<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THESECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 30, 1996
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission file number: 0-19807
SYNOPSYS, INC.
- - - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 56-1546236
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 East Middlefield Road
Mountain View, CA 94043
(Address of principal executive offices, including zip code)
Registrant's Telephone No., including area code: (415) 962-5000
-----------------------------
Indicate by check mark whether the registrant 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 has been subject to such filing requirements
for the past 90 days:
Yes X No
----- -----
As of April 19, 1996 there were 39,702,735 shares of the Registrant's Common
Stock outstanding.
1
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SYNOPSYS, INC.
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
<S> <C> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets-
March 31, 1996 and September 30, 1995 3
Condensed Consolidated Statements of Income-
Three months and six months ended
March 31, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows-
Six months ended March 31, 1996 and 1995 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7-10
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SYNOPSYS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
--------- -------------
1996 1995
---- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 90,910 $ 91,193
Short-term investments 134,465 118,791
--------- ---------
Cash and short-term investments 225,375 209,984
--------- ---------
Accounts receivable, net of allowances of $2,947 and $2,813 51,439 42,863
Prepaid expenses, deferred taxes and other 24,853 9,681
--------- ---------
Total current assets 301,667 262,528
--------- ---------
Property and equipment, net 40,590 28,720
Capitalized software development costs, net of accumulated
amortization of $2,274 and $1,680 1,177 1,271
Other assets 5,357 5,052
--------- ---------
Total assets $ 348,791 $ 297,571
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 54,681 $ 48,744
Current portion of long-term debt 12,561 4,061
Income taxes payable 8,010 9,908
Deferred revenue 64,813 52,556
--------- ---------
Total current liabilities 140,065 115,269
--------- ---------
Long-term debt 19,625 --
Stockholders' equity:
Preferred stock, $.01 par value; 2,000,000 shares authorized;
no shares outstanding -- --
Common stock, $.01 par value; 100,000,000 shares
authorized; 39,599,532 and 38,970,504 shares
outstanding 396 390
Additional paid-in capital 133,812 124,322
Retained earnings 55,188 57,838
Cumulative translation adjustment (295) (248)
--------- ---------
Total stockholders' equity 189,101 182,302
--------- ---------
Total liabilities and stockholders' equity $ 348,791 $ 297,571
========= =========
</TABLE>
See accompanying notes
3
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SYNOPSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
MARCH 31, MARCH 31,
--------- ---------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Product $ 56,980 $43,707 $ 110,729 $ 83,716
Service 28,020 20,293 53,271 40,184
-------- ------- --------- --------
Total revenue 85,000 64,000 164,000 123,900
-------- ------- --------- --------
Cost of revenue:
Product 3,930 5,190 7,523 8,380
Service 5,263 3,081 10,004 6,489
-------- ------- --------- --------
Total cost of revenue 9,193 8,271 17,527 14,869
-------- ------- --------- --------
Gross margin 75,807 55,729 146,473 109,031
-------- ------- --------- --------
Operating expenses:
Research and development 20,441 13,505 38,643 26,737
Sales and marketing 32,599 24,632 62,922 48,079
General and administrative 6,467 5,492 12,808 10,415
In-process research and development 39,700 -- 39,700 --
-------- ------- --------- --------
Total operating expenses 99,207 43,629 154,073 85,231
-------- ------- --------- --------
Operating income (loss) (23,400) 12,100 (7,600) 23,800
Other income, net 1,700 1,169 3,550 1,808
-------- ------- --------- --------
Income (loss) before income taxes (21,700) 13,269 (4,050) 25,608
Income tax provision (benefit) (7,400) 4,951 (1,400) 9,484
-------- ------- --------- --------
Net income (loss) $(14,300) $ 8,318 $ (2,650) $ 16,124
======== ======= ========= ========
Earnings (loss) per share $ (.36) $ .21 $ (.07) $ .41
======== ======= ========= ========
Weighted average common shares
and equivalents where dilutive 39,494 40,050 39,360 39,802
</TABLE>
See accompanying notes
4
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SYNOPSYS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS; UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------
MARCH 31,
---------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (2,650) $ 16,124
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 7,727 9,337
Provision for doubtful accounts and sales returns 134 716
Tax benefit associated with stock options 2,000 5,000
Deferred revenue 12,257 8,805
Deferred taxes (14,811) (926)
In-process research and development 39,700 --
Net change in assets and liabilities:
Accounts receivable (8,710) (12,348)
Prepaid expenses and other (361) (28)
Other assets (330) (1,459)
Accounts payable and accrued liabilities 6,237 4,701
Income taxes payable (1,898) 3,442
-------- --------
Net cash provided by operating activities 39,295 33,364
-------- --------
Cash flows from investing activities:
Change in short-term investments (15,674) (40,206)
Purchases of property and equipment (18,978) (9,602)
Purchase of technology (11,375) --
Capitalization of software development costs (500) (500)
-------- --------
Net cash used in
investing activities (46,527) (50,308)
-------- --------
Cash flows from financing activities:
Principal payments on debt obligation (500) --
Proceeds from sale of common stock, net 7,496 7,460
-------- --------
Net cash provided by
financing activities 6,996 7,460
-------- --------
Effect of exchange rate changes on cash (47) 485
Net decrease in cash and cash equivalents (283) (8,999)
Cash and cash equivalents, beginning of period 91,193 51,941
-------- --------
Cash and cash equivalents, end of period $ 90,910 $ 42,942
======== ========
Supplemental Disclosure:
Cash paid during the period for:
Interest $ -- $ --
======== ========
Income taxes $ 12,018 $ 238
======== ========
Non-cash transactions:
Purchase of technology $ 28,500 $ --
======== ========
</TABLE>
See accompanying notes
5
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The unaudited financial information furnished herein reflects all
adjustments, consisting only of normal recurring adjustments which in
the opinion of management are necessary to fairly state the Company's
and its subsidiaries' condensed consolidated financial position, the
results of their operations, and their cash flows for the periods
presented. This report on Form 10-Q should be read in conjunction with
the Company's Financial Report included in the Annual Report to
Stockholders for the year ended September 30, 1995. For financial
reporting purposes, the Company reports on a 13-week quarter and a 52
or 53-week year. For presentation purposes, the consolidated financial
statements refer to the quarter's calendar month end. The consolidated
results of operations for the period ended March 31, 1996 are not
necessarily indicative of the results to be expected for any subsequent
quarter or for the entire fiscal year.
2. Earnings per share is computed using the weighted average number of
common and dilutive common equivalent shares outstanding during the
period. Dilutive common equivalent shares consist of Common Stock
issuable upon exercise of stock options and warrants using the treasury
stock method.
3. On August 14, 1995, the Company announced a two-for-one stock split of
its common stock payable in the form of a stock dividend which was
distributed on September 8, 1995, to holders of record on August 25,
1995. On March 1, 1996, the Company's Amended and Restated Certificate
of Incorporation was amended to increase the number of shares the
Company is authorized to issue from 50,000,000 to 100,000,000 shares.
Fiscal 1995 per share and authorized amounts have been restated to
reflect the stock split and amendment of the Certificate of
Incorporation.
4. On February 1, 1996, the Company and International Business Machines
Corporation ("IBM") entered into a six-year Joint Development and
License Agreement Concerning EDA Software and Related Intellectual
Property (the "Agreement"). Pursuant to the Agreement, the Company
acquired certain in-process research and development technology and a
non-exclusive license to sublicense and to use certain existing IBM
electronic design automation ("EDA") technology and the underlying
intellectual property, and licensed certain of its EDA-related
intellectual property to IBM. In addition, the Company and IBM will
jointly develop new EDA products in the areas of synthesis, test
methodology, design planning and static timing sign-off. The Company
will have sole ownership of synthesis products and the exclusive right
to market test, design planning and static timing products (subject to
certain rights of IBM upon termination of the Agreement). The agreement
calls for the Company to pay IBM $11 million in cash and issue $30
million in notes, which bear interest at 3%, and are payable to IBM
upon the earlier of achievement of scheduled milestones or at maturity
in 2006. The Company will also pay royalties on revenues from the sale
of new products developed pursuant to the Agreement. As a result of the
transaction, the Company incurred an in-process research and
development charge of $39.7 million for the quarter ending March 31,
1996.
5. On May 7, 1996, the Company and Cooper and Chyan Technology, Inc.
(CCT) announced that they have signed agreements to enter into a
strategic relationship. As part of this strategic relationship, the
Company has purchased approximately 9.9 percent of the outstanding
shares of CCT, a developer of routing technology for printed circuit
boards and integrated circuits, for $14.50 per share. In connection
with the equity investment, the Company has been granted certain
rights to maintain its percentage ownership interest in CCT. The cash
investment represents 1,046,250 shares of stock purchased from
corporate officers as well as 160,292 newly issued shares. The
strategic relationship focuses on the development of new tools and
methodologies for designing multi-million gate integrated circuits
that utilize silicon geometries of quarter-micron and below.
6
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SYNOPSYS, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Revenue for the second quarter of fiscal 1996 increased 33% to $85.0 million
from $64.0 million in the second quarter of fiscal 1995. Revenue for the first
six months of fiscal 1996 increased 32% to $164.0 million from $123.9 million
for the comparable period in fiscal 1995. This increase in revenue was primarily
attributable to increased worldwide licensing and sales of the Company's
software and systems products. Product revenue as a percentage of total revenue
was 67% and 68% in the second quarter and first half of fiscal 1996,
respectively, compared to 68% in the second quarter and first half of fiscal
1995.
International revenue as a percentage of total revenue decreased slightly to 52%
in the second quarter of fiscal 1996 from 53% in the second quarter of fiscal
1995. International revenue as a percentage of total revenue decreased to 49%
for the first six months of fiscal 1996 from 51% for the comparable period in
fiscal 1995. This decrease was primarily due to decreased revenue in Japan,
principally attributable to a decline in the value of the yen versus the dollar,
and Europe as a percentage of total revenue in the first half of fiscal 1996.
Cost of revenue as a percentage of total revenue decreased to 11% in the second
quarter and first six months of fiscal 1996, from 13% and 12% in the second
quarter and first half of fiscal 1995, respectively. Cost of revenue includes
personnel and related costs, production costs and amortization of capitalized
software development and purchased software costs. Cost of revenue as a
percentage of total revenue decreased in the second quarter and first half of
fiscal 1996, primarily due to a decrease in amortization expense.
Research and development expenses as a percentage of total revenue increased to
24% in the second quarter of fiscal 1996 from 21% in the second quarter of
fiscal 1995, and increased in absolute dollars to $20.4 million from $13.5
million. Research and development expenses as a percentage of total revenue also
increased to 24% in the first half of fiscal 1996 from 22% in the comparable
period in fiscal 1995, and increased in absolute dollars to $38.6 million from
$26.7 million. Increased research and development expenses reflect the Company's
commitment to invest in product and development and primarily reflect personnel
increases.
Sales and marketing expenses as a percentage of total revenue decreased slightly
to 38% in the second quarter and first six months of fiscal 1996 from 38% and
39% in the second quarter and first six months of fiscal 1995, respectively. In
absolute dollars, sales and marketing expenses increased to $32.6 million in the
second quarter of fiscal 1996 from $24.6 million in the second quarter of fiscal
1995. Sales and marketing expenses increased to $62.9 million in the first half
of fiscal 1996 from $48.1 million in the first half of fiscal 1995. Total sales
and marketing expenses increased as a result of continued expansion of the
Company's worldwide sales and marketing organizations and higher commissions and
bonuses associated with increased revenue.
General and administrative expenses as a percentage of total revenue were 8% in
the second quarter and first six months of fiscal 1996, compared to 9% and 8% of
total revenue in the second quarter and first six months of fiscal 1995,
respectively. In absolute dollars, general and administrative expenses were $6.5
million in the second quarter of fiscal 1996, compared to $5.5 million in the
second quarter of fiscal 1995. For the first half of fiscal 1996, general and
administrative expenses were $12.8 million, compared to $10.4 million for the
first half of fiscal 1995. This increase in total expenses was due principally
to personnel increases and investments in management information and control
systems.
7
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\The Company recorded an income tax benefit of 34% of the loss before income
taxes in the second quarter of fiscal 1996, compared to an income tax provision
of 37% of income before income taxes in the second quarter of fiscal 1995. The
decrease in the Company's tax rate was primarily due to a decrease in
nondeductible expenses partially offset by the lapse of the U.S. federal
research tax credit.
A net loss of $14.3 million was recorded in the second quarter of fiscal 1996,
compared to net income of $8.3 million recorded in the second quarter of fiscal
1995. The Company incurred an in-process research and development charge of
$39.7 million in the second quarter of fiscal 1996, in connection with the
acquisition of certain IBM technology. For the first half of fiscal 1996, the
net loss was $2.7 million, compared to net income of $16.1 million in the first
half of fiscal 1995.
The Company's book-to-bill ratio for the second quarter of fiscal 1996 was
greater than one-to-one. The book-to-bill ratio measures the ratio of accepted
orders to revenue.
Liquidity and Capital Resources
For the first six months of fiscal 1996, cash and short-term investments
increased $15.4 million to $225.4 million, net of a payment to IBM of $11.0
million. The increase in cash and short-term investments is due primarily to
cash generated from operations.
The Company believes that the existing cash and short-term investments balance
of $225.4 million and the existing credit facilities will be sufficient to meet
its currently anticipated liquidity and capital expenditure requirements for at
least the next twelve months.
Factors that Could Cause Actual Results to Differ Materially from Those
Projected
When used in the following discussion, the words "projects", "expects" and
similar expressions are intended to identify forward-looking statements. Such
statements, and the Company's results, are subject to certain risks and
uncertainties, including those discussed below, that could cause actual results
to differ materially from those projected or estimated.
The Company's future success depends upon its ability to enhance current
products and to develop and introduce new products that keep pace with
technological developments and address the increasingly sophisticated needs of
its customers. Much of the Company's growth has been attributable to the
strength of its synthesis products, a market segment in which the Company is
currently the leading supplier. Opportunities for growth in market share in this
segment are limited.
The Company is seeking to develop a balanced product portfolio. Among the most
important new products offered by the Company are its Behavioral Compiler and
Cell Based Array products. These products have achieved initial market
acceptance, but the Company will only derive significant revenue from these
products if they are accepted by a broad range of customers, which cannot be
assured. The Company is developing new products in the areas of design
planning, simulation and emulation, market segments in which the Company is not
currently the market leader and faces significant entrenched competition.
8
<PAGE> 9
The electronic design automation (EDA) industry is highly competitive. The
Company's products compete with similar products from other vendors and compete
with other EDA products and services for a share of the EDA budgets of their
customers. The EDA industry as a whole may experience pricing and margin
pressure as a result of changes in the overall computing environment, such as
faster and multiple processing CPUs, high-speed networks, and Internet-based
software distribution. Such competition may adversely affect the Company's
operating results and financial condition.
The Company's business has benefited from the rapid worldwide growth of the
semiconductor industry. The rate of growth of the semiconductor industry has
slowed in recent quarters, and the outlook for the remainder of 1996 is
uncertain. Slower growth in the semiconductor industry could have an adverse
effect on the Company's performance.
The Company recently entered into a six-year joint development and license
agreement with International Business Machines Corporation (IBM), pursuant to
which the Company and IBM will jointly develop certain new products that the
Company believes are important to the long-term growth of its business. The
Company has not previously entered into a joint development agreement of this
scope. Joint development of products is subject to risks and uncertainties over
and above those affecting internal development, and there can be no assurance
that the Company's joint development efforts will be successful.
The Company's success is dependent on the technical and other contributions of
key individuals, and there can be no assurance that the Company can continue to
recruit and retain such key personnel.
The Company attempts to manage its business to achieve quarter-to-quarter
revenue and earnings growth. The ability to manage such growth is affected by a
number of factors, including customer product demand, the size of the Company's
backlog and decisions regarding the timing of revenue recognition. In recent
years, the Company's orders have become more seasonal, with higher volumes in
the second and fourth quarters of the Company's fiscal year, and orders have
been disproportionately weighted toward the latter part of the quarter. In
addition, the average order size has increased. For a given quarter it is
possible for the Company to maintain steady revenue and earnings growth while
experiencing a slower rate of orders growth. Ultimately, long term revenue and
earnings growth is dependent upon the successful development and sale of the
Company's products and services over a sustained period of time.
