<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
-----------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number: 0-27358
DOCUMENTUM, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-4261421
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.
5671 GIBRALTAR DRIVE, PLEASANTON, CALIFORNIA 94588-8547
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(Registrant's telephone number, including area code): (925) 463-6800
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Nasdaq National Market
Common Stock, $0.001 par value
(TITLE OF CLASS)
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 (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [_]
The number of outstanding shares of the registrant's Common Stock, par value
$0.001 per share, was 15,940,735 on June 30, 1998.
<PAGE>
FORM 10-Q
Index
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of June 30, 1998 and December 31,
1997..................................................................................... Page 3
Condensed Consolidated Statements of Operations for the three and six months
ended June 30, 1998 and 1997............................................................. Page 4
Condensed Consolidated Statements of Cash Flows for the six months
ended June 30, 1998 and 1997............................................................. Page 5
Notes to Condensed Consolidated Financial Statements..................................... Page 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................................... Page 10
PART II OTHER INFORMATION
Item 2 Changes in Securities and Use of Proceeds................................................ Page 22
Item 4 Submission of Matters to a Vote of Security Holders...................................... Page 22
Item 5 Other Information........................................................................ Page 23
Item 6. Exhibits and Reports on Form 8-K......................................................... Page 24
Signatures............................................................................................. Page 25
Exhibit Index.......................................................................................... Page 26
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
- ------------------------------
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- ---------------------------------------------------
DOCUMENTUM, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data; unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
--------------- ---------------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents $ 14,754 $ 14,236
Short-term investments 79,624 78,895
Accounts receivable, net of allowances of $2,827 and $2,537
(including $6,556 and $2,181 receivable from a stockholder
and it affiliates) 21,747 19,996
Other current assets 6,691 3,740
--------------- ---------------
122,816 116,867
Property and equipment, net 11,245 9,837
Other assets 6,000 499
--------------- ---------------
$ 140,061 $ 127,203
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,727 $ 1,721
Accrued liabilites 18,378 15,225
Deferred revenue 11,444 8,224
--------------- ---------------
32,549 25,170
--------------- ---------------
Stockholders' equity:
Preferred stock, $0.001 par value; 5,000 shares authorized
none issued and outstanding - -
Common stock, $0.001 par value; 100,000 shares authorized;
15,941 and 15,603 shares issued and outstanding 16 16
Additional paid-in capital 99,379 96,830
Cumulative translation adjustment 37 8
Retained earnings 8,080 5,179
--------------- ---------------
107,512 102,033
--------------- ---------------
$140,061 $127,203
=============== ===============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
DOCUMENTUM, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data; unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
--------------------------------- -----------------------------
Revenues:
<S> <C> <C> <C> <C>
Licenses (including $5,929, $919, $6,784, and
$1,932 from a stockholder and its affiliates) $ 18,716 $ 12,007 $ 35,767 $ 23,069
Services 9,721 5,303 17,742 9,278
------------- ------------- ------------- -------------
Total revenues 28,437 17,310 53,509 32,347
------------- ------------- ------------- -------------
Cost of revenues:
Licenses 703 411 1,906 797
Services 5,961 2,911 11,007 5,401
------------- ------------- ------------- -------------
Total cost of revenues 6,664 3,322 12,913 6,198
------------- ------------- ------------- -------------
Gross profit 21,773 13,988 40,596 26,149
------------- ------------- ------------- -------------
Operating expenses:
Sales and marketing 11,847 8,613 22,416 15,898
Research and development 3,732 2,563 7,374 4,861
General and administrative 2,424 1,197 4,719 2,501
Acquisition and related costs - - 2,171 -
-------------- ------------- ------------- -------------
Total operating expenses 18,003 12,373 36,680 23,260
-------------- ------------- ------------- -------------
Income from operations 3,770 1,615 3,916 2,889
-------------- ------------- ------------- -------------
Interest and other income, net 1,034 552 2,144 997
-------------- ------------- ------------- -------------
Income before income tax provision 4,804 2,167 6,060 3,886
Provision for income taxes (1,633) (720) (2,399) (1,322)
-------------- ------------- ------------- -------------
Net income $ 3,171 $ 1,447 $ 3,661 $ 2,564
============== ============= ============= =============
Basic earnings per share $ 0.20 $ 0.10 $ 0.23 $ 0.18
============== ============= ============= =============
Diluted earnings per share $ 0.19 $ 0.10 $ 0.22 $ 0.17
============== ============= ============= =============
Shares used to compute basic earnings per share 15,903 14,200 15,855 14,187
============== ============= ============= =============
Shares used to compute diluted earnings per share 17,014 14,805 16,883 14,843
============== ============= ============= =============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
DOCUMENTUM, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands; unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------------------------
1998 1997
-------------------------------------
Cash flows from operating activities:
<S> <C> <C>
Net income $ 3,661 $ 2,564
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 2,337 1,496
Provision for doubtful accounts 651 (146)
Changes in assets and liabilities:
Accounts receivable (2,281) 1,692
Other current assets and other assets (8,423) (705)
Accounts payable 710 1,044
Accrued liabilities 2,607 859
Deferred revenue 3,191 1,120
------------- ------------
Net cash provided by operating activities 2,453 7,924
------------- ------------
Cash flows from investing activities:
Purchases of short-term investments (54,709) (31,387)
Sales of short-term investments 53,980 31,333
Purchases of property and equipment (3,376) (4,305)
Other 10 -
------------- ------------
Net cash used in investing activities (4,095) (4,359)
------------- ------------
Cash flows from financing activities:
Issuance of common stock 2,532 1,028
Repayments on capital lease obligations (71) (125)
Repayment on loan (330) (777)
------------- ------------
Net cash provided by financing activities 2,131 126
------------- ------------
Effect of exchange rate on changes in cash 29 (27)
------------- ------------
Net increase in cash and cash equivalents 518 3,664
Cash and cash equivalents at beginning of period 14,236 5,369
------------- ------------
Cash and cash equivalents at end of period $ 14,754 $ 9,033
============= ============
Supplemental schedule of cash flow information:
Interest paid $ 16 $ 32
Income taxes paid $ 3,032 $ 513
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
DOCUMENTUM, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Basis of presentation
The unaudited condensed consolidated financial statements of Documentum, Inc.
("Documentum" or the "Company") included herein reflect all adjustments,
consisting only of normal recurring adjustments, which in the opinion of
management are necessary to present fairly the Company's consolidated financial
position, results of operations and cash flows for the periods presented. These
financial statements should be read in conjunction with the Company's audited
consolidated financial statements included in the Company's 1997 Annual Report
on Form 10-K and the Company's quarterly report on Form 10-Q for the three
months ended March 31, 1998. The consolidated results of operations for the
period ended June 30, 1998 are not necessarily indicative of the results to be
expected for any subsequent quarter or for the entire fiscal year ending
December 31, 1998.
Principles of consolidation
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, Documentum International, Inc. and Workgroup
Management, Inc. ("WMI") in the United States, and Documentum Software Europe
Ltd., in the United Kingdom. All significant inter-company accounts and
transactions have been eliminated.
Earnings per share
Basic earnings per share is computed using the weighted average number of
shares of common stock. Diluted earnings per share is computed using the
weighted average number of shares of common stock and common equivalent shares
outstanding during the period. Common equivalent shares consist of stock
options (using the treasury stock method). Common equivalent shares are excluded
from the computation if their effect is antidilutive.
The following is a reconciliation of the computation for basic and diluted EPS:
<TABLE>
<CAPTION>
Three months ended June 30, Six Months ended June 30,
------------------------------------- -------------------------------------
1998 1997 1998 1997
---------------- ---------------- ---------------- ----------------
(in thousands, except per share data) (in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Net income $ 3,171 $ 1,447 $ 3,661 $ 2,564
---------------- ---------------- ---------------- ----------------
Shares calculation
Average basic shares outstanding 15,903 14,200 15,855 14,187
Effect of Dilutive Securities:
Options 1,111 605 1,028 656
Total shares used to compute
---------------- ---------------- ---------------- ----------------
diluted earnings per share 17,014 14,805 16,883 14,843
================ ================ ================ ================
Earnings per basic share $ 0.20 $ 0.10 $ 0.23 $ 0.18
================ ================ ================ ================
Earnings per diluted share $ 0.19 $ 0.10 $ 0.22 $ 0.17
================ ================ ================ ================
</TABLE>
6
<PAGE>
DOCUMENTUM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
Options to purchase 95,203 shares of common stock at prices ranging from
$52.625 to $59.625 per share were outstanding for the three months ended June
30, 1998 but were not included in the computation of diluted EPS because either
the option's exercise price was greater than the average market price of the
common shares or inclusion of such options would have been anti-dilutive.
Options to purchase 90,200 shares of common stock at prices ranging from $46.563
to $59.625 per share were outstanding for the six months ended June 30, 1998
but were not included in the computation of diluted EPS because either the
option's exercise price was greater than the average market price of the common
shares or inclusion of such options would have been anti-dilutive.
Revenue recognition
In October, 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position No. 97-2 ("SOP 97-2"), "Software Revenue
Recognition", which the Company has adopted for transactions entered into during
the fiscal year beginning January 1, 1998. SOP 97-2 provides guidance for
recognizing revenue on software transactions and supersedes SOP 91-1, "Software
Revenue Recognition". In March 1998, the AICPA issued Statement of Position No.
98-4 ("SOP 98-4"), "Deferral of the Effective Date of a Provision of SOP 97-2,
Software Revenue Recognition". SOP 98-4 defers, for one year, the application
of certain passages in SOP 97-2 which limit what is considered vendor-specific
objective evidence ("VSOE") necessary to recognize revenue for software licenses
in multiple-element arrangements when undelivered elements exist. Additional
guidance is expected to be provided prior to adoption of the deferred provision
of SOP 97-2. The Company will determine the impact, if any, the additional
guidance will have on current revenue recognition practices when issued.
Adoption of the remaining provisions of SOP 97-2 did not have a material impact
on revenue recognition during the three and six months ended June 30, 1998.
Comprehensive net income
Effective January 1998, Documentum adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS 130"). SFAS 130
establishes standards for the reporting of comprehensive income and its
components in a full set of general-purpose financial statements. Comprehensive
income is comprised of net income and other comprehensive earnings such as
foreign currency translation gain/loss and unrealized gains or losses on
available-for-sale marketable securities. The Company's unrealized gains and
losses on available for sale marketable securities have been insignificant for
all periods presented. Documentum's total comprehensive earnings were as
follows:
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
----------------------------- -----------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
(in thousands) (in thousands)
<S> <C> <C> <C> <C>
Net income $ 3,171 $ 1,447 $ 3,661 $ 2,564
Other Comprehensive income
Foreign translation adjustment 11 14 29 (27)
------------- ------------- ------------- -------------
Comprehensive Net Income $ 3,182 $ 1,461 $ 3,690 $ 2,537
</TABLE>
Recent accounting pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments of An
Enterprise and Related Information" ("SFAS 131"). SFAS 131 revises information
regarding the reporting of operating segments. It also establishes standards for
related disclosures about
7
<PAGE>
DOCUMENTUM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
products and services, geographic areas and major customers. The Company will
adopt SFAS 131 for fiscal year ending December 31, 1998 and has not evaluated
the impact of such adoption on the notes to its consolidated financial
statements.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 establishes a new model for
accounting for derivatives and hedging activities and supercedes and amends a
number of existing accounting standards. SFAS 133 requires that all derivatives
be recognized in the balance sheet at their fair market value, and the
corresponding derivative gains or losses be either reported in the statement of
operations or as a deferred item depending on the type of hedge relationship
that exists with respect to such derivative. The Company has not yet determined
the effect, if any, of adopting SFAS 133, which will be effective for the
Company's fiscal year ended December 31, 2000.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1 provides
guidance regarding the determination of whether computer software is internal-
use software, the capitalization of costs incurred for computer software
developed or obtained for internal use and accounting for the proceeds of
computer software originally developed or obtained for internal use and then
subsequently sold to the public. The Company has not yet determined the effect,
if any, of adopting SOP 98-1, which will be effective for the Company's fiscal
year ended December 31, 1999.
