Abatement Event.................................................. 38
Additional Rent.................................................. 11
Alterations...................................................... 20
Base Building.................................................... 21
Base Rent........................................................ 10
Brokers.......................................................... 47
Building......................................................... 6
Building Direct Expenses......................................... 11
Building Operating Expenses...................................... 11
Building Tax Expenses............................................ 11
Common Areas..................................................... 7
Cosmetic Alterations............................................. 21
Cost Pools....................................................... 15
Direct Expenses.................................................. 12
Effective Date................................................... 10
Eligibility Period............................................... 38
Estimate......................................................... 15
Estimate Statement............................................... 15
Estimated Payment................................................ 15
Expansion Rent................................................... 8
Expansion Rent Notice............................................ 7
Expansion Space.................................................. 7
Expense Payment.................................................. 15
Expense Year..................................................... 12
Force Majeure.................................................... 46
Irvine Oaks Executive Park....................................... 6
Landlord......................................................... 1
Landlord Parties................................................. 23
Lease............................................................ 1
Lease Commencement Date.......................................... 9
Lease Expiration Date............................................ 9
Lease Term....................................................... 9
Lease Year....................................................... 9
Mail............................................................. 46
Mortgagees....................................................... 35
Notices.......................................................... 46
(iv)
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
Operating Expenses............................................... 12
Option Rent...................................................... 9
Option Rent Notice............................................... 10
Option Term...................................................... 9
Original Improvements............................................ 24
Other Improvements............................................... 48
Outside Date..................................................... 10
Premises......................................................... 6
Project.......................................................... 6
Project Direct Expenses.......................................... 11
Proposition 13................................................... 13
Renovations...................................................... 49
Rent............................................................. 11
rentable square feet............................................. 7
Security Deposit................................................. 39
Statement........................................................ 15
Subject Space.................................................... 29
Summary.......................................................... 1
Tax Expenses..................................................... 13
Tenant........................................................... 1
Tenant Parties................................................... 23
Tenant Work Letter............................................... 6
Tenant's Building Share.......................................... 14
Tenant's Project Share........................................... 14
Tenant's Subleasing Costs........................................ 31
Termination Notice............................................... 10
Transfer......................................................... 32
Transfer Notice.................................................. 29
Transfer Premium................................................. 31
Transferee....................................................... 29
Transfers........................................................ 29
(v)
IRVINE OAKS EXECUTIVE PARK
[MicroSim Corporation]
<PAGE>
EXHIBIT 10.11
LEASE AGREEMENT BETWEEN
TIGARD TRIANGLE I, LLC -- LANDLORD
AND
ORCAD, INC. -- TENANT
DATED: FEBRUARY 20, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1. DEMISE AND RENT 1
1.1 Demise.................................................. 1
1.2 Premises................................................ 1
1.3 Commencement and Expiration Dates....................... 2
1.4 Extension of Lease Term................................. 2
1.5 Rent.................................................... 3
1.6 Late Charge............................................. 3
1.7 Confidentiality......................................... 3
SECTION 2. USE........................................................ 3
2.1 Generally............................................... 3
2.2 ADA Law Compliance...................................... 4
2.3 Environmental Law Compliance............................ 4
2.4 Indemnity Regarding Legal Violations.................... 5
SECTION 3. TENANT IMPROVEMENTS; TENANT'S ACCEPTANCE
AND MAINTENANCE OF PREMISES............................. 5
3.1 Tenant Improvements..................................... 5
3.2 Alterations............................................. 6
3.3 Satellite Dishes........................................ 6
SECTION 4. OPERATING EXPENSES AND TAXES............................... 6
4.1 Operating Expenses...................................... 6
4.2 Exclusions From Operating Expenses...................... 7
4.3 Taxes................................................... 7
SECTION 5. PAYMENT OF OPERATING EXPENSES.............................. 8
5.1 Operating Year.......................................... 8
5.2 Tenant's Pro Rata Share................................. 8
5.3 Written Statement of Estimate........................... 8
5.4 Final Written Statement................................. 9
5.5 Tenant Examination...................................... 9
5.6 Disputes................................................ 9
5.7 Payment................................................. 10
5.8 No Reduction in Amount of Base Rent..................... 10
SECTION 6. SECURITY................................................... 10
6.1 The Security Deposit.................................... 10
SECTION 7. SUBORDINATION, NOTICE TO SUPERIOR LESSORS AND MORTGAGEES... 11
7.1 Subordination........................................... 11
7.2 Notice.................................................. 11
7.3 Attornment.............................................. 11
SECTION 8. QUIET ENJOYMENT............................................ 12
SECTION 9. ASSIGNMENT AND SUBLETTING.................................. 12
9.1 Generally............................................... 12
9.2 Conditions of Landlord's Consent........................ 13
SECTION 10. INSURANCE.................................................. 13
10.1 Waiver of Right of Recovery............................. 13
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
10.2 Public Liability Insurance.............................. 13
10.3 Acceptable Insurance Companies.......................... 14
10.4 Increase in Coverage.................................... 14
SECTION 11. RULES AND REGULATIONS...................................... 14
SECTION 12. ALTERATIONS................................................ 14
12.1 Requirements............................................ 14
12.2 Indemnification of Landlord............................. 15
SECTION 13. LANDLORD'S AND TENANT'S PROPERTY........................... 15
13.1 Landlord's Property..................................... 15
13.2 Tenant's Property....................................... 15
13.3 Abandonment............................................. 15
SECTION 14. SERVICES AND UTILITIES..................................... 16
14.1 Building Maintenance.................................... 16
14.2 Utilities............................................... 16
14.3 Excess Usage............................................ 16
14.4 Disclaimer.............................................. 16
14.5 Use of Common Areas and Facilities...................... 17
14.6 Parking Facilities...................................... 17
14.7 Signage................................................. 17
14.8 Mailbox................................................. 18
14.9 Security................................................ 18
14.10 Basketball Court........................................ 18
SECTION 15. ACCESS AND NAME............................................ 18
SECTION 16. NOTICE OF OCCURRENCES...................................... 19
SECTION 17. NONLIABILITY AND INDEMNIFICATION........................... 19
17.1 Waiver.................................................. 19
17.2 Indemnification......................................... 19
17.3 Duty to Defend.......................................... 20
SECTION 18. DAMAGE OR DESTRUCTION...................................... 20
18.1 Casualty................................................ 20
18.2 Condemnation............................................ 20
SECTION 19. SURRENDER AND HOLDING OVER................................. 21
19.1 General................................................. 21
19.2 Surrender............................................... 21
19.3 Holding Over After Renewal.............................. 21
19.4 Holding Over with Consent............................... 21
19.5 Holding Over Without Consent............................ 21
SECTION 20. EVENTS OF DEFAULT.......................................... 22
20.1 Events of Default....................................... 22
20.2 Limitation of Tenant Right to Notice.................... 23
SECTION 21. REMEDIES UPON DEFAULT...................................... 23
21.1 Remedies................................................ 23
21.2 Cumulative Remedies..................................... 24
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
21.3 Termination............................................. 24
21.4 Interest on Damages..................................... 24
SECTION 22. SERVICES IN THE EVENT OF DEFAULT........................... 24
SECTION 23. NO WAIVERS OF PERFORMANCE.................................. 24
SECTION 24. CURING DEFAULTS............................................ 24
24.1 Curing Tenant Defaults.................................. 24
24.2 Landlord Defaults....................................... 25
SECTION 25. BROKER..................................................... 25
SECTION 26. NOTICES.................................................... 25
SECTION 27. ESTOPPEL CERTIFICATES...................................... 26
SECTION 28. MEMORANDUM OF LEASE........................................ 26
SECTION 29. APPRAISAL.................................................. 26
29.1 Appraisal of Fair Rental Value.......................... 26
29.2 Allocation of Operating Expenses........................ 26
29.3 Procedure............................................... 27
SECTION 30. ADJUSTMENT OF COMMENCEMENT AND EXPIRATION DATES............ 27
30.1 Commencement Date....................................... 27
30.2 Delay in Delivery of Premises; Rent Abatement........... 27
30.3 Tenant Termination Rights............................... 28
30.4 Expiration Date......................................... 28
30.5 Early Occupancy......................................... 28
SECTION 31. MISCELLANEOUS.............................................. 28
31.1 Merger.................................................. 28
31.2 Modifications........................................... 28
31.3 Successors and Assigns.................................. 28
31.4 Nonrecourse Lease....................................... 29
31.5 Force Majeure........................................... 29
31.6 Definitions............................................. 29
31.7 Effect of Expiration.................................... 30
31.8 Excavation.............................................. 30
31.9 Union Contracts......................................... 30
31.10 Prorations.............................................. 30
31.11 Governing Law........................................... 31
31.12 Light, Air and View..................................... 31
31.13 Tenant Representations.................................. 31
31.14 Defined Terms........................................... 31
31.15 Counterparts............................................ 31
31.16 Costs and Attorney Fees................................. 31
31.17 Effect of Failure to Consent............................ 32
</TABLE>
EXHIBIT A. Legal Description for Land
EXHIBIT B. Floor Plan for the Building
EXHIBIT C. Work Agreement
EXHIBIT D. Plot Plan, Evaluation, and Rendering of Building
iii
<PAGE>
EXHIBIT E. Rules and Regulations
iv
<PAGE>
LEASE AGREEMENT
BASIC LEASE INFORMATION
The following Basic Lease Information is hereby incorporated into and
made a part of the Lease between Landlord and Tenant to which it is attached.
Each reference in the Lease to any of the Basic Lease Information shall mean the
respective information set forth below, and such information shall be deemed
incorporated as a part of the terms provided under the particular Lease Section
pertaining to such information. In the event of any conflict between any Basic
Lease Information and the Lease, the Basic Lease Information shall control.
1. BUILDING: Triangle Corporate Park - Building III
2. LANDLORD: Tigard Triangle I, LLC
3. LANDLORD'S ADDRESS FOR GIVING OF NOTICES AND PAYMENT OF RENT:
c/o Gerding/Edlen Development Company
4650 S.W. Macadam, Suite #220
Portland, Oregon 97201
4. TENANT: OrCAD, Inc.
9300 S.W. Nimbus Avenue
Beaverton, OR 97005
Attn: Operations Manager
5. PREMISES: The floor area on three and one-half floors of the Building
consisting of approximately 71,695 rentable square feet of office
space located on floors 1, 2 and part of 3 as outlined on the floor
plan of the Building attached hereto as EXHIBIT B. (Section 1.2;
EXHIBIT B). The Premises shall also include on the lower level
approximately 7,640 rentable square feet for a fitness center and
storage space with grade level access. Actual square footage will be
adjusted based upon Tenant's final plans and calculated in the manner
described in Section 1.2.3.
6. PARKING ALLOWANCE: 3.68 spaces per 1,000 square feet of the Premises.
(Section 14.6)
7. USE OF PREMISES: Offices for the following type of business:
Software and onsite training. The lower level will be used for
shipping, receiving and handling of software products. (Section 2)
8. LEASE DOCUMENT ISSUANCE AND REFERENCE DATE: February 20, 1998.
9. CONSTRUCTION DOCUMENT APPROVAL DATE: Tenant shall deliver the
Construction Document Package (EXHIBIT C, Section 4.1) to Landlord for
approval in
1 -- BASIC LEASE INFORMATION
<PAGE>
accordance with EXHIBIT C.
10. COMMENCEMENT DATE: The Commencement Date shall be either (a) June 1,
1999, or (b) such earlier or later date as provided in Section 30 of
the Lease Agreement. (Section 1.3)
11. EXPIRATION DATE: The later of: (i) the day prior to the tenth
anniversary of the actual Commencement Date, or (ii) the Expiration
Date as extended pursuant to Section 30 of the Lease Agreement.
(Section 1.3; Section 30)
12. RENT: Tenant's Base Rent shall be as follows:
<TABLE>
<CAPTION>
Years Base Rent Amount
----- ----------------
<S> <C>
Office Years 1 through 4 $17.41 per square foot
Years 5 through 8 $19.63 per square foot
Years 9 through 10 $22.13 per square foot
Storage Space Years 1 through 4 $ 9.00 per square foot
and Fitness Years 5 through 8 $10.15 per square foot
Center Shipping Years 9 through 10 $11.44 per square foot
Area
</TABLE>
The Base Rent referred to above is stated on an annual basis. Base
Rent shall be payable in equal monthly installments. The monthly Base
Rent rate for the initial partial month shall be the same as the rate
specified for the first full calendar month when Base Rent is payable.
Tenant has deposited Ninety-eight Thousand, Six Hundred Fifty-six and
67/100 Dollars ($98,656.67) to be applied against the first full
month's Rent. (Section 1.4)
13. TENANT'S PERCENTAGE OF OPERATING EXPENSES: This is a net lease and
Tenant will be responsible for all operating expenses benefiting the
Premises and for its share of all interior and exterior common area
operating expenses except as otherwise described in Sections 4 and 5.
(Section 5.2) Tenant's share of operating expenses for the office
portion of the Premises will be based upon the ratio of Tenant's
rentable office space, determined in accordance with this Lease, to
the total rentable square footage of office space in the Building,
estimated to be 121,000 square feet. Tenant's share of operating
expenses for the storage, fitness center and shipping and handling
portions of the Premises located on the lower level will be based upon
the ratio of Tenant's rentable space on the lower level, determined in
accordance with this Lease, to the total rentable square footage in
the lower level of the Building, estimated to be 10,000 square feet.
Actual rentable square footage of the Building will be determined by
the Project Architect based upon final construction drawings, and in
accordance with Section 1.2.3 of this Lease.
2 -- BASIC LEASE INFORMATION
<PAGE>
14. SECURITY DEPOSIT: 110% of the first full month's Base Rent. (Section
6)
15. BROKERS: Tenant is represented by Hume Myers Tenant Counsel, L.L.C.
(Section 25)
LANDLORD TENANT
TIGARD TRIANGLE I, LLC ORCAD, INC.
By: By:
------------------------- -------------------------
Title: Title:
---------------------- ----------------------
Date: Date:
----------------------- -----------------------
3 -- BASIC LEASE INFORMATION
<PAGE>
LEASE AGREEMENT
TERMS AND CONDITIONS
SECTION 1. DEMISE AND RENT:
1.1 DEMISE: Landlord leases to Tenant, and Tenant leases from Landlord,
upon and subject to the terms, covenants, provisions and conditions of this
Lease Agreement (the "Lease"), the premises described in Section 1.2 in the
building (the "Building") located on the land described on EXHIBIT A attached
hereto and incorporated herein (the "Land"), and the nonexclusive right to use
all common areas of the Building and the Land. A preliminary plot plan and
building elevation are attached as Exhibit D.
1.2 PREMISES: The premises (the "Premises") leased to Tenant are
described in the Basic Lease Information, and are outlined on the floor plan(s)
for the Building attached hereto as EXHIBIT B and incorporated herein by this
reference. Tenant shall have the right to increase or decrease the Premises as
follows:
1.2.1 Expansion Space: Landlord shall provide Tenant with a right of
first opportunity (the "Expansion Right") to lease up to an additional 20,000
rentable square feet of any unleased space in the Building (the "Expansion
Space") under the same terms and conditions, including Base Rental rates,
Additional Rental, and Tenant Improvement allowance per foot as this Lease. The
term of the lease for the Expansion Space shall coincide with the remaining term
of this Lease.
1.2.1.1 Tenant's Expansion Right shall be exercised, if at all,
by Tenant giving notice to Landlord in the manner set forth in this
section. Starting 90 days after the date of this Lease and continuing
until the 90th day after the Commencement Date, Tenant shall arrange a
quarterly meeting with Landlord to exercise some or all of Tenant's unused
Expansion Right regarding available space within the Building. Thereafter,
so long as Tenant has not exercised its entire Expansion Right, Landlord
shall advise Tenant as Expansion Space becomes available in the Building,
and Tenant shall have thirty (30) days from the date of such notice to
exercise its Expansion Right as to such space. Available space will be
limited to that which is not subject to a lease, letter of intent or other
written commitment to lease by Landlord. Exercise of the Expansion Right
shall be effective upon receipt of a written notice from Tenant and the
execution of an amendment to this Lease incorporating the Expansion Space
in the Premises. From the date of this Lease until Landlord shall have
received a notice of exercise from Tenant in accordance with this section,
Landlord will have the right to lease any available space in the Building
to other tenants.
1.2.1.2 The Commencement Date for payment of Rent regarding the
Expansion Space which has previously been occupied by a tenant shall be the
earlier of: i) the date Tenant occupies such Expansion Space; or ii) sixty
days after the later of the date Tenant exercises its Expansion Right
regarding such space or the date such space is vacant. The Commencement
Date for payment of Rent regarding Expansion Space which has not been
previously occupied by another tenant shall be the date Tenant's tenant
improvements in such space are substantially complete and ready for
occupancy, determined in the manner described in Section 30.1.2 of this
Lease, and subject to adjustment for Tenant Caused Delays as defined in
Exhibit C. For purposes of this Section, Tenant will have no more than
1 -- LEASE AGREEMENT
<PAGE>
45 days from the date Tenant exercises its Expansion Right as to such space
to complete space planning and preparation of a construction document
package suitable for permits and construction, and any additional time for
preparation of construction documents will be a Tenant Caused Delay.
1.2.1.3 If Tenant desires to exercise the Expansion Right after
it has been leased to and vacated by another tenant, Landlord shall provide
Tenant with a Tenant Improvement allowance for such space equal to $1.00
per square foot per year remaining in the initial lease term for the
Expansion Space.
1.2.1.4 Landlord agrees to use its reasonable commercial efforts
to lease up to 20,000 square feet of the Expansion Space to other tenants
for periods ranging from three (3) to five (5) years, but Landlord will not
be required to displace any tenants to make the Expansion Space available
to Tenant.
1.2.2 Reduction of Premises: Tenant shall have the right on a single
occasion to reduce the square footage of the Premises by up to 15,000 rentable
square feet. Any such reduction shall be on the first floor or the third floor
of the Building, and any space not leased by Tenant shall be contiguous and
leasable to other tenants. Tenant shall exercise its right to reduce the square
footage of the Premises by providing Landlord with prior written notice at least
thirty (30) days prior to the commencement of construction of the Building, but
not before the later of April 1, 1998 or thirty (30) days before commencement of
construction. If Tenant reduces the square footage of the Premises in
accordance with this Section, the 20,000 square feet of Expansion Space shall be
reduced pro rata based on the percentage of the 15,000 square foot reduction
area utilized by Tenant. For example, if Tenant reduces the Premises by 5,000
square feet under this Section, the available expansion space will be reduced by
one-third to 13,333 square feet.
1.2.3 Calculation of Rentable Square Footage. The final
determination of rentable square footage of the initial Premises will be made
based upon Tenant's final plans as follows: Tenant's architect, Group
Mackenzie, will certify that Tenant's usable square footage is a certain number
of square feet per floor (measured on single tenant floors on a glass line to
glass line basis, less vertical penetrations and on multi-tenant floors using
the BOMA standard for multi-tenant space). The rentable square footage will
then be determined as follows: (i) for single-tenant floors, 1.08 x (times) the
usable square footage figure and (ii) for multi-tenant floors, which shall
include the first floor, 1.15 x (times) the usable square footage figure.
Furthermore, Landlord covenants and agrees that in the event Tenant occupies the
entire Building, Tenant's rentable square footage will not exceed the gross
square footage of the Building and at no time, regardless of the extent of
Tenant's occupancy, will the total rentable square footage of the Building
exceed the total gross square footage of the Building. The calculation of
rentable square footage on the lower level shall be based upon a load factor for
lower level common areas only, estimated to be a load factor 1.157 x (times) the
usable square footage on the lower level.
1.3 COMMENCEMENT AND EXPIRATION DATES: The term of this Lease (herein
called "Lease Term") shall be for the period specified in the Basic Lease
Information, subject to adjustment as provided in Section 30 (or until sooner
terminated as herein provided). Landlord and Tenant agree to execute a
memorandum confirming when the actual Commencement Date occurred if the same is
adjusted pursuant to the terms of Section 30, and such memorandum shall be
considered a part of this Lease.
1.4 EXTENSION OF LEASE TERM: Tenant shall have the option to extend the
Lease Term for two (2) consecutive five (5) year renewal terms at the fair
market Base Rent at the time each
2 -- LEASE AGREEMENT
<PAGE>
such renewal period commences. In no event shall the Base Rental rate for a
renewal of the Lease Term be less than the Base Rental rate paid by Tenant in
the year preceding such renewal, and Additional Rent shall continue to be paid
in accordance with the terms of this Lease. Before any renewal, Tenant shall
provide Landlord with fifteen (15) months' prior written notice of Tenant's
intent to renew the Lease Term. Within thirty (30) days after Tenant provides
Landlord with Tenant's notice of intent to renew the Lease Term, Landlord shall
provide written notice to Tenant of the proposed Base Rental rate and other
monetary terms for the extension term, together with any other changes to this
Lease required by applicable law for the renewal term. Tenant and Landlord shall
have thirty (30) days thereafter to negotiate an acceptable Base Rental rate for
the extension of the Lease Term. In the event that Landlord and Tenant are
unable to reach an agreement within the specified time frame, either party shall
have the option to establish the Base Rental rate by appraisal in accordance
with Section 29.