In recent years, international revenue has accounted for approximately half of
the Company's revenue. As a result, the Company's financial performance could be
negatively affected by such factors as changes in foreign currency exchange
rates and changes in regional or worldwide economic or political conditions.
The Company's operating expenses are based in part on its expectations of future
revenue, and expense levels are generally committed in advance of revenue. The
Company continues to expand and increase its operating expenses in order to
generate and support additional revenue in the future. If revenue does not
materialize as expected, the Company's results of operations are likely to be
adversely affected. Net income may be disproportionately affected by a reduction
in revenue because only a small portion of the Company's expenses varies with
its revenue.
9
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The Company is currently engaged in a major project to upgrade its
enterprise-wide database and information management systems, based principally
on software from SAP AG. In recent years, some software and computer systems
companies undertaking major systems transitions have experienced significant
disruption as a result of unexpected delays in the implementation of these
projects. There can be no assurance that the Company's project will be completed
within the projected time frame or within budget.
The Company's stock price, like that of other technology companies, is subject
to significant volatility. Past financial performance should not be considered a
reliable indicator of future performance, and investors should not use
historical trends to anticipate results or trends in future periods. If revenues
or earnings in any quarter fail to meet expectations of the investment
community, there could be an immediate and significant impact on the Company's
stock price. In addition, the Company's stock price may be affected by broader
market trends that may be unrelated to the Company's performance.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the recorded amounts of assets and liabilities, disclosure of those
assets and liabilities at the date of the financial statements and the recorded
amounts of expenses during the reporting period. A change in the facts and
circumstances surrounding these estimates could result in a change to the
estimates and impact future operating results.
10
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's 1995 annual meeting of stockholders was held on
March 1, 1996. The following directors were elected by the
stockholders:
Harvey C. Jones, Jr.
Aart J. de Geus
Deborah A. Coleman
William W. Lattin
A. Richard Newton
Steven C. Walske
The following additional matters were submitted to the
stockholders for vote at the meeting:
1. Approval of an amendment to the Company's Amended and
Restated Certificate of Incorporation to increase the number
of shares of Common Stock that the Company is authorized to
issue from 50,000,000 to 100,000,000. Of the total shares
voting on the foregoing resolution, 33,273,223 voted in favor,
1,368,140 against and 34,538 abstained.
2. Approval of an amendment to the Company's 1992 Stock Option
Plan to increase the number of shares authorized for issuance
thereunder on the first day of fiscal years 1997, 1998, and
1999, in each case by an amount equal to 5% of the weighted
average shares and share-equivalents outstanding during the
last quarter of the preceding fiscal year. Of the total shares
voting on the foregoing resolution, 17,787,187 voted in favor,
14,830,815 against and 61,063 abstained.
3. Approval of an amendment to the Company's Employee Stock
Purchase Plan and the International Employee Stock Purchase
Plan (the "Plans") to (a) increase the number of shares of
Common Stock reserved for issuance thereunder by 750,000
shares; (b) provide for the commencement of a new 24-month
enrollment period every six months; (c) expand the types of
compensation eligible for withholding under the Plans to
include commissions, bonuses and certain other cash
compensation; (d) permit participants to adjust their
withholding rate once during an enrollment period and (e)
permit the Plans to remain in effect (subject to the
authorization of additional shares) if all available shares
have been issued. Of the total shares voting on the foregoing
resolution, 28,887,068 voted in favor, 3,750,753 against and
41,244 abstained.
4. Ratification of the appointment of KPMG Peat Marwick LLP as
independent auditors of the Company for the fiscal year ending
September 30, 1996. Of the total shares voting on the
foregoing resolution, 34,931,770 voted in favor, 22,298
against and 40,935 abstained.
11
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ITEM 5. OTHER INFORMATION
On May 7, 1996, the Company and Cooper and Chyan Technology, Inc. (CCT)
announced that they have signed agreements to enter into a strategic
relationship. As part of this strategic relationship, the Company has purchased
approximately 9.9 percent of the outstanding shares of CCT, a developer of
routing technology for printed circuit boards and integrated circuits, for
$14.50 per share. In connection with the equity investment, the Company has
been granted certain rights to maintain its percentage ownership interest in
CCT. The cash investment represents 1,046,250 shares of stock purchased from
corproate officers as well as 160,292 newly issued shares. The strategic
relationship focuses on the development of new tools and methodologies for
designing multi-million gate integrated circuits that utilize silicon
geometries of quarter-micron and below.
In addition, on May 7, 1996, the Company announced that its Board of Directors
authorized a stock repurchase program under which up to 2.0 million shares, or
approximately 5%, of the Company's outstanding common stock may be acquired in
the open market. Under the program, share purchases may be made in the open
market at prevailing prices over the next 24 months. The purchases will be
funded from available working capital and the repurchased shares will be used
for ongoing stock issuances such as for existing employee stock plans.
Mr. A. Brooke Seawell, the Company's Senior Vice President for Finance and
Operations, and Chief Financial Officer, will be taking a planned four month
leave of absence from the Company beginning on May 18, 1996. During his absence,
Gregory C. Walker, Vice President for Finance, will assume the duties of
Treasurer and Chief Financial Officer.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a.) Exhibits
10.28 Lease dated January 2, 1996 between the Company and
Tarigo-Paul, a California Limited Partnership.
(b.) Reports on Form 8-K
The Company filed a report on Form 8-K on February 14, 1996
related to the Joint Development and License Agreement
Concerning EDA Software and Related Intellectual Property,
executed on February 1, 1996, between the Company and
International Business Machines Corporation.
12
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SYNOPSYS, INC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 14, 1996 SYNOPSYS, INC.
(Registrant)
By: /s/ A. Brooke Seawell
-------------------------------
A. Brooke Seawell
Sr. Vice President, Finance and Operations
(Principal Financial and Accounting
Officer)
13
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EXHIBIT INDEX
Exhibit 10.18 Lease dated January 2, 1996 between the Company and
Tarigo-Paul, a California Limited Partnership
Exhibit 27 Financial Data Schedule
<PAGE> 1
EXHIBIT 10.28
1
SYNOPSYS -
MARY AVENUE INDUSTRIAL LEASE
ARTICLE 24865
PARTIES
This Lease, dated, for reference purposes only, January 2, 1996, is
made by and between Tarigo-Paul, a California Limited Partnership ("Lessor"),
and Synopsys, Inc., a Delaware corporation ("Lessee"). The parties acknowledge
and agree that this Lease is subject to the Lessor's ability to obtain financing
for the Buildings (defined below) and Site Improvements; accordingly, if, within
ninety (90) days of the execution of this Lease by all parties, such financing
is unavailable (i) because, based on the financial security of Synopsys as a
Lessee, Lessor is unable to obtain satisfactory financing solely due to a
material adverse change in Lessee's business operations or financial condition
(other than decreases in the value of Lessee's publicly traded shares of stock)
occurring after the execution of this Lease, or (ii) due to an industry-wide
change in commercial credit markets or Acts of God or major catastrophes, as a
result of which commercial lenders in general are no longer willing to provide
financing for or based upon the credit of Silicon Valley technology companies.
If such financing has not been obtained by such date due to any of the
conditions set forth in (i) or (ii) above, then Lessor may terminate this Lease
agreement by written notice to Lessee as of such date.
The parties also acknowledge and agree that certain terms of this Lease
as written may limit or restrict the availability of financing, and the parties
agree to cooperate in good faith to revise or eliminate any such terms, as long
as such revisions do not materially alter the terms of the Lease or the rights
of the parties hereto, in order to obtain acceptable financing to ensure the
feasibility of the project. Lessor shall update Lessee on a periodic (but not
less than every two weeks) basis as to the status of Lessor's attempts to obtain
adequate financing for the construction of the Buildings, and agrees to use
diligent, good faith efforts to obtain such financing.
ARTICLE 24866
PREMISES
<PAGE> 2
Section 1 Real Property. Lessor is the owner in fee simple of that
certain real property situated in the City of Sunnyvale, County of Santa Clara,
State of California, located at the corner of Mary Avenue and Corte Madera
Avenue, more particularly described herein in Exhibit "A" which is attached
hereto and incorporated herein (the "Real Property") upon which Lessor, pursuant
to the Work Agreement attached hereto as Exhibit C (the "Work Agreement") shall
construct the Shell (defined in the Work Agreement) of two (2) office/research
and development buildings (the "Buildings"). One of the Buildings will be four
(4) stories, and will contain approximately 105,090 square feet; the other will
be either three (3) or four (4) stories depending upon the approval of the
fourth story by the City of Sunnyvale, and will contain approximately 70,100
square feet if it is 3 stories, or 105,090 square feet if it is 4 stories. The
Buildings are identified on the site plan attached hereto as Exhibit "A" as
Building I (approximately 105,090 square feet) and Building II (approximately
70,100 square feet). Said Real Property, together with the Buildings and all
Tenant Improvements constructed therein, and all the common areas and all Site
Improvements (defined in the Work Agreement) thereon (i.e., including, but not
be limited to, all landscaped areas, parking lots, driveways, and sidewalks)
appurtenant to the Buildings, is hereby referred to as the "Premises".
Section 2. Leasing. Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor for the Term, at the rental, and upon all of the conditions
set forth herein, the Premises.
Section 3 Parking. The Development Agreement currently in effect with
the City of Sunnyvale regarding the Real Property (the "Development Agreement")
contemplates the construction of 175,000 square feet of building space and
allows for the inclusion of approximately 3.50 passenger vehicle parking spaces
for each thousand square feet of leased Premises.
Section 4. Measurement. Prior to the Delivery Date (defined Section 3.1
below) for each Building, Lessor shall deliver to Lessee (or a representative
designated by Lessee) a diskette containing a copy of Lessor's calculation of
the square footage of the Buildings (which square footage as set forth
throughout this Lease shall be measured from the face of the outside walls), in
AutoCad compatible format for certification by Lessee. Either
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Lessor or Lessee at any time after a Building Shell has been completed but
before the Tenant Improvements have been completed, may request that an
architect mutually acceptable to the parties hereto measure and confirm the
actual number of square feet in the Building and/or Buildings in accordance with
the standards provided in this Section 2.4. The actual square footage so
determined shall be used for all purposes of this Lease, including, without
limitation, the calculation of Base Rent pursuant to Section 4.1. The cost of
such determination shall be borne by the party requesting the same.
Section 5. Generally. It is the intention of the parties hereto that,
following construction of the Shell of the Buildings, and all Site Improvements
(defined in the Work Agreement) (all such work to be performed by Lessor
pursuant to the provisions of Section II of the Work Agreement), Lessee shall
construct within the Buildings its Tenant Improvements pursuant to Section III
of the Work Agreement and shall thereafter operate, manage, maintain (except as
set forth herein) and exercise day-to-day control over the Premises during the
term of this Lease (the "Term"). During the Term, Lessee shall have the
exclusive right to use the entirety of the Real Property and the Buildings,
including the ground floor lobby, bathrooms, halls, passages, exits, entrances,
elevators, storage areas, stairways and the roof of the Buildings and all other
areas of the Premises.
ARTICLE 24867
TERM
Section 1 Term. The Term shall be for ten (10) years, commencing on the
"Commencement Date" established pursuant to the procedure set forth below in
this Section. Pursuant to the provisions of Section II of the Work Agreement,
Lessor shall construct and deliver the Shell of the Buildings, the Site
Improvements, and the Common Areas and deliver the same to Lessee. The Shells of
the Buildings are intended to be delivered on or about February 1, 1997, (such
date being referred to herein as the "Target Delivery Date", and the date upon
which Lessor actually delivers the Building Shells to Lessee with all work
required to be performed by Lessor therein substantially complete is referred to
herein as the "Delivery Date"). The Commencement Date shall be the date that is
the earlier of (i) the later to occur of (A) one hundred fifty (150) days
following the date that Lessor allows Lessee's contractor access to the
Buildings,
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substantially completed as set forth in Section III.I. of the Work Agreement For
Construction Of Premises (Exhibit "C"), for the commencement of the construction
of the Tenant Improvements (which is anticipated to occur at least thirty (30)
days prior to the Delivery Date)and (B) one hundred twenty (120) days following
the actual Delivery Date, and (ii) the date that Lessee occupies the Buildings
and commences business in the Premises. The parties shall execute a "Memorandum
of Commencement of Lease Term" in the form of Exhibit ___ attached hereto when
the Commencement Date becomes known.
Section 2 Option to Extend.
1 Exercise. Lessee is given two (2) options to extend the Term
(each, an "Option to Extend") for five-year periods each (for a total of ten
(10) additional years) (each such Term being referred to herein as an "Option
Term"), following expiration of the initial Term, which options may be exercised
only by written notice ("Option Notice") from Lessee to Lessor given not less
than nine (9) months prior to the end of the initial Term, or not less than one
hundred eighty (180) days prior to the end of the initial Option Term (each, an
"Option Exercise Date"); provided, however, if Lessee is in material default
under this Lease (beyond the expiration of applicable grace periods) on the
Option Exercise Date, the Option Notice shall be totally ineffective, and this
Lease shall expire at the end of the initial Term or at the end of the then
expiring Option Term. The right of Lessee to exercise the Option to Extend shall
not be affected by any sublease or assignment of this Lease previously entered
into by Lessee pursuant to the provisions of this Lease.
2 Rent. In the event Lessee exercises an Option to Extend set
forth herein, the Option Term shall be subject to all the terms and conditions
of this Lease except that the rent payable by Lessee during the Option Term
shall be equal to ninety-five percent (95%) of the then Fair Market Rent
(defined below), as determined under subparagraph (b) below, but in no event
less than the monthly rent prevailing on the last month of the initial Term, or
on the last month of the then expiring Option Term. "Fair Market Rent" shall
mean the effective rate being charged and received for comparable space in
similar buildings in the vicinity, including periodic adjustments thereto as
applicable during the period of the Option Term (i.e., of a similar age and
quality considering any recent renovations or modernization, and floor plate
size; or, if
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such comparable space is not available, adjustments shall be made in the
determination of Fair Market Rent to reflect the age and quality of the Building
and Premises as contrasted to other buildings used for comparison purposes),
with similar amenities, taking into consideration: size, location, floor level,
leasehold improvements or allowances provided or to be provided, proposed term
of the lease, extent of services to be provided, the time that the particular
rate under consideration became or is to become effective, and any other
relevant terms or conditions applicable to both new and renewing tenants.
3 Determination of Fair Market Rent.
(a) Negotiation. At any time following the date that
is twelve (12) months prior to the end of the initial Term (or the first Option
Term, as applicable), Lessee may send written notice to Lessor requesting
Lessor's good faith best estimate of the Fair Market Rent applicable to the
Premises for the Option Term in question. Within fifteen (15) days after receipt
of such request, Lessor shall deliver to Lessee, Lessor's good faith best
estimate of the Fair Market Rent applicable to the Option Term. Without any
obligation on the part of the Lessee to exercise an Option to Extend prior to
the applicable Option Exercise Date, the parties agree to consult, meet, confer
and negotiate in good faith the applicable Fair Market Rent therefor. If,
however, Lessee so exercises the Option to Extend in a timely manner and prior
to an agreement between the parties as to the Fair Market Rent, the parties
shall then meet in good faith to negotiate the Fair Market Rent for the Premises
for each respective Option Term, including fair market periodic adjustments
thereto, if applicable, during the first thirty (30) days after the date of the
delivery by Lessee of the Option Notice (the "Negotiation Period"). If, during
the Negotiation Period, the parties agree on the Fair Market Rent applicable to
the Premises for the Option Term (including periodic adjustments thereto, if
applicable), then such agreed amount shall be the Fair Market Rent for purposes
of determining the rent payable by Lessee hereunder during the Option Term.