Accrued expenses and other current liabilities:
June 30, December 31,
1998 1997
---------------- ----------------
(in thousands)
Current accrued liabilities
Compensation & related benefits $ 8,384 $ 6,840
Taxes 2,818 3,663
Other current liabilities 7,176 5,082
---------------- ----------------
$ 18,378 $ 15,225
================ ================
Business acquisition
On January 5, 1998 the Company acquired all the outstanding shares of WMI, a
privately-held company, in exchange for 192,473 shares of the Company's common
stock valued on the transaction date at approximately $6.7 million. The
acquisition was accounted for as a pooling of interests. WMI is a professional
services firm with approximately 35 employees (as of the date of the
acquisition) located in Oakland, California specializing in the design,
development and implementation of document management systems for the
semiconductor industry. As of December 31, 1997, WMI had $530,000 in total
assets. The Company believes that this acquisition is immaterial to the
Company's prior financial statements and as such the Company's prior financial
statements have not been restated. The acquisition of WMI is part of the
Company's strategic plan to add specific domain expertise in targeted vertical
industries. The Company recorded merger expenses of approximately $2.2 million
in connection with the acquisition in the first quarter of 1998. The $2.2
million primarily consisted of accounting and legal fees and other related
transactions costs.
8
<PAGE>
DOCUMENTUM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)
Subsequent event:
On July 16, 1998 the Company acquired all the outstanding shares of Relevance
Technologies, Inc. ("Relevance"), a privately held company, in exchange for
consideration totaling approximately $36.5 million, including 578,488 shares of
the Company's common stock. The acquisition was accounted for by the purchase
method of accounting. Relevance was a development stage software company with
approximately 25 employees (as of the date of the acquisition) located in San
Francisco, California specializing in the development of content mining
technology for unstructured information. As of May 31, 1998, Relevance had no
revenues and had gross assets of approximately $3.6 million. The Company
expects to record approximately $34 million as a charge related to the write off
of acquired research and development.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Forward-Looking Statements
The following discussion contains forward-looking statements regarding the
Company, its business, prospects and results of operations that are subject to
certain risks and uncertainties posed by many factors and events that could
cause the Company's actual business, prospects and results of operations to
differ materially from those that may be anticipated by such forward-looking
statements. Factors that could cause or contribute to such differences include,
but are not limited to, those discussed herein under the caption "Risk Factors,"
as well as those discussed in the Company's 1997 annual report on Form 10-K and
the Company's quarterly report on Form 10-Q for the three months ended March 31,
1998. Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this report. The Company
undertakes no obligation to revise any forward-looking statements in order to
reflect events or circumstances that may subsequently arise. Readers are urged
to carefully review and consider the various disclosures made by the Company in
this report and in the Company's other reports filed with the Securities and
Exchange Commission that attempt to advise interested parties of the risks and
factors that may affect the Company's business and results of operations.
OVERVIEW
Documentum, which was formed in 1990, develops, markets and supports a family
of Intranet and client/server software-based solutions that enable companies to
share, manage and reuse the vital corporate knowledge contained in documents.
From its inception through December 1992, the Company's activities consisted
primarily of developing its products, establishing its infrastructure and
conducting market research. The Company shipped the first commercial version of
its Documentum Server product in late 1992, and since then substantially all of
the Company's revenues have been from licenses of its family of enterprise
document management system ("EDMS") products and related services, which include
maintenance and support, training and consulting services. The Company continues
to invest in research and development in order to update its family of products.
During the quarter ended June 30, 1998, the Company began offering global
customer support 24 hours a day, 7 days a week, as a result of opening a new
office in Melbourne, Australia. The Company expects that Documentum EDMS and
EDMS-related license and service revenues will continue to account for
substantially all of the Company's revenues for the foreseeable future. As a
result, the Company's future operating results are dependent upon continued
market acceptance of EDMS and enhancements thereto.
Since inception, the Company has invested significant resources in developing
its EDMS software and related solutions, as well as building its sales,
services, marketing and general administrative organizations. As a result, since
inception the Company's operating expenses have increased in absolute dollar
amounts and are expected to continue to increase.
Although the Company has experienced significant revenue growth in recent
years, the Company does not believe that such growth rates are sustainable.
Accordingly, the rate at which the Company has grown in the past should not be
considered to be indicative of future revenue growth, if any, or future
operating results. There can be no assurance that the Company will remain
profitable on a quarterly basis. See "Risk Factors Uncertainty of Future
Operating Results; Fluctuations in Quarterly Operating Results."
RECENT DEVELOPMENTS
On July 16, 1998 the Company acquired all the outstanding shares of Relevance
Technologies, Inc. ("Relevance"), a privately held company, in exchange for
consideration totaling approximately $36.5 million, including 578,488 shares of
the Company's common stock. The acquisition was accounted for by the purchase
method of accounting. Relevance was a development stage software company with
approximately 25 employees (as of the date of the acquisition) located in San
Francisco, California specializing in the development of content mining
technology for unstructured information. As of May 31, 1998, Relevance had no
revenues and had gross assets of approximately $3.6 million. The Company
expects to record approximately $34 million as a charge related to the write off
of acquired research and development.
10
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth certain items from the Company's consolidated
statement of operations as a percentage of total revenues for the periods
indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
MARCH 31, JUNE 30,
-------------------------- ------------------------
1998 1997 1998 1997
---------- ---------- ---------- ----------
Revenues:
<S> <C> <C> <C> <C>
Licenses 65.8% 69.4% 66.8% 71.3%
Services 34.2% 30.6% 33.2% 28.7%
---------- ---------- ---------- ----------
Total revenues 100.0% 100.0% 100.0% 100.0%
---------- ---------- ---------- ----------
Cost of revenues:
Licenses 2.5% 2.4% 3.6% 2.5%
Services 21.0% 16.8% 20.6% 16.7%
---------- ---------- ---------- ----------
Total cost of revenues 23.5% 19.2% 24.2% 19.2%
---------- ---------- ---------- ----------
Gross profit 76.5% 80.8% 75.8% 80.8%
---------- ---------- ---------- ---------
Operating expenses:
Sales and marketing 41.7% 49.8% 41.9% 49.1%
Research and development 13.1% 14.8% 13.8% 15.0%
General and administrative 8.5% 6.9% 8.8% 7.7%
Acquisition and related costs 0.0% 0.0% 4.1% 0.0%
---------- ---------- ---------- ---------
Total operating expenses 63.3% 71.5% 68.6% 71.8%
---------- ---------- ---------- ---------
Income from operations 13.2% 9.3% 7.2% 9.0%
---------- ---------- ---------- ---------
Interest and other income, net 3.6% 3.2% 4.0% 3.1%
---------- ---------- ---------- ---------
Income before income tax provision 16.8% 12.5% 11.2% 12.1%
Provision for income taxes (5.7%) (4.2%) (4.5%) (4.1%)
---------- ---------- ---------- ---------
Net income 11.1% 8.3% 6.7% 8.0%
========== ========== ========== =========
AS A PERCENTAGE OF RELATED REVENUES:
Cost of license revenues 3.8% 3.4% 5.3% 3.5%
Cost of service revenues 61.3% 54.9% 62.0% 58.2%
</TABLE>
Revenues
The Company's revenues are derived from the sale of perpetual licenses for its
document management software and related services, which include maintenance and
support, consulting and training services. License revenues are recognized upon
shipment of the product if no significant vendor obligations remain, fees are
fixed and determinable and collection of the resulting receivable is probable.
In instances where a significant vendor obligation exists, revenue recognition
is deferred until the obligation has been satisfied. Allowances for estimated
future returns are provided upon shipment. Annual maintenance and support
revenues are recognized for providing ongoing support and product updates and
are recognized ratably over the term of the contract. Renewals of maintenance
contracts are
11
<PAGE>
recorded when collectibility is deemed probable. Revenues from consulting and
training are recognized when the services are performed and collectibility is
deemed probable.
In October, 1997, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position No. 97-2 ("SOP 97-2"), "Software Revenue
Recognition", which the Company has adopted for transactions entered into during
the fiscal year beginning January 1, 1998. SOP 97-2 provides guidance for
recognizing revenue on software transactions and supersedes SOP 91-1, "Software
Revenue Recognition." In March 1998, the AICPA issued Statement of Position No.
98-4 ("SOP 98-4"), "Deferral of the Effective Date of a Provision of SOP 97-2,
Software Revenue Recognition." SOP 98-4 defers, for one year, the application
of certain passages in SOP 97-2 which limit what is considered vendor-specific
objective evidence ("VSOE") necessary to recognize revenue for software licenses
in multiple-element arrangements when undelivered elements exist. Additional
guidance is expected to be provided prior to adoption of the deferred provision
of SOP 97-2. The Company will determine the impact, if any, the additional
guidance will have on current revenue recognition practices when issued.
Adoption of the remaining provisions of SOP 97-2 did not have a material impact
on revenue recognition during the three and six months ended June 30, 1998.
License revenues increased by 56% to $18.7 million for the three months ended
June 30, 1998 from $12.0 million for the three months ended June 30, 1997, and
increased 55% to $35.8 million for the six months ended June 30, 1998 from $23.1
million for the six months ended June 30, 1997. The growth in license revenues
was due to an increase in the number of licenses sold, reflecting increased
acceptance of the Company's EDMS family of products, as well as an increase in
the number of customers who purchased additional product licenses, and the
expansion of the Company's sales organization. During the three months ended
June 30, 1998, the Company had three sales accounting for $3.0 million, $2.6
million and $1.9 million or 16%, 14% and 10% of total license revenues. For the
three months ended June 30, 1998 and 1997 and the six months ended June 30, 1998
and 1997, license revenues from Xerox and certain Xerox affiliates, acting as
systems integrators, accounted for 32%, 8%, 19% and 8% of total license
revenues, respectively. The loss of a major customer or any reduction or delay
in orders by such customers would have a material adverse effect on the
Company's business, operating results and financial condition. Also, the
Company's strategy to provide customers with whole solutions could result in
software licenses being bundled with services. Therefore, with certain future
transactions, the delivery of services may delay recognition of license revenue.
Service revenues increased by 83% to $9.7 million for the three months ended
June 30, 1998 from $5.3 million for the three months ended June 30, 1997, and
increased 91% to $17.7 million for the six months ended June 30, 1998 from $9.3
million for the six months ended June 30, 1997, representing 34%, 31%, 33% and
29% of total revenues for the respective periods. The increase in both service
revenue dollars and in service revenues as a percent of total revenues was
attributable to an expansion of consulting services offerings, partially
attributed to the WMI acquisition, as well as a larger installed base of
customers receiving ongoing maintenance, training and support services and
increases in the Company's professional services consulting staff.
The Company markets its products through its direct sales force and its
indirect channel partners. While historically the Company generated the majority
of its revenues from its direct sales force, the Company has also focused on
complementing its direct sales channel with indirect channels, consisting of
systems integrators, distributors and resellers. Revenues from all indirect
channel partners comprised 47% and 30% of license revenues for the three months
ended June 30, 1998 and 1997, respectively, and 34% and 24% of license revenues
for the six months ended June 30, 1998 and 1997, respectively. License revenues
from indirect channels include revenues from Xerox, a related party owning
approximately 10% of the Company's outstanding common shares as of June 30,
1998. License revenues from Xerox acting in its role as an indirect channel
partner represented 32% and 8% of license revenues for the three months ended
June 30, 1998 and 1997, respectively, and 19% and 8% of license revenues for the
six months ended June 30, 1998 and 1997, respectively. The increase in both
indirect channel revenues and revenues from Xerox as a percentage of license
revenues is due to two large Xerox indirect sales during the three months ended
June 30, 1998. Revenues from indirect partners for any period are subject to
significant variations. As a result, the Company believes that period to period
comparisons of indirect revenues are not necessarily meaningful and should not
be relied upon as indications of future performance. There can be no assurance
that the Company's indirect channel partners will elect or be able to continue
to market or support Documentum EDMS effectively, or that economic conditions or
industry demand will not adversely affect these partners. See "Risk Factors
Reliance on Certain Relationships."