1.5 RENT: The rent shall be and consist of a Base Rent (herein called
"Base Rent") and Additional Rent (herein called "Additional Rent"). For purposes
of this Lease Agreement, Base Rent and Additional Rent are referred to
collectively as "Rent." Base Rent shall be the amount indicated in the Basic
Lease Information. Base Rent shall be payable in equal monthly installments in
advance on the first day of each and every calendar month during the term of
this Lease (except to the extent otherwise specifically provided elsewhere in
this Lease and except that Tenant shall pay, upon the execution and delivery of
this Lease by Tenant, the sum indicated in the Basic Lease Information, to be
applied against the first installment(s) of Base Rent becoming due under this
Lease). Additional Rent shall consist of all other sums of money as shall become
due from and payable by Tenant to Landlord under this Lease. All Rent shall be
paid in lawful money of the United States of America to Landlord at its office
or such other place, as Landlord shall designate by notice to Tenant. Tenant
shall pay the Base Rent and Additional Rent promptly when due without notice or
demand and without any abatement, deduction or offset for any reason whatsoever,
except as expressly provided in this Lease. If the Commencement Date occurs on a
day other than the first day of a calendar month, the Base Rent for that partial
calendar month shall be prorated on a daily basis.
1.6 LATE CHARGE: Tenant recognizes that late payment of any Rent from
Tenant to Landlord will result in administrative expense to Landlord, the extent
of which additional expense is extremely difficult and economically impractical
to ascertain. Tenant therefore agrees that if Rent from Tenant to Landlord
remains unpaid ten (10) days after said amount is due, the amount of such unpaid
Rent or other payments shall be increased by a late charge to be paid to
Landlord by Tenant in an amount equal to five percent (5%) of the amount of the
delinquent Rent or other payment. Tenant agrees that such amount is a reasonable
estimate of the loss and expense to be suffered by Landlord as a result of such
late payment by Tenant and may be charged by Landlord to defray such loss and
expense. The provisions of this Section in no way relieve Tenant of the
obligation to pay Rent or other payments on or before the date on which they are
due, nor do the terms of this Section in any way affect Landlord's remedies
pursuant to Section 21 of this Lease in the event Rent is past due.
1.7 CONFIDENTIALITY: Tenant shall keep the Rent and other terms of this
Lease confidential from all third parties except to the extent disclosure is
reasonably necessary in the conduct of Tenant's business. Notwithstanding the
foregoing, Landlord consents to disclosure of the provisions of this Lease
relating to the Commencement Date to Tenant's existing Landlord.
SECTION 2. USE:
2.1 GENERALLY: Tenant shall use and occupy the Premises continuously
during the term
3 -- LEASE AGREEMENT
<PAGE>
of this Lease for the use specified in the Basic Lease Information and for no
other purpose without the written consent of Landlord, which consent shall not
be unreasonably withheld, conditioned or delayed. If any governmental license or
permit, other than a Certificate of Occupancy, shall be required for the proper
and lawful conduct of Tenant's business in the Premises or any part thereof,
Tenant, at its expense, shall duly procure and thereafter maintain such license
or permit and submit the same to Landlord for inspection. Tenant shall at all
times comply with the terms and conditions of each such license or permit.
Tenant shall not do or permit anything to be done in or about the Premises which
is reasonably likely to obstruct or interfere with the rights of other tenants
or occupants of the Building or injure or annoy them, nor use or allow the
Premises to be used for any unlawful or reasonably objectionable purpose for a
Class A office building in the Kruse Way area, nor shall Tenant cause or
maintain or permit any nuisance in, on, or about the Premises. Tenant shall not
commit or allow the commission of any waste in, on, or about the Premises.
Tenant shall not use the Premises or permit anything to be done in or about the
Premises which will in any way conflict with any law, statute, ordinance, or
governmental rule or regulation now in force or which may hereafter be enacted
or promulgated. Tenant shall use reasonable care not to do or permit anything to
be done on or about the Premises or bring or keep anything therein which Tenant
knows or should have known (by written notice from Landlord or otherwise) will
in any way increase the rate of any insurance upon the Building in which the
Premises are situated or any of its contents (unless Tenant shall reimburse
Landlord for the entire additional insurance premium resulting from such action)
or cause a cancellation of said insurance or otherwise affect said insurance in
any manner. Tenant shall, at its sole cost and expense, promptly comply with all
laws, statutes, ordinances, and governmental rules, regulations, or requirements
now in force or which may hereafter be in force ("Legal Requirements"), except
as such responsibility is otherwise allocated to Landlord as provided elsewhere
in this Lease, and with the requirements of any board of fire underwriters or
other similar body now or hereafter constituted relating to or affecting the
condition, use, or occupancy of the Premises, excluding structural changes not
related to or affected by: (i) alterations or improvements made by or for
Tenant; or (ii) Tenant's acts. Tenant shall use its reasonable best efforts to
prevent any violation of applicable Legal Requirements by its partners,
directors, officers, agents and employees.
2.2 ADA LAW COMPLIANCE: Landlord and Tenant acknowledge that the
provisions of the Americans with Disabilities Act (the "ADA") allow allocation
of responsibility for compliance with the terms and conditions of the ADA in the
Lease. Landlord and Tenant agree that the responsibility for compliance with the
ADA shall be allocated as set forth in this Section. Tenant shall be responsible
for compliance with the applicable provisions of the ADA with respect to all
improvements within the Premises except that Landlord represents that any
improvements designed by Landlord's office planner and installed by Landlord
pursuant to Exhibit C will conform to the ADA requirements imposed by the local
governmental authorities in connection with the issuance of building permits and
inspection of the Premises to verify compliance with the approved plans and
specifications. Landlord shall be responsible for compliance with the provisions
of Title III of the ADA with respect to the exterior of the Building and the
Land including parking areas, sidewalks and walkways, and the like, together
with all common areas of the Building. Neither Landlord nor Tenant shall be
obligated to supervise, monitor, or otherwise review the compliance activities
of the other. Tenant acknowledges that the expense of Landlord's fulfillment of
its ADA obligations is an element of Operating Expenses as such term is defined
in the Lease. Any such ADA expense for capital improvements shall be amortized
over the useful life of the same for purposes of Operating Expenses in the same
manner as provided in the Lease for capital improvements intended to reduce
Operating Expenses. References in this Lease to Legal Requirements shall be
deemed to refer to the ADA among other laws.
2.3 ENVIRONMENTAL LAW COMPLIANCE: For purposes of this Section the term
4 -- LEASE AGREEMENT
<PAGE>
"Hazardous Substances" shall mean and include all hazardous and toxic
substances, waste or materials, any pollutant or contaminant, including, without
limitation, PCBs, asbestos, asbestos-containing material, and raw materials that
are included under or regulated by any Environmental Laws. For purposes of this
Lease the term "Environmental Laws" shall mean and include all federal, state
and local statutes, ordinances, regulations and rules presently in force or
hereafter enacted relating to environmental quality, contamination, and clean-up
of Hazardous Substances. References in this Lease to Legal Requirements shall be
deemed to refer to Environmental Laws among other laws. Landlord represents that
to the best of its current actual knowledge, the Building and the Land are in
compliance with all Environmental Laws respecting Hazardous Substances, and that
Landlord has received no notice of any pending or threatened lien, action or
proceeding respecting any alleged violation of Environmental Laws respecting
Hazardous Substances that has occurred on or near the Land or in or about the
Building. Tenant acknowledges that the expense of compliance with Environmental
Laws is an element of Operating Expenses except to the extent that any such
expense resulted from the fault of Landlord. Landlord shall use reasonable
efforts to recover any expense of compliance with Environmental Laws from any
third party who is liable for the same and credit any such recovery against
Operating Expenses.
2.4 INDEMNITY REGARDING LEGAL VIOLATIONS: Tenant shall indemnify and hold
harmless Landlord and its members, partners, directors, officers, agents and
employees from and against any and all claims arising from Tenant's breach of
its representations, warranties and covenants under this Lease which require
compliance with Legal Requirements including but not limited to the ADA or
Environmental Laws; together with all costs, expenses and liabilities incurred
or in connection with each such claim, action, proceeding or appeal, including,
without limitation, all attorney fees and expenses. Landlord shall indemnify and
hold harmless Tenant and its partners, directors, officers, agents and employees
from and against any and all claims arising from Landlord's breach of its
representations, warranties and covenants under this Lease which require
compliance with Legal Requirements including but not limited to the ADA or
Environmental Laws; together with all costs, expenses and liabilities incurred
or in connection with each such claim, action, proceeding or appeal, including,
without limitation, all attorney fees and expenses.
5 -- LEASE AGREEMENT
<PAGE>
SECTION 3. TENANT IMPROVEMENTS; TENANT'S ACCEPTANCE AND MAINTENANCE OF
PREMISES:
3.1 TENANT IMPROVEMENTS: Landlord and Tenant agree that the Premises will
be improved for tenant use in accordance with the provisions of EXHIBIT C
attached hereto and incorporated herein. By taking possession of the Premises,
Tenant accepts the Premises as being in compliance with the provisions of
EXHIBIT C and otherwise in good order, condition and repair, except for all
matters addressed on punchlists created by Tenant prior to occupancy, or, as to
latent defects not reasonably discoverable by Tenant prior to occupancy and
within thirty (30) days after occupancy (except that all matters identified in
the second punchlist shall pertain only to incorrect, missing or defective items
but not any defects or wear and tear that was not identified on the earlier
punchlist and could be attributed to the moving process or the use of the
Premises by Tenant). Landlord's obligations to maintain the Building are as set
forth in Section 14.1 hereof. Tenant shall, at all times during the term hereof
at Tenant's sole cost and expense, keep the following items in the Premises in
good order, condition and repair: (i) floor coverings, (ii) wall coverings,
(iii) paint, (iv) casework, (v) ceiling tiles, (vi) all of Tenant's Property (as
defined in Section 13.2 herein); and (vii) any and all Non-Building-Standard
Tenant Improvements (defined in EXHIBIT C). Landlord shall have no obligation to
alter, remove, improve, repair, decorate, or paint the Premises or any part
thereof except as specified in EXHIBIT C, or as set forth in Section 14.1. No
representations respecting the condition of the Premises or the Building have
been made by Landlord to Tenant, except as herein set forth. Assuming that the
Tenant Improvement plans are completed and submitted at the same time that the
Building construction documents are prepared and ready for permitting and
construction bidding, Tenant shall have the benefit of competitive bidding for
the Tenant Improvements at the same time that Landlord bids the site and
building construction. Landlord will not charge its fees for supervision of
Tenant's initial work in the Premises. Landlord shall provide Tenant with a
detailed cost breakdown of all estimated hard and soft costs related to
construction, permitting and design of the Tenant Improvements prior to the
commencement of construction of such Tenant Improvements.
3.2 ALTERATIONS: Tenant shall have the right to make alterations to the
Premises with Landlord's prior written approval, which shall not be unreasonably
withheld, conditioned or delayed. Tenant shall use Landlord's contractor for all
mechanical, electrical and plumbing alterations and the initial Tenant
Improvements, except as otherwise provided in Exhibit C. Tenant shall provide
Landlord with as-built plans for any and all alterations within thirty (30) days
following their completion.
3.3 SATELLITE DISHES: Tenant shall have the right to install up to two
(2) satellite dishes on the roof of the Building in locations to be mutually
agreed upon by Landlord and Tenant. The parties intend that the location of the
satellite dishes shall be such that they may not be viewed from the ground.
Tenant shall be responsible for the installation, maintenance, and removal, as
well as any and all related repairs or improvements, required to accommodate the
installation, operation, and/or removal of the satellite dishes.
SECTION 4. OPERATING EXPENSES AND TAXES:
4.1 OPERATING EXPENSES: For the purposes of this Lease, the term
"Operating Expenses" shall mean all expenses paid or incurred by Landlord (or on
Landlord's behalf) as reasonably determined by Landlord to be necessary or
appropriate for the efficient operation, maintenance and repair of the Land
and/or Building, including the common areas of the Building, including without
limitation: (i) salaries, wages, medical, surgical, union and general welfare
benefits (including, without limitation, group life insurance) and pension
payments of employees of
6 -- LEASE AGREEMENT
<PAGE>
Landlord engaged in the repair, operation and maintenance of the Land and/or
Building; (ii) payroll taxes, workers' compensation insurance, uniforms and
related expenses for employees; (iii) except for separately metered charges paid
for by Tenant, the cost of all charges for gas, steam, electricity, heat,
ventilation, air-conditioning, water and other utilities furnished to the
Building, together with any taxes on such utilities; (iv) the cost of painting
of public areas; (v) the cost of all charges of insurance reasonably necessary
and at competitive rates available to Landlord, including but not limited to all
risk property insurance with rent loss coverage, liability and fidelity
insurance, with regard to the Land and/or Building and the maintenance and/or
operation thereof; (vi) the cost or rental cost of all supplies, including
without limitation, cleaning supplies, light bulbs, tubes and ballasts,
materials and equipment, and sales and other taxes thereon; (vii) the cost of
hand tools and other movable equipment used in the repair, maintenance or
operation of the Building amortized over the useful life of such hand tools and
movable equipment (as reasonably estimated by Landlord); (viii) the cost of all
charges for window and other cleaning and janitorial and security services; (ix)
charges of independent contractors performing repairs or services to the Land
and/or Building; (x) non-capital repairs; (xi) remodeling of the public and
common areas of the Building including, without limitation, repainting,
replacement and repair of furnishings, fixtures, accessories, carpeting or other
floor covering, wall and window coverings in the public and common areas, the
cost of which shall be amortized (with interest at the prime rate of interest
publicly announced by Key Bank as its prime rate of interest, plus 2% per annum
("Prime Plus 2%"), on the unamortized balance) over the useful life of the
improvements as reasonably estimated by Landlord; (xii) alterations and
improvements to the Building made by reason of the laws and requirements of any
public authorities or the requirements of insurance bodies; (xiii) management
fees paid to a third party, or, if no managing agent is employed by Landlord,
Landlord shall be entitled to charge a management fee which is not in excess of
four percent (4%) of gross revenue, and such fee shall be included in the
Operating Expenses; (xiv) the cost of any capital improvements or repairs to the
Building and/or of any machinery or equipment installed in the Building
amortized (with interest at Prime Plus 2% on the unamortized balance) over the
useful life of the improvement, machinery and/or equipment as reasonably
estimated by Landlord, which is made or becomes operational, as the case may be,
after the completion of the construction of the Building and which have a
reasonable probability of reducing the expenses which otherwise would be
included in Operating Expenses; (xv) reasonable legal, accounting and other
professional fees incurred in connection with operation, maintenance and
management of the Land and/or Building; (xvi) the cost of providing elevator
service; (xvii) the cost of landscape and parking area maintenance and repair;
(xviii) the common area charges to which the Building is subject; (xix) Taxes as
defined in Section 4.3; and (xx) all other charges properly allocable to the
operation, repair and maintenance of the Building in accordance with generally
accepted accounting principles.
4.2 EXCLUSIONS FROM OPERATING EXPENSES: Operating Expenses shall not
include: (i) depreciation or amortization (except as provided above in Section
4.1); (ii) interest on and amortization of debts (except as provided above in
Section 4.1) or ground lease rent; (iii) leasehold improvements made for new
tenants of the Building; (iv) leasing commissions, attorney fees, costs and
disbursements and other expenses (including advertising) incurred in connection
with leasing, renovating, or improving space for tenants or other occupants or
prospective tenants or occupants of the Building; (v) refinancing costs; (vi)
the cost of any work or services performed for any occupants of any leased space
in the Building (including Tenant), whether at the expense of Landlord or such
occupants, to the extent that such work or services is in excess of the work or
services which Landlord, at its expense, is required to furnish to Tenant under
this Lease; (vii) damages recoverable by any occupant due to violation by
Landlord of any of the terms and conditions of this Lease or any other lease
relating to the Building; (viii) repairs occasioned by fire, windstorm or other
casualty, to the extent such repairs are paid for by insurance proceeds (which
7 -- LEASE AGREEMENT
<PAGE>
proceeds Landlord agrees to pursue with commercially reasonable diligent); (ix)
capital repairs and replacements (except as provided above in Section 4.1); (x)
separately metered or monitored electrical or HVAC expenses paid for by Tenant
or provided for the exclusive benefit of other tenants; (xi) overhead and profit
increment paid to Landlord or to an affiliate or subsidiary for goods and/or
services in the Building, to the extent the same exceeds the costs of such goods
and/or services rendered by unaffiliated third parties on a competitive basis;
(xii) costs arising from the presence prior to the Commencement Date of
hazardous substances in the ground water or soil; (xiii) costs arising from
Landlord's charitable or political contributions; (xiv) costs for sculpture,
paintings or other art if the same are removed from the Building during the
lease term; and (xv) costs, including attorney fees arising from claims,
disputes or potential disputes with other tenants or any lender holding security
in the Building.
4.3 TAXES: The term "Taxes" shall include (i) all real property taxes and
assessments and personal property taxes, charges, rates, duties and assessments
rated, levied or imposed by any governmental authority with respect to the Land,
the Building and any improvements, fixtures and equipment located therein or
thereon, and with respect to all other property of Landlord, real or personal,
located in or on the Land or the Building and used in connection with the
operation of the Building; (ii) any tax in lieu of a real property tax; (iii)
any tax or excise levied or assessed by any governmental authority on the
rentals payable under this Lease or rentals accruing from the use of the Land or
the Building; provided that this shall not include federal or state, corporate
or personal income taxes; and (iv) any tax or excise imposed or assessed against
Landlord which is measured or based in whole or in part on the capital employed
by Landlord to improve the Land and construct the Building. If Landlord receives
a refund of Taxes then Landlord shall credit such refund, net of any
professional fees and costs incurred by Landlord to obtain the same, against the
Taxes for the Operating Year to which the refund is applicable or the current
Operating Year, at Landlord's option. Taxes will be allocated solely to the
office space in the Building unless Landlord can establish with reasonable
certainty that the tax assessment includes an assessment specifically for space
on the lower level, in which case such portion will be allocated to lower level
tenants.
SECTION 5. PAYMENT OF OPERATING EXPENSES:
5.1 OPERATING YEAR: As used in this Section 5, the term "Operating Year"
shall mean each calendar year of the Lease Term, including extensions, and in
the event this Lease begins or ends on any date other than the first day of the
calendar year, the calculations, costs and payments referred to herein shall be
prorated as provided in Section 31.11.
5.2 TENANT'S PRO RATA SHARE: Throughout the entire Lease Term, Tenant
shall pay, as Additional Rent, its pro rata share of the Operating Expenses of
the Building. Tenant's pro rata share of the Operating Expenses of the Building
for each Operating Year shall be calculated as follows: the actual Operating
Expenses for each Operating Year shall be multiplied by Tenant's percentage (as
specified in the Basic Lease Information, and as adjusted as provided herein).
If in any Operating Year Tenant occupies the Premises for less than the full
Operating Year, then the product from the foregoing multiplication shall be
multiplied by the percentage of the Operating Year in which Tenant occupied the
Premises. Tenant's percentage (as specified in the Basic Lease Information, and
adjusted as provided herein) shall be changed from time to time to reflect any
change in the total rentable square footage in the Building including, without
limitation, any change resulting from conversion of any floor of the Building
from multi-tenant use to single-tenant use or vice versa; provided, however,
that Landlord agrees that in the event Tenant occupies the entire Building,
Tenant's rentable square feet will not exceed the gross square feet of the
Building. Additionally, Landlord warrants that the total rentable office and
storage square footage of the Building will not exceed the gross square footage
of the Building. All calculations of rentable area
8 -- LEASE AGREEMENT
<PAGE>
shall be on the basis as originally used to determine the rentable area shown in
the Basic Lease Information. During the periods when the Building is less than
95% occupied, Landlord shall adjust Operating Expenses to reflect the costs that
would have been incurred had the Building been 95% occupied for the entire
period and the Building had been fully assessed for property tax purposes. If
during any Operating Year the tenant of any space in the Building performs work
or services therein pursuant to a written agreement between Landlord and such
tenant in lieu of having Landlord perform the same and the cost thereof would
have been included in Landlord's Operating Expenses, then in any such event(s),
at Landlord's option, the Operating Expenses for such Operating Year shall be
adjusted to reflect the Operating Expenses that would have been incurred if
Landlord had performed such work or services, as the case may be, at normal
market cost for such work or services.
5.3 WRITTEN STATEMENT OF ESTIMATE: Prior to the commencement of each
Operating Year during the Lease Term, Landlord shall furnish Tenant with a
written statement setting forth Tenant's pro rata share of the estimated
increase in Operating Expenses for the next Operating Year. Tenant shall pay to
Landlord as Additional Rent commencing on January 1 of the Operating Year, and
thereafter on the first day of each calendar month, an amount equal to one-
twelfth of the amount of Tenant's pro rata share as shown in Landlord's written
statement. In the event Landlord delivers the written statement late, Tenant
shall continue to pay to Landlord an amount equal to one-twelfth of Tenant's pro
rata share of the estimated Operating Expenses for the immediately preceding
Operating Year until Landlord does furnish the written statement, at which time
Tenant shall pay the amount of any excess of Tenant's pro rata share for the
expired portion of the current Operating Year over Tenant's actual payments
during such time and any excess payments by Tenant shall be credited to the next
due payment of Rent from Tenant. The late delivery of any written statement by
Landlord shall not constitute a waiver of Tenant's obligation to pay its pro
rata share of Operating Expenses nor subject Landlord to any liability, but
Landlord shall use reasonable best efforts to deliver such written statements of
estimated increase in Operating Expenses as soon as possible after the
commencement of each Operating Year.