(b) Arbitration. In the event that the parties are
unable to agree on the Fair Market Rent for the Premises within the Negotiation
Period, then within ten (10) days after the expiration of the Negotiation
Period, each party shall separately designate an appraiser to make this
determination. Each appraiser shall be a
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member of MAI. Within five (5) business days of their appointment, the two
designated appraisers shall jointly designate a third similarly qualified
appraiser. The failure of either party to appoint an appraiser within the time
allowed shall be deemed equivalent to appointing the appraiser appointed by the
other party. Within fifteen (15) days after their selection, each of the initial
two appraisers shall submit to the third appraiser a sealed envelope containing
such appraiser's good faith best determination of the Fair Market Rent for the
Premises for the Option Term; concurrently with such delivery, each such
appraiser shall deliver a copy of their determination to the other appraiser.
Within ten (10) days following receipt of such submissions, the third appraiser
shall make its own good faith determination of the applicable Fair Market Rent
for the Premises for the Option Term, and then determine which of the two
appraisers' determinations most closely reflects said third appraiser's
determination. The determination most closely reflecting the third appraiser's
determination shall be deemed to be the Fair Market Rent for the Premises during
the Option Term; the third appraiser shall have no rights to adjust, amend or
otherwise alter the determinations made by the appraiser selected by the
parties, but must select one or the other of such appraisers' submissions. The
determination by such third appraiser shall be final and binding upon the
parties. Said third appraiser shall, upon selecting the determination which most
closely resembles said third appraiser's calculation of Fair Market Rent,
calculate the amount which is ninety-five percent (95%) of the thus-determined
Fair Market Rent, and concurrently notify both parties hereto. The parties shall
share the appraisal expenses equally.
Section 3 Governmental Approvals. As noted in Section 2.3 above, the
Development Agreement allows for the construction of 175,000 square feet of
building space, measured from the face of the outside walls, and includes the
site plan and elevation specifications for the Real Property. As of the date of
this Lease, Lessor is currently working with the City of Sunnyvale to obtain an
amendment to the Development Agreement in order to increase the allowed square
footage to approximately 210,180 square feet. If such an amendment is obtained,
then the second Building will be increased in size from an approximately 75,000
square foot Building to an approximately 105,090 square foot Building. If such
an amendment is not obtained, then Lessor will proceed with the construction of
the 175,000 square feet of Building space. Lessor anticipates that the City of
Sunnyvale will
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render its decision on the approval of the amendment by February 6, 1996 (the
"Zoning Approval Date"). Lessor agrees to use best efforts to obtain such
approvals on or before the Zoning Approval Date and shall periodically (no less
often than bi-weekly) update Lessee in reasonable detail as to the status of
Lessor's efforts. If, notwithstanding Lessor's reasonable efforts, Lessor does
not obtain those governmental approvals, Lessor shall immediately notify Lessee.
Section 4 Construction Approvals.
1 Special Assessment District. The Premises are in a special
assessment district which was created when the City of Sunnyvale completed the
extension of Mary Avenue. The 1995-1996 property taxes for the parcel in which
the Premises are situated (APN: 165-32-003-00) include a special assessment tax
of $99,929.74.
2 Detailed Plans. As described in Section II of the Work
Agreement, Lessor shall provide Lessee with the opportunity to work with
Lessor's qualified Structural and Architectural Engineers in the preparation of
the complete, detailed plans and specifications for the construction of the
Buildings and the Site Improvements. These plans, when approved by Lessor and
Lessee, shall be designated as Exhibit "B" and incorporated into this Lease
Agreement. Attached as Exhibit "C" to this Lease Agreement is the Work Agreement
governing the Construction of the Building Shells, the Site Improvements and
Tenant Improvements, and attached to this Lease as Exhibit "D" is a schedule of
Cost Responsibilities of Lessor and Lessee, which describe the planning and
expense responsibilities of the Lessor and Lessee with respect to the
construction of the Building Shells, the Site Improvements and Tenant
Improvements.
ARTICLE 24868
RENT: SPECIAL NET LEASE
Section 1 Base Rent. Lessee shall pay to Lessor base rent for the
Premises ("Base Rent") in advance, on the first day of each month of the Lease
Term and commencing on the Commencement Date, according to one of the following
schedules of Base Rent, depending upon whether the Buildings consist of
approximately 175,000 square feet or approximately 210,180 square feet:
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IF THE BUILDINGS CONSIST OF APPROXIMATELY 210,180 SQUARE FEET:
<TABLE>
<CAPTION>
Rent Per Square Monthly
Months Square Foot Footage Base Rent
------ ----------- ------- ---------
<S> <C> <C> <C>
01-03 $ 0.00 "NNN" 210,180 sq. ft. $ 0.00
04-30 1.50 "NNN" 210,180 sq. ft. $ 315,270
31-60 1.60 "NNN" 210,180 sq. ft. $ 336,288
61-90 1.70 "NNN" 210,180 sq. ft. $ 357,306
91-120 1.80 "NNN" 210,180 sq. ft. $ 378,324
</TABLE>
IF THE BUILDINGS CONSIST OF APPROXIMATELY 175,000 SQUARE FEET:
<TABLE>
<CAPTION>
Rent Per Square Monthly
Months Square Foot Footage Base Rent
------ ----------- ------- ---------
<S> <C> <C> <C>
01-03 $ 0.00 "NNN" 175,000 sq. ft. $ 0.00
04-30 1.475"NNN" 175,000 sq. ft. $ 258,125
31-60 1.575"NNN" 175,000 sq. ft. $ 275,625
61-90 1.675"NNN" 175,000 sq. ft. $ 293,125
91-120 1.775"NNN" 175,000 sq. ft. $ 310,625
</TABLE>
Base Rent for any period during the term hereof which is for less than
one month shall be a pro rata portion of the monthly installment (based on a 30
day month). Base Rent shall be payable in lawful money of the United States to
Lessor at the address stated herein or to such other persons or at such other
places as Lessor may designate in writing.
Section 4.2. Advance Rental. Lessee shall pay to Lessor, upon execution
of this Lease, an advance rental equal to $258,125 for the first monthly base
rent payable under the Lease, based on the final square footage of the Premises
being 175,000 square feet. In the event that approval is obtained for the
210,180 square feet of building space, then this advance rental shall be
increased to $315,270 upon the Lessor's receipt of such approval. In the event
that this Lease is terminated prior to the Commencement Date, then this advance
rental shall be returned to Lessee within fifteen (15) days of such termination;
if Lessor delays in returning this advance rental beyond said 15 days, then
Lessor shall pay to Lessee interest on such sum at the rate of ten percent (10%)
per year from the date that is 15 days after said termination.
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Section 4.3 Special Net Lease. This Lease is what is commonly called a
"Net, Net, Net Lease", it being understood that Lessor shall receive the rent
set forth in Section 4.1 free and clear of any and all other impositions, taxes,
liens, charges or expenses of any nature except as otherwise provided in this
agreement. In addition to the rent reserved by Section 4.1, Lessee shall pay to
the parties respectively entitled thereto all impositions, insurance premiums,
taxes, assessments, operating charges, maintenance charges, and any other
charges, costs and expenses which arise or may be contemplated under any
provisions of this Lease for the entire Premises during the Term. All of such
charges, costs and expenses shall constitute additional rent, and upon the
failure of Lessee to pay any of such costs, charges or expenses, Lessor shall
have the same rights and remedies as otherwise provided in this Lease for the
failure of Lessee to pay rent. It is the intention of the parties hereto that
this Lease shall not be terminable for any reason by Lessee, except as herein
expressly provided and that Lessee shall in no event be entitled to any
abatement of or reduction in rent payable under this Lease, except as herein
expressly provided. Any present or future law to the contrary shall not alter
this agreement of the parties.
ARTICLE 24869
USE
Section 1 Use. The Premises shall be used and occupied for offices,
research and development, and manufacturing and for any other lawful purpose,
including such ancillary uses as lunchrooms, computer centers, classrooms,
auditoriums and other purposes consistent with such use as a corporate
office/R&D complex. Lessee shall not use nor permit the use of the Premises in
any manner that will tend to create waste, nuisance or disturbances.
Section 2 Compliance with Law.
1 Lessor warrants to Lessee that the Premises (including
without limitation, all Site Improvements), in its state existing on the
Commencement Date, but without regard to the use for which Lessee will use the
Premises, does not violate and will be in compliance with any covenants,
conditions or restrictions of record, as well as any applicable zoning, building
code, regulation, law, rule or ordinance (including, without limitation, the
Americans With Disabilities Act [ADA]) in effect on the
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Commencement Date. Lessor further agrees that, during the Term, if the ADA is
amended to require modifications or additions to the exterior of one or both of
the Buildings and/or the Site Improvements, and such modifications or additions
are not caused by Lessee's specific use of the Premises, then Lessor shall make
such modifications or additions to the exterior of the buildings (but not to the
interior) at the Lessor's sole cost. Lessor shall indemnify, defend, protect and
hold Lessee harmless from and against any and all loss, cost, damage or
liability arising in any manner out of Lessee's warranty set forth herein being
incorrect or untrue.
2 Except as provided in paragraph 5.2(a), Lessee shall, at
Lessee's expense, comply promptly with all applicable statutes, ordinances,
rules, regulations, orders, covenants, and restrictions of record, and
requirements in effect during the Term or any part of the Term, regulating the
use by Lessee of the Premises.
(c) By executing this Lease, Lessee acknowledges that it has
reviewed and satisfied itself as to its compliance, or intended compliance, with
the applicable zoning and permit laws, hazardous waste requirements, and all
other statutes, laws, or ordinances relevant to the uses stated in Section 5.1,
above.
Section 3 Condition of Premises.
Subject to all of the terms of this Lease Agreement for the
construction of improvements,
1 Lessor shall deliver the Premises to Lessee clean and free
of debris on the Commencement Date, and Lessor further warrants to Lessee that
the plumbing, lighting, air conditioning, heating, and loading doors in the
Premises shall be in proper operating condition on the Commencement Date, that
those systems shall have been built in accordance with the approved plans
therefor, and in a workmanlike manner. In the event that it is determined that
any of these warranties has been violated, then it shall be the obligation of
Lessor, after receipt of written notice from Lessee setting forth with
specificity the nature of the violation, to promptly, at Lessor's sole cost,
rectify such violation. Lessee's failure to give such written notice to Lessor
within one (1) year of the Commencement Date shall cause the conclusive
presumption that Lessor has complied with all of Lessor's obligations here
under, except as to latent
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defects. In the event of Lessor's nonconformance with respect to these
warranties, Lessee shall have the right to have all Contractor's Guarantees and
Warranties assigned to Lessee.
2 Pursuant to the provisions of the Work Agreement, Lessor
also warrants that the Shell improvements and the Site Improvements referenced
in Exhibit "B" shall be free of defects, built according to the approved
Construction Documents therefor, and in a workmanlike manner. The parties
acknowledge and agree that the term "workmanlike" as used throughout this Lease
to denote the appropriate construction standards shall mean standards
substantially similar to those used in Lessor's "Argo Boeing Project" in the
vicinity of the Premises.
3 Except as otherwise provided in this Lease, Lessee shall
accept the Premises in their condition existing as of the Commencement Date,
subject to all applicable zoning, municipal, county, state, and other laws,
ordinances, and regulations governing and regulating the use of the Premises,
and any covenants or restrictions of record, and accepts this Lease subject
thereto and to all matters disclosed thereby and by any exhibits attached
thereto. Lessee acknowledges that neither Lessor nor Lessor's agent has made any
representation or warranty as to the present or future suitability of the
Premises for the conduct of Lessee's business.
Section 4 Signage. During the Term, Lessee shall have the right to
place such exterior signage on the Premises (in the form of signage affixed to
one or both of the Buildings or monument signage, or otherwise) as Lessee, in
its reasonable discretion, deems advisable, provided that (i) all such signage
shall comply with all applicable codes, laws, rules or regulations (including
any recorded covenants, conditions and restrictions), and (ii) at the request of
Lessor, at the end of the Term, Lessee shall remove any such signage and repair
any damage to the Premises caused by such removal.
ARTICLE 24870
MAINTENANCE, REPAIRS AND ALTERATIONS
Section 1 Maintenance - Premises.
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1 Lessee's Obligations. Throughout the Term, Lessee agrees to
keep and maintain the Premises, including all improvements and appurtenances
thereto (such as sewer connec tions, plumbing, heating and cooling appliances,
wiring, and glass), in good order, condition and repair, reasonable use and wear
and tear associated with Lessee's use of the Premises for the purposes permitted
under Article V above and damage due to casualty (covered by Article VIII below)
or condemnation (covered by Article XVIII below) excepted. Lessee hereby
expressly waives the provisions of any law permitting repairs by a tenant at the
expense of a landlord, including, without limitation, all rights of Lessee under
Sections 1941 and 1942 of the California Civil Code. Lessee agrees to keep the
Premises clean and in sanitary condition as required by the health, sanitary and
police ordinances and regulations of any political subdivision having
jurisdiction. Lessee further agrees to keep the interior of the Premises, such
as the windows, floors, walls, doors, showcases and fixtures clean and neat in
appearance and to regularly remove all trash and debris which may be found in or
around the Premises.
2 Lessor's Obligations. Notwithstanding any of the foregoing
to the contrary, Lessor, at Lessor's sole cost, agrees to promptly make all
structural repairs to the Buildings' roof and the exterior walls (provided that
the damage to the exterior walls or rooftops is not caused by Lessee, in which
event Lessee shall, at Lessee's cost and expense, repair the same).
Additionally, and provided that Lessee has adequately maintained the roofs
according to the standards set forth in Section 6.3, Lessor shall be responsible
for the restoration of the roofs when their useful life has expired. All such
work shall be commenced by Lessor promptly, but in no event later than thirty
(30) days following the earlier to occur of (i) Lessee's delivery to Lessor of
notice of the need for such work, and (ii) Lessor's discovery that such work is
required. Such work shall be performed pursuant to plans and specifications
reasonably approved by Lessee, all in a manner and so as to cause the least
possible interference with the performance of Lessee's business operations in,
and Lessee's (and Lessee's employees' and invitees') access to the Premises and
Buildings.
Section 2 Maintenance - Common Areas.
1 Lessee's Responsibility. Lessee shall be responsible for
maintaining in a good and clean condition
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the common areas of the Premises, to include trash removal, landscape
maintenance, sidewalks, driveways, parking lots, including striping and
re-sealing, sprinkler systems, lighting, ponds, fountains, and drains.
2 Lessor's Responsibility. Provided that Lessee has adequately
maintained such Common Areas according to the standards set forth in Section
6.3, Lessor agrees, at Lessor's sole cost and expense, to replace the parking
lot areas, landscaping, and sprinkler systems when each's useful life has
expired.
Section 3 Standards of Performance; Failure to Perform.
(a) Standards of Performance. Lessor and Lessee shall perform
their respective obligations under this Article according to generally accepted
industry standards to get the maximum useful life from the Premises as a whole
and from each of the improvements therein. Lessor shall have the right to review
and reasonably approve all maintenance contracts into which Lessee enters with
third parties, and to enter onto the Premises as set forth in Article XIV to
inspect the Premises to ensure that proper and adequate maintenance is being
performed to Lessor's satisfaction. For the purpose of ensuring proper
maintenance and repair, Lessor and Lessee shall mutually agree upon a contractor
to inspect the Premises on an annual basis, which annual inspection shall be
paid for by Lessee; said contractor shall deliver duplicate copies of its
inspection report to Lessor and Lessee simultaneously. Lessor and Lessee agree
to perform, according to their respective obligations hereunder, the additional
maintenance and/or repair, if any, that such contractor suggests be made in its
inspection report. Lessor may, at Lessor's expense and with reasonable notice to
Lessee and coordination with Lessee's scheduling, cause inspections of the HVAC,
roof, parking lot, and landscaping by contractors mutually agreed upon by Lessor
and Lessee to occur more frequently than annually in the event that Lessor
reasonably believes that such inspections are necessary, and the parties shall
perform any additional maintenance or repair suggested by such contractor.
(b) Failure to Perform. If Lessee refuses or neglects to
commence any such repairs and/or maintenance suggested by such contractor and
required by Lessee under this Lease, and complete the same within a reasonable
time after written notice thereof from Lessor, then Lessor may
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<PAGE> 14
enter the Premises and cause such repairs and/or maintenance to be made and
shall not be responsible to Lessee for any loss or damage occasioned thereby.