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International revenues represented 31% and 36% of license revenues for the
three months ended June 30, 1998 and 1997, respectively, and 34% and 26% of
license revenues for the six months ended June 30, 1998 and 1997, respectively.
International revenues historically have consisted mainly of revenues from
Europe. However, during the three months ended June 30, 1998, the Company had
one sale originating from Canada for $3.0 or 16% of total license revenue. The
Company classifies license revenue as domestic or international based upon the
billing location of the customer. In many instances, especially with large
purchases from multinational companies, the customer has the right to deploy the
licenses anywhere in the world. Thus, the percentages discussed herein
represent where licenses were sold, and may or may not represent where the
products are used. As a result, the Company believes that period to period
comparisons of international revenues are not necessarily meaningful and should
not be relied upon as indications of future performance.
While the Company believes that large multinational organizations represent a
significant opportunity for revenue growth and the Company intends to continue
expansion of its international sales, service and support operations, there can
be no assurance that the Company will be successful in meeting the requirements
of these large organizations or that the Company will be able to effectively
support this international expansion. The Company's international sales are
primarily denominated in U.S. dollars and the Company does not currently engage
in hedging activities. Although exposure to currency fluctuations to date has
been insignificant, there can be no assurance that fluctuations in the currency
exchange rates in the future will not have a material adverse impact on revenues
from direct international sales and thus the Company's business, operating
results and financial condition. See "Risk Factors International Operations."
Cost of revenues
Cost of license revenues consists primarily of the royalties paid to third-
party vendors. It also includes product costs such as packaging, documentation,
production and freight. Royalties, which are paid to third-parties for selected
products, include both fixed fees and variable fees. Cost of license revenues
increased by 71% to $703,000 for the three months ended June 30, 1998 from
$411,000 for the three months ended June 30, 1997, and increased 139% to $1.9
million for the six months ended June 30, 1998 from $797,000 for the six months
ended June 30, 1997, representing 4% and 3% of the related license revenues for
the three months ended June 30, 1998 and 1997, respectively, and 5% and 4% of
related license revenues for the six months ended June 30, 1998 and 1997,
respectively. During the third quarter of 1998, the Company anticipates
reselling third party products that will bear additional royalties. As a
result, the Company expects the cost of license revenue to increase in dollar
amount.
Cost of services revenues consists primarily of personnel-related costs
incurred in providing consulting services, training to customers and telephone
support. Cost of services revenues increased by 105% to $6.0 million for the
three months ended June 30, 1998 from $2.9 million for the three months ended
June 30, 1997, and increased 104% to $11.0 million for the six months ended June
30, 1998 from $5.4 million for the six months ended June 30, 1997, representing
61% and 55% of the related services revenues for the three months ended June 30,
1998 and 1997, respectively, and 62% and 58% of related services revenues for
the six months ended June 30, 1998 and 1997, respectively. The increase in cost
of services revenues in dollar amount and as a percentage of related revenues
was a result of increased investments in the Company's service operations.
Additionally the Company increased consulting headcount and integrated the
operations for WMI. Specifically during the three months ended June 30, 1998,
the Company opened a new support center in Australia. The Company expects the
cost of services revenue to increase in dollar amount as the related services
revenue increases.
Operating expenses
Sales and marketing. Sales and marketing expenses consist primarily of
salaries, benefits, sales commissions and other expenses related to the direct
sales force, indirect channel group, various marketing expenses and costs of
other market development programs. Sales and marketing expenses increased by 38%
to $11.8 million for the three months ended June 30, 1998 from $8.6 million for
the three months ended June 30, 1997, and increased by 41% to $22.4 million for
the six months ended June 30, 1998 from $15.9 million for the six months ended
June 30, 1997, representing 42% and 50% of total revenues for the three months
ended June 30, 1998 and 1997, respectively, and 42% and 49% of total revenues
for the six months ended June 30, 1998 and 1997, respectively. The increase in
dollar amount was the result of the Company's continued investment in its sales
and marketing infrastructure, including increasing the number of sales teams and
increasing the number of marketing and DocSolution programs.
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The decrease in spending as a percentage of revenues is primarily due to
economies of scale realized as certain expenses such as management compensation
grew proportionately less than revenues. The Company expects that sales and
marketing expenses will increase in dollar amount to support the Company's
anticipated revenue growth.
Research and development. Research and development expenses consist primarily
of salaries and benefits for software developers, contracted development efforts
and related facilities costs. Research and development expenses increased by
46% to $3.7 million for the three months ended June 30, 1998 from $2.6 million
for the three months ended June 30, 1997, and increased 52% to $7.4 million for
the six months ended June 30, 1998 from $4.9 million for the six months ended
June 30, 1997, representing 13% and 15% of total revenues for the three months
ended March 31, 1998 and 1997, respectively and 14% and 15% of total revenues
for the six months ended June 30, 1998 and 1997, respectively. The increase in
dollar amount reflects the expansion of the Company's engineering staff and
related costs required to support the development of new products and
enhancement of existing products. Based on the Company's research and
development process, costs incurred between the establishment of technological
feasibility and general release have not been material and therefore have been
expensed as incurred. As a result of the acquisition of Relevance, the Company
expects research and development costs will continue to increase in dollar
amount and as a percentage of total revenues.
General and administrative. General and administrative expenses consist
primarily of personnel costs for finance, management information systems, legal,
human resources and general management as well as outside professional services.
General and administrative expenses increased by 103% to $2.4 million for the
three months ended June 30, 1998 from $1.2 million for the three months ended
June 30, 1997, and increased 89% to $4.7 million for the six months ended June
30, 1998 from $2.5 million for the six months ended June 30, 1997, representing
9% and 7% of total revenues for the three months ended June 30, 1998 and 1997,
respectively and 9% and 8% of total revenues for the six months ended June 30,
1998 and 1997, respectively. The increase in dollar amount is primarily due to
increased staffing and professional fees necessary to manage and support the
Company's growth. The Company expects general and administrative expenses to
increase in dollar amount in order to support the growing needs of the Company.
Acquisition and related costs. On January 5, 1998 the Company acquired all the
outstanding shares of Workgroup Management, Inc. ("WMI"), a privately-held
company, in exchange for 192,473 shares of the Company's common stock valued on
the transaction date at approximately $6.7 million. The acquisition was
accounted for as a pooling of interests. WMI was a professional services firm
with approximately 35 employees as of the date of the acquisition located in
Oakland, California specializing in the design, development and implementation
of document management systems for the semiconductor industry. The acquisition
of WMI is part of the Company's strategic plan to add specific domain expertise
in targeted vertical industries. The Company recorded a one time charge of
approximately $2.2 million or $0.11 per diluted share in connection with the
acquisition.
Interest and other income, net
Interest and other income, net consists primarily of interest income earned on
the Company's cash and cash equivalents and short-term investments, and other
items including foreign exchange gains and losses and interest expense.
Interest and other income, net increased by 87% to $1.0 million for the three
months ended June 30, 1998 from $552,000 for the three months ended June 30,
1997, and increased 115% to $2.1 million for the six months ended June 30, 1998
from $1.0 million for the six months ended June 30, 1997. To date, the Company's
international sales have been generally denominated in U.S. dollars and the
Company has not engaged in hedging activities as the exposure to currency
fluctuations has been insignificant. In the future, as the Company expands its
international operations, the Company expects to have an increased amount of
non-U.S. dollar denominated contracts. Unexpected changes in the exchange rates
for these foreign currencies could result in significant fluctuation in the
foreign currency translation gains and losses in future periods.
Provision for income taxes
The provision for income taxes as a percentage of pretax income was 34% and
33% for the three months ended June 30, 1998 and 1997, respectively and 40% and
34% for the six months ended June 30, 1998 and 1997, respectively. The tax rate
for the six months ended June 30, 1998 was higher than rates for the six months
ended June 30, 1997 due to non-deductible items related to the acquisition of
WMI. As a result of the acquisition of Relevance, the Company expects the
effective tax rate to increase for the remainder of the year.
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LIQUIDITY AND CAPITAL RESOURCES
Since 1993, the Company has financed its operations primarily through the sale
of stock and through cash generated from operations. In February 1996, the
Company completed its initial public offering, whereby it sold 2,058,000 shares
of its common stock, and received net proceeds of approximately $45 million. In
October 1997, the Company completed a secondary public offering, whereby it sold
1,115,700 shares of its common stock, and received net proceeds of approximately
$31 million.
The Company's cash and investments totaled $94.4 million at June 30, 1998
representing 67% of total assets. The Company has invested the Company's cash
in excess of current operating requirements in investment grade securities. The
investments have variable and fixed interest rates and primarily short-term
maturities. In accordance with SFAS 115, "Accounting for Certain Investments in
Debt and Equity Securities" such investments are classified as "available for
sale."
Net cash provided by operating activities was $2.5 million and $7.9 million
for the six months ended June 30, 1998 and 1997, respectively. For the six
months ended June 30, 1998, the cash generated by operations was primarily
attributable to net income of $3.7 million, growth in accrued liabilities of
$2.6 million, depreciation and amortization of $2.3 million, and deferred
revenue of $3.2 million, offset by an increase in accounts receivable of $2.3
million and an increase in other assets of $8.4 million, consisting of $2.5
million for prepaid rent related to a new lease, $1.4 million for prepaid third
party royalties and $1.5 million for an investment in Relevance. For the six
months ended June 30, 1997, the cash generated by operations was primarily
attributable to net income of $2.6 million, a decrease in accounts receivable of
$1.7 million , growth in accounts payable of $1.0 million and growth in deferred
revenue of $1.1 million. For the six months ended June 30, 1998 and 1997,
capital expenditures of $3.4 million and $4.3 million, respectively, were
primarily for computer equipment, fixed assets and leasehold improvements
acquired in conjunction with the Company's expansion to new facilities.
On January 15, 1998, the Company entered into an unsecured revolving credit
agreement (the "Facility") with a new bank. The Facility allows for borrowings
of up to $10 million bearing interest at the Company's option of: (1) the bank's
prime rate minus 0.5%; (2) the LIBOR plus 1.0%; or (3) at the bank's competitive
bid rate, and expires in December 1999. The Company must comply with certain
financial covenants and conditions as described in the Facility. The Company
was in compliance as of June 30, 1998.
In June of 1998, the Company signed a leases for approximately 122,000 square
feet and 63,000 square feet in Pleasanton, California beginning in June of 1999
and January of 2000, respectively and expiring in May of 2005 and December of
2006, respectively. This space will serve as the Company's headquarters and
will contain the principal administrative, engineering, manufacturing, marketing
and sales facilities. The Company expects to make capital purchases related to
the new facilities leasehold improvements and office furniture. The Company
currently has no other significant capital spending or purchase commitments
other than normal purchase commitments and commitments under facilities and
capital leases.
The Company believes that its existing cash balances, its available bank
financing and the cash flows generated from operations, if any, will be
sufficient to meet its anticipated cash needs for working capital and capital
expenditures for at least the next 12 months. A portion of the Company's cash
could be used to acquire or invest in complementary businesses or products or
obtain the right to use complementary technologies. The Company is currently
evaluating, in the ordinary course of business, potential investments such as
businesses, products or technologies. See "Risk Factors Risks Associated with
Acquisitions."