5.4 FINAL WRITTEN STATEMENT: Within 120 days after the close of each
Operating Year during the Lease Term, Landlord shall deliver to Tenant a written
statement (the "Operating Statement") setting forth Tenant's actual pro rata
share of the Operating Expenses for the preceding Operating Year. In the event
Tenant's pro rata share of the actual Operating Expenses is in excess of
Tenant's pro rata estimated Operating Expenses, Tenant shall pay the amount of
such excess to Landlord as Additional Rent within thirty (30) days after receipt
of such statement by Tenant. In the event Tenant's pro rata share of the actual
Operating Expenses is less than Tenant's pro rata share of the estimated
Operating Expenses actually paid by Tenant then the amount of the excess
overpayment shall be paid by Landlord to Tenant within thirty (30) days
following the date of such statement or Landlord may elect to apply the
overpayment to Tenant's next Rent payment, reimbursing only the excess over such
next payment, if any. The late delivery of any written statement by Landlord
shall not constitute a waiver of Tenant's obligation to pay its pro rata share
of Operating Expenses, but Landlord shall use reasonable best efforts to deliver
such written statements as soon as possible after the close of each Operating
Year.
5.5 TENANT EXAMINATION: The Operating Statement referred to herein need
not be audited but shall contain sufficient detail to enable Tenant to verify
the calculation of the total amount of Operating Expenses and Tenant's pro rata
share. In addition, Tenant, upon at least five (5) days advance written notice
to Landlord and during business hours, may examine at Tenant's cost any
invoices, receipts, canceled checks, vouchers or other instruments used to
support the figures shown on the Operating Statement, provided however, that
Tenant shall only be entitled to such an examination once in each Operating
Year. Tenant will be permitted such additional
9 -- LEASE AGREEMENT
<PAGE>
examinations as Tenant may reasonably require, but Tenant shall reimburse
Landlord for Landlord's reasonable actual costs incident to such further
examination, unless the examination results in a reduction of 8% or more of
Tenant's current share of variable Operating Expenses.
5.6 DISPUTES: Each such Operating Statement given by Landlord pursuant to
this Section shall be conclusive and binding upon Tenant unless within ninety
(90) days after the receipt of such Operating Statement Tenant shall notify
Landlord that it disputes the correctness of the Operating Statement, specifying
the particular respects in which the Operating Statement is claimed to be
incorrect. If such disputes shall not have been settled by agreement, either
party, within ninety (90) days after receipt of such Statement, may pursue a
determination in accordance with Section 29 of this Lease, but Tenant hereby
agrees that a dispute over the Operating Statement or any error by Landlord in
interpreting or applying Section 4 or in calculating the amounts in the
Operating Statement shall not be a breach of this Lease by Landlord, and even if
any legal proceeding over the Operating Statement is resolved against Landlord
this Lease shall remain in full force and effect and Landlord shall not be
liable for any consequential damages, and pending the determination of such
dispute, Tenant, within ten (10) days of receipt of such Operating Statement,
shall pay Additional Rent in accordance with the Operating Statement, without
prejudice to Tenant's position. If the dispute shall be determined in Tenant's
favor, Landlord shall, within ten (10) days of such determination, pay to Tenant
the amount of Tenant's overpayment of rents resulting from compliance with the
Operating Statement if the determination shows that Landlord overcharged Tenant
in the Operating Statement by an amount equal to 8% or more of the variable
Operating Expenses, Landlord shall also pay to Tenant Tenant's reasonable actual
out-of-pocket costs and expenses relating to this dispute within ten (10) days
of receipt from Tenant of an invoice for same.
5.7 PAYMENT: If an Operating Year ends after the expiration or
termination of this Lease, any Additional Rent payable under this Section shall
be paid by Tenant within ten (10) days of its receipt of the Operating Statement
for such Operating Year.
5.8 NO REDUCTION IN AMOUNT OF BASE RENT: Nothing in the Lease shall be
construed to mean the Base Rent amount specified in the Basic Lease Information
shall be reduced due to any decrease in Operating Expenses, it being intended
that the amount of the Base Rent remain fixed throughout the Lease Term.
SECTION 6. SECURITY DEPOSIT:
6.1 THE SECURITY DEPOSIT: Prior to the commencement of construction of
the Building, Landlord shall provide Tenant with notice of its intent to proceed
with the commencement of construction. Within 5 days of such notice, Tenant
shall provide Landlord with a security deposit equal to 110% of the first full
months' Base Rent (the "Security Deposit"). Failure to promptly pay such
Security Deposit shall be considered a default under this Lease. Landlord will
hold the Security Deposit in a separate account identified as Tenant's Security
Deposit, with interest payable to Landlord. If Tenant defaults in the full and
prompt payment and performance of any of Tenant's covenants and obligations
under this Lease, including, but not limited to, the payment of Base Rent and
Additional Rent, Landlord may use, apply or retain the whole or any part of the
Security Deposit so deposited to the extent required for the payment of any Base
Rent and Additional Rent or any other sums as to which Tenant is in default or
for any such sums which Landlord may expend or may be required to expend by
reason of Tenant's default in respect of any of the terms, covenants and
conditions of this Lease, including, but not limited to, any damages or
deficiency in the reletting of the Premises, whether such damages or deficiency
accrue before or after summary proceedings or other re-entry by Landlord. In the
event of any transfer of Landlord's interest in the Building, Landlord shall
transfer the remaining Security Deposit, if any, to such transferee.
10 -- LEASE AGREEMENT
<PAGE>
6.2 DISPOSITION OF SECURITY DEPOSIT:
6.2.1 REPLENISHMENT OF SECURITY DEPOSIT: If Landlord shall so use,
apply or retain the whole or any part of the security, Tenant shall upon demand
immediately deposit with Landlord a sum equal to the amount so used, applied or
retained, as continuing security. If Tenant shall fully and faithfully comply
with all of Tenant's covenants and obligations under this Lease, the security or
any balance thereof shall be returned or paid over to Tenant after the date on
which this Lease shall expire or sooner terminate. In the event of any sale of
Landlord's interest in the Building or any leasing of the Building, whether or
not in connection with a sale or leasing of the Land, Landlord shall have the
right to transfer the security to the vendee or lessee, as the new landlord, and
Landlord shall thereupon be released by Tenant from all liability for the return
or payment thereof; and Tenant shall look solely to the new landlord for the
return or payment of the same; and the provisions hereof shall apply to every
transfer or assignment made of the same to a new landlord. Tenant shall not
assign or encumber or attempt to assign or encumber the monies deposited herein
as security for any purpose and neither Landlord nor its successors or assigns
shall be bound by any such assignment, encumbrance, attempted assignment or
attempted encumbrance.
6.2.2 RETURN OF SECURITY DEPOSIT: Thirty-six months after the
Commencement Date, if Tenant is not in default under the terms and conditions of
this Lease and if Tenant's financial condition has not deteriorated (when
comparing Tenant's June 30, 1997 financial statements with Tenant's then-current
financial statements), Landlord shall refund in full the Security Deposit.
SECTION 7. SUBORDINATION, NOTICE TO SUPERIOR LESSORS AND MORTGAGEES
7.1 SUBORDINATION: Any lease to which this Lease is, at the time referred
to, subject and subordinate is herein called "Superior Lease" and the lessor of
a Superior Lease or its successor in interest, at the time referred to, is
herein called "Superior Lessor," and any mortgage to which this Lease is, at the
time referred to, subject and subordinate is herein called "Superior Mortgage"
and the holder of a Superior Mortgage, or its successor in interest, at the time
referred to, is herein called "Superior Mortgagee." This Lease, and all rights
of Tenant hereunder, are and shall be subject and subordinate to any ground
leases covering the Land and/or the Building now or hereafter existing, and to
all mortgages which may now or hereafter affect the Land and/or the Building
and/or any of such leases, whether or not such mortgages shall also cover other
lands and/or buildings and/or leases, to each and every advance made or
hereafter to be made under such mortgages, and to all renewals, modifications,
replacements and extensions of such leases and such mortgages. This Section
shall be self-operative, and no further instrument of subordination shall be
required. In confirmation of such subordination, Tenant shall promptly execute,
acknowledge or deliver any instrument that Landlord, any Superior Lessor or any
Superior Mortgagee may reasonably request to evidence such subordination subject
to the nondisturbance provisions of Section 7.3.
7.2 NOTICE: If any act or omission of Landlord would give Tenant the
right, immediately or after lapse of a period of time, to cancel or terminate
this Lease, or to claim a partial or total eviction, Tenant shall not exercise
such right: (i) until it has given written notice of such act or omission to
Landlord and each Superior Mortgagee and each Superior Lessor whose name and
address shall previously have been furnished to Tenant; and (ii) until such
parties had thirty (30) days from the date of such notice to cure the condition,
or, if the condition cannot reasonably be cured in thirty (30) days, such
parties or any of them shall have commenced efforts to cure such
11 -- LEASE AGREEMENT
<PAGE>
condition and diligently pursued such cure.
7.3 ATTORNMENT: For the purposes of this Section, the term "Successor
Landlord" shall mean the Superior Lessor or Superior Mortgagee if the same
succeeds to the rights of Landlord under this Lease, whether through possession
or foreclosure action or delivery of a new lease or deed, or any third party
that succeeds to the rights of Landlord under this Lease by virtue of having
purchased the Land and the Building at a foreclosure sale. The Successor
Landlord shall accept Tenant's attornment, assume Landlord's obligations under
the Lease, and shall not disturb Tenant's quiet possession of the Premises.
Tenant shall attorn to and recognize such Successor Landlord as Tenant's
Landlord under this Lease and shall promptly execute and deliver any instrument
that such Successor Landlord may reasonably request to evidence such attornment.
Upon such attornment this Lease shall continue in full force and effect as a
direct lease between the Successor Landlord and Tenant upon all of the terms,
conditions and covenants as are set forth in this Lease except that the
Successor Landlord shall not: (i) be liable for any previous act or omission of
Landlord under this Lease except that Tenant may terminate the Lease if the
Successor Landlord fails to cure any continuing breach of this Lease caused by
Landlord's prior acts or omissions within a reasonable period of time; (ii) be
subject to any offset, deficiency or defense which theretofore shall have
accrued to Tenant against Landlord; (iii) be bound by any previous modification
of this Lease or by any previous prepayment of more than one (1) month's Base
Rent, unless such modification or prepayment shall have been expressly approved
in writing by the Superior Lessor or the Superior Mortgagee whose name and
address shall previously have been furnished to Tenant and through or by reason
of which the Successor Landlord shall have succeeded to the right of Landlord
under this Lease; (iv) be liable for the commencement or completion of any
construction or any contribution toward construction or installation of any
improvements upon the Premises required under this Lease, or any expansion or
rehabilitation of existing improvements upon the Premises, or for restoration of
improvements following any casualty not required to be insured under this Lease
or for the costs of any restoration in excess of the proceeds recovered under
any insurance required to be carried under this Lease; (vii) be liable for any
lien, right, power or interest, if any, which may have arisen or intervened in
the period between the recording of any Superior Mortgage and the execution of
this Lease or any lien or judgment which may arise at any time under the terms
of this Lease; or (viii) be liable for the return of any security deposit which
was not actually transferred to the Successor Landlord.
SECTION 8. QUIET ENJOYMENT:
So long as Tenant pays all of the Base Rent and Additional Rent and
performs all of Tenant's other obligations hereunder, Tenant shall peaceably and
quietly have, hold and enjoy the Premises without hindrance, ejection or
molestation by Landlord or any person lawfully claiming through or under
Landlord, subject nevertheless, to the provisions of this Lease and to the
rights of any Superior Lease and/or Superior Mortgage. This covenant shall be
construed as a covenant running with the Land, and is not, nor shall it be
construed as, a personal covenant of Landlord, except to the extent of
Landlord's interest in this Lease and only so long as such interest shall
continue, and thereafter this covenant shall be binding only upon subsequent
successors in interest of Landlord's interest in this Lease, to the extent of
their respective interests, for so long as they shall retain such interest.
SECTION 9. ASSIGNMENT AND SUBLETTING:
9.1 GENERALLY: Upon receipt of prior written consent of Landlord, which
consent shall not be unreasonably withheld, conditioned or delayed, Tenant may
assign this Lease or sublet the Premises, or any portion thereof, to any other
entity or person whose character and business are
12 -- LEASE AGREEMENT
<PAGE>
consistent with the standards of the Building and of Triangle Corporate Park,
and if the business of such other entity or person does not conflict or compete
with other tenants in Triangle Corporate Park. If Tenant desires to assign this
Lease or sublease the Premises to any other entity for the remainder of the
Lease Term, Landlord shall have the right (but no obligation) to regain
possession of such portion of the Premises. Tenant shall not permit any lien to
be placed on Tenant's interest by operation of law. Any change in effective
control of a corporation, partnership or other artificial entity which is Tenant
shall be deemed a transfer of this Lease. Any transfer hereunder by Tenant shall
not result in Tenant being released or discharged from any liability under this
Lease. Any sale, assignment, encumbrance, subletting, occupation, lien or other
transfer of this Lease which does not comply with the provisions of this Section
9 shall be void.
9.1.1 Tenant shall, by written notice, advise Landlord of its desire
from and after a stated date (which shall not be less than thirty (30) days nor
more than ninety (90) days after the date of Tenant's notice), to transfer its
interest in the Premises or any portion thereof for any part of the term hereof;
and such notice by Tenant shall state the name and address of the proposed
transferee, and Tenant shall deliver to Landlord a true and complete copy of the
proposed transfer instrument with said notice.
9.1.2 Upon any request by Tenant to transfer all or any part of the
Premises, Landlord shall have the right to either: (a) permit the transfer on
the conditions referred to in Section 9.2 and any other conditions Landlord may
impose, (b) deny Tenant's request, in which event this Lease shall continue in
full force and effect and unmodified; or (c) terminate this Lease by written
notice to Tenant with respect to the portion of the Premises described in
Tenant's notice and if Landlord desires, to then lease such space to any party
including the transferee identified in Tenant's notice at whatever terms
Landlord establishes. Any such termination with respect to less than all of the
Premises shall result in a percentage reduction in Rent equal to the percentage
of the Premises as to which the Lease is terminated.
9.2 CONDITIONS OF LANDLORD'S CONSENT: As a condition to Landlord's prior
written consent as provided for in this Section, the transferee(s) shall agree
in writing to comply with and be bound by all of the terms, covenants,
conditions, provisions and agreements of this Lease, and Tenant shall deliver to
Landlord, promptly after execution, an executed copy of each transfer instrument
and an agreement of said compliance by each transferee. Landlord may require as
a condition of granting consent to a transfer that Tenant shall pay to Landlord
all profits from the transfer determined by deducting from the total
consideration paid directly or indirectly to or for the benefit of Tenant or its
designee for the transferred interest, the reasonable costs of the transfer
incurred by Tenant and subtracting the remaining rent obligation of Tenant at
such time under this Lease. For purposes of determining all profits from the
transfer, substance shall control over form such that Landlord may ignore any
attempt by Tenant to inflate the purchase price of any other assets transferred
in an attempt to conceal the profit on the transfer of Tenant's interest in this
Lease. Sums payable hereunder shall be paid to Landlord as and when paid by the
transferee to Tenant.
13 -- LEASE AGREEMENT
<PAGE>
SECTION 10. INSURANCE:
10.1 WAIVER OF RIGHT OF RECOVERY: Neither party, nor its officers,
directors, employees, agents or invitees, nor, in case of Tenant, its
subtenants, shall be liable to the other party or to any insurance company (by
way of subrogation or otherwise) insuring the other party for any loss or damage
to any building, structure or other tangible property normally covered under an
all risk policy of property insurance or under workers' compensation insurance
even though such loss or damage might have been occasioned by the negligence of
such party, its agents or employees; provided, however, that if, by reason of
the foregoing waiver, either party shall be unable to obtain any such insurance,
such waiver shall be deemed not to have been made by such party and, provided,
further, that if either party shall be unable to obtain any such insurance
without the payment of an additional premium therefor, then, unless the party
claiming the benefit of such waiver shall agree to pay such party for the cost
of such additional premium within thirty (30) days after notice setting forth
such requirement and the amount of the additional premium, such waiver shall be
of no force and effect between such party and such claiming party.
10.2 PUBLIC LIABILITY INSURANCE: Tenant, at its expense, shall maintain at
all times during the term of this Lease, public liability insurance in respect
of the Premises and the conduct or operation of business therein, with Landlord
and its managing agent, if any, and any Superior Lessor or Superior Mortgagee
whose name and address shall previously have been furnished to Tenant, as
additional insureds, with Two Million and No/100 Dollars ($2,000,000.00) minimum
combined single limit coverage, or its equivalent. All such insurance shall
insure the performance by Tenant of the indemnity agreement as to liability for
injury to, illness of, or death of persons and damage to property set forth in
Section 17. Tenant shall deliver to Landlord and any additional insured such
fully paid for policies or certificates of insurance, in form satisfactory to
Landlord issued by the insurance company or its authorized agent, at least ten
(10) days before the Commencement Date. Tenant shall procure and pay for
renewals of such insurance from time to time before the expiration thereof, and
Tenant shall deliver to Landlord and any additional insured such renewal policy
or certificate at least thirty (30) days before the expiration of any existing
policy. All such policies shall contain a provision whereby the same cannot be
canceled or modified unless Landlord and any additional insured is given at
least twenty (20) days prior written notice of such cancellation or
modification.
10.3 ACCEPTABLE INSURANCE COMPANIES: All insurance policies required to be
carried by Tenant hereunder shall be issued by responsible insurance companies
authorized to issue insurance in the State of Oregon rated B VII or higher by
Best's Insurance Rating Service.
10.4 INCREASE IN COVERAGE: Landlord may from time to time, but not more
frequently than once every three (3) years, require that the amount of public
liability insurance to be maintained by Tenant under Section 10.2 be increased
so that the amount thereof adequately protects Landlord's interest based on
amounts of coverage required of comparable tenants in comparable buildings.
SECTION 11. RULES AND REGULATIONS:
Tenant shall faithfully observe and comply with the rules and
regulations attached to this Lease as EXHIBIT E and all reasonable modifications
thereof and additions thereto from time to time established by Landlord by
written notice to Tenant. Landlord shall not be responsible for the
nonperformance by any other Tenant or occupant of the Building of any said rules
and regulations but Landlord shall use reasonable efforts to remedy any
violation of the rules and regulations applicable to any other Building occupant
upon Tenant's request.
14 -- LEASE AGREEMENT
<PAGE>
SECTION 12. ALTERATIONS:
12.1 REQUIREMENTS: Tenant shall not make or suffer to be made any
alterations, additions, or improvements in, on, or to the Premises or any part
thereof which would require a building permit without the prior written consent
of Landlord, which shall not be unreasonably withheld, conditioned or delayed.
Any such alterations, additions, or improvements in, on, or to said Premises,
except for Tenant's movable furniture and equipment, shall immediately become
Landlord's property and, at the end of the term hereof, shall remain on the
Premises without compensation to Tenant. In the event Landlord consents to the
making of any such alterations, additions, or improvements by Tenant, the same
shall be made by Tenant, at Tenant's sole cost and expense, in accordance with
plans and specifications approved by Landlord, and any contractor or person
selected by Tenant to make the same must first be approved in writing by
Landlord. If the alterations, additions or improvements shall be made by
Landlord for Tenant's account, Tenant shall reimburse Landlord for the cost
thereof within twenty (20) days after receipt of a statement, setting forth the
actual cost of such alterations, additions or improvements. In any event, Tenant
shall pay Landlord an administrative charge of ten percent (10%) of the actual
cost of such alterations, additions or improvements, if such work is performed
by Landlord. If such work is performed by Tenant, Tenant shall reimburse
Landlord for Landlord's actual costs to review Tenant's plans and specifications
and coordinate such work, including $40 per hour for time spent by Landlord's
employees reviewing or coordinating such work, not to exceed in the aggregate
10% of the total cost of such work. After the expiration or sooner termination
of the Lease and upon demand by Landlord, Tenant shall remove any or all
alterations, additions, or improvements made by or for the account of Tenant,
designated by Landlord to be removed if made without Landlord's consent or if
the terms of such consent of Landlord required the removal upon termination of
the Lease, and Tenant in such case shall repair and restore the Premises to
their original condition, subject to ordinary wear and tear. Such removal,
repair and restoration work shall be done promptly and with all due diligence at
Tenant's sole cost and expense. The provisions of this Section 12 shall not
apply to the initial Tenant Improvements described in EXHIBIT C to this Lease.
12.2 INDEMNIFICATION OF LANDLORD: Tenant, at its expense, and with
diligence and dispatch, shall procure the cancellation or discharge of all
notices of violation arising from or otherwise connected with alterations, or
any other work, labor, services or materials done for or supplied to Tenant, or
any other person claiming through or under Tenant, which shall be issued by any
public authority having or asserting jurisdiction. Tenant shall defend,
indemnify and save harmless Landlord and any Superior Lessor or Superior
Mortgagee from and against any and all mechanic's and other liens and
encumbrances filed in connection with alterations, or any other work, labor,
services or materials done for or supplied to Tenant, or any person claiming
through or under Tenant, including, without limitation, security interests in
any materials, fixtures or articles so installed in and constituting part of the
Premises and against all costs, expenses and liabilities incurred in connection
with any such lien or encumbrance or any action or proceeding brought thereon.