Lessee agrees that upon demand, it shall pay to Lessor the cost of any such
repairs or maintenance, together with accrued interest from the date of payment
at the rate of ten percent (10%) per year.
If Lessor fails to make any of the repairs suggested by such
contractor and required to be made by Lessor hereunder, Lessor shall be liable
to Lessee, its employees, invitees, or licensees for any damage to person or
property occasioned thereby, and Lessee's remedy shall be the performance of
said repairs by Lessee with right of reimbursement from Lessor of the cost of
such repairs, together with accrued interest from the date of payment at the
rate of ten percent (10%) per year. Lessee shall give Lessor written notice of
repairs to be made by Lessor and Lessor shall have a reasonable time to perform
the same.
Section 4 Alterations and Additions.
1 Generally. Subject to the provisions of Section 5.4 above
regarding Lessee's right to install signage, no changes, alterations, or
additions shall be made to the structural walls or roof of the Buildings by
Lessee, and no other material changes, alterations, or additions shall be made
to the Premises (with "material", for the purposes of this subparagraph (a)
only, meaning changes or alterations costing in excess of Fifty Thousand Dollars
($50,000.00)) without the prior written consent of Lessor, which Lessor will not
unreasonably withhold, condition or delay. Lessee shall, however, provide notice
to Lessor of all changes, alterations, or additions, whether or not such
changes, alterations, or additions are structural or material.
2 Work Requiring Lessor's Consent. As a condition to giving
its consent to proposed changes, alterations or additions requiring such consent
hereunder, Lessor may require that Lessee agree to remove any such alterations,
additions, or improvements, including those made to the structural walls or roof
of the Buildings, at the expiration of the Term and to restore such portion of
the Buildings to their prior condition. All changes, alterations, or additions
to be made to the Premises shall be under the supervision of a competent
architect or competent licensed structural engineer and any changes, alterations
or additions to the structural walls or roof
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of the Buildings shall be made in accordance with plans and specifications which
have been furnished to and approved by Lessor prior to commencement of work. In
connection therewith, Lessor shall review and approve (or disapprove) such plans
and specifications within twenty (20) business days following delivery of the
same by Lessee (except for non-structural material changes, which shall be
approved or disapproved within ten (10) business days), such approval not to be
unreasonably withheld. All work shall be done at the sole cost of Lessee, and
such alterations, changes and add itions shall be constructed in good and
workmanlike manner in accordance with all ordinances and laws relating thereto.
Any addition to, or alteration of, the Premises, except furniture and trade
fixtures and removable equipment (including, without limitation, CPU's
generators, UPS systems, telecommunication systems, security systems, data
systems and portable air conditioning equipment), shall remain for the benefit
of and become the property of Lessor at the expiration or sooner termination of
this Lease. Notwithstanding the foregoing, during the Term, title to any
alterations, additions, changes, or improvements to the extent paid for by
Lessee (including any Tenant Improvements paid for by Lessee) shall remain in
Lessee, and Lessee shall be entitled to any depreciation deductions and other
tax benefits, if any, attributable to such alterations, additions, changes or
improvements. All heating, lighting, electrical, air conditioning, full height
partitioning, drapery, and carpeting installations made by Lessee together with
all property that has become an integral part of the Premises, shall be and
become the property of Lessor upon expiration or sooner termination of this
Lease, and shall not be deemed trade fixtures. Lessee agrees to advise Lessor in
writing at least two (2) days before the date upon which any alterations will
commence in order to permit Lessor to post notices of non-responsibility to
avoid liability to contractors or material suppliers for payment for Lessee's
improvements. Lessee will at all times permit such notices to be posted and to
remain posted until the completion of the work.
Section 6.5. Tenant Improvements.
Lessor shall provide to Lessee the Shell Buildings as described in
Exhibit "D" attached hereto, and a Tenant Improvement allowance of Thirty
Dollars ($30.00) per square foot to be used for the Tenant Improvements outlined
in Exhibit "D", all as outlined in the Work
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Agreement for Construction of Premises attached as Exhibit "C".
ARTICLE 24871
INSURANCE
Section 1 Property/Rental Insurance-- Premises. During the term of this
Lease, Lessor shall keep the Premises insured against loss or damage by fire and
those risks normally included in the term "all risk" including (a) flood
coverage, (b) earthquake coverage at the election of Lessor, (c) coverage for
loss of rents and (d) boiler and machinery coverage if the Lessor deems such
coverage necessary. Any deductibles, not to exceed $25,000/$50,000, shall be
paid by Lessee. The amount of such insurance shall be not less than one hundred
percent (100%) of the replacement value of the Premises; such insurance shall
include a so-called "change-in-code" endorsement insuring the increased costs of
reconstructing the Premises incurred due to the need to comply with applicable
codes. Lessor agrees to cooperate with Lessee as much as is reasonably
practicable to procure insurance coverage at a commercially competitive cost.
Any recovery received from said insurance policy shall be paid to Lessor and
thereafter applied by Lessor to the reconstruction of the Premises in accordance
with the provisions of Article VIII below.
Lessee, in addition to the rent and other charges provided herein,
agrees to reimburse Lessor for the cost of the premiums for all such insurance
covering the Premises. Such reimbursement shall be made within fifteen (15) days
of Lessee's receipt of a copy of Lessor's statement therefor, accompanied by
reasonable backup documentation. Lessee shall pay to Lessor any deductibles
(subject to the above conditions) owing, accompanied by reasonable back-up
documentation, within fifteen (15) days after receipt of notice from Lessor of
the amount owing.
Section 2 Property Insurance--Fixtures and Inventory. During the term,
Lessee reserves the right to insure or "self insure" its fixtures, leasehold
improvements, furnishings, merchandise, equipment or personal property in or on
the Premises, whether in place as of the date hereof or installed hereafter.
Should Lessee not elect to "self insure", Lessee shall, at its sole expense,
maintain insurance with "all risk" coverage on any fixtures, leasehold
improvements, furnishings,
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merchandise, equipment, or personal property in or on the Premises, whether in
place as of the date hereof or installed hereafter, for the full replacement
value thereof, and Lessor shall not have any responsibility nor pay any costs
for maintaining any types of such insurance. Any deductibles shall be paid by
Lessee.
Section 3 Lessor's Liability Insurance. During the term, Lessor shall
maintain a policy or policies of comprehensive general liability insurance
insuring Lessor (and such others as designated by Lessor) against liability for
bodily injury, death and property damage on or about the Premises or the common
area, with combined single limit cover age of not less than Eighteen Million
Dollars ($18,000,000).
Lessee, in addition to the rent and other charges provided herein,
agrees to pay to Lessor the premiums for all such insurance. The insurance
premiums shall be paid in accordance with Article IV, within fifteen (15) days
of Lessee's receipt of a copy of Lessor's statement therefor.
Section 4 Lessee's Responsibilities With Regard To Liability Insurance.
During the term, Lessee reserves the right to "self insure" itself. Should
Lessee not elect the right to "self insure", Lessee shall then, at its sole
expense, maintain for the mutual benefit of Lessor and Lessee, compre hensive
general liability and property damage insurance against claims for bodily
injury, death or property damage occurring in or about the Premises or arising
out of the use or occupancy of the Premises, with combined single limit coverage
of not less than Five Million Dollars ($5,000,000). The limits of such insurance
shall not serve to limit the liability of Lessee. Lessee shall furnish to Lessor
prior to the Commencement Date, and at least twenty (20) days prior to the
expiration date of any policy, certificates indicating that the liability
insurance required by Lessee above is in full force and effect; that Lessor has
been named as an additional insured to the extent of contractual liability
assumed in Section 7.6 "Indemnification"; and that all such policies will not be
canceled unless thirty (30) days' prior written notice of the proposed
cancellation has been given to Lessor. The insurance shall be with insurers
approved by Lessor and with policies in form satisfactory to Lessor, provided
however, that such approval shall not be unreasonably withheld.
Section 5 Mutual Waiver of Claims. Notwithstanding an other provisions
of this Lease to the
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contrary, Lessor hereby releases Lessee, and Lessee hereby releases Lessor, and
their respective subtenants, assignees, officers, agents, employees and
servants, from any and all claims or demands of damages, loss, expense, or
injury to the Premises, or to the furnishings and fixtures and equipment, or
inventory or other property of either Lessor or Lessee in, or about or upon the
Premises or the Buildings, which are or would be included in a standard "all
risk" insurance policy, whether or not such loss or damage is due to the
negligence of Lessor or Lessee, their agents, employees, guests, licensees,
invitees, or contractors. Provided that such is available, each party hereto
shall obtain insurance coverage pursuant to this Article VII which contains a
waiver of subrogation rights by the insurer as is applicable to this Section
7.5.
Section 6 Indemnification.
1 Lessee's Indemnification. Lessee shall indemnify Lessor and
save it harmless from and against:
(a) Any and all claims of liability or expense for
any injury or damage to any person or property arising from the use by
Lessee, its agents, licensees, employees, or invitees of the Premises
or the Buildings, or from the conduct of Lessee's business, or from any
activity, work, or thing done, permitted, or suffered by Lessee (other
than work performed by Lessor or Lessor's contractors, employees or
agents), in or about the Premises or the buildings except:
(A) claims and liabilities to the extent
caused by the acts or omissions of Lessor, its agents,
employees, contractors, or invitees, or
(B) claims and liabilities for property
damage addressed in Section 7.5, above;
(b) Any and all claims arising from any breach or
default in the performance of any obligation on Lessee's part to be
performed under this Lease.
Further, in the event that any claim indemnified herein does not involve the
acts or omissions of Lessor, its agents, employees, contractors' or invitees,
such indemnity shall also include all reasonable costs, attorneys' fees, and
expenses incurred in the defense of
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any such claim or action or proceeding brought thereon. In the event any such
action or proceeding is brought against Lessor by reason of any claim falling
within the scope of the foregoing indemnity, and in the absence of any
negligence on the part of Lessor, Lessee upon prompt notice in writing from
Lessor shall have the right to defend the same at Lessee's expense by counsel
reasonably satisfactory to Lessor. Lessor agrees to cooperate fully and
completely with Lessee's counsel in this event.
2 Lessor's Indemnification. Lessor shall indemnify Lessee and
save Lessee harmless from and against any and all claims of liability or expense
for any injury or damage to any person or property arising from (i) any act or
omission of Lessor, or Lessor's agents, licensees, employees, contractors or
invitees on or about the Premises, and (ii) any and all claims arising from any
breach or default in the performance of any obligation on Lessor's part to be
performed under this Lease. Such indemnity shall also include all reasonable
costs, attorneys' fees and expenses incurred in the defense of any such claim or
action or proceeding brought thereon. In the event any such action or proceeding
is brought against Lessee by reason of any claim falling within the scope of the
foregoing indemnity, and in the absence of any negligence on the part of Lessee,
Lessor, upon prompt notice in writing from Lessee, shall have the right to
defend the same at Lessor's expense by counsel reasonably satisfactory to
Lessee. Lessee agrees to cooperate fully and completely with Lessor's counsel in
this event.
3 Survival. The indemnity obligations set forth in this
Section 7.6 shall survive the expiration or sooner termination of this Lease.
ARTICLE 24872
DAMAGE OR DESTRUCTION
Section 1 Destruction of the Premises. In the event of a partial
destruction of the Premises during the term of the Lease from any cause except
for incidental damage and destruction caused by vandalism and accidents for
which Lessee is responsible under Article VI, Lessor, upon receipt of insurance
proceeds paid in connection with such casualty, shall forthwith repair the same
in a workmanlike manner, provided the repairs can be made in a reasonable time
under the laws and regulations of the state, federal, county, or municipal
authorities. Lessor shall notify Lessee, as soon as reasonably possible, (a)
whether in
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Lessor's reasonable, good faith judgment insurance proceeds adequate to make the
necessary repairs are not, for any reason, available to Lessor from Lessor's
insurance policies, including the fact that the loss has resulted from a
casualty not required to be insured against by Lessor under Article VII above
and (b) Lessor's good faith estimate of the time period necessary to
substantially complete all such repairs. In such an event, Lessor may elect to
terminate this Lease unless Lessee, at Lessee's sole option, elects to make
funds available to Lessor to make the required repairs, in which case this Lease
shall not be terminable by Lessor under this Section 8.1. Such partial
destruction shall in no way annul or void this Lease, except that Lessee shall
be entitled to a proportionate reduction of rent until such repairs are
completed (provided that fire and other destructions to the Premises shall not
have been caused by the fault or neglect of Lessee, its agents, servants,
employees or invitees). Such proportionate reduction is to be based upon the
extent to which such damage and/or the making of such repairs shall interfere
with the business carried on by the Lessee on the Premises. Lessor shall use
diligence in making such repairs within a reasonable period, acts of God,
industry-wide strikes, and delays beyond Lessor's control excepted, in which
instance the time period shall be extended accordingly, and the Lease shall
remain in full force and effect, with the rent to be proportionately reduced as
provided in this Section. A total destruction of the improvements on or in any
one Building shall not terminate the entire Lease, but the Lease shall then be
adjusted to compensate for the loss of the square footage of the destroyed
Building and the rental amount adjusted accordingly.
Section 2 Lessee's Termination Rights. In the event of a partial
destruction of more than twenty-five percent (25%) of the entire Premises, the
Lessee shall have the following termination rights under the following
circumstances:
1 Lessor shall determine and notify Lessee in writing within
ninety (90) days from the date of the casualty if, in Lessor's reasonable
judgment, the damage cannot, with diligent reasonable efforts, be substantially
repaired and restored under applicable laws and governmental regulations within
twelve (12) months from the date of the casualty, in which case Lessee may elect
to terminate this Lease by giving written notice of such election to Lessor
within thirty (30) days after Lessor's
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notice to Lessee, such termination to be effective thirty (30) days after the
delivery of such notice to Lessor. In addition, if this Lease has not been
terminated by Lessee as provided in the immediately preceding sentence, and the
Premises have not actually been substantially repaired and restored within
twelve (12) months from the date of the casualty (with an additional allowance
of up to six (6) additional months beyond said 12 months for any delays for
cause as set forth in Section 21.18), Lessee may elect to terminate this Lease
by giving written notice of such election to Lessor within fifteen (15) days
after the end of such period, such termination to be effective thirty (30) days
after the delivery of such notice to Lessor.
2 Lessee may, at its option, elect to terminate this Lease if
Lessor is required or has elected to repair or restore the Premises, and either
(i) fails to apply for any permits required for such repair and restoration in a
reasonable time following the receipt by Lessor of insurance proceeds, or Lessor
thereafter fails to proceed to diligently pursue reasonable efforts to obtain
such permits, or (ii) has failed to commence such repair or restoration
(including demolition and related preparation for the restoration) within thirty
(30) days after issuance of required permits and approvals, or (iii) has so
commenced such repair or restoration and thereafter fails to diligently and in
good faith pursue reasonable efforts to complete such repair or restoration,
which failure has continued for a continuous period of at least forty-five (45)
days; provided, however, that if Lessor shall be delayed in pursuing and
completing such repair or restoration by reason of any cause described in
Section 21.18 below, then such time periods shall be extended by the amount of
any such delay.
Section 8.3 Arbitration. Any disputes arising out of this Article shall
be settled by arbitration in accordance with the rules of the American
Arbitration Association for commercial arbitration as then in effect and in
accordance with applicable statutes. The judgment or award rendered by the
arbitrators shall be final and conclusive except only as provided by applicable
law, and may be entered in any court having jurisdiction. The out-of-pocket
expenses and fees of the arbitrators shall be shared equally by the parties.