YEAR 2000 DISCLOSURE
In the next two years, most companies will face a potentially serious
information systems problem because many software application and operational
programs written in the past may not properly recognize calendar dates beginning
in the year 2000. This problem could force computers to either shut down or
provide incorrect data or information. The Company has started to assess the
Company's state of readiness and the risks of the Company's year 2000 issues,
and plans to review third parties with whom the Company has a material
relationships such as
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vendors and significant customers. The Company also plans to review the
potential liability to third parties resulting from possible legal action for
breach of contract or other harm, if its systems are not year 2000 compliant.
Efforts will be made to modify or replace any non-compliant software, systems
and equipment by the year 1999. The Company has expended and will continue to
expend appropriate resources to address this issue on a timely basis. However,
no estimate of the expected total cost of this effort can be made at this time,
nor can any assurance be given that the year 2000 problem will not have an
adverse impact on the Company's earnings.
RISK FACTORS
In evaluating the Company's business, prospective investors should carefully
consider the following factors in addition to the other information presented in
this report. The section entitled "Management's Discussion and Analysis of
Financial Condition and Results of Operations" in this report contains forward-
looking statements within the meaning of Section 27A of the Securities Act of
1933, and Section 21E of the Securities Exchange Act 1934. Actual results could
differ materially from those projected in the forward-looking statements as a
result of the Risk Factors set forth below and elsewhere in this report.
Uncertainty of Future Operating Results; Fluctuations in Quarterly Operating
Results. Prior growth rates in the Company's revenue and operating results
should not be considered indicative of future growth, if any, or of future
operating results. Future operating results will depend upon many factors,
including the demand for the Company's products, the level of product and price
competition, the length of the Company's sales cycle, the size and timing of
individual license transactions, the delay or deferral of customer
implementations, the budget cycles of the Company's customers, the Company's
success in expanding its direct sales force and indirect distribution channels,
the timing of new product introductions and product enhancements by the Company
and its competitors, the mix of products and services sold, levels of
international sales, activities of and acquisitions by competitors, the timing
of new hires, changes in foreign currency exchange rates, the ability of the
Company to develop and market new products and control costs and general
domestic and international economic and political conditions. The Company's
first quarter revenues and earnings in any year are typically flat or lower as
compared to the immediate preceding fourth quarter, due to seasonality, which
the Company believes is common in the software industry. Moreover, the Company
typically recognizes a substantial amount of its revenue in the last month,
weeks or even days of each quarter. The Company's license sales generally
reflect a relatively high amount of revenues per order and the number of large
individual license sales has continued to increase. The loss or delay of
individual orders, therefore, could have a significant impact on the revenues
and quarterly results of the Company. In addition, the timing of license revenue
is difficult to predict because of the length of the Company's sales cycle,
which is typically six to 12 months from the initial contact. Also, the
Company's strategy to provide customers with whole solutions could result in
software licenses being bundled with services. Therefore, with certain future
transactions, the delivery of services may delay recognition of license revenue.
Because the Company's operating expenses are based on anticipated revenue
trends and because a high percentage of the Company's expenses are relatively
fixed, any shortfall from anticipated revenue or a delay in the recognition of
revenue from a limited number of license transactions could cause significant
variations in operating results from quarter to quarter and could result in
losses. As a result of these factors, operating results for any quarter are
subject to significant variation, and the Company believes that period-to-period
comparisons of its results of operations are not necessarily meaningful related
to future performance and should not be relied upon as indications of future
performance. Furthermore, due to all of the foregoing factors, it is likely
that in some future quarter the Company's operating results will be below the
expectations of public market analysts or investors. In such event, the market
price of the Company's common stock would likely be materially adversely
affected. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Lengthy Sales and Implementation Cycles. The license of the Company's software
products is often an enterprise-wide decision by prospective customers and
generally requires the Company to engage in a lengthy sales cycle (typically
between six and 12 months) to provide a significant level of education to
prospective customers regarding the use and benefits of the Company's products.
Additionally, the size of the transaction and the complexity of the arrangement
can also cause delays in the sales cycle. The implementation by customers of the
Company's products involves a significant commitment of resources by such
customers over an extended period of time and is commonly associated with
substantial business reengineering efforts. For these and other reasons, the
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sales and customer implementation cycles are subject to a number of significant
delays over which the Company has little or no control. Delay in the sale or
customer implementation of a limited number of license transactions could have a
material adverse effect on the Company's business, financial condition and
results of operations and cause the Company's operating results to vary
significantly from quarter to quarter. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
Product Concentration. To date, substantially all of the Company's revenues
have been attributable to sales of licenses of the Documentum EDMS family of
products and related services. The Company currently expects the Documentum EDMS
family of products and related services to account for substantially all of its
future revenues. As a result, factors adversely affecting the pricing of or
demand for the Documentum EDMS products such as competition or technological
change could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company's future financial performance
will depend, in significant part, on the successful development, introduction
and customer acceptance of new and enhanced versions of the Documentum EDMS
family of products. There can be no assurance that the Company will continue to
be successful in developing and marketing the Documentum EDMS products.
New Products and Rapid Technological Change. The document management software
and services market is characterized by rapid technological change, change in
customer requirements, frequent new product introductions and enhancements and
emerging industry standards. The introduction of products embodying new
technologies and the emergence of new industry standards can render existing
products obsolete and unmarketable. Accordingly, the life cycles of the
Company's products are difficult to estimate. The Company's future success will
depend in part upon its ability to enhance current products and to continue to
develop and introduce new products that respond to evolving customer
requirements and keep pace with technological developments and emerging industry
standards, such as new operating systems, hardware platforms, user interfaces,
the Internet, corporate intranets and RDBMS software. The Company's future
success will also depend in part on its ability to execute on its strategy to
develop whole-product solutions in certain target vertical industries. In
addition, the Company's future success will depend in part upon its ability to
maintain and enhance relationships with its technology partners, such as RDBMS
vendors, in order to provide its customers with integrated product solutions.
There can be no assurance that the Company will be successful in maintaining
these relationships or in developing and marketing product enhancements or in
delivering products that respond to technological change, updates and
enhancements to third party products used in conjunction with the Company's
products, changes in customer requirements or emerging industry standards; that
the Company will not experience difficulties that could delay or prevent the
successful development, introduction and marketing of new products and
enhancements; or that any new products or enhancements that the Company may
introduce will adequately meet the requirements of the marketplace and achieve
market acceptance. Moreover, the Company has in the past experienced delays in
the release dates of enhancements to its products. If release dates of any
future product enhancements are delayed or, if when released, fail to achieve
market acceptance, the Company's business, financial condition and results of
operations could be materially adversely affected. To date, the delays the
Company has experienced have been minor in nature and are often the result of
adding enhancements or functionality based upon customer feedback during beta
product versions. These delays have generally not exceeded six months in
duration from the Company's scheduled internal release dates; however, there can
be no assurance that the Company may not experience future delays in product
introduction. The inability of the Company, for technological or other reasons,
to develop and introduce new products or enhancements in a timely manner in
response to changing customer requirements, technological change or emerging
industry standards, would have a material adverse effect on the Company's
business, financial condition and results of operations.
Dependence on Emerging Markets. The market for document management software
and services is intensely competitive, highly fragmented and subject to rapid
change. The Company's future financial performance will depend primarily on
growth in the number of document management applications developed for use in
client/server environments. There can be no assurance that the market for
document management software and services will continue to grow or that, if it
does grow, organizations will adopt the Company's products. The Company has
spent, and intends to continue to spend, significant resources educating
potential customers about the benefits of its products. However, there can be no
assurance that such expenditures will enable the Company's products to achieve
any additional degree of market acceptance, and if the document management
software and services market fails to grow or grows more slowly than the Company
currently anticipates, the Company's business, financial condition and results
of operations would be materially adversely affected.
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Intense Competition. The market for the Company's products is intensely
competitive, subject to rapid change and significantly affected by new product
introductions and other market activities of industry participants. The
Company's products are targeted at the emerging market for open, client/server
software solutions, and the Company's competitors offer a variety of products
and services to address this market. The Company currently encounters direct
competition from a number of public and private companies such as FileNet,
OpenText, PC DOCS and Novasoft. Several competitors have longer operating
histories, greater financial, technical, marketing and other resources, greater
name recognition and a larger installed base of customers than the Company.
In addition, other enterprise software vendors, such as Microsoft, Oracle and
Lotus (a division of IBM), may compete with the Company in the future. Like the
Company's current competitors, many of these companies have longer operating
histories, significantly greater resources, name recognition and a larger
installed base of customers than the Company. Microsoft, Oracle, Lotus and other
potential competitors have well-established relationships with current and
potential customers and strategic partners of the Company, have extensive
knowledge of the enterprise software industry and have the resources to enable
them to more easily offer a single vendor solution. As a result, these
competitors may be able to respond more quickly to new or emerging technologies
and changes in customer requirements, or to devote greater resources to the
development, promotion and sale of their products, than can the Company.
The Company also faces indirect competition from systems integrators. The
Company relies on a number of systems consulting and systems integration firms
for implementation and other customer support services, as well as
recommendations of its products during the evaluation stage of the purchase
process. Although the Company seeks to maintain close relationships with these
service providers, many of these third parties have similar, and often more
established, relationships with the Company's principal competitors. If the
Company is unable to develop and maintain effective, long-term relationships
with these third parties, the Company's competitive position would be materially
adversely affected. Further, there can be no assurance that these third parties,
many of which have significantly greater resources than the Company, will not
market software products in competition with the Company in the future or will
not otherwise reduce or discontinue their relationships with or support of the
Company and its products.
The Company also expects that competition will increase as a result of
software industry consolidations. In addition, current and potential competitors
have established or may establish cooperative relationships among themselves or
with third parties to increase the ability of their products to address the
needs of the Company's prospective customers. Accordingly, it is possible that
new competitors or alliances among competitors may emerge and rapidly acquire
significant market share. Increased competition may result in price reductions,
reduced gross margins and loss of market share, any of which could have a
material adverse effect on the Company's business, operating results and
financial condition. There can be no assurance that the Company will be able to
compete successfully against current and future competitors or that competitive
pressures faced by the Company will not materially and adversely affect its
business, financial condition and results of operations.
End User Customer and Industry Concentration. A relatively small number of end
user customers account for a significant percentage of the Company's revenues.
In addition, the Company's customers are somewhat concentrated in the process
and discrete manufacturing, pharmaceutical and architectural engineering and
construction industries. The Company expects that sales of its products to a
limited number of customers and industry segments will continue to account for a
high percentage of revenue for the foreseeable future. In addition, the future
success of the Company will depend in part on its ability to obtain orders from
new customers and its ability to successfully market its products to customers
in new industry segments. The loss of a major customer or any reduction or delay
in orders by such customers, or the failure of the Company to successfully
market its products outside existing targeted industry segments, would have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Reliance on Certain Relationships. The Company has established strategic
relationships with a number of organizations that it believes are important to
its worldwide sales, marketing and support activities. The Company's
relationships with indirect channel partners and other consultants provide
marketing and sales opportunities for the Company's direct sales force, expand
the distribution of its products and broaden its product offerings through
product bundling. These relationships also assist the Company in keeping pace
with the technological and marketing developments of major vendors, and in
certain instances, provide the Company with technical assistance for the
Company's product development efforts. There can be no assurance that any
customer, systems integrator or
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distributor will continue to market or to purchase the Company's products. The
failure by the Company to maintain these relationships, or to establish new
relationships in the future, could have a material adverse effect on the
Company's business, financial condition and results of operations.
Management of Growth; Dependence Upon Key Personnel. The Company's ability to
compete effectively and to manage future anticipated growth will require the
Company to expand, train and manage its employee work force. The Company's plans
include hiring a significant number of highly-qualified technical, sales and
managerial personnel. In particular, as part of the Company's strategy of
delivering comprehensive solutions, the Company expects to hire additional
professional service personnel in addition to the employees that joined the
Company in connection with the Company's January 1998 acquisition of WMI.