Tenant, at its expense, shall procure the satisfaction or discharge of record of
all such liens and encumbrances within fifteen (15) days after the filing
thereof. Nothing herein contained shall prevent Tenant from contesting, in good
faith and at its own expense, any notice of violation, or lien provided Tenant
posts security acceptable to Landlord.
15 -- LEASE AGREEMENT
<PAGE>
SECTION 13. LANDLORD'S AND TENANT'S PROPERTY:
13.1 LANDLORD'S PROPERTY: All fixtures, carpeting, equipment, improvements
and appurtenances attached to or built into the Premises at the commencement of
or during the term of this Lease, whether or not by or at the expense of Tenant,
shall be and remain a part of the Premises, shall be deemed the property of
Landlord and shall not be removed by Tenant, except as provided in Section 13.2;
provided, that at Landlord's written request, Tenant shall, at its sole expense
and upon termination of the Lease, remove those items specified by Landlord,
including any or all fixtures, equipment, improvements, appurtenances and other
personal property, which are deemed herein the property of Landlord, but not
including the initial Tenant Improvements provided by Landlord pursuant to
Exhibit C of this Lease. Tenant's covenant to remove property specified by
Landlord shall survive the termination of this Lease.
13.2 TENANT'S PROPERTY: All unattached business and trade fixtures,
machinery and equipment, communications equipment and office equipment which are
installed in the Premises by or for the account of Tenant without expense to
Landlord and which can be removed without structural damage to the Building and
all furniture, furnishings (excluding window coverings) and other articles of
movable personal property owned by Tenant and located in the Premises (herein
collectively called "Tenant's Property") shall be and remain the property of
Tenant and may be removed by Tenant at any time during the term of this Lease;
provided, that if any of Tenant's Property is removed, Tenant shall repair or
pay the cost of repairing any damage to the Premises or to the Building
resulting from the installation and/or removal thereof. If Landlord shall have
granted any allowance or credit to Tenant for equipment or property on the
Premises, such equipment or property shall not be considered Tenant's Property,
and shall be deemed the property of Landlord.
13.3 ABANDONMENT: Any items of Tenant's Property which shall remain in the
Premises after the expiration date of this Lease, or after a period of fifteen
(15) days following an earlier termination date, at the option of Landlord, may
be deemed to have been abandoned, and in such case such items may be retained by
Landlord, without accountability, in such manner as Landlord shall determine at
Tenant's expense.
SECTION 14. SERVICES AND UTILITIES:
14.1 BUILDING MAINTENANCE: Landlord shall maintain the Building and the
Land, including public and common areas of the Building, such as the lobbies,
stairs, elevators, corridors and rest rooms, the windows in the Building, the
mechanical, plumbing and electrical equipment serving the Building, the parking
areas, landscaping, and the structure itself, in first class order and condition
except for damage occasioned by the act of Tenant, which damage shall be
repaired by Landlord at Tenant's expense.
14.2 UTILITIES: Provided Tenant shall not be in default
hereunder, and subject to the provisions elsewhere herein contained and to the
rules and regulations of the Building, Landlord agrees to make available to the
Premises (i) heat and air-conditioning required in Landlord's reasonable
judgment for the comfortable use and occupation of the Premises from 7:00 A.M.
to 6:00 P.M. on weekdays, and 8:00 A.M. to 1:00 P.M. on Saturdays exclusive of
legal holidays, (ii) continuous water and electricity service suitable for the
intended use of the Premises, (iii) janitorial services after 6:00 P.M. on
weekdays exclusive of legal holidays in the manner that such services are, in
Landlord's reasonable judgment, customarily furnished in comparable office
buildings in the immediate market area, and (iv) continuous elevator service
which shall mean service by
16 -- LEASE AGREEMENT
<PAGE>
unattended automatic elevators. Landlord shall make available additional or
after-hours heating or air-conditioning at Tenant's request. All charges for
heat, air conditioning, water and electricity will be separately metered to the
Premises and paid by Tenant or allocated to Tenant as an Operating Expense in
accordance with Section 4 of this Lease. Tenant agrees at all times to
reasonably cooperate with Landlord and to abide by all the regulations and
requirements which Landlord may reasonably prescribe for the proper functioning
and protection of the heating, ventilating, and air-conditioning system.
Wherever heat-generating machines, excess lighting or equipment are used in the
Premises which affect the temperature otherwise maintained by the air-
conditioning system, Landlord reserves the right to install supplementary air-
conditioning units in the Premises, and the cost thereof, including the cost of
installation and the cost of operation and maintenance thereof, shall be paid by
Tenant to Landlord upon demand by Landlord. Any sums payable by Tenant under
Section 14 shall be considered Additional Rent, and Landlord shall have the same
remedies for a default in payment of such sum as for a default in the payment of
Base Rent.
14.3 EXCESS USAGE: If Tenant uses excessive amounts of non-metered
utilities or services of any kind because of operation outside of normal
Building hours, high demands from office machinery and equipment, nonstandard
lighting, or any other cause, Landlord shall be reimbursed for its actual cost
of supplying such extra utility services, which charge shall be payable monthly
by Tenant in conjunction with Rent payments. Landlord may install in the
Premises a special meter to measure the amount of water, electric current or
other resource consumed for any such other use. In case of dispute over any
extra charge under this Section, Landlord shall designate three qualified
independent mechanical or electrical engineers, one of which will be chosen by
Tenant to resolve such dispute. The engineer so selected shall determine the
extra charges to be paid by Tenant, which decision shall be conclusive on both
parties. The party not prevailing in such dispute shall pay the cost of such
engineer's determination.
14.4 DISCLAIMER: Landlord shall not be in default hereunder or be liable
for any damages directly or indirectly resulting from, or by reason of (i) the
installation, use or interruption of use of any equipment in connection with the
furnishing of the foregoing utilities and services, (ii) failure to furnish or
delay in furnishing any such utilities or services when such failure or delay is
caused by acts of God or the elements, labor disturbances of any character, any
other accidents or other conditions beyond the reasonable control of Landlord,
or by the making of repairs or improvements to the Premises or the Building, or
(iii) the limitation, curtailment, rationing or restriction on use of water or
electricity, gas or any other form of energy or any other service or utility
whatsoever serving the Premises or the Building. Furthermore, Landlord shall be
entitled to cooperate voluntarily in a reasonable manner with the efforts of
national, state or local governmental agencies or utilities suppliers in
reducing energy or other resource consumption. Rent shall be abated in
accordance with the terms of Section 18 due to the occurrence of any of the
foregoing conditions which are covered by Landlord's insurance, or recovered by
Landlord from any third party.
14.5 USE OF COMMON AREAS AND FACILITIES: All common facilities and areas
furnished by Landlord in or near the Building, including parking areas, lighting
facilities, pedestrian sidewalks and ramps, landscaped areas, exterior
stairways, rest rooms and other areas and improvements provided by Landlord for
the general use, in common, of tenants, their officers, agents, employees and
customers shall at all times be subject to the exclusive control and management
of Landlord. Without limiting the scope of such discretion, Landlord shall have
the full right and authority to employ all personnel and to establish, modify
and enforce reasonable rules and regulations necessary for the proper operation
and maintenance of common areas and facilities. Landlord shall have the right to
close all or any portion of the common areas or facilities to such extent as, in
the opinion of Landlord's legal counsel, may be legally sufficient to prevent a
dedication thereof or the accrual of any rights to any person (other than
Tenant) or the public
17 -- LEASE AGREEMENT
<PAGE>
therein; and to do and perform such other acts in and to said areas and
improvements as Landlord shall reasonably determine to be advisable. All common
areas and facilities not within the Premises, which Tenant may be permitted to
use and occupy, are to be used and occupied under a revocable license, and if
the amount of such areas be diminished, Landlord shall not be subject to any
liability nor shall Tenant be entitled to any compensation or diminution or
abatement of Rent so long as Tenant has access to the Premises approximately
equivalent to the access provided at lease commencement, nor shall such
diminution of such areas be deemed constructive or actual eviction.
14.6 PARKING FACILITIES: Tenant and Tenant's employees, agents, invitees
and licensees shall have the right throughout the Lease Term to use the number
of non-reserved parking spaces in the Building parking lot specified in the
Basic Lease Information. Three of tenant's parking spaces near the Building
shall be designated as "OrCAD visitor" parking for Tenant, the location of which
will be selected by Tenant from spaces not set aside for handicapped parking.
The availability of, and need for termination of parking in excess of Tenant's
allowance shall be determined by Landlord in its sole and unfettered discretion.
If Landlord grants more than three reserved parking spaces to other tenants,
Landlord will allow Tenant to identify an additional reserved parking space from
Tenant's parking allowance for each additional reserved space granted to other
tenants.
14.7 SIGNAGE: Tenant shall have the non-exclusive right to building
standard monument signage and to place signage in two locations on the Building,
at its sole expense. Tenant shall have first choice of building sign locations
on either the north or south elevations of the Building. Tenant will have the
only sign on the top floor of the east elevation of the Building. Subject to
design and feasibility considerations, Tenant's sign on the east elevation may
be placed against the glass in the center of the east elevation.
14.7.1 Restrictions on other Signage: Other tenant signs will
be permitted on the building, subject to the following conditions. No
other tenant building sign will be placed at the same floor level as
Tenant's signs. Only two other tenant signs will be permitted on the east
elevation of the Building, and no other signs will be permitted in the
center of the east elevation. Other tenant signs will be no more than
thirty inches in height and twenty-two feet in length. No tenant signs
will be located on the west elevation of the Building.
14.7.2 All Building tenants will be entitled to building
standard monument signage, subservient to Tenant's monument signage.
14.7.3 Tenant and Landlord agree to cooperate to review any
proposed signage. Landlord and Tenant agree to work together cooperatively
to ensure that any and all signage placed on the Building and any monument
signage is professional and of a first-class nature, however, all signage
shall require Landlord's written approval as to size, location, design and
content, which shall not be unreasonably withheld.
14.8 MAILBOX: Landlord shall furnish Tenant, without additional charge, a
locked mailbox .
14.9 SECURITY: Landlord shall install a card key entry system to all
exterior doors and elevators at Landlord's expense as part of the construction
of the Building. Tenant shall be responsible for any and all security within the
Premises. Landlord will also provide a noncontinuous roaming security patrol
after normal business hours which will perform random door checks, as well as
lock and unlock the Building during normal operating hours.
18 -- LEASE AGREEMENT
<PAGE>
14.10 BASKETBALL COURT: Tenant may install and maintain, at Tenant's
expense, a fenced basketball court in an area of the parking lot to be
designated by Landlord. Tenant's parking allowance shall be reduced by the
number of parking spaces utilized for the court. Tenant shall indemnify and hold
Landlord harmless from any and all claims arising from the use or presence of
the basketball court.
SECTION 15. ACCESS AND NAME:
Landlord reserves, and shall at all times have, the right to re-enter
the Premises upon 24 hours' prior notice to Tenant (except in an emergency) to
inspect the same, to supply janitor service and any other service to be provided
by Landlord to Tenant, to show the Premises to prospective purchasers,
mortgagees or, during the last 24 months of the Term, prospective tenants, to
post notices of nonresponsibility, and to alter, improve or repair the Premises
and any portion of the Building of which the Premises are a part, without
abatement of Rent. For such purpose, Landlord may erect, use and maintain
scaffolding, pipes, conduits and other necessary structures in and through the
Premises where reasonably required by the character of the work to be performed,
provided that entrance to the Premises shall not be blocked thereby, and further
provided that Landlord shall not unreasonably interfere with the business of
Tenant. Tenant hereby waives any claim for damages for any injury or
inconvenience to or interference with Tenant's business, any loss of occupancy
or quiet enjoyment of the Premises and any other loss occasioned by Landlord's
conduct pursuant to this Section, except for wilful misconduct of Landlord. For
each of the purposes stated in this Section, Landlord shall at all times have
and retain a key which unlocks all of the doors in, upon and about the Premises,
excluding Tenant's vaults and safes or special security areas (designated in
advance). Landlord shall have the right to use any and all means which Landlord
may deem necessary or proper to open all doors in an emergency, in order to
obtain entry to any portion of the Premises, and any entry to any portion of the
Premises obtained by Landlord by any such means, or otherwise shall not under
any circumstances be construed or deemed to be a forcible or unlawful entry
into, or a detainer of, the Premises, or an eviction, actual or constructive, of
Tenant from all or part of the Premises. Landlord shall also have the right at
any time, without the same constituting an actual or constructive eviction and
without incurring any liability to Tenant, to change the arrangement and/or
location of entrances or passageways, doors and doorways, corridors, elevators,
stairs, toilets or other public parts of the Building and to change the name,
number or designation by which the Building is commonly known. So long as
Tenant occupies not less than 40% of the total office space in the Building,
Landlord will not rename the Building after another Tenant without Tenant's
prior written consent, which consent may be withheld in Tenant's sole
discretion.
SECTION 16. NOTICE OF OCCURRENCES:
Prior to Tenant taking any legal action against Landlord or any action
under any indemnity contained herein, Tenant shall give notice to Landlord of:
(i) any occurrence in or about the Premises for which Landlord might be liable;
(ii) any fire or other casualty in the Premises; (iii) any damage to or defect
in the Premises including the fixtures, equipment and appurtenances thereof, for
the repair of which Landlord might be responsible; and (iv) damage to or defect
in any part or appurtenances of the Building's sanitary, electrical, heating,
ventilating, air-conditioning, elevator or other systems located in or passing
through the Premises or any part thereof.
19 -- LEASE AGREEMENT
<PAGE>
SECTION 17. NONLIABILITY AND INDEMNIFICATION:
17.1 WAIVER: Landlord shall not be liable for any loss or damage to person
or property sustained by Tenant, or other persons, which may be caused by theft,
or by any act or neglect of any tenant of the Building or by any other person in
or about the Building, except for a person acting by or through Landlord.
Neither Landlord nor any partner, director, officer, agent, servant or employee
of Landlord shall be liable to Tenant for any loss, injury or damage to Tenant
or to any other person, or to its or their property, irrespective of the cause
of such injury, damage or loss except to the extent caused by or resulting from
the intentional torts of Landlord, it being the intent of the parties that
Tenant look to its own all risk insurance policy for coverage of any such item
resulting from an accident even if caused by the negligence of Landlord.
Further, neither Landlord nor any partner, director, officer, agent, servant or
employee of Landlord shall be liable: (i) for any such damage caused by other
tenants or persons in, upon or about the Building, or caused by operations in
construction of any private, public or quasi-public work; or (ii) in any event
for consequential damages, including lost profits, of Tenant or any person
claiming through or under Tenant.
17.2 INDEMNIFICATION: Tenant shall indemnify and hold harmless Landlord
and all Superior Lessors and/or Superior Mortgagees and its and their respective
partners, directors, officers, agents and employees from and against any and all
third party claims for bodily injury and/or property damage arising from or in
connection with any accident, injury or damage whatever (even if caused by
Landlord's negligence or breach of this Lease, but not if caused by Landlord's
willful misconduct) occurring in, at or upon the Premises; together with all
costs, expenses and liabilities incurred or in connection with each such claim
or action or proceeding brought thereon, including, without limitation, all
attorney fees and expenses at trial and upon appeal. Landlord shall indemnify
and hold harmless Tenant and its directors, officers, agents and employees from
and against any and all third party claims for bodily injury and/or property
damage arising from or in connection with any accident, injury or damage
whatever (even if caused by Tenant's negligence or breach of this Lease, but not
if caused by Tenant's wilful misconduct), occurring in, at or upon the common
areas of the Land and the Building; together with all costs, expenses and
liabilities incurred or in connection with each such claim or action or
proceeding brought thereon, including, without limitation, all attorney fees and
expenses at trial and upon appeal. The foregoing indemnity obligations of each
of the parties shall be limited to the amount of liability insurance coverage
required of Tenant under Section 10 of this Lease.
17.3 DUTY TO DEFEND: In case any action or proceeding is brought against
Landlord and/or any Superior Lessor and/or Superior Mortgagee and/or its or
their partners, directors, officers, agents and/or employees and such claim is a
claim from which Tenant is obligated to indemnify Landlord pursuant to Section
17.2, Tenant, upon notice from Landlord or such Superior Lessor or Superior
Mortgagee, shall resist and defend such action or proceeding (by counsel
reasonably satisfactory to Landlord). The obligation of Tenant under this
Section 17 shall survive termination of this Lease. In case any action or
proceeding is brought against Tenant and/or its directors, officers, agents
and/or employees and such claim is a claim from which Landlord is obligated to
indemnify Tenant pursuant to Section 17.2, Landlord, upon notice from Tenant,
shall resist and defend such action or proceeding (by counsel reasonably
satisfactory to Tenant). The obligation of Landlord under this Section 17 shall
survive termination of this Lease.
SECTION 18. DAMAGE OR DESTRUCTION:
18.1 CASUALTY: If the Premises or the Building are damaged by fire or
other casualty, Landlord shall forthwith repair the same unless this Lease is
terminated as permitted herein. Within twenty (20) days from the date of such
damage, Landlord shall notify Tenant if the Building is
20 -- LEASE AGREEMENT
<PAGE>
damaged in excess of twenty-five percent (25%) of the Building's precasualty
value, as reasonably determined by Landlord (damage in excess of such amount
being referred to as "Major Damage" and damage equal to or less than such amount
being referred to as "Minor Damage"). If Major Damage occurs, Landlord may elect
to terminate the Lease. If Minor Damage occurs then Landlord shall repair such
damage and rebuild that portion of the Building or the Premises damaged. In the
event of Major Damage, if Landlord gives its written notice to Tenant electing
to rebuild or in the event of Minor Damage, this Lease shall remain in full
force and effect provided Landlord completes the repairs within one hundred
eighty (180) days (this determination of days not to be affected by the force
majeure provision of this Lease), except the Rent shall be reasonably abated
during the period of repair for that portion of the Premises not reasonably
usable by Tenant and on or after the 181st day after such casualty Tenant may,
by written notice to Landlord, terminate this Lease. If in the event of Major
Damage, Landlord elects by written notice to Tenant not to rebuild, then this
Lease shall automatically terminate as of the effective date of such notice, the
Rent shall be reduced by a proportionate amount based upon the extent to which
said damage interfered with the business carried on by Tenant in the Premises,
and Tenant shall pay such reduced Rent up to the date of termination. Landlord
agrees to refund to Tenant any Rent previously paid for any period of time
subsequent to such date of termination. Landlord shall not be required to repair
any damage by fire or other cause to the property of Tenant.
18.2 CONDEMNATION: If more than twenty-five percent (25%) of the Land
and/or Building shall be taken or appropriated under the power of eminent domain
or conveyed in lieu thereof, Landlord shall have the right to terminate this
Lease. If such taking renders the Premises unsuitable for the conduct of
Tenant's business then Tenant shall have the right to terminate this Lease. If
this Lease is terminated, Landlord shall receive (and Tenant shall assign to
Landlord upon demand from Landlord) any and all income, rent, award or any
interest thereon which may be paid or owed in connection with the exercise of
such power of eminent domain or conveyance in lieu thereof, and Tenant shall
have no claim against the agency exercising such power or receiving such
conveyance, for any part of such sum paid by virtue of such proceedings, whether
or not attributable to the value of the unexpired term of this Lease except for
the unamortized value of Tenant Improvements paid for by Tenant and relocation
benefits, if any. If a part of the Land and/or Building shall be so taken or
appropriated or conveyed and Landlord hereto shall elect not to terminate this
Lease, Landlord shall nonetheless receive (and Tenant shall assign to Landlord
upon demand from Landlord) any and all income, rent, award or any interest
thereon paid or owed in connection with such taking, appropriation or
conveyance; and if the Premises have been damaged as a consequence of such
partial taking or appropriation or conveyance, Landlord shall restore the
Premises and this Lease shall remain in full force and effect, except that
Tenant shall be entitled to an appropriate reduction in Rent while such
restoration is being made by Landlord. Such proportionate reduction shall be
based upon the extent to which the restoration being made by Landlord shall
interfere with the business carried on by Tenant in the demised Premises.
Landlord will not be required to repair or restore any injury or damage to the
property of Tenant.
SECTION 19. SURRENDER AND HOLDING OVER:
19.1 GENERAL: On the last day of the term of this Lease, or upon other
lawful re-entry by Landlord upon the Premises, Tenant shall quit and surrender
the Premises to Landlord "broom-clean" and in good order, condition and repair,
except for ordinary wear and tear and casualty, and in accordance with the
provisions of Section 13 of this Lease.
19.2 SURRENDER: No agreement relating to the surrender of the Premises by
Tenant shall be valid unless in writing and signed by Landlord.
21 -- LEASE AGREEMENT
<PAGE>
19.3 HOLDING OVER AFTER RENEWAL: If Tenant exercises its option to extend
the Lease Term set forth in Section 1.4, and Landlord and Tenant are unable to
agree on the renewal Base Rental amount, Tenant may holdover for a period not to
exceed six (6) months after the expiration of the Lease Term. During such
holdover period, Tenant shall pay to Landlord 115% of the Base Rental in effect
immediately prior to expiration, together with all Additional Rent provided for
in this Lease. Tenant shall provide Landlord with at least 12 months' prior
written notice of its intent to holdover pursuant to this section. In such
notice, Tenant shall indicate the total number of months that Tenant will
holdover, not to exceed six months. The notice shall be irrevocable.