ARTICLE 24873
REAL PROPERTY TAXES
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Section 1 Payment of Taxes. Lessee shall pay the Real Property Tax, as
defined in Section 9.2, applicable to the Premises during the Term. With respect
to any Real Property Taxes not billed directly to Lessee, Lessor shall provide
Lessee, on the later of sixty (60) days prior to the date upon which any
installment or payment of Real Property Taxes would become delinquent or five
(5) business days after Lessor receives the tax bill, a statement setting forth
the amount of Real Property Taxes payable, the portion thereof that Lessee is
obligated to pay and the date upon which such installment or payment will become
delinquent, which statement shall be accompanied by copies of the relevant tax
bills. Lessee shall pay to Lessor the portion of any such installment or payment
required to be paid by Lessee on or before the tenth (10th) day preceding the
date upon which such installment or payment will become delinquent. Lessor will
deliver to Lessee copies of the payment receipts for such Real Property Taxes
promptly following the payment thereof by Lessor. If any such Real Property
Taxes paid by Lessee shall cover any period of time prior to the Commencement
Date or after the expiration of the Term, Lessee's share of such Real Property
Taxes shall be equitably prorated to cover only the period of time within the
tax fiscal year during which this Lease shall be in effect, and Lessor shall
reimburse Lessee to the extent required. If Lessee shall fail to pay any such
Real Property Taxes, Lessor shall have the right to pay the same, in which case
Lessee shall repay such amount to Lessor with Lessee's next rent installment
together with interest at the rate of ten percent (10%) per year from the date
such amount was paid by Lessor to the taxing authority. Any refund of Real
Property Taxes previously paid by Lessee, whether by virtue of any general
refund by any governmental authority, any reduction or increase in any tax rate
on the assessed value of any property on which such Real Property Taxes are
calculated, or otherwise, and whether occurring during the Term or following the
expiration thereof, shall be paid to Lessee; Lessor shall pay such refund to
Lessee within thirty (30) days after receipt thereof.
Section 2 Definition of "Real Property Tax". As used herein, the term
"Real Property Tax" shall include any form of real estate tax or assessment,
general, special, supplemental, ordinary or extraordinary, and any license fee,
commercial rental tax, improvement bond or bonds, levy or tax (other than
inheritance, personal income,
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corporate, gross receipts, franchise or estate taxes, or any penalty or charge
imposed upon Lessor (but not on the Premises) by any governmental authority,
unless Lessor incurs such taxes, penalties or charges due to the failure of
Lessee to observe or perform any of Lessee's obligations hereunder in the manner
and within the time periods provided for herein) imposed on the Premises by any
authority having the direct or indirect power to tax, including any improvement
district thereof, as against any legal or equitable interest of Lessor in the
Premises or in the real property of which the Premises are a part, but excluding
any imposition as against Lessor's right to rent or to gain other income
therefrom, or as against Lessor's business of leasing the Premises.
Section 9.3 Lessee's Right to Challenge. Lessee shall be entitled to
contest by appropriate proceedings the amount, validity or application, in whole
or in part, of any Real Property Taxes or other acts or enactments by any
governmental authority imposed upon the Premises (collectively, "Enactments"),
provided that any such contest shall not delay or defer Lessee's obligation to
pay any Real Property Taxes or perform any of its other obligations in
accordance with the provisions of this Lease. Lessee shall be entitled, at its
own expense, to contest the Enactment upon giving Lessor notice of Lessee's
intention to do so at least ten (10) days prior to the delinquency of such Real
Property Taxes required to be paid by Lessee hereunder or within thirty (30)
days following notice of such other Enactment from the applicable authority or
from Lessor, as the case may be. Lessee shall be entitled to any refund as a
result of Lessee's contest of any Enactment to the extent that such refund is a
refund of sums which had been paid by Lessee. In addition to any other
indemnification obligations required under this Lease, in the event of any such
contest, Lessee shall indemnify and hold Lessor harmless against all loss, cost,
expense or damage, including reasonable attorneys' fees, resulting from any
contest under this Section 9.4. If Lessee conducts a contest pursuant to the
provisions of this Section 9.4, at Lessee's request Lessor shall cooperate by
bringing in its name or joining in any proceeding to protest the amount,
application or validity of any such Enactment and executing all necessary
documents that such party shall approve in its reasonable discretion in
connection with any such proceeding. Lessor shall not settle any such proceeding
under this Section 9.4 without the prior
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written approval of Lessee, which shall not be unreasonably withheld.
Section 9.4 Personal Property Taxes.
1 Lessee shall pay prior to delinquency all taxes assessed
against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Lessee contained in the Premises or elsewhere. When
possible, Lessee shall cause said trade fixtures, furnishings, equipment and all
other personal property to be assessed and billed separately from the real
property of Lessor.
2 If any of Lessee's said personal property shall be assessed
with Lessor's real property, Lessee shall pay Lessor the taxes attributable to
Lessee within thirty (30) days after receipt of a written statement setting
forth the taxes applicable to Lessee's property.
3 If Lessee shall fail to pay any such taxes, Lessor shall
have the right to pay the same, in which case Lessee shall repay such amount to
Lessor with Lessee's next rent installment together with interest at the rate of
ten percent (10%) per year.
ARTICLE 24874
UTILITIES
Lessee shall pay prior to delinquency throughout the Term the cost of
water, gas, heating, cooling, sewer, telephone, electricity, garbage, air
conditioning and ventilation, janitorial service, landscaping, and all other
materials and utilities supplied to the Premises. Lessor, at Lessor's cost,
shall provide for Lessee separate utility meters to each Building.
ARTICLE 24875
ASSIGNMENT AND SUBLETTING
Section 1 Lessor's Consent Required. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in this Lease or in the Premises,
without Lessor's prior written consent which Lessor shall not unreasonably
withhold, condition or delay. Lessor shall respond to Lessee's request for
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consent hereunder within twenty (20) days following delivery to Lessor of the
documentation specified in Section 11.5 and Lessee's request for Lessor's
consent to such proposed transaction (specifying in reasonable detail the
grounds for any disapproval); if Lessor fails to timely respond to such request,
Lessor shall be deemed to have approved such proposed transaction. Lessor's
consent shall not be deemed unreasonably withheld if consent is denied because
the Lessor reasonably determines that the proposed sublessee is not financially
capable of meeting the sublease obligations as they become due. Any attempted
assignment, transfer, mortgage, encumbrance, or subletting without such consent
shall be void, and shall constitute a breach of this lease. Notwithstanding any
other provision of this Article XI to the contrary, Lessee shall have the right,
without prior notice to or the approval Lessor, to sublease part of the Premises
(up to a maximum of 25% of the rentable area in the Premises) or on
office-by-office basis to Lessee's customers, vendors, or corporate venture
parties.
Section 2 Lessee Affiliate. Without the requirement of Lessor's prior
consent, Lessee may assign or sublet the Premises, or any portion thereof, to
any corporation which controls, is controlled by, or is under common control
with Lessee, or to any corporation resulting from the merger or consolidation
with Lessee, or to any person or entity which acquires all, or substantially all
of the assets of Lessee as a going concern of the business that is being
conducted on the Premises, provided that said assignee assumes, in full, the
obligations of Lessee under this Lease. Any such assignment shall not, in any
way, affect or limit the liability of Lessee under the terms of this Lease.
Section 3 No Release of Lessee. Regardless of Lessor's consent, no
subletting or assignment shall release Lessee of Lessee's obligation or alter
the primary liability of Lessee to pay the rent and to perform all other
obligations to be performed by Lessee hereunder. The acceptance of rent by
Lessor from any other person shall not be deemed consent to any subsequent
assignment or subletting. In the event of default by any assignee of Lessee or
any successor of Lessee, in the performance of any of the terms hereof, provided
that Lessee received a copy of any notice of default issued by Lessor, Lessor
may proceed directly against Lessee without the necessity of exhausting remedies
against said assignee.
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Section 4 Excess Rent. In the event Lessor shall consent to a sublease
or an assignment under the Lease, Lessee shall pay to Lessor with its regularly
scheduled rent payments fifty percent (50%) of all sums collected by Lessee from
a sublessee or assignee which are in excess of the rent then owing pursuant to
Article IV above, but only after deducting therefrom the reasonable costs
incurred by Lessee associated with such assignment or subletting (including,
without limitation, reasonable attorneys' fees and costs, reasonable brokers'
commissions, the cost of marketing and marketing materials, and the costs of
design and construction of improvements for any subtenant or assignee as well as
improvements necessary to separately demise any subtenant's space (and code work
associated therewith)).
Section 5 Requirements. Lessee's written request to Lessor for consent
to an assignment or subletting shall be accompanied by (a) the name and legal
composition of the proposed sublessee; (b) the nature of the proposed
sublessee's business to be carried on in the Premises; (c) the material terms
and provisions of the proposed sublease; (d) pertinent financial information
concerning the proposed sublessee, including a balance sheet and income
statement for the two (2) most recent fiscal years, and (e) other reasonable
information as Lessor may, within seven (7) days following receipt of Lessee's
request, request concerning the proposed sublessee.
ARTICLE 24876
DEFAULTS; REMEDIES
Section 1 Defaults. The occurrence of any one or more of the following
events shall constitute a material default and breach of this Lease by Lessee:
1 The failure by Lessee to make any payment of rent or any
other payment required to be made by Lessee hereunder, as and when due, where
such failure shall continue for a period of seven (7) days after written notice
from Lessor to Lessee. In the event that Lessor serves Lessee with a Notice To
Pay Rent or Quit pursuant to applicable Unlawful Detainer statutes such Notice
To Pay Rent or Quit shall constitute notice required by this Section;
2 The failure by Lessee to observe or perform any of the
covenants, conditions or provisions of this
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Lease to be observed or performed by Lessee, other than described in paragraph
(b) above, where such failure shall continue for a period of thirty (30) days
after written notice hereof from Lessor to Lessee; provided, however, that if
the nature of Lessee's default is such that more than thirty (30) days are
reasonably required for its cure, then Lessee shall not be deemed to be in
default if Lessee commences such cure within said thirty (30) day period and
thereafter diligently prosecutes such cure to completion;
3 (a) The making by Lessee of any general ar rangement or
assignment for the benefit of creditors; (ii) Lessee files a voluntary petition
in bankruptcy under Title 11 U.S.C. or an involuntary petition is filed against
Lessee and remains uncontested for a period of sixty (60) days; (iii) the
appointment of a trustee or receiver to take possession of substantially all of
Lessee's assets located at the Premises or of Lessee's interest in this Lease,
or (iv) the attachment, execution or other judicial seizure of substantially all
of Lessee's assets located at the Premises or of Lessee's interest in this
Lease. Provided, however, in the event that any provision of this Section
13.01(d) is contrary to any applicable law, such provision shall be of no force
or effect;
(d) The discovery by Lessor that any financial statement given
to Lessor by Lessee, any assignee of Lessee, any successor in interest of Lessee
or any guarantor of Lessee's obligation hereunder, and any of them, was
materially false.
Section 2 Remedies. In the event of any such material default or breach
by Lessee, Lessor may at any time thereafter, with or without notice or demand
and without limiting Lessor in the exercise of any right or remedy which Lessor
may have by reason of such default or breach:
1 Terminate Lessee's right to possession of the Premises by
any lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession of the Premises to Lessor. In such event Lessor
shall be entitled to recover from Lessee all damages incurred by Lessor by
reason of Lessee's default including, but not limited to, (i) the cost of
recovering possession of the Premises and reasonable attorneys' fees related
thereto; (ii) the worth, at the time of
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the award, of the unpaid rent that had been earned at the time of termination of
the Lease; (iii) the worth, at the time of the award, of the amount by which the
unpaid rent that would have been earned after the date of termination of this
Lease until the time of award exceeds the amount of the loss of rent that Lessee
proves could have been reasonably avoided; (iv) the worth, at the time of the
award, of the amount by which the unpaid rent for the balance of the term after
the time of award exceeds the amount of the loss of rent that Lessee proves
could have been reasonably avoided.
2 Maintain Lessee's right to possession in which case this
Lease shall continue in effect whether or not Lessee shall have abandoned the
Premises. In such event Lessor shall be entitled to enforce all of Lessor's
rights and remedies under this Lease, including the right to recover the rent as
it becomes due hereunder.
3 Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the State of California. Unpaid
installments of rent and other unpaid monetary obligations of Lessee under the
terms of this Lease shall bear interest from the date due at the rate of ten
percent (10%) per year.
4 Lessor agrees at all times to use commercially reasonable
efforts to mitigate its damages in the event of a default on the part of Lessee.
Section 3 Default by Lessor. Lessor shall not be in default unless
Lessor fails to perform obligations required of Lessor within a reasonable time,
but in no event later than thirty (30) days after written notice by Lessee to
Lessor and to the holder of any first mortgage or deed of trust covering the
Premises whose name and address shall have theretofore been furnished to Lessee
in writing, specifying wherein Lessor has failed to perform such obligation;
provided, however, that if the nature of Lessor's obligation is such that more
than thirty (30) days are required for performance then Lessor shall not
be in default if Lessor commences performance within such 30-day period and
thereafter diligently prosecutes the same to completion. In the event Lessor
does not commence performance within the thirty (30) day period provided herein,
Lessee may perform such obligation and will be reimbursed for its expenses by
Lessor together with interest thereon at the rate of ten percent (10%) per year
from the date(s) on which Lessee incurred such costs; provided, however, that if
the parties are in dispute as
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to what constitutes Lessor's obligations under this Lease agreement, any such
dispute shall be resolved by arbitration in a manner identical to that provided
in Section 8.2, above.
Nothing in this Section shall be deemed applicable in the event of
Lessor's delay in delivery of the Premises. In that situation, all rights and
remedies shall be determined under the Work Agreement.
Section 4 Late Charges. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed on
Lessor by the terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or any other sum due from Lessee shall
not be received by Lessor or Lessor's designated agent within seven (7) days
following notice to Lessee that such sum has not been paid when due, Lessee
shall pay to Lessor a late charge equal to five percent (5%) of such overdue
amount. However, in the event that such a notice is sent to the Lessee and the
sum is not paid when due for three (3) months in any twelve (12) month period,
then thereafter no notice shall be required and the late charge shall thereafter
apply to any such sum that is not received by Lessor within seven (7) days after
its due date. Late charges shall continue to apply hereunder without notice, as
described in the immediately preceding sentence, and no notice shall again be
required under this Section until all sums payable by Lessee to Lessor under
this Lease have been paid on time for a period of twelve (12) consecutive
months. The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late payment by
Lessee. Acceptance of any such late charge by Lessor shall in no event
constitute a waiver of Lessee's default with respect to such overdue amount, nor
prevent Lessor from exercising any of the other rights and remedies granted
hereunder.
In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of rent, then rent shall
automatically become due and payable quarterly in advance, rather than monthly,
notwithstanding section 4.1 or any other provision of this Lease to the
contrary. These quarterly installments shall
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continue to apply hereunder without notice until all sums payable by Lessee to
Lessor under this Lease have been paid on time for a period of twelve (12)
consecutive months.
Section 12.5. Impounds. In the event that a late charge is payable
hereunder, whether or not collected, for three (3) installments of rent or any
other monetary obligation of Lessee under the terms of this Lease within a
twelve (12) month period, Lessee shall pay to Lessor, if Lessor shall so
request, in addition to any other payments required under this Lease, a monthly
advance installment, payable at the same time as the monthly rent, as estimated
by Lessor, for real property tax and insurance expenses on the Premises which
are payable by Lessee under the terms of this Lease. Such fund shall be
established to insure payment when due, before delinquency, of any or all such
real property taxes and insurance premiums. If the amounts paid to Lessor by
Lessee under the provisions of this paragraph are insufficient to discharge the
obligations of Lessee to pay such real property taxes and insurance premiums as
the same become due, Lessee shall pay to Lessor, upon Lessor's demand, such
additional sums necessary to pay such obligations. All moneys paid to Lessor
under this paragraph may be intermingled with other moneys of Lessor and shall
not bear interest. In the event of a default in the obligations of Lessee to
perform under this Lease, then any balance re maining from funds paid to Lessor
under the provisions of this paragraph may, at the option of Lessor, be applied
to the payment of any monetary default of Lessee in lieu of being applied to the
payment of real property tax and insurance premiums.
ARTICLE 24877
CONDEMNATION OF PREMISES.
Section 1 Total Condemnation. If the entire Premises,
whether by exercise of governmental power or the sale or
transfer by Lessor to any condemnor under threat of condemnation or while
proceedings for condemnation are pending, at any time during the Term, shall be
taken by condemnation such that there does not remain a portion suitable for
occupation and use for Lessee's business purposes, this Lease shall then
terminate as of the date transfer of possession is required. Upon such
condemnation, all rent shall be paid up to the date transfer of possession is
required, and Lessee shall have
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no claim against Lessor for the value of the unexpired term of this Lease.