Competition for such personnel is intense, and there can be no assurance that
the Company will be able to attract, assimilate or retain such key employees.
See "Risks Associated with Acquisitions" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
International Operations. The Company's sales are primarily to large
multinational companies. To service the needs of such companies, both
domestically and internationally, the Company and its support partners must
provide worldwide product support services. As a result, the Company intends to
continue expanding its existing international operations and enter additional
international markets, which will require significant management attention and
financial resources and could adversely affect the Company's operating margins
and earnings, if any. The Company has offices in London, Paris, and Munich, and
opened offices in Tokyo and Seoul in December 1997. The Company operates its own
European technical support operation, located in the London office, and recently
expanded this operation into Munich during 1997. In order to successfully expand
international sales, the Company must establish additional foreign operations,
hire additional personnel and develop relationships with additional
international vendors. To the extent that the Company is unable to do so in a
timely manner, the Company's growth, if any, in international sales will be
limited, and the Company's business, financial condition and results of
operations could be materially adversely affected. In addition, there can be no
assurance that the Company will be able to maintain or increase international
market demand for its products.
Additional risks inherent in the Company's international business activities
generally include currency fluctuations, unexpected changes in regulatory
requirements, tariffs and other trade barriers, the Company's limited experience
in localizing products for foreign countries, cost of localization, lack of
acceptance of localized products in foreign countries, longer accounts
receivable payment cycles, difficulties in managing international operations,
potentially adverse tax consequences, including restrictions on the repatriation
of earnings, and the burdens of complying with a wide variety of foreign laws.
To date, a significant portion of the Company's international revenues have been
denominated in U.S. dollars. Although exposure to currency fluctuations to date
has been insignificant, there can be no assurance that fluctuations in the
currency exchange rates in the future will not have a material adverse impact on
revenues from international sales and thus the Company's business, financial
condition and results of operations.
Dependence on Proprietary Technology; Risks of Infringement. The Company's
success is heavily dependent upon proprietary technology. The Company relies
primarily on a combination of copyright and trademark laws, trade secrets,
confidentiality procedures and contractual provisions to protect its proprietary
rights. The Company seeks to protect its software, documentation and other
written materials under trade secret and copyright laws, which afford only
limited protection. The Company presently has no patents or patent applications
pending. Despite the Company's efforts to protect its proprietary rights,
unauthorized parties may attempt to copy aspects of the Company's products or to
obtain and use information that the Company regards as proprietary.
Policing unauthorized use of the Company's products is difficult, and while
the Company is unable to determine the extent to which piracy of its software
products exists, software piracy can be expected to be a persistent problem. In
addition, the laws of some foreign countries do not protect the Company's
proprietary rights to as great an extent as do the laws of the United States.
There can be no assurance that the Company's means of protecting its proprietary
rights will be adequate or that the Company's competitors will not independently
develop similar technology. The Company is not aware that any of its products
infringe the proprietary rights of third parties. There can be no assurance,
however, that third parties will not claim infringement by the Company with
respect to current or future products. The Company expects that software product
developers will increasingly be subject to infringement claims as the number of
products and competitors in the Company's industry segment grows and the
functionality of products in different industry segments overlaps. Any such
claims, with or without merit, could be
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time-consuming, result in costly litigation, cause product shipment delays or
require the Company to enter into royalty or licensing agreements. Such royalty
or licensing agreements, if required, may not be available on terms acceptable
to the Company or at all, which could have a material adverse effect upon the
Company's business, operating results and financial condition.
In addition, the Company also relies on certain software that it licenses from
third parties, including software that is integrated with internally developed
software and used in the Company's products to perform key functions. There can
be no assurances that such firms will remain in business, that they will
continue to support their products or that their products will otherwise
continue to be available to the Company on commercially reasonable terms. The
loss or inability to maintain any of these software licenses could result in
delays or reductions in product shipments until equivalent software can be
developed, identified, licensed and integrated, which would adversely affect the
Company's business, financial condition and results of operations.
Product Liability. The Company's license agreements with its customers
typically contain provisions designed to limit the Company's exposure to
potential product liability claims. However, it is possible that the limitation
of liability provisions contained in the Company's license agreements may not be
effective under the laws of certain jurisdictions. Although the Company has not
experienced any product liability claims to date, the sale and support of
products by the Company may entail the risk of such claims, and there can be no
assurance that the Company will not be subject to such claims in the future. A
successful product liability claim brought against the Company could have a
material adverse effect upon the Company's business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Risk of Product Defects. Software products as complex as those offered by the
Company frequently contain errors or failures, especially when first introduced
or when new versions are released. Although the Company conducts extensive
product testing, the Company has in the past released products that contain
defects, and has discovered software errors in certain of its new products and
enhancements after their introduction. The Company could in the future lose or
delay recognition of revenues as a result of software errors or defects. The
Company's products are typically intended for use in applications that may be
critical to a customer's business. As a result, the Company expects that its
customers and potential customers have a greater sensitivity to product defects
than the market for software products generally. Although the Company's business
has not been adversely affected by any such errors to date, there can be no
assurance that, despite testing by the Company and by current and potential
customers, errors will not be found in new products or releases after
commencement of commercial shipments, resulting in loss of revenue or delay in
market acceptance, diversion of development resources, damage to the Company's
reputation, or increased service and warranty costs, any of which could have a
material adverse effect upon the Company's business, financial condition and
results of operations.
Risks Associated with Acquisitions. As part of its business strategy, the
Company expects to make acquisitions of, or significant investments in,
businesses that offer complementary products and technologies. For example, the
Company recently acquired Relevance. Such acquisition will, and any future
acquisitions or investments would, expose the Company to the risks commonly
encountered in acquisitions of businesses. Such risks include, among others,
difficulty of assimilating the operations; information systems and personnel of
the acquired businesses; the potential disruption of the Company's ongoing
business; the inability of management to maximize the financial and strategic
position of the Company through the successful incorporation of acquired
employees and customers; the maintenance of uniform standards, controls,
procedures and policies; and the impairment of relationships with employees and
customers as a result of any integration of new management personnel. There can
be no assurance that any potential acquisition will be consummated or, if
consummated, that it will not have a material adverse effect on the Company's
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Possible Volatility of Stock Price. The trading price of the Company's Common
Stock is subject to significant fluctuations in response to variations in
quarterly operating results, the gain or loss of significant orders, changes in
earning estimates by analysts, announcements of technological innovations or new
products by the Company or its competitors, general conditions in the software
and computer industries and other events or factors. In addition, the stock
market in general has experienced extreme price and volume fluctuations which
have affected the market price for many companies in industries similar or
related to that of the Company and which have been unrelated to the operating
performance of these companies. These market fluctuations may adversely affect
the market price of the Company's Common Stock.
20
<PAGE>
Effect of Certain Charter Provisions: Antitakeover Effects of Certificate of
Incorporation, Bylaws and Delaware Law. The Company's Board of Directors has the
authority to issue up to 5,000,000 shares of Preferred Stock and to determine
the price, rights, preferences, privileges and restrictions, including voting
rights, of those shares without any further vote or action by the stockholders.
The Preferred Stock could be issued with voting, liquidation, dividend and other
rights superior to those of the Common Stock. The rights of the holders of
Common Stock will be subject to, and may be adversely affected by, the rights of
the holders of any Preferred Stock that may be issued in the future. The
issuance of Preferred Stock, while providing desirable flexibility in connection
with possible acquisitions and other corporate purposes, could have the effect
of making it more difficult for a third party to acquire a majority of the
outstanding voting stock of the Company. The Company has no current plans to
issue any shares of Preferred Stock. Further, certain provisions of the
Company's Amended and Restated Certificate of Incorporation, including
provisions that create a classified board of directors, and certain provisions
of the Company's Amended and Restated Bylaws and of Delaware law could delay or
make more difficult a merger, tender offer or proxy contest involving the
Company.
Year 2000. In the next two years, most companies will face a potentially
serious information systems problem because many software application and
operational programs written in the past may not properly recognize calendar
dates beginning in the year 2000. This problem could force computers to either
shut down or provide incorrect data or information. The Company has started to
assess the Company's state of readiness and the risks of the Company's year 2000
issues, and plans to review third parties with whom the Company has a material
relationships such as vendors and significant customers. The Company also plans
to review the potential liability to third parties resulting from possible legal
action for breach of contract or other harm, if its systems are not year 2000
compliant. Efforts will be made to modify or replace any non-compliant
software, systems and equipment by the year 1999. The Company has expended and
will continue to expend appropriate resources to address this issue on a timely
basis. However, no estimate of the expected total cost of this effort can be
made at this time, nor can any assurance be given that the year 2000 problem
will not have an adverse impact on the Company's earnings.
21
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
(c)
(i) On January 5, 1998, the Company issued 192,473 shares of its Common
Stock to the shareholders of privately held Workgroup Management, Inc. ("WMI")
in connection with the Company's acquisition of WMI pursuant to Section 4(2) of
the Securities Act of 1933, as amended.
(ii) On July 16, 1998, the Company issued 578,788 shares of its Common
Stock to the shareholders of privately held Relevance Technologies, Inc.
("Relevance") in connection with the Company's acquisition of Relevance pursuant
to Section 4(2) of the Securities Act of 1993, as amended.
(d) There has been no change to the disclosure contained in the Company's
report on Form 10-Q for the quarter ended September 30, 1997 regarding the
use of proceeds generated by the Company's initial public offering of its
Common Stock.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company's annual meeting of stockholders was held on May 28, 1998 (the
"Annual Meeting").
(c)The following matters were voted upon at the Annual Meeting:
(i) The first matter related to the election of three director
nominees, Geoffrey A. Moore, Colin J. O'Brien, and John L.
Walecka as directors of the Company to serve until 2001 annual
meeting of stockholders. The votes cast and withheld for such
nominees were as follows:
Name For Withheld
----------------- ---------- --------
Geoffrey A. Moore 14,323,324 118,611
Colin J. O'Brien 14,321,983 119,952
John L. Walecka 14,323,072 118,863
(ii) The second matter related to the approval of an amendment to the
Company's 1993 Equity Incentive Plan, to increase the aggregate
number of shares of Common Stock authorized for issuance under
such plan by 600,000 shares. 6,594,961 votes were cast for
approval, 6,489,849 votes were cast against approval, and there
were 20,979 abstentions and 1,336,146 broker non-votes.
(iii) The third matter related to the approval of an amendment to the
Company's 1995 Employee Stock Purchase Plan to increase the
aggregate number of shares of Common Stock authorized for
issuance under such plan by 350,000 shares. 12,757,574 votes
were cast for approval, 334,926 votes were cast against
approval, and there were 13,289 abstentions and 1,336,146 broker
non-votes.
(iv) The fourth matter related to the approval of an amendment to the
Company's Amended and Restated Certificate of Incorporation to
increase the authorized number of shares of Common Stock from
35,000,000 to 100,000,000 shares. 8,301,035 votes were cast for
approval, 6,129,822 votes were cast against approval, and there
were 11,078 abstentions.
(v) The fifth matter related to the ratification of the appointment
of Price Waterhouse LLP as independent auditors of the Company
for its fiscal year ending December 31, 1998, 14,428,496 votes
were cast for ratification, 8,485 votes were cast against
ratification, and there were 4,954 abstentions.
Based on these voting results, each director nominated was elected and the
second, third, fourth and fifth matters were approved.
22
<PAGE>
Item 5. Other Information
Pursuant to the Company's bylaws, stockholders who wish to bring matters or
propose nominees for director at the Company's 1999 annual meeting of
stockholders must provide specified information to the Company between February
27, 1999 and March 29, 1999 (unless such matters are included in the Company's
proxy statement pursuant to Rule 14a-8 under Securities Exchange Act of 1934, as
amended).