19.4 HOLDING OVER WITH CONSENT: Any holding over after the expiration of
the term of this Lease other than as described in Section 19.3, with the written
consent of Landlord, shall be a tenancy from month to month. The terms,
covenants and conditions of such tenancy shall be the same as provided herein,
and the monthly Rent shall be the then fair market rent for the Premises as
determined by Landlord, but in no event less than 115% of the Rent in effect
immediately prior to expiration, and subject to adjustment as provided in
Section 4 herein. Acceptance by Landlord of Rent after such expiration shall not
result in any other tenancy or any renewal of the Lease Term, and the provisions
of this Section are in addition to and do not affect Landlord's right of re-
entry or other rights provided under this Lease or by applicable law.
19.5 HOLDING OVER WITHOUT CONSENT: If Tenant shall retain possession of
the Premises or any part thereof without Landlord's consent following the
expiration or sooner termination of this Lease for any reason, then Tenant shall
pay to Landlord for each day of such retention 150% of the amount of the daily
Rent for the last period prior to the date of such expiration or termination,
subject to adjustment as provided in Section 4. Tenant shall also indemnify and
hold Landlord harmless from any loss or liability resulting from delay by Tenant
in surrendering the Premises, including, without limitation, any claims made by
any succeeding tenant founded on such delay. Alternatively, if Landlord gives
notice to Tenant of Landlord's election thereof, such holding over shall
constitute renewal of this Lease for a period from month to month. Acceptance of
Rent by Landlord following expiration or termination shall not constitute a
renewal of this Lease, and nothing contained in this Section shall waive
Landlord's right of re-entry or any other right. Unless Landlord exercises the
option hereby given to it, Tenant shall be only a Tenant at sufferance, whether
or not Landlord accepts any Rent from Tenant while Tenant is holding over
without Landlord's written consent.
SECTION 20. EVENTS OF DEFAULT:
20.1 EVENTS OF DEFAULT: The occurrence of any one or more of the following
events of default shall constitute a breach of this Lease by Tenant:
20.1.1 If Tenant shall default in the payment of any security
deposit, Base Rent or Additional Rent, and such default shall continue for ten
(10) days after written notice from Landlord; or
20.1.2 If Tenant shall, whether by action or inaction, be in default
of any of its obligations under this Lease (other than a default in the payment
of any security deposit, Base Rent or Additional Rent) and such default shall
continue and not be remedied within twenty (20) days after Landlord shall have
given to Tenant a notice specifying the same, or, in the case of a default which
cannot with due diligence be cured within a period of Twenty (20) days and the
continuance of which for the period required for cure will not subject Landlord
or any Superior Lessor to prosecution for a crime or termination of any Superior
Lease or foreclosure of any Superior Mortgage, if Tenant shall not, (i) within
said twenty (20) day period advise Landlord of Tenant's
22 -- LEASE AGREEMENT
<PAGE>
intention to remedy such default; (ii) duly commence within said twenty (20) day
period, and thereafter diligently prosecute to completion, subject to delays
caused by force majeure, all steps necessary to remedy the default; and (iii)
complete such remedy within a reasonable time after the date of said notice of
Landlord; or
20.1.3 If any event shall occur or any contingency shall arise
whereby this Lease or the estate hereby granted or the unexpired balance of the
term hereof would, by operation of law or otherwise, pass to any person, firm or
corporation other than Tenant, except as expressly permitted by Section 9; or
20.1.4 If Tenant shall vacate or abandon the Premises continuously
for more than sixty (60) days; or
20.1.5 If Tenant or any guarantor of Tenant's obligations under this
Lease shall make a general assignment for the benefit of creditors, or shall be
unable to pay its debts as they become due, or shall file a petition in
bankruptcy, or shall be adjudicated as bankrupt or insolvent, or shall file a
petition seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, or shall file an answer admitting or shall fail timely to
contest the material allegations of a petition filed against it in any such
proceeding, or shall seek or consent to or acquiesce in the appointment of any
trustee, receiver or liquidator of Tenant or any material part of its
properties; or
20.1.6 If within ninety (90) days after the commencement of any
proceeding against Tenant seeking any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation, such proceeding shall not have been dismissed
or if, within ninety (90) days after the appointment without the consent or
acquiescence of Tenant of any trustee, receiver or liquidator of Tenant or of
any material part of its properties, such appointment shall not have been
vacated; or
20.1.7 If this Lease or any estate of Tenant hereunder shall be
levied upon under any attachment or execution and such attachment or execution
is not vacated within ten (10) days.
20.2 LIMITATION OF TENANT RIGHT TO NOTICE: During any calendar year,
Tenant shall be entitled to only one (1) notice each for the same type of
default pursuant to Section 20.1.1 or 20.1.2.
SECTION 21. REMEDIES UPON DEFAULT:
21.1 REMEDIES: Upon the occurrence of an event of default constituting a
breach of this Lease under Section 20, Landlord may exercise any one or more of
the remedies set forth in this Section 21 or in Section 24, or any other remedy
available under applicable law or contained in this Lease.
21.1.1 Landlord or Landlord's agents and employees may immediately or
at any time thereafter re-enter the Premises, or any part thereof, either by
summary eviction proceedings or by any suitable action or proceeding at law, or
by force or otherwise, without being liable to indictment, prosecution or
damages therefor, and may repossess the same, and may remove any person
therefrom, to the end that Landlord may have, hold and enjoy the Premises.
21.1.2 Landlord at its option may relet the whole or any part of the
Premises from time to time, either in the name of Landlord or otherwise, to such
tenants, for such terms ending before, on or after the expiration date of the
Lease Term, at such rentals and upon such other
23 -- LEASE AGREEMENT
<PAGE>
conditions (including concessions, tenant improvements, and free rent periods)
as Landlord may determine to be appropriate. Landlord at its option may make
such physical changes to the Premises as Landlord considers advisable or
necessary in connection with any such reletting or proposed reletting, without
relieving Tenant of any liability under this Lease or otherwise affecting
Tenant's liability. If there is other unleased space in the Building, Landlord
may lease such other space without prejudice to its remedies against Tenant.
21.1.3 Whether or not Landlord retakes possession or relets the
Premises, Landlord shall have the right to recover unpaid rent and all damages
caused by the default, including attorney fees. Damages shall include, without
limitation: (i) all rentals lost; (ii) all legal expenses and other related
costs incurred by Landlord following Tenant's default; (iii) all costs incurred
by Landlord in restoring the Premises to good order and condition, or in
remodeling, renovating or otherwise preparing the Premises for reletting; and
(iv) all costs incurred by Landlord in reletting the Premises, including,
without limitation, any brokerage commissions and the value of Landlord's time.
21.1.4 To the extent permitted under Oregon law, Landlord may sue
periodically for damages as they accrue without barring a later action for
further damages. Landlord may in one action recover accrued damages plus
damages attributable to the remaining Lease Term equal to the difference between
the rent reserved in this Lease (including an estimated amount of Additional
Rent as determined by Landlord) for the balance of the Lease Term after the time
of award, and the fair rental value of the Premises for the same period,
discounted to the time of award at the rate of nine percent (9%) per annum. If
Landlord has relet the Premises for the period which otherwise would have
constituted the unexpired portion of the Lease Term or any part, the amount of
rent reserved upon such reletting shall be deemed, prima facie, to be the fair
and reasonable rental value for the part or the whole of the Premises so relet
during the term of the reletting.
21.2 CUMULATIVE REMEDIES: The remedies provided for in this Lease are
cumulative and are not intended to be exclusive of any other remedies to which
Landlord may lawfully be entitled at any time, and Landlord may invoke any
remedy allowed at law or in equity, including an action for specific
performance, as if specific remedies were not provided for herein. In the event
of a breach or threatened breach by Tenant of any of its obligations under this
Lease, Landlord shall also have the right to obtain an injunction and any other
appropriate equitable relief.
21.3 TERMINATION: Even though Tenant has breached this Lease, the Lease
shall continue in effect for so long as Landlord does not terminate Tenant's
possession of the Premises or Tenant does not abandon the Premises. Even after
Tenant is no longer in possession of the Premises, Tenant shall have continuing
contractual liability under the Lease, and Landlord may enforce its rights and
remedies under this Lease in the event of a breach, including the right to
recover its damages for loss of Rent for the remainder of the Lease Term after
Tenant is dispossessed of the Premises. Acts of maintenance or preservation or
efforts to relet the Premises or the appointment of a receiver upon initiative
of Landlord to protect Landlord's interest under this Lease shall not constitute
a termination of Tenant's contractual liability under the Lease unless written
release of liability is given by Landlord to Tenant.
21.4 INTEREST ON DAMAGES: In addition to any other remedies Landlord may
have under this Lease, and without reducing or adversely affecting any of
Landlord's rights and remedies under this Section 21, if any Base Rent,
Additional Rent or damages payable hereunder by Tenant to Landlord are not paid
within five (5) days after demand therefor, the same shall bear interest at the
annual rate of twelve percent (12%) or the maximum rate permitted by law,
whichever is less, calculated monthly from the due date thereof until paid, and
the amount of such interest shall be
24 -- LEASE AGREEMENT
<PAGE>
included as Additional Rent.
SECTION 22. SERVICES IN THE EVENT OF DEFAULT:
In addition to any rights and remedies which Landlord may have under
this Lease, if there shall be a default hereunder by Tenant which shall not have
been remedied within the applicable grace period, Landlord shall not be
obligated to furnish Tenant or the Premises any heat, ventilation or air-
conditioning services, or any cleaning services; and the discontinuance of any
one or more such services shall be without liability by Landlord to Tenant and
shall not reduce, diminish or otherwise affect any of Tenant's covenants and
obligations under this Lease.
SECTION 23. NO WAIVERS OF PERFORMANCE:
The failure of either party to insist in any one or more instances
upon the strict performance of any one or more of the obligations of this Lease,
or to exercise any election herein contained, shall not be construed as a waiver
or relinquishment for the future of the performance of such one or more
obligations or any other obligations of this Lease or of the right to exercise
such election, but the same shall continue and remain in full force and effect
with respect to any subsequent breach, act or omission. The receipt by Landlord
of Rent with knowledge of a breach by Tenant of any obligation of this Lease
shall not be deemed a waiver of such breach.
SECTION 24. CURING DEFAULTS:
24.1 CURING TENANT DEFAULTS: All covenants and agreements to be performed
by Tenant under any of the terms of this Lease shall be performed by Tenant at
Tenant's sole cost and expense and without any abatement of Rent except as
expressly provided otherwise herein. If Tenant shall fail to pay any sum of
money, other than Rent, required to be paid by it hereunder or shall fail to
perform any other act on its part to be performed hereunder, and such failure
shall continue for the periods referred to in Section 20 hereof, Landlord may
make any such payment or perform any such act on Tenant's part to be made or
performed as in this Lease provided but shall not be obligated so to do. Any
such payment or performance shall not be a waiver or release of Tenant's
obligations. All sums so paid by Landlord and all necessary incidental costs
together with interest thereon at the rate specified in Section 21.4 from the
date of such payment by Landlord shall be payable as Additional Rent to Landlord
on demand, and Tenant covenants to pay any such sums, and Landlord shall have,
in addition to any other right or remedy of Landlord, the same rights and
remedies in the event of the nonpayment thereof by Tenant as in the case of
default by Tenant in the payment of the Rent.
24.2 LANDLORD DEFAULTS: If the Landlord shall fail to perform any act on
its part to be performed hereunder and such failure continues for ten (10) days
after notice thereof by Tenant (except in the event of an emergency) and has a
material adverse effect on Tenant's ability to use the Premises for the
permitted use, then Tenant may, but shall not be obligated to do so, and without
waiving or releasing the Landlord from any obligations of the Landlord, make any
such payment or perform any such other act on Landlord's part to be made or
performed as provided in this Lease. Tenant shall be entitled to reimbursement
of all sums paid on behalf of Landlord, together with interest at the rate of
twelve percent (12%) per annum until reimbursed., but in no event will Tenant
have any right of offset for any such obligation.
25 -- LEASE AGREEMENT
<PAGE>
SECTION 25. BROKER:
Tenant covenants, warrants and represents that no broker except as
provided in the Basic Lease Information (the "Broker") was instrumental in
bringing about or consummating this Lease and that Tenant had no conversations
or negotiations with any broker except the Broker concerning the leasing of the
Premises. Tenant agrees to indemnify and hold harmless Landlord against and
from any claims for any brokerage commissions and all costs, expenses and
liabilities in connection therewith, including, without limitation, attorney
fees and expenses, arising out of any conversations or negotiations had by
Tenant with any broker other than the Broker. Landlord shall pay any brokerage
commissions due the Broker as per a separate agreement between Landlord and the
Broker.
SECTION 26. NOTICES:
Any notice, statement, demand, consent, approval or other
communication required or permitted to be given, rendered or made by either
party to the other, pursuant to this Lease or pursuant to any applicable law or
requirement of public authority, shall be in writing (whether or not so stated
elsewhere in this Lease). Notices shall be deemed to have been properly given,
rendered or made: (a) if delivered in person to Landlord or Tenant and receipt
is acknowledged; (b) if sent postage prepaid by registered or certified mail,
return receipt requested, effective forty-eight (48) hours after posted in a
United States post office station or letter box in the continental United
States, addressed to the other party at the address designated by the party
(except that after the Commencement Date, Tenant's address, unless Tenant
shall give notice to the contrary, shall be the Building); or (c) if sent by
facsimile, when transmission is confirmed to the facsimile number designated by
the party. Either party may designate a different address or addresses or
facsimile number for notices, statements, demands, consents, approvals or other
communications intended for it.
SECTION 27. ESTOPPEL CERTIFICATES:
Each party agrees, at any time and from time to time, as requested by
the other party with not less than ten (10) days' prior notice, to execute and
deliver to the other a statement certifying that this Lease is unmodified and in
full force and effect (or if there have been modifications, that the same is in
full force and effect as modified and stating the modifications), certifying the
dates to which the Base Rent and Additional Rent have been paid, stating whether
or not, to the best knowledge of the signer, the other party is in default in
performance of any of its obligations under this Lease, and, if so, specifying
each such default of which the signer shall have knowledge, and stating whether
or not, to the best knowledge of the signer, any event has occurred which with
the giving of notice or passage of time, or both, would constitute such a
default, and, if so, specifying each such event, it being intended that any such
statement delivered pursuant hereto shall be deemed a representation and
warranty to be relied upon by the party requesting the certificate and by others
with whom such party may be dealing, regardless of independent investigation.
Tenant also shall include in any such statement such other relevant factual
information concerning the status of this Lease as Landlord may reasonably
request. If Tenant fails to respond within fifteen (15) days of receipt by
Tenant of a written request for such a statement, Tenant shall be deemed to have
given such statement and shall be deemed to have admitted the accuracy of any
information contained in the request for such statement and that the Lease is
unmodified and in full force and effect, that there are not uncured defaults in
Landlord's performance, and that not more than one (1) month's Rent has been
paid in advance.
SECTION 28. MEMORANDUM OF LEASE:
26 -- LEASE AGREEMENT
<PAGE>
Tenant shall not record this Lease. Upon ten (10) days prior written
notice from Landlord, Tenant shall execute, acknowledge and deliver to Landlord
a memorandum of lease in respect of this Lease sufficient for recording. Such
memorandum shall not be deemed to change or otherwise affect any of the
obligations or provisions of this Lease.
SECTION 29. APPRAISAL
29.1 APPRAISAL OF FAIR RENTAL VALUE: In the event that Landlord and Tenant
are unable to agree upon a Base Rent when required under Section 1.4, the Base
Rent shall be established in accordance with this Section. Within ten (10) days
of written request, Landlord and Tenant shall each designate a disinterested
person with at least ten years' professional experience as a licensed real
estate broker having experience with Class A commercial office rental rates in
the Kruse Way and Washington Square areas. The two brokers shall appoint a third
disinterested broker with the same experience and qualifications. Within thirty
(30) days of appointment, the third broker shall select from the Base Rental
rates proposed by Tenant's broker and Landlord's broker the rate which the third
broker deems most closely reflects the fair market Base Rent for the premises
applicable to the renewal term. In no event will the Base Rent be less than the
Base Rental paid by the Tenant during the year preceding such renewal term. The
Base Rent for the renewal term may include rent escalators, if consistent with
market conditions then existing. In the event either party shall fail to select
broker(s) as provided in this Section, or the two brokers, once selected, shall
fail to agree on a third, the required broker shall be selected by the presiding
judge of Washington County, Oregon. The Base Rent established in accordance with
the terms of this Section shall be conclusive upon the parties, and enforceable
in the manner provided by Oregon law for arbitration awards. The expenses of
each appraisal conducted under the provisions of this Section shall be paid by
the non-prevailing party.
29.2 ALLOCATION OF OPERATING EXPENSES: In the event of any dispute under
Section 5.6 regarding the accuracy of an Operating Statement, the matter shall
be determined in accordance with the procedure described in Section 29.1, except
that the individuals chosen to make such determination shall be certified public
accountants or professional property managers having not less than ten years'
experience in office/commercial real estate matters.
29.3 PROCEDURE: It is the intent of Landlord and Tenant that issues
subject to resolution under this Section 29 shall be determined in the
discretion of the individuals selected to make the decision, without the
necessity of a hearing or formal presentation of evidence by either party. The
brokers, accountants or property managers, as the case may be, shall meet as
they deem appropriate, and without the direct participation of Landlord or
Tenant, in order to reach a decision as required by this Section. Each party
will be entitled to submit, for consideration only, a written proposal and a
response to the other party's proposal.
SECTION 30. ADJUSTMENT OF COMMENCEMENT AND EXPIRATION DATES:
30.1 COMMENCEMENT DATE: The Term of this Lease shall commence on a date
(herein the "Commencement Date") which shall be the date specified in the Basic
Lease Information unless changed as follows:
30.1.1 If for any reason construction of the Building has not begun
prior to June 1, 1998. Landlord may adjust the Commencement Date by providing
Tenant with written notice of a revised Commencement Date on or before the
actual commencement of construction of the Building subject to Tenant's rights
in Section 30.3 below.
27 -- LEASE AGREEMENT
<PAGE>
30.1.2 The Commencement Date shall be extended to the date of
issuance of a permanent or temporary Certificate of Occupancy by the appropriate
municipal authority and the issuance of a Certificate of Substantial Completion
by Group Mackenzie (the "Project Architect"); provided that if the issuance of
either certificate is delayed by the installation of Tenant's furniture,
fixtures or equipment, or any other Tenant Caused Delay (as defined in Exhibit
C), the Commencement Date will be upon the date substantial completion would
have been achieved if not for such Tenant Caused Delay, as determined in
accordance with Section 5.5.1 of Exhibit C. Landlord will provide Tenant with
approximately sixty (60) days' prior written notice of the anticipated final
completion date of the Building, which notice will be updated from time to time
within 3 business days of any revision to such anticipated final completion
date.
30.1.3 The date that Tenant actually occupies the Premises (other
than incident to installation of Tenant's furniture, fixtures or equipment)
which is earlier than the date specified in the Basic Lease Information, in
which case the Commencement Date shall be the date Tenant first occupies the
Premises.
30.2 DELAY IN DELIVERY OF PREMISES; RENT ABATEMENT: To the extent Landlord
is unable to deliver the Premises for Tenant's occupancy by the Commencement
Date, due to delay not caused by Tenant, or due to the occurrence of an event of
force majeure, the Base Rent and Additional Rent payable hereunder shall be
abated for the time period of such delay. Tenant shall be considered to have
caused any delay in the delivery of the Premises resulting from (i) Tenant's
failure to sign this Lease on or before the Construction Information Submittal
Date specified in the Basic Lease Information or, in the alternative, to provide
Landlord by such date a written agreement in form and content satisfactory to
Landlord guarantying Tenant will pay Landlord for any and all costs incurred in
connection with the work done prior to execution of this Lease to prepare the
Premises for Tenant; or (ii) the failure of Tenant to comply with the
Construction Information Submittal and Construction Approval Dates specified in
the Basic Lease Information and Exhibit C; or (iii) any changes in the Tenant
Improvements requested by Tenant, as provided in Exhibit C. In the case of delay
caused by Tenant, Tenant shall not be entitled to any abatement of Rent due to
such delay.
30.3 TENANT TERMINATION RIGHTS: If the Premises are not ready for Tenant's
occupancy on or before September 1, 1999 because of the fact that a temporary or
permanent certificate of occupancy has not been procured, Tenant may terminate
this Lease by written notice to Landlord, if Tenant is not responsible for the
delay or the delay was not caused by any of the force majeure events described
in Section 31.5. If, however, the Premises are not ready for Tenant's occupancy
on or before September 1, 1999 because of any of the force majeure events
described in Section 31.5, casualties, acts of God, strikes, shortages of labor
or materials or other causes beyond the reasonable control of Landlord, or
because of a delay caused by Tenant, the date that Tenant may terminate this
Lease shall be delayed from September 1, 1999 for the same number of days that
Tenant's occupancy was delayed by such events. Notwithstanding any of the
foregoing, if the Premises are not ready for Tenant's occupancy by November 1,
1999, extended on a day-for-day's basis for any Tenant-caused delays, Tenant may
terminate this Lease by written notice to Landlord. Termination under this
Section 30.3 shall be Tenant's sole remedy and Tenant shall have no other rights
or claims hereunder at law or in equity except that Landlord shall return to
Tenant promptly after any termination any Rent or Security Deposit deposited
previously with Landlord.