Lessor shall notify Lessee promptly after learning of any proposed condemnation
and Lessor shall also notify Lessee of the actual date of condemnation promptly
after learning the date thereof.
Section 2 Partial Condemnation. If any portion of the Premises is taken
by condemnation during the Term, whether by exercise of governmental power or
the sale or transfer by Lessor to a condemnor under threat of condemnation or
while proceedings for condemnation are pending, this Lease shall remain in full
force and effect except that in the event a partial taking leaves the Premises
unfit for normal and proper conduct of the business of Lessee, then Lessee shall
have the right to terminate this Lease effective upon the date transfer of
possession is required. Lessee may also terminate this Lease if, due to a
condemnation, the parking spaces that are to be provided to Lessee under this
Lease are permanently reduced, or rendered permanently unavailable or
inaccessible, such that the number of parking spaces per 1,000 square feet in
the Premises is less than three (3) and, within one (1) year after the date of
such condemnation, Lessor has not provided to Lessee reasonably proximate
alternative parking such that the total number of parking spaces available to
Lessee is greater than three (3.0) parking spaces per 1,000 square feet in the
Premises. Moreover, Lessor shall have the right to terminate this Lease
effective on the date transfer of possession is required if more than
thirty-three percent (33%) of the total square footage of the Premises is taken
by condemnation. Lessee and Lessor may elect to exercise their respective rights
to terminate this Lease pursuant to this Section by serving written notice to
the other within thirty (30) days of their receipt of notice of condemnation.
All rent shall be paid up to the date of termination, and Lessee shall have no
claim against Lessor for the Lease value of any unexpired term of this Lease. If
this Lease shall not be canceled, the rent after such partial taking shall be
that percentage of the adjusted base rent specified herein, equal to the
percentage which the square footage of the untaken part of the Premises,
immediately after the taking, bears to the square footage of the entire Premises
immediately before the taking. If Lessee's continued use of the Premises
requires alterations and repair by reason of a partial taking, and the
condemnation award to Lessor does not include a specific award for such repair
or alterations, then all such alterations and repair shall be made by Lessee at
Lessee's expense.
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Section 3 Award to Lessee. In the event of any condemnation, whether
total or partial, Lessee shall have the right to claim and recover from the
condemning authority such compensation as may be separately awarded, or
recoverable by Lessee as part of any single award, for loss of its business
fixtures, or equipment belonging to Lessee immediately prior to the condemnation
or the interruption of or damage to Lessee's business. The balance of any
condemnation award shall belong to Lessor, and Lessee shall have no further
right to recover from Lessor or the condemning authority for any additional
claims arising out of such taking.
Section 4 Restoration. If this Lease is not terminated as provided in
Section 13.1 or 13.2 above, following a condemnation, Lessor, at its expense,
shall diligently proceed to repair and restore the Premises (including the
Tenant Improvements) to substantially their former condition (to the extent
permitted by the then applicable codes, laws and regulations) and/or repair and
restore the Building(s) (including the installation of demising walls and
Building systems) to an architecturally complete and economically viable
office/R&D Building, such that the balance of the Premises remaining after such
condemnation is suitable for Lessee's business purposes; provided, however, that
Lessor's obligations to so repair and restore shall be limited to the amount of
any award received by Lessor. In no event shall Lessor have any obligation to
repair or replace any of Lessee's personal property or trade fixtures.
ARTICLE 24878
ENTRY BY LESSOR
Lessee shall permit Lessor and its agents to enter the Premises at all
reasonable times and upon at least twenty-four (24) hours' advance notice to
Lessee (except in the case of emergencies, in which case no advance notice is
required) for any of the following purposes: to inspect the Premises; to
maintain a Building in accordance with and as required by the provisions of this
Lease; to make such repairs to the Premises as Lessor is obligated to make, or
may elect to make under the terms of this Lease; to show the Premises and post
"For Lease" signs for the purposes of reletting during the last ninety (90) days
of the Term; to show the Premises as part of a prospective sale by Lessor or to
post notices of non-responsibility.
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Provided that any such entry is carried out in accordance with the terms and
conditions of this Lease and that Lessor at all times uses best efforts in any
such entry to cause the least possible disturbance to Lessee's business
operations carried out within the Premises, Lessor shall have such right of
entry without any rebate of rent to Lessee for any loss of occupancy or quiet
enjoyment of the Premises thereby occasioned.
Lessor recognizes that a certain portion of the Premises is deemed by
Lessee to be "secure" areas to which access may be restricted. Should Lessor
desire to enter into and upon portions of the Premises designated as "secure"
areas by Lessee, Lessor shall so notify Lessee and Lessee shall use its best
efforts to make access to such portions of the Premises available to Lessor
within a reasonable time thereafter. Notwithstanding anything to the contrary
contained herein, Lessor shall be accompanied by an employee of Lessee, and
shall not unreasonably interfere with Lessee's use upon any such entry.
ARTICLE 24879
ESTOPPEL CERTIFICATE
1 Each party hereto shall at any time upon not less than
fifteen (15) days' prior written notice from the other execute, acknowledge and
deliver to the requesting party a statement in writing (i) certifying that this
Lease is unmodified and in full force and effect (or, if modified, stating the
nature of such modification and certifying that this Lease, as so modified, is
in full force and effect) and the date to which the rent and other charges are
paid in advance, if any, and (ii) acknowledging that there are not, to the
certifying party's knowledge, any uncured defaults on the part of the other
party hereunder, or specifying such defaults if any are claimed. Any such
statement executed by Lessee may be conclusively relied upon by any prospective
purchaser or encumbrancer of the Premises and any such statement executed by
Lessor may be relied upon by any entity which proposes to extend financing to
Lessee or to purchase all or a substantial portion of the assets or outstanding
voting stock of Lessee.
2 A party's failure to deliver such statement within such time
shall be conclusive upon such party (i) that this Lease is in full force and
effect, without modification except as may be represented by the other
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party, (ii) that there are no uncured defaults in the other party's performance,
and (iii) that not more than one month's rent has been paid in advance; or such
failure may be considered by the other party as a default by the failing party
under this Lease.
ARTICLE 24880
LESSOR'S LIABILITY
The term "Lessor" as used herein shall mean only the owner or owners at
the time in question of the fee title of the Real Property and the Improvements.
In the event of any transfer of such title or interest, and the assumption by
the transferee of the obligations of the Lessor hereunder pursuant to a writing
in form and substance reasonably satisfactory to Lessee (except in the case of a
transfer arising out of a foreclosure of a deed of trust secured by the Premises
or a transfer to a mortgagee, in which case no such assumption is required),
Lessor herein named (and in case of any subsequent transfers then the grantor)
shall be relieved as of the effective date of such transfer of all liability as
respects Lessor's obligations arising thereafter to be performed, provided that
any funds in the hands of Lessor or the then grantor at the time of such
transfer, in which Lessee has an interest, shall be delivered to the grantee.
The obligations contained in this Lease to be performed by Lessor shall, subject
as aforesaid, be binding on Lessor's successors and assigns, only during their
respective periods of ownership.
ARTICLE 24881
EXPIRATION ON TERMINATION
Section 1 Surrender of Possession. At the expiration of the Term,
Lessee agrees to deliver up and surrender to Lessor possession of the Premises
and all improvements thereon, in good order and condition, excepting only
ordinary wear and tear and damage due to casualty and condemnation. Upon
termination of this Lease, Lessor may reenter the Premises and remove all
persons and property therefrom. If Lessee shall fail to remove any effects which
it is entitled to remove from the Premises upon the termination of this Lease,
for any cause whatsoever, Lessor, at its option, may remove the same and store
or dispose of them, and Lessee agrees to pay to Lessor on demand any and all
reasonable expenses actually incurred
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in such removal and in making the Premises free from all dirt, litter, debris,
and obstruction, including all storage and insurance charges. If the Premises
are not surrendered at the end of the Term, Lessee shall indemnify Lessor
against loss or liability resulting solely from delay by Lessee in so
surrendering the Premises, including, without limitation, actual damages for
lost rents.
Section 2 Holding Over. If Lessee, with Lessor's consent, remains in
possession of the Premises after expiration of the term and if Lessor and Lessee
have not executed an express written agreement as to such holding over, then
such occupancy shall be a tenancy from month to month, at a monthly rental
equivalent to one hundred fifty percent (150%) of the monthly Base Rent in
effect immediately prior to such expiration, such payments to be made as herein
provided. In the event of such holding over all of the terms of this Lease
including the payment of all charges owing hereunder other than Base Rent shall
remain in force and effect on said month to month basis.
ARTICLE 24882
HAZARDOUS OR TOXIC MATERIALS
Section 1 Lessee's Obligations. Lessee shall not bring, allow, use, or
permit upon the Premises, or generate or create at or emit or dispose from the
Premises any toxic or hazardous gaseous, liquid, or solid materials, or waste
("Toxic Materials"), including, without limitation, material or substance having
characteristics of ignitability, corrosivity, reactivity, or extraction
procedure toxicity or substances or materials which are listed on any of the
Environmental Protection Agency's lists of hazardous wastes or which are
identified in Sections 66680 through 66685 of Title 22 of the California Code of
Regulations as the same may be amended from time to time. Subject to the
exclusions set forth in Section 18.2, below, Lessee shall indemnify and hold
Lessor harmless from any claims, liabilities, costs, or expenses incurred or
suffered by Lessor arising from such bringing, allowing, using, permitting,
generating, creating, or emitting or disposing of Toxic Materials. Lessee's
indemnification and hold harmless obligations include, without limitation, all
of the following: (i) claims, liabilities, costs or expenses resulting from or
based upon administrative, judicial (civil or criminal), or other action, legal
or equitable, brought by any private or public person under common law or any
Federal,
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State, County or Municipal law, ordinance or regulation, (ii) claims,
liabilities, costs, or expenses pertaining to the cleanup or containment of
Toxic Materials, the identification of the pollutants in the Toxic Materials,
the identification of the scope of any environmental contamination, the removal
of pollutants from soils, the provision of an alternative public drinking water
source, or the long term monitoring of ground water and surface waters, and
(iii) all costs of defending such claims. Lessee shall comply, at its sole cost,
with all laws pertaining to such Toxic Materials. Lessee's hold harmless and
indemnity obligations hereunder shall survive the expiration or termination of
this Lease.
Section 2 Lessor's Obligations. Lessor represents and warrants that, to
the best of its knowledge, there are no Toxic Materials in or on the Premises as
of the Commencement Date which would require notification or reporting to any
governmental regulatory agency. Lessor shall indemnify Lessee and hold Lessee
harmless from any claims, liabilities, costs, or expenses incurred or suffered
by Lessee arising from the existence of Toxic Materials on the Premises prior to
or on the Commencement Date, as well as those arising from Lessor's bringing,
allowing, using or permitting upon the Premises or the real property surrounding
the Premises, or generating, creating at or disposing from or on the Premises
any Toxic Materials. Lessor's indemnification and hold harmless obligations
include, without limitation, all of the following: (i) claims, liabilities,
costs or expenses resulting from or based upon administrative, judicial (civil
or criminal), or other action, legal or equitable, brought by any private or
public person under common law or any Federal, State, County or Municipal law,
ordinance or regulation, (ii) claims, liabilities, costs, or expenses pertaining
to the cleanup or containment of Toxic Materials, the identification of the
pollutants in the Toxic Materials, the identification of the scope of any
environmental contamination, the removal of pollutants from soils, the provision
of an alternative public drinking water source, or the long term monitoring of
ground water and surface waters, and (iii) all costs of defending such claims.
Lessor shall comply, at its sole cost, with all laws pertaining to such Toxic
Materials, except to the extent that such Toxic Materials have been brought,
allowed, used, or permitted on the Premises by Lessee, or by Lessee's
Representatives. Lessor's hold harmless and indemnity obligations hereunder
shall survive the expiration or termination of this Lease.
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ARTICLE 24883
RIGHT OF FIRST REFUSAL TO LEASE ADDITIONAL SPACE
While this Lease is in full force and effect with no default by the
Lessee, and while the initial Lessor Tarigo-Paul holds title to and ownership of
the "Argo Boeing Project" buildings, and while either the initial Lessor
Tarigo-Paul or Synopsys, Inc. holds title to and ownership of the Premises, and
subject to any pre-existing third party rights, the Lessee shall have the right
of first refusal, as set forth herein, to lease any space located in the "Argo
Boeing Project" buildings located at _________ Mary Avenue, Sunnyvale,
California, that becomes available for lease before Lessor leases such space to
any third party. In the event that such space becomes available for lease, and
Lessor has received a bona fide offer acceptable to Lessor for the lease of such
space (an "Offer"), Lessor shall notify Lessee in writing of such Offer (such
notice to contain a reasonably detailed description of the space and a true and
correct copy of the Offer (with the name of the offering party deleted if Lessor
so desires)) (the "Offer Notice"), and Lessee shall have ten (10) business days
from the date of delivery of such Offer Notice to notify Lessor in writing
whether or not Lessee desires to lease such space on the same terms and
conditions as set forth in the Offer. If Lessee does not notify Lessor in
writing within such ten day period of Lessee's desire to lease such space on the
same terms and conditions as set forth in the Offer, then Lessor shall be free
to lease the space to any third party on such terms and conditions as set forth
in the Offer, and Lessee shall have no other rights in or to such space until
the third party lessee vacates such space and it again becomes available to
lease; provided, however, that if Lessor fails, within six (6) months following
the date of the Offer Notice to lease the space in question to a third party on
the terms and conditions set forth in the Offer, or if Lessor at any time after
delivering the Offer Notice to Lessee intends to enter into a lease of all or
any portion of the space that is the subject of the Offer Notice on terms more
favorable to the tenant thereunder than the terms set forth in the Offer, Lessor
shall be obligated to deliver a new Offer Notice to Lessee.
Notwithstanding anything to the contrary above, this right of first
refusal shall not apply at any time when the Lessee is in default hereunder
(beyond the expiration of an applicable grace period), nor when Lessee is
subject to the quarterly installment payment provisions set forth in the second
paragraph of Section 12.4, above. For these purposes, Lessor may also require
that Lessee's financial
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condition be at least as strong as the financial condition of the third party
making the bona fide offer; if Lessee's financial condition is materially weaker
than the financial condition of said third party, Lessee's right hereunder shall
be the right to lease such space at a rate equal to the greater of (i) the rate
offered to such third party and (ii) the fair market rate applicable for the
leasing of such space to a tenant of Lessee's financial strength, as reasonably
determined in good faith by Lessee and Lessor. If the parties cannot agree upon
such fair market rent within five (5) business days following Lessee's exercise
of the right set forth herein, Lessor shall have the right to lease such space
to said third party. Furthermore, the applicability of this right of first
refusal is conditioned upon the approval of any lender to the Premises
requesting or requiring approval of Lessor's leases.
ARTICLE 24884
RIGHT OF FIRST NOTICE REGARDING THE SALE OF THE
PREMISES OR "ARGO BOEING PROJECT"
Section 1. Right of First Notice Regarding the Premises. While this
Lease is in full force and effect with no default by the Lessee, and while the
initial Lessor Tarigo-Paul holds title to and ownership of the Premises, and
subject to any pre-existing third party rights, if Lessor lists the Premises (or
any portion thereof) for sale, Lessor shall give first notice ("First Notice")
to Lessee of Lessor's intention to sell the Premises (or such portion of the
Premises being listed for sale) and the purchase price and terms on which the
Premises (or such portion) are listed for sale. For thirty (30) days after such
First Notice is given to Lessee, Lessee shall have the right to purchase
Lessor's entire interest in the Premises (or Lessor's entire interest in such
portion being listed for sale) on the terms stated in the First Notice, by
giving written notice to Lessor of Lessee's intention to so purchase on or
before said thirtieth (30th) day. If Lessee does not notify Lessor in writing
within such 30 day period of Lessee's desire to purchase the Premises (or such
portion) on the terms and conditions set forth in the First Notice, then Lessor
shall be free to sell the Premises (or such portion) to any third party.