23
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
---- ------
<S> <C>
(6)2.1 Agreement and Plan of Merger Reorganization, dated as of July 16, 1998,
among Registrant, RTI Acquisition Corporation and Relevance Technologies, Inc.
(1)3.1 Registrant's Amended and Restated Certificate of Incorporation
(6)3.2 Registrant's Amendment to Amended and Restated Certificate of Incorporation
(2)3.3 Registrant's Amended and Restated Bylaws.
3.4 Registrant's Amendment to Amended and Restated Bylaws
4.1 Reference is made to Exhibits 3.1 and 3.2
(2)4.2 Specimen stock certificate
(2)4.3 Amended and Restated Investor Rights Agreement, dated September 20,
1994, between the Registrant and certain investors.
(6)4.4 Registration Rights Agreement, dated July 16, 1998, between the Registrant and
certain stockholders
10.1 Registrant's 1993 Equity Incentive plan, as amended.
(2)10.2 Form of Incentive Stock Option under the Equity Incentive Plan.
(2)10.3 Form of Nonstatutory Stock Option under the Equity Incentive Plan.
(2)10.4 Form of Early Exercise Stock Purchase Agreement.
10.5 Registrant's Employee Stock Purchase Plan, as amended.
(2)10.6 Registrant's 1995 Non-Employee Director's Stock Option Plan.
(2)10.7 Form of Indemnity Agreement between the Registrant and its officers
and directors.
(2)10.8 Industrial Real Estate Lease, dated September 9, 1995, between the
Registrant and Sunol Center Associates.
(2)10.9 Letter Agreement, dated July 27, 1993, between the Registrant and
Jeffery A. Miller.
10.10 Industrial Real Estate Lease, dated June 22, 1998, between the Registrant and
Patrician Associates, Inc.
Y(3)10.17 Services Partner Agreement, dated April 1,1996, between the
Registrant and Xerox Corporation.
10.18 Registrant's 1996 Non Officer Equity Incentive Plan as amended.
(5)10.20 Lease agreement between the Registrant and Britannia Hacienda IV Limited
Partnership.
27.1 Financial Data Schedule.
27.2 Financial Data Schedule ended 9/30/96. Restated in accordance with SFAS 128.
27.3 Financial Data Schedule ended 6/30/97. Restated in accordance with SFAS 128.
27.4 Financial Data Schedule ended 9/30/97. Restated in accordance with SFAS 128.
------------
Y Confidential treatment requested and granted for portions of this exhibit.
(1)Filed as an exhibit to the Registrant's Registration Statement on Form S-8
(No. 333-01832) and incorporated herein by reference.
(2)Filed as an exhibit to the Registrant's Registration Statement on Form S-1,
as amended (No. 33-80047) and incorporated herein by reference.
(3)Filed as an exhibit to the Registrant's Form 10-Q for the quarterly period
ended March 31, 1996 and incorporated herein by reference.
(4)Filed as an exhibit to the Registrant's Registration Statement on Form S-8
(No. 333-15329) and incorporated herein by reference.
(5)Filed as an exhibit to the Registrant's annual report on 10-K for the year
ended December 31, 1996 and incorporated herein by reference.
(6)Filed as an exhibit to the Registrant's Registration Statement on Form S-3 (No. 333-59331)
</TABLE>
24
<PAGE>
(b) No reports on Form 8-K were filed during the quarter ended June 30, 1998.
SIGNATURE
Pursuant to the requirements of Securities Exchange Act of 1934, the registrant
has duly caused this report on Form 10-Q to be signed on its behalf by the
undersigned, thereunto duly authorized.
DOCUMENTUM, INC.
(Registrant)
Date: August 12, 1998 By: /s/ Mark S. Garrett
-----------------------
Mark S. Garrett
Vice President, and Chief Financial Officer
(Duly Authorized Officer and Principal
Financial Officer)
25
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
---- ------
<S> <C>
(6)2.1 Agreement and Plan of Merger Reorganization, dated as of July 16, 1998,
among Registrant, RTI Acquisition Corporation and Relevance Technologies, Inc.
(1)3.1 Registrant's Amended and Restated Certificate of Incorporation
(6)3.2 Registrant's Amendment to Amended and Restated Certificate of Incorporation
(2)3.3 Registrant's Amended and Restated Bylaws.
3.4 Registrant's Amendment to Amended and Restated Bylaws
4.1 Reference is made to Exhibits 3.1 and 3.2
(2)4.2 Specimen stock certificate
(2)4.3 Amended and Restated Investor Rights Agreement, dated September 20,
1994, between the Registrant and certain investors.
(6)4.4 Registration Rights Agreement, dated July 16, 1998, between the Registrant and
certain stockholders
10.1 Registrant's 1993 Equity Incentive plan, as amended.
(2)10.2 Form of Incentive Stock Option under the Equity Incentive Plan.
(2)10.3 Form of Nonstatuory Stock Option under the Equity Incentive Plan.
(2)10.4 Form of Early Exercise Stock Purchase Agreement.
10.5 Registrant's Employee Stock Purchase Plan, as amended.
(2)10.6 Registrant's 1995 Non-Employee Director's Stock Option Plan.
(2)10.7 Form of Indemnity Agreement between the Registrant and its officers
and directors.
(2)10.8 Industrial Real Estate Lease, dated September 9, 1995, between the
Registrant and Sunol Center Associates.
(2)10.9 Letter Agreement, dated July 27, 1993, between the Registrant and
Jeffery A. Miller.
10.10 Industrial Real Estate Lease, dated June 22, 1998, between the Registrant and
Patrician Associates, Inc.
Y(3)10.17 Services Partner Agreement, dated April 1,1996, between the
Registrant and Xerox Corporation.
10.18 Registrant's 1996 Non Officer Equity Incentive Plan as amended.
(5)10.20 Lease agreement between the Registrant and Britannia Hacienda IV Limited
Partnership.
27.1 Financial Data Schedule.
27.2 Financial Data Schedule ended 9/30/96. Restated in accordance with SFAS 128.
27.3 Financial Data Schedule ended 6/30/97. Restated in accordance with SFAS 128.
27.4 Financial Data Schedule ended 9/30/97. Restated in accordance with SFAS 128.
------------
Y Confidential treatment requested and granted for portions of this exhibit.
(1)Filed as an exhibit to the Registrant's Registration Statement on Form S-8
(No. 333-01832) and incorporated herein by reference.
(2)Filed as an exhibit to the Registrant's Registration Statement on Form S-1,
as amended (No. 33-80047) and incorporated herein by reference.
(3)Filed as an exhibit to the Registrant's Form 10-Q for the quarterly period
ended March 31, 1996 and incorporated herein by reference.
(4)Filed as an exhibit to the Registrant's Registration Statement on Form S-8
(No. 333-15329) and incorporated herein by reference.
(5)Filed as an exhibit to the Registrant's annual report on 10-K for the year
ended December 31, 1996 and incorporated herein by reference.
(6)Filed as an exhibit to the Registrant's Registration Statement on Form S-3 (No. 333-59331)
</TABLE>
26
<PAGE>
EXHIBIT 3.4
AMENDMENT TO
AMENDED AND RESTATED BYLAWS OF
DOCUMENTUM, INC.
The Board of Directors of Documentum, Inc., at a meeting held March 12,
1998, approved amended Section 15 of the Company's Amended and Restated Bylaws
to read as follows:
"SECTION 15. NUMBER AND TERM OF OFFICE. The Board of Directors shall
consist of one or more members, the number thereof to be determined from
time to time by resolution of the Board of Directors. The number of
authorized Directors also may be modified from time to time by amendment
of this Section 15 in accordance with the provisions of Section 44
hereof. Except as provided in Section 17, the Directors shall be elected
by the stockholders at their annual meeting in each year and shall hold
office until the next annual meeting and until their successors shall be
duly elected and qualified. Directors need not be stockholders unless so
required by the Certificate of Incorporation. If for any cause, the
Directors shall not have been elected at an annual meeting, they may be
elected as soon thereafter as convenient at a special meeting of the
stockholders called for that purpose in the manner provided in these
Bylaws. No reduction of the authorized number of Directors shall have
the effect of removing any Director before the Director's term of office
expires, unless such removal is made pursuant to the provisions of
Section 19 hereof."
<PAGE>
EXHIBIT 10.1
DOCUMENTUM, INC.
1993 EQUITY INCENTIVE PLAN
AS AMENDED ON
JUNE 14, 1994,
JUNE 30, 1995,
NOVEMBER 21, 1995,
MARCH 6, 1997
DECEMBER 17, 1997
MAY 28, 1998
<PAGE>
1. PURPOSES.
(a) The purpose of the 1993 Equity Incentive Plan (the "Plan") is to
provide a means by which selected Employees and Directors of and Consultants to
the Company, and its Affiliates, may be given an opportunity to benefit from
increases in value of the stock of the Company through the granting of (i)
Incentive Stock Options, (ii) Nonstatutory Stock Options, (iii) stock bonuses,
(iv) rights to purchase restricted stock, and (v) Stock Appreciation Rights, all
as defined below. The Plan amends and restates the Documentum, Inc. 1993 Stock
Option Plan (the "Prior Plan").
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company and
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company.
(c) The Company intends that the Stock Awards issued under the Plan shall,
in the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof, or (iii) Stock
Appreciation Rights granted pursuant to Section 8 hereof. All Options shall be
separately designated Incentive Stock Options or Nonstatutory Stock Options at
the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. DEFINITIONS.
(a) "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board in accordance with
subsection 3(c) of the Plan.
(e) "Company" means Documentum, Inc., a Delaware corporation.
(f) "Concurrent Stock Appreciation Right" or "Concurrent Right" means a
right granted pursuant to subsection 8(b)(ii) of the Plan.
<PAGE>
(g) "Consultant" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(h) "Continuous Status as an Employee, Director or Consultant" means the
employment or relationship as a Director or Consultant is not interrupted or
terminated by the Company or any Affiliate. The Board, in its sole discretion,
may determine whether Continuous Status as an Employee, Director or Consultant
shall be considered interrupted in the case of: (i) any leave of absence
approved by the Board, including sick leave, military leave, or any other
personal leave; provided, however, that for purposes of Incentive Stock Options
and Stock Appreciation Rights appurtenant thereto, any such leave may not exceed
ninety (90) days, unless reemployment upon the expiration of such leave is
guaranteed by contract (including certain Company policies) or statute; or (ii)
transfers between locations of the Company or between the Company, Affiliates or
its successor.
(i) "Director" means a member of the Board.
(j) "Disability" means total and permanent disability as defined in Section
22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and Directors, employed
by the Company or any Affiliate of the Company. Neither service as a Director
nor payment of a director's fee by the Company shall be sufficient to constitute
"employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(m) "Fair Market Value" means, as of any date, the value of the common
stock of the Company determined as follows:
(i) If the common stock is listed on any established stock
exchange or traded on the Nasdaq National Market, the Fair Market Value of a
share of common stock shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such system or exchange (or
the exchange with the greatest volume of trading in common stock) on the date of
determination, and if the date of determination was not a market trading day,
then on the last market trading day prior to the date of determination, as
reported in the Wall Street Journal or such other source as the Board deems
reliable;
(ii) If the common stock is quoted on the Nasdaq Stock Market
(but not on the National Market thereof) or is regularly quoted by a recognized
securities dealer but selling
<PAGE>
prices are not reported, the Fair Market Value of a share of common stock shall
be the mean between the bid and asked prices for the common stock on the date of
determination, and if the date of determination was not a market trading day,
then on the last market trading day prior to the date of determination, as
reported in the Wall Street Journal or such other source as the Board deems
reliable;
(iii) In the absence of an established market for the common stock,
the Fair Market Value shall be determined in good faith by the Board.
(n) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(o) "Independent Stock Appreciation Right" or "Independent Right" means a
right granted under subsection 8(b)(iii) of the Plan.