30.4 EXPIRATION DATE: In the event the Commencement Date is adjusted to a
date other than as specified in the Basic Lease Information, the Expiration Date
shall be extended as necessary so that the Lease Term will contain the number of
full calendar months indicated in the Rent
28 -- LEASE AGREEMENT
<PAGE>
Schedule of the Basic Lease Information and so that the Expiration Date will
fall on the last day of a calendar month.
30.5 EARLY OCCUPANCY: If Landlord has given Tenant written permission to
enter into the possession of the Premises prior to the Commencement Date, such
possession or occupancy shall be deemed to be upon all the terms, covenants,
conditions and provisions of this Lease, including, without limitation, the
payment of Rent.
SECTION 31. MISCELLANEOUS:
31.1 MERGER: All understandings and agreements previously made between the
parties are merged in this Lease and any other written agreement(s) made
concurrently herewith. The Lease and such other documents fully and completely
express the agreement of the parties and neither party is relying upon any
statement or representation not embodied in this Lease or any other written
agreement(s) made concurrently herewith.
31.2 MODIFICATIONS: No agreement shall be effective to change, modify,
waive, release, discharge, terminate or effect an abandonment of this Lease, in
whole or in part, unless such agreement is in writing, refers expressly to this
Lease and is signed by the party against whom enforcement is sought. If Tenant
shall at any time request Landlord to sublet the Premises for Tenant's account,
Landlord or its agent is authorized to receive the keys for such purposes
without releasing Tenant from any of its obligations under this Lease, and
Tenant hereby releases Landlord of any liability for loss or damage to any of
Tenant's Property in connection with such subletting.
31.3 SUCCESSORS AND ASSIGNS: Except as otherwise expressly provided in
this Lease, the obligations of this Lease shall bind and benefit the successors
and assigns of the parties hereto with the same effect as if mentioned in each
instance where a party is named or referred to; provided, however, that: (i) no
violation of the provisions of Section 9 shall operate to vest any rights in any
successor or assignee of Tenant; and (ii) the provisions of this Section shall
not be construed as modifying the provisions of Sections 9 or 20.
31.4 NONRECOURSE LEASE: Tenant shall look only to Landlord's interest in
the Land and the Building (or the proceeds thereof) for the satisfaction of
Tenant's remedies for the collection of a judgment (or other judicial process)
requiring the payment of money by Landlord in the event of any default by
Landlord hereunder, and no other property or assets of Landlord or its partners
or principals, disclosed or undisclosed, shall be subject to levy, execution or
other enforcement procedure for the satisfaction of Tenant's remedies under or
with respect to this Lease, the relationship of Landlord and Tenant hereunder or
Tenant's use or occupancy of the Premises.
31.5 FORCE MAJEURE: The obligations of Tenant hereunder shall not be
affected, impaired or excused, nor shall Landlord have any liability whatsoever
to Tenant, because:
31.5.1 Landlord is unable to fulfill, or is delayed in fulfilling,
any of its obligations under this Lease by reason of strike, other labor
trouble, governmental pre-emption of priorities or other controls in connection
with a national or other public emergency or shortages of fuel, supplies or
labor resulting therefrom, or any other cause, whether similar or dissimilar,
beyond Landlord's reasonable control; or
31.5.2 of any failure or defect in the supply, quantity or character
of electricity, water or other utilities furnished to the Premises, by reason of
any requirement, act or omission of the public utility or others serving the
Building with electric energy, steam, oil, gas or water, or for
29 -- LEASE AGREEMENT
<PAGE>
any other reason whether similar or dissimilar, beyond Landlord's reasonable
control.
31.6 DEFINITIONS: For the purpose of this Lease, the following terms have
the meanings indicated:
31.6.1 The term "mortgage" shall include a mortgage and/or deed of
trust, and the term "holder of a mortgage" or "mortgagee" or words of similar
import shall include a mortgagee of a mortgage or a beneficiary of a deed of
trust.
31.6.2 The term "laws and requirements of any public authorities" and
words of similar import shall mean laws and ordinances of any or all of the
federal, state, city, town, county, borough and village governments and rules,
regulations, orders and directives of any and all departments, subdivisions,
bureaus, agencies or offices thereof, and of any other governmental, public or
quasi-public authorities having jurisdiction over the Building and/or the
Premises, and the direction of any public officer pursuant to law, whether now
or hereafter in force.
31.6.3 The term "requirements of insurance bodies" and words of
similar import shall mean rules, regulations, orders and other requirements of
the Oregon Surveying and Rating Bureau and/ or any other similar body performing
the same or similar functions and having jurisdiction or cognizance over the
Building and/or the Premises, whether now or hereafter in force.
31.6.4 The term "Tenant" shall mean Tenant herein named or any
assignee or other successor in interest (immediate or remote) of Tenant herein
named, which at the time in question is the owner of Tenant's estate and
interest granted by this Lease; but the foregoing provisions of this subsection
shall not be construed to permit any assignment of this Lease or to relieve
Tenant herein named or any assignee or other successor in interest (whether
immediate or remote) of Tenant herein named from the full and prompt payment,
performance and observance of the covenants, obligations and conditions to be
paid, performed and observed by Tenant under this Lease.
31.6.5 The term "Land" shall mean the real property lot or parcel
upon which the Building is located including without limitation parking areas,
landscaped areas, walkways, driveways, sidewalks and curbs.
31.6.6 The term "Landlord" shall mean only the owner at the time in
question of the Building or of a lease of the Building, so that in the event of
any transfer or transfers of title to the Building or of Landlord's interest in
a lease of the Building, the transferror shall be and hereby is relieved and
freed of all obligations of Landlord under this Lease accruing after such
transfer and assumption by such transferee, and it shall be deemed without
further agreement that such transferee has assumed and agreed to perform and
observe all obligations of Landlord herein during the period it is the holder of
Landlord's interest under this Lease.
31.6.7 The term "herein," "hereof" and "hereunder," and words of
similar import, shall be construed to refer to this Lease as a whole, and not to
any particular Section, unless expressly so stated.
31.6.8 The term "and/or" when applied to two or more matters or
things shall be construed to apply to any one or more or all thereof as the
circumstances warrant at the time in question.
31.6.9 The term "person" shall mean natural person or persons, a
partnership, a
30 -- LEASE AGREEMENT
<PAGE>
corporation and any other form of business or legal association or entity.
31.7 EFFECT OF EXPIRATION: Upon the expiration or other termination of
this Lease, neither party shall have any further obligation or liability to the
other except as otherwise expressly provided in this Lease and except for such
obligations as by their nature or under the circumstances can only be, or by the
provisions of this Lease, may be, performed after such expiration or other
termination and in any event, unless otherwise expressly provided in this Lease,
any liability for a payment (including, without limitation, Additional Rent
herein) which shall have accrued to or with respect to any period ending at a
time of expiration or other termination of this Lease shall survive the
expiration or other termination of this Lease.
31.8 EXCAVATION: If an excavation shall be made upon land adjacent to or
under the Building, or shall be authorized to be made, Tenant shall afford to
the person causing or authorized to cause such excavation, license to enter the
Premises for the purpose of performing such work as said person shall deem
necessary or desirable to preserve and protect the Building from injury or
damage and to support the same by proper foundations, and without reducing or
otherwise affecting Tenant's obligations under this Lease.
31.9 UNION CONTRACTS: Following notice from Landlord of any union
contracts affecting the Land or the Building, Tenant agrees that the exercise of
its rights pursuant to the provision of Section 12 or of any other provisions of
this Lease or the Exhibits hereto shall not be done in a manner which would
violate such union contracts, nor create any lawful work stoppage, picketing,
labor disruption or dispute or any interference with the business of Landlord or
any tenant or occupant of the Building.
31.10 PRORATIONS: Any apportionments or prorations of Base Rent or
Additional Rent to be made under this Lease shall be computed on the basis of a
three hundred sixty (360) day year, with twelve (12) months of thirty (30) days
each.
31.11 GOVERNING LAW: Regardless of the place of execution or performance,
this Lease shall be governed by and construed in accordance with the laws of the
State of Oregon. If any provision of this Lease or the application thereof to
any person or circumstances shall, for any reason and to any extent, be invalid
or unenforceable, the remainder of this Lease and the application of that
provision to other persons or circumstances shall not be affected but rather
shall be enforced to the extent permitted by law. The table of contents,
captions, heading and titles in this Lease are solely for convenience or
reference and shall not affect its interpretation. Each covenant, agreement,
obligation or other provision of this Lease to be performed by Landlord or
Tenant, shall be deemed and construed as a separate and independent covenant of
Landlord or Tenant, as applicable, not dependent on any other provision of this
Lease. All terms and words used in this Lease, regardless of the number or
gender in which they are used, shall be deemed to include any other number and
any other gender as the context may require. Time is of the essence of this
Lease and all of its provisions.
31.12 LIGHT, AIR AND VIEW: Any diminution or shutting off of light, air
or view by any structure which may be erected on lands adjacent to or near the
Building shall in no way affect this Lease or impose any liability on Landlord,
except that Landlord agrees that no additional buildings shall be constructed on
the Land.
31.13 TENANT REPRESENTATIONS: If Tenant is a corporation, each person
executing this Lease on behalf of Tenant does hereby covenant and warrant that:
31 -- LEASE AGREEMENT
<PAGE>
31.13.1 Tenant is duly incorporated and validly existing under the
laws of its state of incorporation, and, if such corporation is existing under
the laws of a jurisdiction other than Oregon, qualified to transact business in
Oregon;
31.13.2 Tenant has full corporate right and authority to enter into
this Lease and to perform all Tenant's obligations hereunder; and
31.13.3 Each person (and both of the persons if more than one signs)
signing this Lease on behalf of the corporation is duly and validly authorized
to do so.
31.14 DEFINED TERMS: Words capitalized other than as the first word of a
sentence are defined terms and have the meaning, throughout this Lease, given to
them when they are first used with an initial capital or when used in quotation
marks .
31.15 COUNTERPARTS: This Lease may be executed in one or more
counterparts by separate signature, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument, binding
on all parties hereto, even though all parties are not signatories to the
original or to the same counterpart. Any counterpart of this Lease that has
attached to it separate signature pages, which together contain the signatures
of all parties, shall for all purposes be deemed a fully executed instrument,
and in making proof of this Lease, it shall not be necessary to produce or
account for more than one such counterpart.
31.16 COSTS AND ATTORNEY FEES:
31.16.1 NO SUIT OR ACTION FILED. If this Lease is placed in the
hands of an attorney due to a default in the payment or performance of any of
its terms, the defaulting party shall pay, immediately upon demand, the other
party's reasonable attorney fees, collection costs even though no suit or action
is filed thereon, and any other fees or expenses incurred by the nondefaulting
party.
31.16.2 ARBITRATION OR MEDIATION; TRIAL AND APPEAL. If any
arbitration, mediation, or other proceeding is brought in lieu of litigation, or
if legal action is instituted to enforce or interpret any of the terms of this
Lease or if legal action is instituted in a Bankruptcy Court for a United States
District Court to enforce or interpret any of the terms of this Lease, to seek
relief from an automatic stay, to obtain adequate protection, or to otherwise
assert the interest of Landlord in a bankruptcy proceeding, the party not
prevailing shall pay the prevailing party's costs and disbursements, the fees
and expenses of expert witnesses in determining reasonable attorney fees
pursuant to ORCP 68, and such sums as the court may determine to be reasonable
for the prevailing party's attorney fees connected with the trial and any appeal
and by petition for review thereof.
31.16.3 DEFINITIONS. For purposes of this Lease, the term attorney
fees includes all charges of the prevailing party's attorneys and their staff
(including without limitation legal assistants, paralegals, word processing, and
other support personnel) and any post-petition fees in a bankruptcy court. For
purposes of this Lease, the term fees and expenses includes but is not limited
to long-distance telephone charges; expenses of facsimile transmission; expenses
for postage (including costs of registered or certified mail and return
receipts), express mail, or parcel delivery; mileage and all deposition charges,
including but not limited to court reporters' charges, appearance fees, and all
costs of transcription; and costs incurred in searching records and obtaining
reports.
32 -- LEASE AGREEMENT
<PAGE>
31.17 EFFECT OF FAILURE TO CONSENT: The parties acknowledge that the
obligation of good faith and fair dealing generally applies to this Lease
requiring each party to act reasonably except to the extent explicitly and
specifically provided otherwise in this Lease. If either party unreasonably
withholds or conditions a requested consent or demands payment of an
unreasonable sum, the other party shall not be entitled to any damages for the
unreasonableness, it being intended that the sole remedy shall be to proceed as
if the unreasonable party had responded reasonably.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease as of
the date and year first above written.
LANDLORD TENANT
TIGARD TRIANGLE I, LLC ORCAD, INC.
By: By:
------------------------- -------------------------
Title: Title:
---------------------- ----------------------
Date: Date:
----------------------- -----------------------
33 -- LEASE AGREEMENT
<PAGE>
EXHIBIT A.
LEASE AGREEMENT
Legal Description for Land
EXHIBIT A, 1 - Legal Description for Land
<PAGE>
EXHIBIT B.
LEASE AGREEMENT
Floor Plan for the Building
EXHIBIT B, 1 - Floor Plan for the Building
<PAGE>
EXHIBIT C.
WORK AGREEMENT
SECTION 1 TENANT IMPROVEMENTS PROVIDED BY LANDLORD:
- --------- -----------------------------------------
Landlord shall construct and provide an approximately 121,000 rentable square
foot, floors one through five, five-story office building shell with one level
of storage/fitness center space on a lower level of approximately 10,000 square
feet. Landlord agrees to provide the following building improvements (the
"Landlord Improvements") in the base building office shell (excluding storage
and fitness center space unless otherwise indicated below) in accordance with
the final shell plans and specifications (the "Shell Plan") which shall be based
upon the Building General Description attached as Annex A to this Work
Agreement, which may be further amended; however, no material changes shall be
made without Tenant's prior written approval, which approval shall not be
unreasonably withheld, conditioned or delayed.
1.1 All exterior doors;
1.2 One (1) each of men's and women's restrooms located on each floor
shall be finished as follows: 2 porcelain water closets, 2 porcelain urinals,
and 2 porcelain sink fixtures in each men's restroom; and 3 porcelain water
closets and 2 porcelain sink fixtures in each women's restroom, plus 1 water
fountain on each floor. Each restroom shall include ceramic floor tiles and 4"
ceramic tile wet walls to 6' installed; all other wall surfaces to be painted
gypboard or gypboard with vinyl wall covering; ceilings to be suspended
acoustical ceiling tiles. Restrooms shall comply with applicable ADA
requirements as of the Date of Lease Execution.
1.3 Telephone and janitorial closets, one each per floor;
1.4 First floor main lobby including "monument type" stair to the second
floor complete with all Class A finishes installed therein;
1.5 Second, third, fourth, and fifth floor lobbies ready for tenant
finishes with sheetrock installed and taped but no other finishes, except for
multi-tenant floors which shall have building standard lobby finishes;
1.6 All exterior walls furred and insulated;
1.7 Building electrical service is sized at 2400 amps at 480/277 volts and
is distributed to the main distribution panel located in the electrical room in
the building sized to provide service to Tenant based on one 20 amp circuit for
five employees per 1,000 rentable square feet. Electrical service is
distributed through the building via a 1600 amp vertical bus to electrical rooms
located on each floor. Electrical rooms on each floor shall be equipped with
one 200 amp 480/277 volt panel, one 75 kva transformer, and one two-session 200
amp 120/208 volt panel. Electrical power will be provided to the elevators,
HVAC system as provided in Section 1.8 herein, lighting at all common areas,
including restrooms and two exit stairwells, exterior building and site lighting
including surface parking areas as required by applicable building codes, but
excluding the lower level fitness center;
1.8 Building heating ventilating and air conditioning system (HVAC)
consisting of 250 ton variable air volume (VAV) rooftop units, and building
standard quantity VAV boxes installed
EXHIBIT C, 1 - Work Agreement
<PAGE>
on each floor. This system shall be installed to and including the VAV terminal
units and include a direct digital control system with basic programming and
room sensors. Downstream ductwork and customization of control system and
programming shall be excluded. The system shall be designed to accommodate load
calculations based on 150 square feet per person with winter design
temperatures -outside 10 degrees Fahrenheit/inside 75 degrees Fahrenheit, summer
design temperatures - outside 95 degrees Fahrenheit/inside 75 degrees
Fahrenheit, and outside air ventilation at 20 cfm/person based on occupancy of
150 square feet per person. Design basis for VAV zones include interior zones at
1/1500 square feet average and exterior zones at 1/700 square feet average;
1.9 2 x 4 suspended acoustical ceiling grid installed;
1.10 Wet fire sprinkler system installed with plugged tees for future
downheads and smoke detection;
1.11 Building standard 2 x 4 second look tegular ceiling tiles in building
standard quantities, purchased and inventoried, uninstalled on the floor;
1.12 Light fixtures to include building standard quantity (based upon 1
fixture per each 100 square feet) 2 x 4, 3 lamp, 18 cell parabolic light
fixtures with single electronic ballast and T-8 lamps which shall be purchased
and inventoried on the floor slab, uninstalled;
1.13 Traffic impact fees included in the building shell, but excluding
system development charges and traffic impact fees attributable to the lower
level fitness center;
1.14 Three (3) elevators consisting of two (2) 3,000 lbs., and one (1)
3,500 lbs. traction elevators shall be installed. Elevator cab finishes shall
be of Class A office standards.
1.15 Storage space improvements by Landlord shall include freeze
protection, code required ventilation, code required fluorescent strip tube
lighting, 1 electrical outlet per 200 square feet, 1 light switch per 1,000
square feet, and construction of common area corridors on the lower level. All
additional improvements on the lower level for Tenant's fitness center will be
at Tenant's expense.
1.16 Electronic cardkey access security system installed on all building
exterior doors and elevators.
1.17 Site modifications to accommodate a basketball and volleyball court
combination (non-regulation size, approximately 30' x 60' in size). All above
ground improvements including at grade surfaces and equipment shall be paid by
Tenant per Section 2. The space to be occupied by these improvements shall be
deducted from Tenant's parking allowance in the Basic Lease Information.
SECTION 2 ADDITIONAL TENANT IMPROVEMENTS AT TENANT'S EXPENSE:
- --------- ---------------------------------------------------
All other improvements required or requested by Tenant, including but not
limited to, those related to the interior improvements within the Premises
(including costs for all signage, permits, governmental fees, and architectural
and engineering fees), (the "Additional Improvements"), which are not listed in
Section 1 shall be constructed by Landlord and paid for as follows: Tenant
shall pay the costs and expenses of the Additional Improvements to the extent
not covered by the Tenant Improvement Allowance described in Section 3 below.
Tenant payments for Additional
EXHIBIT C, 2 - Work Agreement
<PAGE>
Improvements shall be paid within fifteen (15) days of receipt of invoice from
Landlord as follows: (a) 20% prior to the commencement of construction of the
building, (b) 40% within five (5) months after commencement of construction of
the building, and (c) 40% within ten (10) days of the Commencement Date, except
for reimbursement of architect and consultant fees over and above the $2.00 per
square foot space planning allowance and deposits or prepayments required for
specially ordered items, which shall be reimbursed by Tenant on a monthly basis.
Contractor's profit and overhead for the initial improvements constructed by
Landlord shall not exceed 4.5%, general conditions shall not exceed 5%, and
insurance shall not exceed .5%. Notwithstanding the foregoing, Tenant shall have
the right, upon notice to Landlord and in accordance with Section 7, hereof, to
construct removable office type furniture or cabinetry or to install low voltage
wiring to be paid for by Tenant per Section 3.2. Tenant shall also have the
right to select an independent vendor for its phone and data work and the
fitness center in the lower level, separate from tenant improvement work or any
work performed by Landlord, but subject to the restrictions of section 7.1. If
Tenant elects to so proceed, Tenant shall indemnify and hold Landlord completely
free and harmless from all damages, claims or actions arising from or claimed by
reason of Tenant's or its contractor's work in the Building and shall not
interfere with work of Landlord's general contractor.
SECTION 3 TENANT IMPROVEMENT ALLOWANCES PROVIDED BY LANDLORD:
- --------- ---------------------------------------------------
3.1 Allowances: Landlord agrees to provide an allowance equal to $22.00
per each rentable square foot leased by Tenant, excluding storage space and the
fitness center, of which $20 is the for tenant improvements including, but not
limited to, permits and governmental fees, and all costs of construction as
determined by Landlord's General Contractor, (hereafter the "Project
Contractor") pursuant to Section 4.3 herein, and $2.00 is for space planning and
related consultants (hereafter the "Tenant Improvement Allowance") for all costs
associated with the design and construction of Additional Improvements.
3.2 Application: Each dollar allowance may be applied to any Additional
Improvement item. Tenant may apply up to $1.00 per square foot of any unused
Tenant Improvement Allowance not used to the cost for data, telecom, and low
voltage wiring. Any amount of Tenant Improvement Allowance not used shall be
applied to a credit against future Rent payable.
3.3 Storage Space: There shall be no tenant improvement allowance for any
leased storage space or the fitness center.