Notwithstanding anything to the contrary above, this right of first
notice shall not apply at any time when the Lessee is in default hereunder
(beyond the expiration of an applicable grace period), nor when Lessee is
subject to the quarterly installment payment provisions set forth in the second
paragraph of Section 12.4, above.
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Section 2. Right of First Notice Regarding the Argo Boeing Project.
While this Lease is in full force and effect with no default by the Lessee, and
while the initial Lessor Tarigo-Paul holds title to and ownership of the "Argo
Boeing Project" buildings (the "Project"), and while either the initial Lessor
Tarigo-Paul or Synopsys, Inc. holds title to and ownership of the Premises, and
subject to any pre-existing third party rights, if Lessor lists the Project (or
any portion of the Project) for sale, Lessor shall give first notice ("First
Notice") to Lessee of Lessor's intention to sell the Project (or such portion of
the Project being listed for sale) and the purchase price and terms on which the
Project (or such portion) is listed for sale. For thirty (30) days after such
First Notice is given to Lessee, Lessee shall have the right to purchase
Lessor's entire interest in the Project (or Lessor's entire interest in such
portion being listed for sale) on the terms stated in the First Notice, by
giving written notice to Lessor of Lessee's intention to so purchase on or
before said thirtieth (30th) day. If Lessee does not notify Lessor in writing
within such 30 day period of Lessee's desire to purchase the Project (or such
portion) on the terms and conditions set forth in the First Notice, then Lessor
shall be free to sell the Project (or such portion) to any third party.
Notwithstanding anything to the contrary above, this right of first
notice shall not apply at any time when the Lessee is in default hereunder
(beyond the expiration of an applicable grace period), nor when Lessee is
subject to the quarterly installment payment provisions set forth in the second
paragraph of Section 12.4, above.
ARTICLE 24885
MISCELLANEOUS PROVISIONS
Section 1 Severability. The invalidity of any provision of this Lease
as determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
Section 2 Interest on Past-due Obligations. Except as expressly herein
provided, any amount due to a party hereto not paid when due shall bear interest
at the rate of ten percent (10%) per year. Payment of such interest shall not
excuse or cure any default by the paying party under this Lease, provided,
however, that interest shall not be payable on late charges incurred by Lessee
nor on any amounts upon which late charges are paid by Lessee.
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Section 3 Time of Essence. Time is of the essence in the performance of
all obligations under this Lease.
Section 4 Additional Rent. Any monetary obligations of Lessee to Lessor
under the terms of this Lease shall be deemed to be rent.
Section 5 Incorporation of Prior Agreements; Amendments and Exhibits.
This Lease (including Exhibits "A", "B", "C", and "D") contains all agreements
of the parties with respect to any matter mentioned herein. No prior agreement
or understanding pertaining to any such matter shall be effective. This Lease
may be modified in writing only, signed by the parties in interest at the time
of the modification. Except as otherwise stated in this Lease, Lessee hereby
acknowledges that neither Lessor nor any employees or agents of the Lessor has
made any oral or written warranties or representations to Lessee relative to the
condition or use by Lessee of said Premises and Lessee acknowledges that Lessee
assumes all responsibility regarding the Occupational Safety Health Act, the
legal use and adaptability of the Premises and the compliance thereof with all
applicable laws and regulations in effect during the term of this Lease except
as otherwise specifically stated in this Lease.
Section 6 Notices. Any notice required or permitted to be given
hereunder shall be in writing and may be given by personal delivery or certified
mail (postage prepaid, return receipt requested), and shall be addressed to
Lessee or to Lessor at the address noted below the signature of the respective
parties, as the case may be. Notices shall be deemed given on the date of
delivery (or the date delivery is refused by the addressee). Either party may by
notice to the other specify a different address for notice purposes. A copy of
all notices required or permitted to be given to Lessor hereunder shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate by notice to Lessee.
Section 7 Waivers. No waiver by a party hereto of any provision hereof
shall be deemed a waiver of any other provision hereof or of any subsequent
breach by the other party of the same or any other provisions. The consent by a
party hereto, or approval of, any act shall not be deemed to render unnecessary
the obtaining of such party's consent to or approval of any subsequent act by
the other party. The acceptance of rent hereunder by Lessor shall not be a
waiver of any
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preceding breach by Lessee of any provision hereof, other than the failure of
Lessee to pay the particular rent so accepted, regardless of Lessor's knowledge
of such preceding breach at the time of acceptance of such rent.
Section 8 Recording. Lessor or Lessee shall, promptly following the
execution of this Lease, execute, acknowledge, and deliver to the other party a
"short form" memorandum of this Lease, which either party may record at its
option.
Section 9 Cumulative Remedies. No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
Section 10 Covenants and Conditions. Each provision of this Lease
performable by Lessee shall be deemed both a covenant and a condition.
Section 11 Binding Effect; Choice of Law; Venue. Subject to any
provisions hereof restricting assignment or subletting by Lessee and subject to
the provisions of Article XVII, this Lease shall bind the parties, their
personal representatives, successors and assigns. This Lease shall be governed
by the laws of the State of California. Venue for any action or proceeding
brought to enforce or defend this agreement, and for any other purpose
hereunder, shall be Santa Clara County.
Section 12 Subordination of Leasehold. Lessee agrees that this Lease is
and shall be, at all times, subject and subordinate to the lien of any mortgage
or other encumbrances which Lessor may create against the Premises including all
renewals, replacements and extensions thereof; provided, however, that the
holder of any such mortgage or encumbrance agrees in writing that regardless of
any default under any such mortgage or encumbrance or any sale of the Premises
under such mortgage, so long as Lessee performs all covenants and conditions of
this Lease and continues to make all payments hereunder, this Lease and Lessee's
possession and rights hereunder shall not be disturbed by the mortgagee or
anyone claiming under or through such mortgagee. Except as provided in this
Section below regarding pre-construction financing , Lessee shall not be
required to execute any documents subordinating this Lease unless the lender
agrees to enter into a recognition agreement providing that the Lease will not
be terminated if Lessee is not in default following a
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foreclosure, and recognizing all of Lessee's rights under the Lease.
Notwithstanding the above, Lessee agrees that if Lessor obtains a
pre-construction loan secured by the Premises in an amount not to exceed Three
Million Dollars ($3,000,000), this Lease shall be subject and subordinate to the
lien of such mortgage or encumbrance without the necessity of the Lender
executing a nondisturbance or recognition agreement; provided, however, either
that such loan is repaid (and this Lease is then no longer subject to such loan)
upon Lessor's obtaining the construction financing, or such pre-construction
lender agrees, at the time that the construction loan is obtained, to execute a
nondisturbance or recognition agreement with respect to this Lease. Lessee shall
have the right to record a Request For Notice Of Default with respect to such
pre-construction loan.
Section 13 Attorneys' Fees. Except as expressly set forth herein, if
any action or proceeding in law or in equity or any arbitration proceeding is
instituted by either party for damages or possession of the Premises or both,
for an alleged breach of any obligation of either party under this Lease, to
recover rent, to terminate the tenancy of Lessee at the Premises, or to enforce,
protect, or establish any right or remedy of either party, the prevailing party
in such action or proceeding shall be entitled to recover as part of such action
or proceeding its reasonable attorneys' fees, expert witness fees, and court
costs as incurred, or as may be fixed by the court or jury.
Section 14 Voluntary Surrender or Merger. The voluntary or other
surrender of this Lease by Lessee, or a mutual cancellation thereof, or a
termination by Lessor, shall not work a merger, and shall, at the option of
Lessor, terminate all or any existing subtenancies or may, at the option of
Lessor, operate as an assignment to Lessor of any or all of such subtenancies.
Section 15 Quiet Possession. Upon Lessee paying the rent for the
Premises and observing and performing all of the covenants, conditions and
provisions on Lessee's part to be observed and performed hereunder, Lessee shall
have quiet possession of the Premises for the entire Term subject to all of the
provisions of this Lease. The individuals executing this Lease on behalf of
Lessor
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represent and warrant to Lessee that they are fully authorized and legally
capable of executing this Lease on behalf of Lessor that Lessor holds fee simple
title to the Real Property as of the date of Lessor's execution of this Lease,
and that such execution is binding upon all parties holding an ownership
interest in the Premises.
Section 16. Easements. Lessor reserves to itself the right, from time
to time, to grant such easements, rights and dedications that Lessor deems
necessary or desirable, and to cause the recordation of Parcel Maps and
restrictions, so long as such easements, rights, dedications, Maps and
restrictions do not unreasonably interfere with the use of or access to the
Premises by Lessee. Lessee shall sign any of the aforementioned documents upon
request of Lessor and failure to do so shall constitute a material breach of
this Lease.
Section 17. Corporate Authority. Each individual executing this Lease
on behalf of a corporation represents and warrants that he or she is duly
authorized to execute and deliver this Lease on behalf of the corporation in
accordance with a duly adopted resolution of the Board of Directors of the
corporation, and that this Lease is binding upon said corporation in accordance
with its terms.
Section 18. Delays for Cause. In any case where either party hereto is
required to do any act, delays caused by or resulting from Acts of God, war,
civil commotion, fire, flood or other casualty, industry-wide labor
difficulties, unforeseeable shortages of labor, materials or equipment,
government regulations, unusually severe weather, or other causes beyond such
party's reasonable control shall not be counted in determining the time during
which work shall be completed, whether such time be designated by a fixed date,
a fixed time or "a reasonable time", and such time shall be deemed to be
extended by the period of such delay.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED
AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS
LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE
43
<PAGE> 44
COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND
LESSEE WITH RESPECT TO THE PREMISES.
Executed at ___________________, California, on January ___, 1996.
LESSOR: Address:
Tarigo-Paul, a California c/o Jay Paul Company
Limited Partnership 1093 South Green Valley
Road
Watsonville, CA 95076
By: ___________________________
Jay Paul, General Partner
LESSEE:
Synopsys, Inc., a Delaware 700 East Middlefield Road
corporation Mountain View, CA 94043-
4033
Attn: Director of Facilities
By:________________________ With a copy to:
Sally DeStefano, Vice- 700 East Middlefield Road
President, Human Resources Mountain View, CA
94043-4033
Attn: Legal Department
44
<PAGE> 45
EXHIBIT "A"
[Site Plan]
EXHIBIT "B"
[Plans and Specifications for the
construction of the shell buildings]
45
<PAGE> 46
EXHIBIT "C"
WORK AGREEMENT FOR CONSTRUCTION OF PREMISES
This Work Agreement is attached as Exhibit C to and made a
part of that certain Lease dated January 2, 1996, by and between Tarigo-Paul, a
California Limited Partnership ("Lessor") and SYNOPSYS, INC. ("Lessee") (the
"Lease"). Capitalized terms used but not defined herein shall have the meaning
given them in the Lease, and where the terms of this Work Agreement and the
terms of the Lease conflict, the terms of the Lease shall control. This Work
Agreement will confirm the agreement of Lessor and Lessee relative to
construction responsibilities regarding the shell of the Buildings and the
interior improvements to be constructed therein.
I. General. Initially, pursuant to the provisions of Section II below,
Lessor shall construct the shell and core (the "Shell") of the Buildings on the
Real Property as well as the Site Improvements (i.e., all exterior improvements
to be constructed on the Premises, including, without limitation, landscaping,
parking areas [including striping and paving] curbs and curb cuts, gutters,
drainage systems, irrigation systems, underground utilities, walkways,
sidewalks, driveways, fountains, grading and entrances) pursuant to a design and
level of quality which is consistent with the design and quality of existing
buildings located at the Argo Boeing Project in the vicinity of the Premises.
Lessor's responsibility with respect to the cost of the design and construction
of the Shell of each Building and the Site Improvements is as set forth in
Exhibit D attached to the Lease. Following delivery of the Shell of each
Building, Lessee shall construct the Tenant Improvements in the Buildings
pursuant to the terms of Section III below.
II. Design and Construction of Building Shells and Site Improvements.
A. Design.
1. Building Shell. Lessor shall, at its own expense,
provide Lessee with the opportunity to work with Lessor's qualified Structural
and Architectural Engineers ("Lessor's Designers") in the preparation of
complete, detailed plans and specifications for all
46
<PAGE> 47
plumbing, electrical, heating and air conditioning, plans regarding the
construction of the Building Shells, including, without limitation, all of the
items specified in Exhibit D attached hereto. The final design of each Shell
shall be subject to Lessee's prior review and written approval, which shall not
be unreasonably withheld, conditioned or delayed. Within ten (10) days following
Lessor's delivery of such draft plans and specifications, Lessee shall provide
Lessor with Lessee's comments and suggested revisions to such draft plans and
specifications to Lessor and Lessor's Designers. If Lessor agrees with Lessee's
suggested revisions (such agreement not to be unreasonably withheld) and (unless
otherwise mutually agreed by Lessor and Lessee), such revisions do not increase
Lessor's aggregate cost, Lessor shall cause Lessor's Designers to incorporate
Lessee's comments into such draft plans and specifications. In the event that
Lessee's suggested revisions would cause an increase in Lessor's aggregate cost
of construction of the Buildings, and if Lessee agrees to pay all of such
increased costs, then Lessor shall cause Lessor's Designers to incorporate
Lessee's comments into such draft plans and specifications. The Shell
Construction Documents shall be used by Lessor to obtain the necessary approvals
from the City of Sunnyvale for the use permit for the Premises, and shall be
attached to the Lease Agreement as part of Exhibit "B".
2. Site Improvements. Lessor shall deliver to Lessee
Lessor's Site Improvement Plans, which shall include specifications in detail
for the location of all exterior plants (including type of plant), and the
location, design and materials to be incorporated in all fountains, ponds,
walkways, mezzanines, parking areas, entryways, sidewalks, planters, and
landscaping, and the distribution and design of and specifications for all
underground utilities as well as the proposed sprinkler or irrigation system for
the Premises (the "Site Improvement Plans"). Within ten (10) business days
following Lessor's delivery to Lessee of the proposed Site Improvement Plans,
Lessee shall deliver to Lessor Lessee's proposed revisions and/or comments to
the draft Site Improvement Plans. If Lessor agrees with Lessee's suggested
revisions (such agreement not to be unreasonably withheld) and (unless otherwise
mutually agreed by Lessor and Lessee) such revisions do not increase Lessor's
aggregate cost of the Site Improvements, Lessor shall incorporate Lessee's
comments and/or proposed revisions into the revised Site
47
<PAGE> 48
Improvement Plans (the "Site Improvement Documents"). In the event that Lessee's
suggested revisions would cause an increase in Lessor's aggregate cost of the
Site Improvements, and if Lessee agrees to pay all of such increased costs, then
Lessor shall cause Lessor's Designers to incorporate Lessee's comments into such
draft plans and specifications.
B. Construction. Following both parties' approval of the Shell
Construction Documents and Site Improvement Documents, and after obtaining the
necessary governmental approvals and permits, Lessor shall, at Lessor's sole
cost, construct the Building Shells and Site Improvements in a workmanlike
manner in full compliance with the approved Construction Documents and Site
Improvement Documents therefor, and in full compliance with all applicable laws.
Any material change orders or change directives with respect to the Building
Shells, or Site Improvements shall be subject to the prior written approval of
Lessee, which approval shall not be unreasonably withheld. Lessee may, at its
option, elect to terminate the Lease if following the approval by Lessee of the
Construction Documents, Lessor (i) fails to apply for any permits required for
the construction of the Building Shells, (ii) fails to commence the construction
of the Building Shells within forty-five (45) days following the issuance of
such required permits and approvals or (iii) had so commenced such construction
and thereafter fails to diligently and in good faith pursue reasonable efforts
to complete such construction, which failure has continued for a continuous
period of at least forty-five (45) days; provided, however, that if Lessor shall
be delayed in pursuing and completing such construction by reason of any cause
described in Section 21.18 of the Lease, then such forty-five (45) day periods
may be extended by the amount of any such delay, up to an aggregate of one
hundred eighty (180) days.