(p) "Non-Employee Director" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a Consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K"), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a "non-
employee director" for purposes of Rule 16b-3.
(q) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(r) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(s) "Option" means a stock option granted pursuant to the Plan.
(t) "Option Agreement" means a written agreement between the Company and an
Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(u) "Optionee" means an Employee, Director or Consultant who holds an
outstanding Option.
<PAGE>
(v) "Outside Director" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(w) "Plan" means this 1993 Equity Incentive Plan.
(x) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with respect to the
Plan.
(y) "Stock Appreciation Right" means any of the various types of rights
which may be granted under Section 8 of the Plan.
(z) "Stock Award" means any right granted under the Plan, including any
Option, any stock bonus, any right to purchase restricted stock, and any Stock
Appreciation Right.
(aa) "Stock Award Agreement" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to
the terms and conditions of the Plan.
(bb) "Tandem Stock Appreciation Right" or "Tandem Right" means a right
granted under subsection 8(b)(i) of the Plan.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible under
the Plan shall be granted Stock Awards; when and how Stock Awards shall be
granted; whether a Stock Award will be an Incentive Stock Option, a Nonstatutory
Stock Option, a stock bonus, a right to purchase restricted stock, a Stock
Appreciation Right, or a combination of the foregoing; the provisions of each
Stock Award granted (which need not be identical), including the time or times
<PAGE>
when a person shall be permitted to receive stock pursuant to a Stock Award;
whether a person shall be permitted to receive stock upon exercise of an
Independent Stock Appreciation Right; and the number of shares with respect to
which Stock Awards shall be granted to each such person.
(2) To construe and interpret the Plan and Stock Awards granted under
it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in Section 14.
(4) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the Company
and which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members (the "Committee"), all of the members
of which Committee may (but need not) be, in the discretion of the Board, Non-
Employee Directors and/or Outside Directors. If administration is delegated to a
Committee, the Committee shall have, in connection with the administration of
the Plan, the powers theretofore possessed by the Board (and references in this
Plan to the Board shall thereafter be to the Committee), subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board. The Board may abolish the Committee at
any time and revest in the Board the administration of the Plan. Notwithstanding
anything in this Section 3 to the contrary, at any time the Board or the
Committee may delegate to a committee of one or more members of the Board the
authority to grant Stock Awards to eligible persons who are not then subject to
Section 16 of the Exchange Act and to eligible persons with respect to whom the
Company does not wish to comply with Section 162(m) of the Code.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 13 relating to adjustments upon
changes in stock, the number of shares of stock that may be issued pursuant to
Stock Awards under the Plan shall not exceed in the aggregate five million
three hundred thousand one hundred thirty-eight (5,300,138) shares of the
Company's common stock. If any Stock Award shall for any reason expire or
otherwise terminate without having been exercised in full, the stock not
purchased shall again become available for issuance under the Plan.
Notwithstanding the foregoing, shares subject to Stock Appreciation Rights
exercised in accordance with Section 8 of the Plan shall not be available for
subsequent issuance under the Plan.
<PAGE>
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options and Stock Appreciation Rights appurtenant
thereto may be granted only to Employees. Stock Awards other than Incentive
Stock Options and Stock Appreciation Rights appurtenant thereto may be granted
only to Employees, Directors or Consultants.
(b) No person shall be eligible for the grant of an Incentive Stock Option
if, at the time of grant, such person owns (or is deemed to own pursuant to
Section 424(d) of the Code) stock possessing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or of any of
its Affiliates unless the exercise price of such Incentive Stock Option is at
least one hundred ten percent (110%) of the Fair Market Value of such stock at
the date of grant and the Incentive Stock Option is not exercisable after the
expiration of five (5) years from the date of grant.
(c) No person shall be eligible to be granted Stock Awards covering more
than one million (1,000,000) shares of the Company's Common Stock in any
calendar year.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. The exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the
<PAGE>
Option is exercised, or (ii) at the discretion of the Board or the Committee,
either at the time of the grant or exercise of the Option, (A) by delivery to
the Company of other common stock of the Company, (B) according to a deferred
payment or other arrangement (which may include, without limiting the generality
of the foregoing, the use of other common stock of the Company) with the person
to whom the Option is granted or to whom the Option is transferred pursuant to
subsection 6(d), or (C) in any other form of legal consideration that may be
acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be payable
at least annually and shall be charged at the minimum rate of interest necessary
to avoid the treatment as interest, under any applicable provisions of the Code,
of any amounts other than amounts stated to be interest under the deferred
payment arrangement.
(d) TRANSFERABILITY. An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Incentive Stock Option
is granted only by such person. A Nonstatutory Stock Option may be transferable
to the extent specified in the Option Agreement, in which case the Option may be
transferred upon such terms and conditions as are set forth in the Option, as
the Board of the Committee shall determine in its sole discretion, including
(without limitation) pursuant to a "domestic relations order" within the meaning
of such rules, regulations or interpretations of the Securities and Exchange
Commission as are applicable for purposes of Section 16 of the Exchange Act.
Notwithstanding the foregoing, the person to whom a Option is granted may, by
delivering written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the Optionee, shall
thereafter be entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. During the remainder of the
term of the Option (if its term extends beyond the end of the installment
periods), the option may be exercised from time to time with respect to any
shares then remaining subject to the Option. The provisions of this subsection
6(e) are subject to any Option provisions governing the minimum number of shares
as to which an Option may be exercised.
(f) SECURITIES LAW COMPLIANCE. The Company may require any Optionee, or
any person to whom an Option is transferred under subsection 6(d), as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's
<PAGE>
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Option; and (2) to give
written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Option for such person's own account and not
with any present intention of selling or otherwise distributing the stock. These
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (i) the issuance of the shares upon the exercise of the Option
has been registered under a then currently effective registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), or (ii) as
to any particular requirement, a determination is made by counsel for the
Company that such requirement need not be met in the circumstances under the
then applicable securities laws.
(g) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR CONSULTANT.
In the event an Optionee's Continuous Status as an Employee, Director or
Consultant terminates (other than upon the Optionee's death or Disability), the
Optionee may exercise his or her Option, but only within such period of time
ending on the earlier of (i) the date three (3) months after the termination of
the Optionee's Continuous Status as an Employee, Director or Consultant (or such
longer or shorter period of time specified in the Option Agreement), or (ii) the
expiration of the Option's term, and only to the extent that the Optionee was
entitled to exercise it at the date of termination (but in no event later than
the expiration of the term of such Option as set forth in the Option Agreement).
If, at the date of termination, the Optionee is not entitled to exercise his or
her entire Option, the shares covered by the unexercisable portion of the Option
shall revert to and again become available for issuance under the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified in the Option Agreement, the Option shall terminate, and the
shares covered by such Option shall revert to the Plan.
An Optionee's Option Agreement may also provide that if the exercise of the
Option following the termination of the Optionee's Continuous Status as an
Employee, Director, or Consultant (other than upon the Optionee's death or
disability) would result in liability under Section 16(b) of the Exchange Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in the Option Agreement, or (ii) the tenth (10th) day
after the last date on which such exercise would result in such liability under
Section 16(b) of the Exchange Act. Finally, an Optionee's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant (other than
upon the Optionee's death or disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements under
the Act, then the Option shall terminate on the earlier of (i) the expiration of
the term of the Option set forth in the first paragraph of this subsection 6(f),
or (ii) the expiration of a period of three (3) months after the termination of
the Optionee's Continuous Status as an Employee, Director or Consultant
<PAGE>
during which the exercise of the Option would not be in violation of such
registration requirements.
(h) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status
as an Employee, Director or Consultant terminates as a result of the Optionee's
Disability, the Optionee may exercise his or her Option, but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination (or such longer or shorter period of time as
specified in the Option Agreement), or (ii) the expiration of the term of the
Option as set forth in the Option Agreement). If, at the date of termination,
the Optionee is not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to the Plan. If,
after termination, the Optionee does not exercise his or her Option within the
time specified herein, the Option shall terminate, and the shares covered by
such Option shall revert to and again become available for issuance under the
Plan.
(i) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option after the termination of, the
Optionee's Continuous Status as an Employee, Director or Consultant, the Option
may be exercised by the Optionee's estate, by a person who acquired the right to
exercise the Option by bequest or inheritance, or by a person designated to
exercise the option upon the Optionee's death pursuant to subsection 6(d), but
only within the period ending on the earlier of (i) the date twelve (12) months
following the date of death (or such longer or shorter period specified in the
Option Agreement) or (ii) the expiration of the term of such Option as set forth
in the Option Agreement. If, at the time of death, the Optionee was not entitled
to exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available under the Plan.
If, after death, the Option is not exercised within the time specified herein,
the Option shall terminate, and the shares covered by such Option shall revert
to and again become available for issuance under the Plan.
(j) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased shall be subject to a repurchase right in favor of the Company, with
the repurchase price to be equal to the original purchase price of the stock.
(k) WITHHOLDING. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2) authorizing
the Company to withhold shares from the shares of the common stock otherwise
issuable to the participant as a result of the exercise of the Option; or (3)
delivering to the Company owned and unencumbered shares of the common stock of
the Company.
<PAGE>
(l) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board or Committee to make or not to make grants of Options hereunder, the Board
or Committee shall have the authority (but not an obligation) to include as part
of any Option Agreement a provision entitling the Optionee to a further Option
(a "Re-Load Option") in the event the Optionee exercises the Option evidenced by
the Option agreement, in whole or in part, by surrendering other shares of
Common Stock in accordance with this Plan and the terms and conditions of the
Option Agreement. Any such Re-Load Option (i) shall be for a number of shares
equal to the number of shares surrendered as part or all of the exercise price
of such Option; (ii) shall have an expiration date which is the same as the
expiration date of the Option the exercise of which gave rise to such Re-Load
Option; and (iii) shall have an exercise price which is equal to one hundred
percent (100%) of the Fair Market Value of the Common Stock subject to the Re-
Load Option on the date of exercise of the original Option or, in the case of a
Re-Load Option which is an Incentive Stock Option and which is granted to a 10%
stockholder (as described in subsection 5(c)), shall have an exercise price
which is equal to one hundred ten percent (110%) of the Fair Market Value of the
stock subject to the Re-Load Option on the date of exercise of the original
Option and shall have a term which is no longer than five (5) years.
Any such Re-Load Option may be an Incentive Stock Option or a Nonstatutory
Stock Option, as the Board or Committee may designate at the time of the grant
of the original Option, provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollar ($100,000) annual limitation on exercisability of Incentive Stock Options
described in subsection 12(d) of the Plan and in Section 422(d) of the Code.
There shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option
shall be subject to the availability of sufficient shares under subsection 4(a)
and shall be subject to such other terms and conditions as the Board or
Committee may determine which are not inconsistent with the express provisions
of the Plan regarding the terms of the Options.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The terms and conditions of stock bonus or restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate agreements need not be identical, but each stock bonus or
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:
(a) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such agreement. Notwithstanding the foregoing, the
Board or the Committee may determine that eligible
<PAGE>
participants in the Plan may be awarded stock pursuant to a stock bonus
agreement in consideration for past services actually rendered to the Company or
for its benefit.
(b) TRANSFERABILITY. No rights under a stock bonus or restricted stock
purchase agreement shall be assignable by any participant under the Plan, either
voluntarily or by operation of law, except by will or by the laws of descent and
distribution, and shall be exercisable during the lifetime of the person to whom
the rights are granted only by such person. The person to whom the Stock Award
is granted may, be delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of such person, shall thereafter be entitled to exercise the rights held
by such person under the stock bonus or restricted stock purchase agreement.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment or other arrangement with the person to whom the stock is sold;
or (iii) in any other form of legal consideration that may be acceptable to the
Board or the Committee in its discretion. Notwithstanding the foregoing, the
Board or the Committee to which administration of the Plan has been delegated
may award stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
(d) VESTING. Shares of stock sold or awarded under the Plan may, but need
not, be subject to a repurchase option in favor of the Company in accordance
with a vesting schedule to be determined by the Board or the Committee.