SECTION 4 DESIGN OF ADDITIONAL IMPROVEMENTS:
- --------- ----------------------------------
4.1 CDP Preparation: Tenant and/or its design consultants, (the "Tenant's
Architect"), shall prepare a construction document package (hereafter the "CDP")
consisting of a detailed floor plan and Tenant's supplemental specifications in
accordance with Section 4.1.1 herein. By March 16, 1998, Landlord will provide
Tenant with each of the following in a form sufficient to prepare the CDP: site
plan, floor plans, base shell building mechanical and electrical plans, exterior
elevations, sections, and window details. The CDP shall be completed and
submitted to Landlord for Landlord's approval pursuant to this Section 4 by May
4, 1998.
4.1.1 The CDP shall depict all Additional Improvements to the
Premises and shall include all construction information, which shall be in
sufficient detail to obtain any and all required building permits and for the
Project Contractor to use for bidding and construction purposes, which shall
include, but not be limited to plans, specifications, information and schematics
for:
EXHIBIT C, 3 - Work Agreement
<PAGE>
4.1.2 All electrical requirements, including but not limited to
locations and specifications of all equipment requiring electrical service.
Landlord and Tenant agree that locations and specifications for electrical
receptacles, outlets and Tenant's electrical equipment shall be included with
the CDP.
4.1.3 Any special mechanical system requirements including
specifications for any equipment requiring plumbing or mechanical systems.
Landlord and Tenant agree that the design of the mechanical system shall be
included with the CDP.
4.1.4 Any special engineering design requirements including areas, as
specified by Tenant pursuant to this Work Agreement, subject to above-normal
load capacities to accommodate heavy equipment or other weights exceeding the
design capacity of the slab of 70 pounds per square foot (50 pounds per square
foot live load and a 20 pound per square foot partition load) or any
concentrated load in excess of 2000 pounds, or other areas requiring special
capacities, openings or other considerations affecting the structural framework
of the Building.
4.1.5 All interior finish items, treatments, and build-outs to the
Premises including but not limited to electrical, mechanical, millwork, carpet,
paint, wall finishes, ceiling treatments, and lighting.
4.1.6 All specifications for voice, data systems, any Tenant security
system and furniture including locations and specifications for telephone and
computer system equipment. Landlord and Tenant agree that the final design,
including specific locations for voice and data receptacles, outlets and
Tenant's equipment shall be completed by Tenant and submitted on the same date
as the CDP.
4.2 CDP Approval: Submission of the CDP to Landlord shall constitute
Tenant's approval of such for bidding and permitting purposes, subject to any
additions or deletions requested by Tenant, and also subject to Landlord's
approval. Landlord shall approve or disapprove, with clearly identified and
reasonable objections, the CDP in writing within five (5) business days after
receiving the CDP from Tenant. The CDP must be approved by Landlord before
Landlord will proceed to obtain building permits, commence bidding the CDP, or
commence construction of the Additional Improvements.
4.3 CDP Statement: Within twenty-one (21) business days following
approval of the CDP by Landlord, Landlord shall provide Tenant a statement (the
"Statement") of the costs, as determined by Landlord, of the Additional
Improvements as depicted in the approved CDP, including, but not limited to, all
space planning, architectural and engineering fees, permits and governmental
fees, and all construction costs as determined by Landlord and the Project
Contractor and that portion of the costs, if any, for which Tenant will be
responsible under the terms of this Work Agreement, but excluding those costs
paid for directly by Tenant. All costs will be available to Tenant on an "open
book" basis for Tenant's review. The Statement must be approved by Tenant, in
writing, within five (5) business days of receipt from Landlord, subject to any
additions or deletions requested by Tenant, which Tenant shall have the right to
make, before the Landlord will commence construction of the Additional
Improvements. Unless Tenant approves of the Statement in writing within five
(5) days of its delivery, the Statement will be deemed disapproved by Tenant
which, in the case of a Tenant disapproval, shall be considered a Tenant Delay
pursuant to Section 8. Any delay in completion caused by Tenant resulting from
delay of CDP preparation, Tenant's approval of the CDP Statement, or changes to
the CDP or CDP Statement and/or resulting permitting delays resulting from any
of the foregoing beyond June 22, 1998, shall be deemed a
EXHIBIT C, 4 - Work Agreement
<PAGE>
Tenant Caused Delay as defined in Section 8 herein.
SECTION 5 CONSTRUCTION:
- --------- -------------
5.1 Authorization to Proceed: Tenant's submission of the CDP and Tenant's
written approval of the CDP Statement shall constitute Tenant's authorization to
complete the Premises in accordance with the CDP. In the absence of such
written authorization, Landlord shall not be obligated to commence work on the
Additional Improvements on or in the Premises. Landlord shall complete the
construction of the Additional Improvements as soon as reasonably possible given
the overall construction schedule for the Premises and the Project after the
approval of the CDP and the CDP statement is given by the Tenant.
5.2 Interior Finish Items: Selection of any interior finishes, such as
wall paint colors, wall coverings, fixtures, carpet and any or all other
interior finish items required by Tenant in the design and construction of the
Additional Improvements shall be made in writing within ten (10) business days
of notice from Landlord requiring that such selections shall be made. If the
cost of the selected finish items will exceed the original estimated cost for
such item in the Statement, Landlord will advise Tenant of the increased cost
and Tenant will have five (5) business days to provide written approval of such
increased cost or requested changes therein.
5.3 Completion: Landlord's contractor shall complete Tenant Improvements
in accordance with Tenant's approved CDP.
5.4 Commencement Date. The Commencement Date of the Lease shall be as
described in Section 1.3 of the Lease. Tenant shall be allowed by Landlord to
enter upon the Premises approximately 90 days prior to the Commencement Date for
inspection, and preparation for installation of Tenant's phone, data and other
long lead items, and for installation of furniture, fixtures, and equipment
("FF&E") and provided for in Section 7 herein. Tenant will make final
electrical connections to Tenant's FF&E at Tenant's expense. Following
substantial completion, Project Contractor shall complete punchlist items and
Tenant shall make final electrical and mechanical connections as may be required
for the installation of Tenant's FF&E. Any delays in completion resulting from
Tenant or Tenant's vendors installations of FF&E shall be a Tenant Caused Delay
and at Tenant's sole cost pursuant to Section 8 herein. Tenant's access to the
Premises for installation of low-voltage systems or FF&E prior to the
Commencement Date shall be suspended in the event said access shall interfere
with completion of the Premises by Landlord. A Certificate of Substantial
Completion shall not be conditioned upon issuance of a temporary occupancy
permit, if such a permit is unavailable, in the determination of the Project
Architect, solely because of exposed wiring or other conditions caused or
required by Tenant's installation of Tenant's FF&E on any other Tenant-caused
delays.
5.5 Acceptance of Premises: Within two (2) business days following notice
from Landlord to Tenant indicating substantial completion, and, at Landlord's
election, before Tenant's installation of FF&E and/or occupancy, Landlord and
Tenant shall conduct a joint inspection of the Premises during which they shall
develop a mutually agreeable punchlist of items to be completed by Landlord
following issuance of a Certificate of Substantial Completion by the Project
Architect. Tenant's installation of FF&E or occupancy of the Premises, or if
Tenant does not install FF&E or occupy, then five (5) days following issuance of
such Certificate shall be deemed to constitute Tenant's acceptance of the
Premises and acknowledgment by Tenant that Landlord has fully complied with its
obligations hereunder to construct and deliver the Premises to Tenant, except
for the punchlist items, which shall be completed by Landlord within a
reasonable time thereafter with Landlord using diligent efforts to complete the
punchlist items. Landlord shall have the right to
EXHIBIT C, 5 - Work Agreement
<PAGE>
enter the Premises to complete or repair any such punchlist items and entry by
Landlord, its agents, servants, employees or contractors for such purpose shall
not constitute an actual or construction eviction, in whole or in part, or
entitle Tenant to any abatement or diminution of rent or relieve Tenant of any
of its obligations under this Lease, or impose any liability upon Landlord or
its agents, servants, employees or contractors, so long as the punchlist items
do not prevent Tenant from conducting its business. Landlord shall advise Tenant
in advance of its punchlist work schedule.
5.5.1 Resolution of Disputes: The opinion in writing of the Project
Architect shall be binding on both Landlord and Tenant respecting all matters of
dispute regarding the work of Landlord and Tenant, including the state of
completion and whether or not work is completed in a good and workmanlike
manner. Any dispute regarding the existence of an alleged Tenant Caused Delay
or its impact on substantial completion of the Building and Tenant Improvements
will be resolved in the following manner:
5.5.1.1 The dispute will first be submitted in writing to the
Project Architect for a proposed resolution, which will be rendered within
10 business days of request by either party.
5.5.1.2 Should either party object to the proposed resolution from
the Project Architect, the objecting party will submit a list of two
architects with commercial office construction experience to the other
party for selection, within 3 business days, of an independent architect to
render a decision regarding the disputed Tenant Caused Delay issue. Each
party shall have ten business days after selection of the independent
architect to submit written materials regarding the matter in dispute, and
each party shall then have three business days to respond in writing. Based
upon the information so submitted, and any investigation the independent
architect deems necessary, the independent architect shall render a
decision regarding the disputed Tenant Caused Delay issue, which decision
shall be final and binding on both Landlord and Tenant. The non-prevailing
party in any such dispute will be responsible for the fees payable to the
independent architect relating to the dispute, not to exceed $2500. The
independent architect shall have no authority to assess monetary damages,
if any, which may be claimed as a result of any Tenant Caused Delay.
5.6 SUMMARY OF THE SCHEDULE. Attached as Annex B to this Exhibit C is a
chart summarizing the timing of events regarding this Work Agreement. In the
event of any conflict between the provisions of this Work Agreement and the
provisions of Annex B, the terms of this Work Agreement shall control.
SECTION 6 FIELD CHANGE ORDERS:
- --------- --------------------
6.1 Change Order Procedure: If Tenant shall request any change in the
Tenant approved CDP as specified in Section 4.2 herein or the interior finish
items selected pursuant to Section 5.2 herein, Tenant shall cause the Tenant's
Architect to prepare plans and specifications for such and a proposed field
change request ("FCR") as soon as reasonably possible thereafter. Upon receipt,
Landlord shall approve (approval not to be unreasonably withheld) or disapprove
said FCR within five (5) business days, and if approved, shall promptly and
diligently prepare and deliver a proposed change estimate ("CE") which shall
set forth the estimated Tenant Caused Delay, if any, and the estimated cost of
the changes, excluding those paid directly by Tenant, but including and not
limited to construction costs, architectural fees, any related consultant's fees
or costs, permit or other fees, which cost shall be added to or deleted from, as
the case may be, the Statement as specified in Section 4.3 herein, and paid as
provided in Section 2 herein, however, Landlord shall
EXHIBIT C, 6 - Work Agreement
<PAGE>
charge an administrative fee for said CE equal to 5% of the cost related to the
FCR. Tenant shall have five (5) business days after receipt to approve the CE in
writing. If the CE is approved later than the time specified, it shall
constitute a Tenant Caused Delay if it causes a delay in delivery of the
Premises by the Scheduled Commencement Date. The proposed CE shall be effective
only when signed by both the Landlord and the Tenant. Landlord shall not be
obligated to proceed with any work which would be affected by a proposed CE
until it is effective.
6.2 Tenant Responsibilities: Even if Tenant fails to approve the proposed
CE, Tenant shall be responsible for the cost of preparing any plans and
specifications for the proposed CE. The actual cost, including design and
construction, of any CE shall be either charged against Tenant's Tenant
Improvement Allowance pursuant to Section 3, or in the event said Tenant
Improvement Allowance has been exceeded, paid by Tenant within fifteen (15) days
of receipt of invoice from Landlord.
SECTION 7 IMPROVEMENTS CONSTRUCTED BY TENANT:
- --------- -----------------------------------
If any work is to be performed in addition to or concurrently with the
Additional Improvements on or about the Premises by Tenant or Tenant's
contractors or vendors, then the following shall apply:
7.1 Landlord's Approval: Such work shall not proceed until Landlord's
written approval, not to be unreasonably withheld or delayed, has been provided
for each of the following items: (a) Tenant's contractor; (b) public liability
and property damage insurance carried by Tenant or its contractor; and (c)
schematic plans and specifications for such work. The detailed construction
plans and specifications shall be prepared at Tenant's expense based upon the
schematic plans and specifications. Landlord shall provide its approval or
disapproval within ten (10) business days of Tenant providing Landlord written
request of the work and the above items. All such work shall be done in strict
conformity with such detailed construction plans and specifications (subject to
field change orders prepared and approved in the manner specified in Section 6
above). Upon completion, Tenant shall provide Landlord a full set of as-built
construction documents depicting the improvements as they are actually built.
Any work requiring modifications to structural, plumbing, mechanical or
electrical systems shall be completed by the Project Contractor or such other
contractors or subcontractors as may be selected by Landlord.
7.2 Permits: All work shall be done in conformity with a valid building
permit (obtained at Tenant's expense), a copy of which shall be furnished to
Landlord before such work is commenced, and in any case, all such work shall be
performed in accordance with all applicable governmental regulations at Tenant's
sole expense. Notwithstanding any failure by Landlord to object to any such
work, Landlord shall have no responsibility for Tenant's failure to meet all
applicable regulations regarding the design, work, or installation of Tenant
installed improvements or usage thereof.
7.3 Coordination: All work by Tenant or Tenant's contractor shall be
scheduled through Landlord. Tenant or Tenant's contractor shall arrange for
necessary utility, hoisting and elevator service with Landlord or Project
Contractor and shall pay such reasonable charges for such services as may be
charged by Landlord or Project Contractor. Landlord shall not be responsible
for delays or additional costs, if any, caused by Tenant's installations which
shall be deemed Tenant Caused Delays, as specified in Section 8 herein.
Tenant's work shall not interfere with or disturb any of the tenants in the
building.
7.4 Manner of Entry: Tenant's entry to the Premises for any purpose,
including without limitation, inspection or performance of Tenant construction
by Tenant's agents, prior to the
EXHIBIT C, 7 - Work Agreement
<PAGE>
Commencement Date as specified in the Basic Lease Information shall be at such
times as are approved by Landlord and subject to all the terms and conditions of
the lease, except the payment of Rent. Tenant's entry shall mean entry by
Tenant, its officers, contractors, licensees, agents, servants, employees,
guests, invitees, or visitors. Landlord shall not be responsible for delays or
additional costs, if any, caused by Tenant's installations which shall be deemed
Tenant Caused Delays pursuant to Section 8 herein.
7.5 Faulty Work: Following written notice from Landlord regarding faulty
work, Tenant shall promptly and diligently repair such work so as not to impede
completion of the Building. If Tenant fails to do so, Landlord may make such
corrections and Tenant shall promptly reimburse Landlord upon demand for any
extra expense incurred by the Landlord by reason of faulty work done by Tenant
or its contractors or by reason of any delays caused by such work, or by reason
of inadequate cleanup.
7.6 Performance of the work. All such work shall be scheduled through
Landlord and shall be performed in a manner and at times which do not impede or
delay any work on the Premises being performed by Project Contractor. Landlord
shall not be responsible for delays in completion or costs resulting from
Tenant's failure to comply with these terms which shall be deemed a Tenant
Caused Delay pursuant to Section 8 herein.
SECTION 8 TENANT CAUSED DELAYS:
- --------- ---------------------
8.1 Delays in completion of the Building, Tenant Improvements or
Additional Improvements by Landlord or Tenant caused by Tenant including, but
not limited to any of the following, shall constitute delays caused by Tenant
("Tenant Caused Delays"):
8.1.1 Tenant's failure to comply with any timelines or to provide
approvals or information as provided herein;
8.1.2 Delays in delivery of non-building standard materials requiring
long lead times. Landlord will identify any long lead time items when and as
discovered by Landlord and allow Tenant to make substitutions;
8.1.3 Tenant's failure to timely select and approve interior finish
items when they cause delay in the delivery of the Premises by the Scheduled
Commencement Date;
8.1.4 Tenant's failure to timely inspect the Premises and develop a
punchlist of items to be completed by Landlord;
8.1.5 Tenant's FCR's if they delay delivery of the Premises by the
Scheduled Commencement Date;
8.1.6 Improvements constructed by Tenant if they delay delivery of
the Premises by the Scheduled Commencement Date;
8.1.7 Installation of furnishings, fixtures, equipment or component
parts or wiring associated therewith if it delays delivery of the Premises by
the Scheduled Commencement Date;
8.1.8 Tenant's failure to make timely payment as required in Sections
2 and 6 of this agreement;
EXHIBIT C, 8 - Work Agreement
<PAGE>
8.1.9 Tenant's failure to provide the CDP as provided in Section 4,
any delays resulting from inaccurate or incomplete construction information
and/or specifications in the CDP;
8.1.10 Tenant's failure to comply with any term, provision or
agreement hereunder when they cause delay in the delivery of the Premises by the
Scheduled Commencement Date. Tenant Caused Delays shall not result in the
abatement of Rent or delay the Scheduled Commencement Date. Tenant shall be
responsible for all additional costs, including without limitation Tenant's
Architect and Tenant's Contractor fees, resulting from conduct described in this
Section 8 and shall be charged pursuant to Section 2; and
8.2 In the event of Tenant Caused Delay, Landlord shall notify Tenant in
writing within five (5) business days after becoming aware of a matter which
Landlord deems could result in a Tenant Caused Delay. Landlord and Tenant will
each use reasonable efforts to mitigate the effects of any delay. Each Landlord
notice of delay to Tenant under this section will include Landlord's good-faith
estimate of the delay in the Commencement Date which will be attributable to the
event identified in such notice. In the event of a change in Landlord's
estimate of the resulting delay, Landlord will provide Tenant with an amended
notice of delay reflecting the revised estimate of delay in the Commencement
Date. Unless Tenant objects in writing within five business days of delivery of
Landlord's notice of delay (including any amended notice of delay), Tenant shall
have conclusively accepted the amount of the Tenant Caused Delay estimated in
such notice, to the extent such delay actually occurs. Should Tenant object in
writing to the estimated delay in any notice from Landlord, either party may
submit the dispute for determination in accordance with Section 5.5.1 of this
Exhibit C.
SECTION 9 GENERAL CONDITIONS:
- --------- -------------------
9.1 Remedies: If the Tenant causes any delay (as determined pursuant to
Section 8 above) in the delivery of the Premises beyond the Scheduled
Commencement Date pursuant to the Lease, then Tenant's obligation to pay rent
shall commence on the Scheduled Commencement Date, as extended under the Lease
for delays other than Tenant Caused Delays. Notwithstanding any Tenant Caused
Delays, Landlord shall be obligated to deliver finished space ready for
occupancy as soon as practically possible, so long as Tenant complies with its
obligations under this Work Agreement. Except for requiring payment of rent as
provided in this Exhibit C and the Lease, Landlord shall have no claim for
consequential damages arising from the first thirty days' delay in completion of
the Building or Premises which result from Tenant Caused Delays. Except for
this limitation, Landlord shall have all remedies available under applicable law
for any provable damages arising from Tenant Caused Delays which delay
completion of the Building or Premises.
9.2 Indemnity: Tenant shall indemnify and hold harmless Landlord, Project
Architect and Project Contractor from and against any and all claims, losses,
liabilities, and expenses (including without limitation attorneys' fees) arising
out of or in any way related to the activities of Tenant's contractors (and any
subcontractors) in the Premises or on the Property.
9.3 Interest: Interest shall accrue at the rate of 12% per annum on all
balances which remain due from Tenant to Landlord after the required date for
payment.
9.4 Construction Fees: Landlord will not directly or indirectly charge
Tenant any fees over and above the General Contractor's fees and costs related
to the construction of the initial Additional Improvements pursuant to the
approved CDP.
SECTION 10 AUTHORIZED REPRESENTATIVES
- ---------- --------------------------
EXHIBIT C, 9 - Work Agreement
<PAGE>
Graham Sheldon, Jim Snell, and Mike Bosworth are authorized by Tenant to make
changes, authorize FCR's, and otherwise make binding commitments for and on
behalf of Tenant as it relates to the Additional Improvements. Written
authorization by any one of the above representatives will indicate Tenant's
binding approval. Landlords authorized representatives shall be Kelly Saito and
Mark Edlen, who are authorized by Landlord to make changes, authorize FCR's, and
otherwise make binding commitments for and on behalf of Tenant as it relates to
the Additional Improvements. Written authorization by any one of the above
representatives will indicate Landlord's binding approval.
EXHIBIT C, 10 - Work Agreement
<PAGE>
ANNEX A TO WORK AGREEMENT
BUILDING III
TRIANGLE CORPORATE PARK
GENERAL DESCRIPTION
1. EXTERIOR BUILDING DESIGN: The building will be constructed as provided in
the Lease generally in conformance with Exhibit D of the Lease, which depicts
the rendering of the building. The quality will be equal to or better than the
following Kruse Way projects: 4004 Kruse Way Place, Kruse Woods III, and 4949
Meadows.