C. Delivery of Building Shells. Lessor shall deliver the Shell
Buildings, substantially complete (i.e., with final inspections signed off by
all parties), on or before the Target Delivery Date (February 1, 1997). For each
day beyond the Target Delivery Date that Lessor fails to deliver the Building
Shells, substantially complete, to Lessee, Lessee shall be afforded one day of
rental abatement under the Lease (except to the extent that any such delay is
due to Lessee, i.e., (i) Lessee's failure to timely respond to Lessor's
submission of draft plans and
48
<PAGE> 49
specifications in accordance with the time periods set forth herein, (ii) change
orders requested by Lessee, or (iii) interruptions in construction of the
Building Shell(s) requested by Lessee). Promptly following the actual Delivery
Date for the Building Shells, Lessor, Lessor's Designers and Lessee's
construction representative shall tour the Building Shells and compile a
"punchlist" of any minor items of construction shown in the Construction
Documents which have not been finally completed, the lack of completion of
which, and the work of completion of which, will not interfere with Lessee's
construction and installation of the Tenant Improvements pursuant to the
provisions of Section III below (the "Punchlist"). Lessor shall cause Lessor's
contractor to complete all items shown on such Punchlist as soon as is
reasonably possible. If all such punchlist items have not been substantially
completed within thirty (30) days following the date that such Punchlist is
established, and Lessor collects a penalty for such delay from the contractor
responsible for the delay, then Lessor shall remit such penalty collected from
the contractor to Lessee as liquidated damages for the contractor's failure to
so complete such Punchlist items within such time period.
III. CONSTRUCTION OF TENANT IMPROVEMENTS.
A. Preparation of Plans.
1. Selection of Designer and Engineer. Lessee shall
select an architect or designer ("Designer") and an engineer ("Engineer")
familiar with all applicable laws. The Designer and the Engineer shall be
selected by Lessee subject to Lessor's approval, which approval shall not be
unreasonably withheld, and which approval (or disapproval for reasonable
reasons) shall be given within fifteen (15) business days after Lessee has
submitted the name of the Designer and the Engineer to Lessor. Lessor shall have
the right to attend Lessee's design meetings concerning the design of the Tenant
Improvements.
2. Preparation and Approval of Space Plan.
(a) Designer shall prepare a space plan
showing all walls, corridors, entrances, exits, doors, stairwells, interior
partitions, and the locations of all offices, conference rooms, computer rooms,
kitchens, reception areas, libraries (if any) and file rooms, etc. (the "Space
Plan").
49
<PAGE> 50
(b) Designer shall submit the Space Plan to
Lessor for Lessor's review and approval. Within ten (10) business days after
Lessor receives the Space Plan, Lessor shall either approve or disapprove the
Space Plan for reasonable and material reasons (a "Design Problem") and return
the Space Plan to Lessee. In such event, Lessor shall require, and Lessee shall
make the changes necessary in order to correct the Design Problems and shall
return the Space Plan to Lessor, which Lessor shall approve or disapprove within
five (5) business days after Lessor receives the revised Space Plan (Lessor's
review being limited in scope to the revisions made to the Space Plan in order
to correct any Design Problems previously specified by Lessor). This procedure
shall be repeated until the Space Plan is finally approved by Lessor and written
approval has been delivered to and received by Lessee.
3. Preparation and Approval of Architectural Working
Drawings.
(a) After the Space Plan is approved by
Lessor, Lessee shall submit to Lessor drawings prepared by the Designer
("Architectural Working Drawings") which shall be compatible with the design and
construction of the Building Shells, comply with all laws, be capable of logical
measurement and construction, contain all such information as may be required
for the construction of the Tenant Improvements and the preparation of the
Engineering Drawings (as defined in Paragraph III.A.4 below), and contain all
partition locations, plumbing locations, air conditioning system and duct work,
reflected ceiling plans, office equipment locations, and special security
systems. The Architectural Working Drawings may be submitted in one or more
stages and at one or more times.
(b) Lessor shall approve the Architectural
Working Drawings, or such portion as has from time to time been submitted,
within ten (10) business days after receipt of same or designate by notice given
within such time period to Lessee the specific changes reasonably required to be
made to the Architectural Working Drawings in order to correct any Design
Problem and shall return the Architectural Working Drawings to Lessee. Lessee
shall make the changes necessary in order to correct any such Design Problem and
shall return the Architectural Working Drawings to Lessor, which Lessor
50
<PAGE> 51
shall approve or disapprove within five (5) business days after Lessor receives
the revised Architectural Working Drawings (Lessor's review being limited in
scope to the revisions made to the Architectural Working Drawings in order to
correct any Design problems previously specified by Lessor). This procedure
shall be repeated until all of the Architectural Working Drawings are finally
approved by Lessor and written approval has been delivered to and received by
Lessee.
4. Preparation and Approval of Engineering Drawings.
(a) Concurrently with the development of the
Architectural Working Drawings, Lessee shall prepare and submit to Lessor for
Lessor's review and approval engineering drawings prepared by the Engineer,
showing complete mechanical, electrical, plumbing, HVAC, telecommunication, and
computer cabling plans ("Engineering Drawings"). The Engineering Drawings may be
submitted in one or more stages and at one or more times.
(b) Lessor shall approve the Engineering
Drawings, or such portion as has from time to time been submitted, within ten
(10) business days after receipt of same or designate by notice given within
such time period to Lessee the specific changes reasonably required to be made
to the Engineering Drawings in order to correct any Design Problem, and shall
return the Engineering Drawings to Lessee. Lessee shall make the changes
necessary in order to correct any such Design Problem and shall return the
Engineering Drawings to Lessor, which Lessor shall approve or disapprove within
ten (10) business days after Lessor receives the revised Engineering Drawings
(Lessor's review being limited in scope to the revisions made to the Engineering
Drawings in order to correct any Design Problems previously specified by
Lessor). This procedure shall be repeated until the Engineering Drawings are
finally approved by Lessor and written approval has been delivered to and
received by Lessee.
5. Integration of Working Drawings and Engineering
Drawings Construction Documents.
(a) After Lessor has approved the
Architectural Working Drawings and the Engineering Drawings, Lessee shall cause
the Designer to integrate the approved Architectural Working Drawings with the
approved
51
<PAGE> 52
Engineering Drawings (collectively "Construction Documents") and deliver the
Construction Documents to Lessor.
(b) Lessor shall approve the Construction
Documents within three (3) business days after receipt of same or designate by
notice given within such time period to Lessee the specific changes reasonably
required to be made to the Construction Documents in order to correct any Design
Problem, and shall return the Construction Documents to Lessee. Lessee shall
make the changes necessary in order to correct any such Design Problem and shall
return the Construction Documents to Lessor, which Lessor shall approve or
disapprove within ten (10) business days after Lessor receives the revised
Construction Documents (Lessor's review being limited in scope to the revisions
made to the Construction Documents in order to correct any Design Problems
previously specified by Lessor). This procedure shall be repeated until all of
the Construction Documents are finally approved by Lessor and written approval
has been delivered to and received by Lessee.
6. Lessor's Review Responsibilities. Lessee agrees
and understands that the review of all plans pursuant to this Work Agreement by
Lessor is solely to protect the interests of Lessor in the Buildings and the
Premises, and, Lessor shall not be the guarantor of, nor responsible for, the
correctness or accuracy of any such plans or compliance of such plans with
applicable laws.
B. Selection of Contractor. Lessee shall select a general
contractor ("Contractor") familiar with all laws to construct the Tenant
Improvements. Such Contractor shall be subject to the approval of Lessor, which
approval will not be unreasonably withheld and shall be granted (or refused for
reasonable reasons) within five (5) business days after Lessee's request for
such approval. Lessee may enter into a construction contract with the Contractor
at a mutually agreed upon price, or, at Lessee's election, in the exercise of
its sole discretion, Contractor shall be selected by Lessee pursuant to
competitive bidding. The construction contract shall provide for progress
payments, and Lessee shall pay for the entire cost of the Tenant Improvements in
excess of the Tenant Improvement Allowance (defined below) only after the Tenant
Improvement Allowance has first been exhausted.
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<PAGE> 53
C. Tenant Improvements. The term "Tenant Improvements" shall
mean all improvements shown in the Final Construction Documents.
D. Tenant Improvement Allowance.
1. Amount. Lessor will pay on behalf of Lessee an
amount equal to Thirty Dollars ($30.00) per square foot attributable to the
Premises (the "Tenant Improvement Allowance") expendable for the costs of the
design and construction of the Tenant Improvements, including any amount paid to
a project coordinator, construction consultant, or similar consultant.
2. Disbursement. The Tenant Improvement Allowance
shall be disbursed by Lessor pursuant to requests for disbursement from Lessee
which shall include invoices and conditional lien releases, and which shall be
approved by Lessee and submitted to Lessor for payment by Lessee relating to
completed work. Such payments shall be made monthly in accordance with the
disbursement schedule determined in the construction loan documents. If Lessor,
at any time, fails to timely disburse the Tenant Improvement Allowance pursuant
to this paragraph, Lessee shall have the right to make any required disbursement
to the Contractor (or Lessee's designer or Lessee's suppliers or consultants, as
the case may be) and Lessor shall reimburse Lessee for the amount of such
disbursement, together with interest at the rate of ten percent (10%) per year
after the date of disbursement by Lessee.
E. Change Orders. In the event that Lessee requests any
changes to the Final Plans, Lessor shall not unreasonably withhold its consent
to any such changes, and shall grant its consent to such changes within five (5)
business days after Lessor's receipt of same, provided the changes do not create
a Design Problem. If such changes increase the cost of constructing the Tenant
Improvements, Lessee shall pay Contractor the increased costs.
F. No Fee to Lessor. Lessor shall receive no fee for
supervision, profit, overhead or general conditions in connection with the
Tenant Improvements.
G. No Parking Charges. Neither Lessee nor the Contractor shall
be charged for parking (to the extent parking is available) during the
construction period and prior to the Commencement Date.
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<PAGE> 54
H. Delivery. If and to the extent that Lessee is delayed in
Substantially Completing the Tenant Improvements in either Building beyond the
date that is one hundred twenty (120) days following the actual Delivery Date
for such Building Shell due to (i) Lessor's failure to timely respond to or
approve draft plans or Lessee's selection of Contractor within the time period
set forth in this Section III, (ii) Lessor's contractor's interference with
Contractor in the work of constructing the Tenant Improvements, (iii) Lessor's
failure to have completed the Site Improvements sufficient to allow Contractor
(and/or any subcontractors or suppliers) adequate access to the Premises, or
(iv) interruptions in construction caused by or requested by Lessor, then Lessee
shall receive one (1) day's abatement of Base Rent under the Lease for each such
day of such delay.
I. Early Access To Buildings Prior To Delivery Date. The
parties acknowledge that the Lessee's contractors for the Tenant Improvements
may be able to commence work on the Tenant Improvements prior to the substantial
completion of the Building Shells and prior to the actual Delivery Date.
Therefore, Lessor shall allow Lessee and Lessee's contractors to have access to
the Premises prior to the actual Delivery Date for the purposes of commencing
the Tenant Improvements, when the following items have been substantially
completed: the roof, glazing, Shell sprinklers, one stairwell, and the Building
is watertight. The parties anticipate that this early access will occur
approximately thirty (30) days prior to the actual Delivery Date.
J. Representatives. Lessor's representative and Lessee's
representative shall be as follows:
1. Lessor's Representative:
Name: Jay Paul
Address: c/o Jay Paul Company
1093 South Green Valley Road
Watsonville, California 95076
Telephone: (408) 763-2991
Facsimile: (408) 763-2998
2. Lessee's Representative:
54
<PAGE> 55
Name: Jan Collinson
Address: 700 East Middlefield Road
Mountain View, CA 94043-4033
Telephone: (415) 962-5000
Facsimile: (415) 694-4133
Lessor's Representative and Lessee's Representative shall be the representatives
of the respective parties with respect to the aspects of this Work Agreement.
Approvals, authorizations or notices from any such Representative shall be
deemed to be approvals, authorizations or notices from the applicable party to
this Work Agreement and may be relied upon by the other party hereto. In
addition to the provisions for notices provided for in the Lease, notices
pursuant to this Work Agreement may be sent via facsimile to the respective
party's Representative.
55
<PAGE> 56
EXHIBIT D
COST RESPONSIBILITIES OF LESSOR AND LESSEE
A. Lessor is responsible for the construction of the building
shell improvements which shall include the following items:
Soils Engineer
Civil Engineer
Architectural and Structural Engineer
Landscaping
Electrical Utilities brought to the Shell to include a 480 volt
power adequate to serve:
First building - 3,000 amps
Second building - 4,000 amps
Fire Protection Design/Build for the Shell - inclusive of main
lateral pipes and drops for the exterior of the Shell but excluding the
interior drops
Testing and Inspection for the Shell
Building Permits for the Shell and exterior premises
Utility Connection Fee (Fire Protection)
Area Fees
Construction Insurance
Construction Interest
Construction Taxes
Land Interest (if any)
Temporary Facilities
All site work to include:
Site clearing and grading
Excavating/Fill
Soil compaction
Site drainage
Site utilities
Paving
Curbs and gutters
Sidewalks
Parking lot lights
Curb painting and parking lot striping and marking as
required by the City
56
<PAGE> 57
Fences, to include special enclosures for trash
Irrigation system
Lawns and planting
Building shells to include:
Concrete Formwork
Concrete Reinforcement (if used)
Cast in place concrete (if used)
Unit Masonry (if used)
Structural Metal
Open web joists (if used)
Metal decking (if used)
Metal framing (if used)
Secondary Stairs (excluding main entry stairs)
Rough Carpentry as related to the Shell
Finish Carpentry as related to the Shell
Millwork as related to the Shell
Glue-Lam Structure (if used)
Building Roof Insulation
Roofing Tiles
Flashings
Drainage Systems for Roof
Roof Pitch Pans
Caulking/Sealants
Exterior Metal Doors/Frames related to the Shell
Wood or Glass Doors as designated as related to the exterior Shell
Overhead Doors
Anodized Aluminum Windows
Finish Hardware as related to the Shell doors
Glass and Glazing as specified on plans
Storefront if desired
Conduit between buildings
Gutters over front and rear entrances
Exterior Loading Docks as specified on plans
Water Supply stubbed to concrete floors (first floor of each Building
only)
Sewer and Waste Piping stubbed to concrete floors
Roof drainage
Gas piping
Electric service panel (including 4,000 amps of 480 volt three phase
power to each building)
Telephone and computer conduits between buildings
Any items required by governmental agencies to obtain a Notice of Completion for
the Shell
57
<PAGE> 58
All governmental fees applying to the exterior Premises and Shell
The following shall be considered interior improvement costs
and shall be the responsibility of the Lessee subject to the tenant improvement
allowance as provided in the Lease:
Interior Building Permits
Gypsum drywall
Ceramic Tile or Slate Tile in Lobbies
Quarry Tile as specified
Flag Pole
Metal door framing
All interior Wood doors and Hardware
Custom Woodwork
Specialized Security construction
Interior Glass doors and windows
Acoustical Treatment (suspended ceiling)
Resilient flooring
Any Special flooring
Carpeting
Fire Resistant Coatings applied to the interior of the Building Shell
Interior Painting
Wall Coverings including Ceramic Tiles
Drapery, blinds or shades
Pedestal floors
Toilet Compartments
Demountable partitions
Firefighting devices (Extinguishers)
Toilet and bath accessories
Lifts (Dock levelers)
Plumbing fixtures and trims
Interior electrical distribution
Lighting
Electrical controls
Electrical Power Equipment
Built-in Audio Visual facilities
Built-in Projection Screens
Water Treatment Discharge
Sinks in Coffee Rooms
Lunch Room plumbing for vending machines
Specialized security systems
Specialized Halon Fire Extinguishing systems
58
<PAGE> 59
Fire sprinkler heads and drops
Specialized caging
Special piping for Tank Farm (if installed)
Hot water heating system
Cool water system
HVAC units inclusive of roof screening walls for air conditioning units
Ducting and Controls
Air Tempering System
59
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<ARTICLE> 5
<CIK> 0000883241
<NAME> SYNOPSYS, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-1-1995
<PERIOD-END> MAR-30-1996
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0
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<INCOME-PRETAX> (4,050)
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