The exterior design elements will include:
a. An exterior facade with the main theme to be in an autumn-colored
brick to compliment the darker colors in Building I and II; a glass
facade with the color of the glass to be substantially similar to that
in Buildings I and II which has a light green tint; potential spandrel
glass elements which are depicted in the rendering as being located
within, above or below the vision glass, or in substitution for
spandrel glass, additional brick of the same color as the rest of the
building; and at the first level and a portion of the second level,
either painted or architectural pre-cast or site-cast elements which
would be of a color to match with the base of Buildings I and II.
b. There will be a major feature that is a curved element located in the
center of each the east and west facades composed substantially of
glass.
c. There will be a loading area at the lower level, the basement, which
is designed to serve as the loading area for the building as well as
OrCAD's shipping and receiving. This area will be served by a single
two-man door, as depicted on the site plan.
2. LOBBY DESIGN: The lobby design will be completed substantially as shown on
Lease Exhibit B which shows the floor plan for the first and second floors of
the building. The basic concepts of the design are as follows:
a. The physical dimensions of the lobby itself will be as shown in Lease
Exhibit B2, provided a portion of the covered portico at the entry to
the lobby may be enclosed.
b. The flooring will consist of approximately a 12" stone tile border
with an inlay of high quality carpet (not to be an oriental carpet
inlay).
c. There will be specialty lighting of a quality equal to or greater than
that in 4004 Kruse Way Place, however, the design of the lighting will
be more suited to the overall tone of the lobby itself.
d. There will be wood paneling and accents in quantities substantially
similar to that of 4004 Kruse way Place, except that the paneling
itself will be a lighter tone (most likely cherry), with color similar
to that at the Pacific Gas Transmission building lobby.
e. OrCAD will be responsible for the completion of the second floor lobby
and its design, materials, and resulting aesthetics shall be
substantially similar to that of the ground floor space as described
above.
EXHIBIT C - Annex A, 1
<PAGE>
ANNEX B TO WORK AGREEMENT
ORCAD/TRIANGLE PARK LEASE
WORK LETTER TIMING CHART
PLAN PREPARATION
<TABLE>
<CAPTION>
RESPONSIBLE
REFERENCE DATE DUE PARTY
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Site plan, floor plans, base shell building 3/16/98 Landlord
mechanical and electrical plans, exterior
elevations, sections, and window details.
2. Preparation of Construction Document Package (CDP). 5/ 4/98 Tenant
3. Approve or disapprove the CDP. Five (5) business days after Landlord
receiving CDP from Tenant.
4. Provide Tenant a statement of the costs of Twenty-one (21) business days Landlord
Additional Improvements as depicted in the following Landlord approved CDP.
approved CDP.
5. Statement of costs must be approved in writing. Five (5) business days after Tenant
receipt from Landlord.
</TABLE>
INTERIOR FINISH SELECTION
<TABLE>
<CAPTION>
RESPONSIBLE
REFERENCE DATE DUE PARTY
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Selection of interior finishes in writing. Ten (10) business days after Tenant
Landlord reasonably requests
selection be made.
2. If cost of selected finish items exceeds the Five (5) business days after Tenant
original estimated cost for such items, Tenant Landlord advises Tenant of the
will provide Landlord with written approval or increased cost. Landlord to
request changes therein. promptly and diligently determine
costs.
</TABLE>
EXHIBIT C - Annex B, 1
<PAGE>
INSPECTION AND COMPLETION
<TABLE>
<CAPTION>
RESPONSIBLE
REFERENCE DATE DUE PARTY
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. Tenant may enter premises for inspection and Ninety (90) days prior to Tenant
preparation for installation of phone, data, Commencement Date
furniture, fixtures and equipment (FF&E)
2. Landlord notice that Commencement Date in Landlord
approximately sixty (60) days
3. Joint inspection of Premises to develop a mutually Two (2) business days following Tenant and
agreeable punchlist of items to be completed by notice from Landlord to Tenant Landlord
Landlord following a Certificate of Substantial indicating substantial completion,
Completion by the Project Architect but in any event prior to Tenant
taking possession
</TABLE>
FIELD CHANGE REQUESTS
<TABLE>
<CAPTION>
RESPONSIBLE
REFERENCE DATE DUE PARTY
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. If Tenant shall request any change to Tenant As soon as reasonably possible. Tenant
approved CDP or interior finish items, Tenant
shall cause Tenant's Architect to prepare biddable
and permitable plans and specifications for such
and a field change request (FCR).
2. Landlord shall approve or disapprove request for Five (5) business days after Landlord
changes from Tenant of plans, specifications receipt from Tenant.
and/or FCR.
3. If request is approved by Landlord, Landlord shall Landlord
prepare a proposed change estimate (CE).
4. Approve the proposed CE in writing Five (5) business days after Tenant
receipt from Landlord.
5. If Tenant disapproves of proposed CE, Tenant shall Thirty (30) days of receipt of Tenant
be responsible for costs of preparing plans and invoice from Landlord, in
specifications for the proposed CE. accordance with Section 2 of
Exhibit C.
</TABLE>
EXHIBIT C - Annex B, 2
<PAGE>
ADDITIONAL IMPROVEMENTS BY TENANT
<TABLE>
<CAPTION>
RESPONSIBLE
REFERENCE DATE DUE PARTY
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1. If any work is to be performed in addition to or Tenant
concurrently with the Additional Improvements by
Tenant or Tenant's contractors or vendors, Tenant
must provide Landlord with written request
including detailed construction plans and
specifications at Tenant expense based upon the
schematic plans and specifications.
2. Landlord must approve or disapprove, in writing, Ten (10) business days of receipt Landlord
Tenant's construction plans and specifications of of request from Tenant.
additional work.
3. In the event of Tenant Caused Delay, Landlord must Five (5) business days after Landlord
notify Tenant, in writing. becoming aware of a matter which
Landlord deems could result in a
Tenant Caused Delay.
</TABLE>
EXHIBIT C - Annex B, 3
<PAGE>
EXHIBIT D.
LEASE AGREEMENT
Plot Plan, Elevation, and Rendering of Building
D, 2 BUILDING III SITE PLAN
D, 3 ELEVATION
D, 4 RENDERING OF BUILDING
EXHIBIT D, 1 - Plot Plan, Elevation, and Rendering of Building
<PAGE>
EXHIBIT E.
LEASE AGREEMENT
Rules and Regulations
1. The rights of each tenant in the entrances, corridors and
elevators servicing the Building are limited to ingress to and egress from such
tenant's Premises for Tenant and its employees, licensees and invitees, and no
tenant shall use, or permit the use of, the entrances, corridors or elevators
for any other purpose. No tenant shall invite to the tenant's Premises, or
permit the visit of, persons in such numbers or under such conditions as to
unreasonably interfere with the use and enjoyment of any of the plazas,
entrances, corridors, elevators and other facilities of the Building by any
other tenants. No tenant shall encumber or obstruct, or permit the encumbrance
or obstruction of any of the sidewalks, plazas, entrances, corridors, elevators,
fire exits or stairways of the Building. Landlord reserves the right to control
and operate the public portions of the Building and the public facilities as
well as facilities furnished for the common use of the tenants, in such manner
as it in its reasonable judgment deems best for the benefit of the tenants
generally.
2. Admission to the Building in certain areas and during certain
hours may be restricted by Landlord by means of access devices such as keys,
entry cards, combination codes and the like. Landlord may require all persons
admitted to or leaving the Building outside of business hours on business days
to provide appropriate identification, use a designated access device and to
comply with all other Building security requirements. Tenant shall be
responsible for all persons to whom it issues an access device or discloses an
access code and shall be liable to Landlord for all acts or omissions of such
persons. Any person whose presence in the Building at any time shall, in the
reasonable judgment of Landlord, be prejudicial to the safety, character or
reputation of the Building or of its tenants may be denied access to the
Building or may be ejected therefrom. During any invasion, riot, public
excitement or other commotion, Landlord may prevent all access to the Building
by closing the doors or otherwise for the safety of the tenants and protection
of property in the Building. Each tenant shall pay Landlord a refundable
deposit in an amount reasonably determined by Landlord from time to time for
each access device issued to a tenant.
3. Smoking is prohibited at all times in all areas of the Building,
including, but not limited to, offices, rest rooms, corridors, stairwells,
lobbies and elevators.
4. No tenant shall obtain or accept for use in its Premises ice,
food, beverages, cleaning or other similar services from any persons reasonably
prohibited in writing from furnishing such services. Such services shall be
furnished only at such hours, and under such reasonable regulations, as may be
fixed by Landlord from time to time.
5. The cost of repairing any damage to the public portions of the
Building, the common areas or the public facilities or to any facilities used in
common with other tenants, caused by a tenant or its employees, agents,
contractors, licensees or invitees, shall be paid by such tenant.
6. No awnings or other projections shall be attached to the outside
walls of the Building. No curtains, blinds, shades or screens, if any, which
are different from the standards adopted by Landlord for the Building shall be
attached to or hung in or used in connection with any exterior window or door of
the Premises of any tenant without the prior written consent of Landlord. All
tenants with Premises visible from one of the lobbies, or any other public
portion of the Building, shall furnish and maintain the Premises in a first-
class manner, utilizing furnishings and other decorations commensurate in
quality and style with the furnishings and decor in the public portions of the
Building.
EXHIBIT E, 1 - Rules and Regulations
<PAGE>
7. No lettering, sign, advertisement, notice or object shall be
displayed in or on the exterior windows or doors, or on the outside of any
tenant's Premises, or at any point inside any tenant's Premises where the same
might be visible outside of such Premises, without the prior written consent of
Landlord which consent may be withheld in Landlord's sole and unfettered
discretion. In the event of the violation of the foregoing by any tenant,
Landlord may remove the same without any liability, and may charge the expense
incurred in such removal to the tenant violating this rule. Interior common
area signs, elevator cab designations, and lettering on doors facing common
areas, if and when approved by Landlord, shall be inscribed, painted or affixed
for each tenant by Landlord at the expense of such tenant, and shall be of a
size, color and style acceptable to Landlord.
8. The windows that reflect or admit light and air into the halls,
passageways or other public places in the Building shall not be covered or
obstructed by any tenant, nor shall any bottles, parcels or other articles be
placed on the window sills.
9. No showcases or other articles shall be put in front of or
affixed to any part of the exterior of the Building, nor placed in the halls,
corridors or vestibules within any common area.
10. No bicycles, vehicles, animals, fish or birds of any kind shall
be brought into or kept in or about the Premises of any tenant or the Building
except in areas designated by Landlord.
11. No noise, including, but not limited to, music or the playing of
musical instruments, recordings, radio or television, which, in the judgment of
Landlord, might disturb other tenants in the Building, shall be made or
permitted by any tenant. Nothing shall be done or permitted in the Premises of
any tenant which would impair or interfere with the use or enjoyment by any
other tenant of any other space in the Building.
12. No tenant, nor any tenant's contractors, employees, agents,
visitors or licensees, shall at any time bring into or keep upon the Premises or
the Building any inflammable, combustible, explosive or otherwise dangerous
fluid, chemical or substance, except any fluids or substances used in the
ordinary course of Tenant's business as part of a use permitted under the Lease.
13. Additional locks or bolts of any kind which shall not be operable
by the Grand Master Key for the Building shall not be placed upon any of the
doors or windows by any tenant, nor shall any changes be made in locks or
mechanisms thereof which shall make such locks inoperable by said Grand Master
Key. Additional keys for a tenant's Premises and rest rooms shall be procured
only from Landlord who may make a reasonable charge therefor. Each tenant
shall, upon the termination of its tenancy, turn over to Landlord all keys of
stores, offices and toilet rooms, either furnished to, or otherwise procured by,
such tenant, and in the event of the loss of any keys furnished by Landlord,
such tenant shall pay to Landlord the cost thereof.
14. All removals, or the carrying in or out of any safes, freight,
furniture, packages, boxes, crates or any other object or matter of any
description must take place during such hours and in such elevators, and in such
manner as Landlord or its agent may determine from time to time. The persons
employed to move safes and other heavy objects shall be reasonably acceptable to
Landlord and, if so required by law, shall hold a Master Rigger's or comparable
license. Arrangements will be made by Landlord with any tenant for moving large
quantities of furniture and equipment into or out of the Building. All labor
and engineering costs incurred by Landlord in connection with any moving
specified in this rule, including a reasonable charge for overhead and profit,
shall be paid by Tenant to Landlord, on demand.
15. Landlord reserves the right to inspect all objects and matter to
be brought into the Building and to exclude from the Building all objects and
matter which violate any of these Rules
EXHIBIT E, 2 - Rules and Regulations
<PAGE>
and Regulations or the Lease of which this Exhibit is a part. Landlord may
require any person leaving the Building with any package or other object or
matter to submit a pass listing such package or object or matter from the tenant
from whose Premises the package or object or matter is being removed, but the
establishment and enlargement of such requirement shall not impose any
responsibility on Landlord for the protection of any tenant against the removal
of property from the Premises of such tenant. Landlord shall in no way be liable
to any tenant for damages or loss arising from the admission, exclusion or
ejection of any person to or from the Premises or the Building under the
provisions of this Rule or of Rule 2 hereof.
16. No tenant shall occupy or permit any portion of its Premises to
be occupied as an office for secretarial or word processing services to third
parties without the prior written consent of Landlord which consent may be
withheld in the sole and unfettered discretion of Landlord. No tenant shall use
its Premises or any part thereof to be used, for manufacturing or the sale at
retail or auction of merchandise, goods or property of any kind or for the
possession, storage, manufacture, or sale of liquor, narcotics, dope, tobacco in
any form, or as a barber, beauty or manicure shop, or as a school.
17. Landlord shall have the right to prohibit any advertising or
identifying sign visible from any common area by any tenant which, in good
faith, Landlord believes will impair the reputation of the Building or its
desirability as a building for others, and upon written notice from Landlord,
such tenant shall refrain from and discontinue such advertising or identifying
sign.
18. Landlord shall have the right to prescribe the weight and
position of safes and other objects of excessive weight, and no safe or other
object whose weight exceeds the lawful load for the area upon which it would
stand shall be brought into or kept upon any tenant's Premises. If, in the
reasonable judgment of Landlord, it is necessary to distribute the concentrated
weight of any heavy object, the work involved in such distribution shall be done
at the expense of the tenant and in such manner as Landlord shall determine.
19. No machinery or mechanical equipment other than ordinary portable
business machines may be installed or operated in any tenant's Premises without
Landlord's prior written consent which consent shall not be unreasonably
withheld, conditioned or delayed, and in no case (even where the same are of a
type so excepted or as so consented to by Landlord) shall any machines or
mechanical equipment be so placed or operated as to disturb other tenants, but
machines and mechanical equipment which may be permitted to be installed and
used in tenant's Premises shall be so equipped, installed and maintained by such
tenant as to prevent any disturbing noise, vibration or electrical or other
interference from being transmitted from such Premises to any other area of the
Building.
20. Landlord, its contractors, and their respective employees, shall
have the right to use, without charge therefor, all light, power and water in
the Premises of any tenant while cleaning or making repairs or alterations in
the Premises of such tenant.
21. No Premises of any tenant shall be used for lodging or sleeping
or for any immoral or illegal purpose.
22. The requirements of tenants will be attended to only upon
application at the office of the Building. Employees of Landlord shall not
perform any work or do anything outside of their regular duties, unless under
special instructions from Landlord.
23. Canvassing, soliciting and peddling in the Building are
prohibited and each tenant shall cooperate to prevent the same.
24. No tenant shall cause or permit any unusual or objectionable
odors to emanate from its Premises which would annoy other tenants or create a
public or private nuisance, except
EXHIBIT E, 3 - Rules and Regulations
<PAGE>
incident to special events approved by Landlord in writing, no cooking shall be
done in the Premises of any tenant except as is expressly permitted in such
tenant's Lease, except that Tenant may use microwave ovens for non-commercial
microwave cooking of food to be consumed on the premises by the tenant's
personnel.
25. Nothing shall be done or permitted in any tenant's Premises, and
nothing shall be brought into or kept in any tenant's Premises, which would
impair or interfere with any of the Building's services or the proper and
economic heating, cleaning or other servicing of the Building or the Premises,
or the use or enjoyment by any other tenant of any other Premises, nor shall
there be installed by any tenant any ventilating, air-conditioning, electrical
or other equipment of any kind which, in the reasonable judgment of Landlord,
might cause any such impairment or interference.
26. No acids, vapors or other materials shall be discharged or
permitted to be discharged into the waste lines, vents or flues of the Building
which may damage them. The water and wash closets and other plumbing fixtures
in or serving any tenant's Premises shall not be used for any purpose other than
the purposes for which they were designed or constructed, and no sweepings,
rubbish, rags, acids or other foreign substances shall be deposited therein.
All damages resulting from any misuse of the fixtures shall be borne by the
tenants who, or whose servants, employees, agents, visitors or licensees shall
have caused the same.
27. All entrance doors in each tenant's Premises shall be left locked
and all windows shall be left closed by the tenant when the tenant's Premises
are not in use. Entrance doors shall not be propped open at any time. Each
tenant, before closing and leaving its Premises at any time, shall turn out all
lights.
28. Hand trucks not equipped with rubber tires and side guards shall
not be used within the Building.
29. The coverings for all windows in each tenant's Premises above the
ground floor shall be lowered and closed as reasonably required because of the
position of the sun, during the operation of the Building air-conditioning
system to cool or ventilate the tenant's Premises.
30. Landlord reserves the right to rescind, alter or waive any rule
or regulation at any time prescribed for the Building when, in its reasonable
judgment, it deems it necessary, desirable or proper for its best interest and
for the best interests of the tenants generally, and no alteration or waiver of
any rule or regulation in favor of one tenant shall operate as an alteration or
waiver in favor of any other tenant. Landlord shall not be responsible to any
tenant for the nonobservance or violation by any other tenant of any of the
rules and regulations at any time prescribed for the Building.
EXHIBIT E, 4 - Rules and Regulations
<PAGE>
EXHIBIT 11.0
ORCAD, INC.
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Basic net income per share for the years ended December 31, 1997, 1996 and
1995 were computed based on the weighted average number of common shares
outstanding. Common shares for the year ended December 31, 1995 include shares
of Series A Preferred Stock that were converted into common shares upon
consummation of OrCAD's initial public offering. To determine diluted net
income per share, equivalent shares of common stock outstanding were included
based on outstanding options using the treasury stock method.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
---------------------
1997 1996 1995
------ ------ -----
<S> <C> <C> <C>
Shares used in basic net income per share........... 6,737 6,190 1,584
------ ------ -----
Series A preferred stock............................ -- -- 2,307
Common stock equivalents............................ 382 526 534
Tax benefit of non-qualified stock options.......... (101) (98) --
------ ------ -----
Shares used in diluted net income per share......... 7,018 6,618 4,425
Net income.......................................... $1,597 $4,202 $ 315
Basic net income per share.......................... $ .24 $ .68 $ .20
====== ====== =====
Diluted net income per share........................ $ .23 $ .63 $ .07
====== ====== =====
</TABLE>
<PAGE>
EXHIBIT 21.0
Subsidiaries of the Registrant:
Intelligent Systems Japan K.K., incorporated under the laws of Japan
Massteck Ltd., incorporated under the laws of the Commonwealth of
Massachusetts
MicroSim Corporation, incorporated under the laws of the State of
California
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
OrCAD, Inc.:
We consent to incorporation by reference in the Registration Statements on
Form S-8 (Nos. 333-04811, 333-15099 and 333-15145) of OrCAD, Inc. of our
reports dated January 27, 1998 relating to the consolidated balance sheets of
OrCAD, Inc. as of December 31, 1997 and 1996, and the related consolidated
statements of operations, stockholders' equity and cash flows and related
financial statement schedule for each of the years in the three-year period
ended December 31, 1997, which reports appear in the December 31, 1997 Annual
Report on Form 10-KSB of OrCAD, Inc.
KMPG PEAT MARWICK LLP
Portland, Oregon
March 30, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 23,620
<SECURITIES> 3,408
<RECEIVABLES> 5,959
<ALLOWANCES> 639
<INVENTORY> 451
<CURRENT-ASSETS> 35,206
<PP&E> 3,987
<DEPRECIATION> 2,107
<TOTAL-ASSETS> 42,772
<CURRENT-LIABILITIES> 6,560
<BONDS> 0
0
0
<COMMON> 68
<OTHER-SE> 36,144
<TOTAL-LIABILITY-AND-EQUITY> 42,772
<SALES> 25,881
<TOTAL-REVENUES> 25,881
<CGS> 3,335
<TOTAL-COSTS> 25,092
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 28
<INTEREST-EXPENSE> 5
<INCOME-PRETAX> 2,284
<INCOME-TAX> 687
<INCOME-CONTINUING> 1,597
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,597
<EPS-PRIMARY> .24
<EPS-DILUTED> .23
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 20,308
<SECURITIES> 8,964
<RECEIVABLES> 3,718
<ALLOWANCES> 637
<INVENTORY> 504
<CURRENT-ASSETS> 33,961
<PP&E> 2,747
<DEPRECIATION> 1,729
<TOTAL-ASSETS> 38,250
<CURRENT-LIABILITIES> 4,316
<BONDS> 0
0
0
<COMMON> 67
<OTHER-SE> 33,867
<TOTAL-LIABILITY-AND-EQUITY> 38,250
<SALES> 20,907
<TOTAL-REVENUES> 20,907
<CGS> 2,498
<TOTAL-COSTS> 16,926
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 215
<INTEREST-EXPENSE> 10
<INCOME-PRETAX> 5,253
<INCOME-TAX> 1,051
<INCOME-CONTINUING> 4,202
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,202
<EPS-PRIMARY> .68
<EPS-DILUTED> .63
</TABLE>