(e) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR CONSULTANT.
In the event a Participant's Continuous Status as an Employee, Director or
Consultant terminates, the Company may repurchase or otherwise reacquire any or
all of the shares of stock held by that person which have not vested as of the
date of termination under the terms of the stock bonus or restricted stock
purchase agreement between the Company and such person.
8. STOCK APPRECIATION RIGHTS.
(a) The Board or Committee shall have full power and authority,
exercisable in its sole discretion, to grant Stock Appreciation Rights to
Employees or Directors of or Consultants to, the Company or its Affiliates under
the Plan. Each such right shall entitle the holder to a distribution based on
the appreciation in the Fair Market Value per share of a designated amount of
stock.
(b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:
<PAGE>
(i) TANDEM STOCK APPRECIATION RIGHTS. Tandem Rights will be
granted appurtenant to an Option and will require the holder to elect between
the exercise of the underlying Option for shares of stock and the surrender, in
whole or in part, of such Option for an appreciation distribution equal to the
excess of (A) the Fair Market Value (on the date of Option surrender) of vested
shares of stock purchasable under the surrendered Option over (B) the aggregate
exercise price payable for such shares.
(ii) CONCURRENT STOCK APPRECIATION RIGHTS. Concurrent Rights will
be granted appurtenant to an Option and may apply to all or any portion of the
shares of stock subject to the underlying Option and will be exercised
automatically at the same time the Option is exercised for those shares. The
appreciation distribution to which the holder of such concurrent right shall be
entitled upon exercise of the underlying Option shall be in an amount equal to
the excess of (A) the aggregate Fair Market Value (at date of exercise) of the
vested shares purchased under the underlying Option with such concurrent rights
over (B) the aggregate exercise price paid for those shares.
(iii) INDEPENDENT STOCK APPRECIATION RIGHTS. Independent Rights may
be granted independently of any Option and will entitle the holder upon exercise
to an appreciation distribution equal in amount to the excess of (A) the
aggregate Fair Market Value (at the date of exercise) of a number of shares of
stock equal to the number of vested share equivalents exercised at such time (as
described in subsection 7(c)(iii)(B)) over (B) the aggregate Fair Market Value
of such number of shares of stock at the date of grant.
(c) The terms and conditions applicable to each Tandem Right, Concurrent
Right and Independent Right shall be as follows:
(i) TANDEM RIGHTS.
(A) Tandem Rights may be tied to either Incentive Stock
Options or Nonstatutory Stock Options. Each such right shall, except as
specifically set forth below, be subject to the same terms and conditions
applicable to the particular Option to which it pertains. If Tandem Rights are
granted appurtenant to an Incentive Stock Option, they shall satisfy any
applicable Treasury Regulations so as not to disqualify such Option as an
Incentive Stock Option under the Code.
(B) The appreciation distribution payable on the exercised
Tandem Right shall be in cash in an amount equal to the excess of (I) the Fair
Market Value (on the date of the Option surrender) of the number of shares of
stock covered by that portion of the surrendered
<PAGE>
Option in which the optionee is vested over (II) the aggregate exercise price
payable for such vested shares.
(ii) CONCURRENT RIGHTS.
(A) Concurrent Rights may be tied to any or all of the shares
of stock subject to any Incentive Stock Option or Nonstatutory Stock Option
grant made under the Plan. A Concurrent Right shall, except as specifically set
forth below, be subject to the same terms and conditions applicable to the
particular Option grant to which it pertains.
(B) A Concurrent Right shall be automatically exercised at the
same time the underlying Option is exercised with respect to the particular
shares of stock to which the Concurrent Right pertains.
(C) The appreciation distribution payable on an exercised
Concurrent Right shall be in cash in an amount equal to such portion as shall be
determined by the Board or the Committee at the time of the grant of the excess
of (I) the aggregate Fair Market Value (on the date the Option is exercised) of
the vested shares of stock purchased under the underlying Option which have
Concurrent Rights appurtenant to them over (II) the aggregate exercise price
paid for such shares.
(iii) INDEPENDENT RIGHTS.
(a) Independent Rights shall, except as specifically set forth
below, be subject to the same terms and conditions applicable to Nonstatutory
Stock Options as set forth in Section 6. They shall be denominated in share
equivalents.
(b) The appreciation distribution payable on the exercised
Independent Right shall be in cash in an amount equal to the excess of (I) the
aggregate Fair Market Value (on the date of the exercise of the Independent
Right) of a number of shares of Company stock equal to the number of share
equivalents in which the holder is vested under such Independent Right, and with
respect to which the holder is exercising the Independent Right on such date,
over (II) the aggregate Fair Market Value (on the date of the grant of the
Independent Right) of such number of shares of Company stock.
(iv) TERMS APPLICABLE TO TANDEM RIGHTS, CONCURRENT RIGHTS AND
INDEPENDENT RIGHTS.
<PAGE>
(A) To exercise any outstanding Tandem, Concurrent or
Independent Right, the holder must provide written notice of exercise to the
Company in compliance with the provisions of the instrument evidencing such
right.
(B) If a Tandem, Concurrent, or Independent Right is granted
to an individual who is at the time subject to Section 16(b) of the Exchange Act
(a "Section 16(b) Insider"), then the instrument of grant shall incorporate all
the terms and conditions at the time necessary to assure that the subsequent
exercise of such right shall qualify for the safe-harbor exemption from short-
swing profit liability provided by Rule 16b-3 promulgated under the Exchange Act
(or any successor rule or regulation).
(C) Except as provided in subsection 5(d), no limitation
shall exist on the aggregate amount of cash payments the Company may make under
the Plan in connection with the exercise of Tandem, Concurrent or Independent
Rights.
9. CANCELLATION AND RE-GRANT OF OPTIONS.
(a) The Board or the Committee shall have the authority to effect, at any
time and from time to time, with the consent of the affected holders of Options
and/or Stock Appreciation Rights, (i) the repricing of any outstanding Options
and/or any Stock Appreciation Rights under the Plan and/or (ii) the cancellation
of any outstanding Options and/or any Stock Appreciation Rights under the Plan
and the grant in substitution therefor of new Options and/or Stock Appreciation
Rights under the Plan covering the same or different numbers of shares of stock,
but having an exercise price per share not less than eighty-five percent (85%)
of the Fair Market Value (one hundred percent (100%) of the Fair Market Value in
the case of an Incentive Stock Option or, in the case of an Incentive Stock
Option granted to a 10% stockholder (as described in subsection 5(c), not less
than one hundred ten percent (110%) of the Fair Market Value) per share of stock
on the new grant date. Notwithstanding the foregoing, the Board or the
Committee may grant an Option and/or Stock Appreciation Right with an exercise
price lower than that set forth above if such Option and/or Stock Appreciation
Right is granted as part of a transaction to which section 424(a) of the Code
applies.
(b) Shares subject to an Option or Stock Appreciation Right canceled under
this Section 9 shall continue to be counted against the maximum award of Options
and Stock Appreciation Rights permitted to be granted to a person pursuant to
subsection 5(d) of the Plan. The repricing of an Option and/or Stock
Appreciation Right under this Section 9, resulting in a reduction of the
exercise price, shall be deemed to be a cancellation of the original Option
and/or Stock Appreciation Right and the grant of a substitute Option and/or
Stock Appreciation Right; in the event of such repricing, both the original and
the substituted Options and Stock Appreciation Rights shall be counted against
the maximum awards of Options and Stock Appreciation Rights
<PAGE>
permitted to be granted to a person pursuant to subsection 5(d) of the Plan. The
provisions of this subsection 9(b) shall be applicable only to the extent
required by Section 162(m) of the Code.
10. COVENANTS OF THE COMPANY.
(a) During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of stock required to satisfy such Stock Awards
up to the number of shares of stock authorized under the Plan.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock under the Stock Awards; provided, however, that
this undertaking shall not require the Company to register under the Securities
Act either the Plan, any Stock Award or any stock issued or issuable pursuant to
any such Stock Award. If, after reasonable efforts, the Company is unable to
obtain from any such regulatory commission or agency the authority which counsel
for the Company deems necessary for the lawful issuance and sale of stock under
the Plan, the Company shall be relieved from any liability for failure to issue
and sell stock under such Stock Awards unless and until such authority is
obtained.
11. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
12. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which a Stock
Award may first be exercised or the time during which a Stock Award or any part
thereof will vest, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.
(b) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Option unless and
until such person has satisfied all requirements for exercise of the Option
pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Employee, Director, Consultant, Optionee,
or other holder of Stock Awards any right to continue in the employ of the
Company or any Affiliate (or to continue acting as a Director or Consultant) or
shall affect the right of the Company or any Affiliate to terminate
<PAGE>
the employment or relationship as a Director or Consultant of any Employee,
Director, Consultant or Optionee, with or without cause.
(d) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
13. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any Stock Award, without receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan pursuant to subsection 4(a) and the maximum
number of shares subject to options and Stock Appreciation Rights pursuant to
subsection 5(d), and the outstanding Stock Awards will be appropriately adjusted
in the class(es) and number of shares and price per share of stock subject to
such outstanding Stock Awards. Such adjustments shall be made by the Board or
the Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a "transaction not involving the receipt of consideration by
the Company".)
(b) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; or (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then, at the sole discretion of the Board and to the extent
permitted by applicable law: (i) any surviving corporation or an Affiliate of
such surviving corporation shall assume any Stock Awards outstanding under the
Plan or shall substitute similar Stock Awards for those outstanding under the
Plan, or (ii) such Stock Awards shall continue in full force and effect. In the
event any surviving corporation and its Affiliates refuse to assume or continue
such Stock Awards, or to substitute similar Stock Awards for those outstanding
under the Plan, then, at the sole discretion of the Board, and with respect to
Stock Awards held by persons then performing services as Employees, Directors or
Consultants, the time during which such Stock Awards may be exercised shall be
accelerated and the Stock Awards terminated if not exercised prior to such
event.
<PAGE>
14. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 13 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company to the extent stockholder approval is necessary for the Plan to
satisfy the requirements of Section 422 of the Code, Rule 16b-3 under the
Exchange Act or any Nasdaq or securities exchange listing requirements.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
(d) Rights and obligations under any Stock Award granted before amendment
of the Plan shall not be altered or impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Stock Award; provided, however, that the rights and obligations
under any Stock Award shall not be altered or impaired by any such amendment
unless (i) the Company requests the consent of the person to whom the Stock
Award was granted and (ii) such person consents in writing.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on March 28, 2003. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Stock Award granted while the Plan is
in effect shall not be impaired by suspension or termination of the Plan, except
with the consent of the person to whom the Stock Award was granted. The terms of
the Prior Plan shall remain in effect and apply to grants made pursuant to the
terms of the Prior Plan.
<PAGE>
EXHIBIT 10.5
DOCUMENTUM, INC.
EMPLOYEE STOCK PURCHASE PLAN
Adopted November 21, 1995
Approved by the Stockholders January 17, 1996
As Amended January 31, 1996
As Amended and
approved by the Stockholders May 28, 1998
1. Purpose.
(a) The purpose of the Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of Documentum, Inc., a Delaware corporation
(the "Company"), and its Affiliates, as defined in subparagraph 1(b), which are
designated as provided in subparagraph 2(b), may be given an opportunity to
purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent corporation or
subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of its
employees, to secure and retain the services of new employees, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
(d) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.
2. Administration.
(a) The Plan shall be administered by the Board of Directors (the "Board") of
the Company unless and until the Board delegates administration to a Committee,
as provided in subparagraph 2(c). Whether or not the Board has delegated
administration, the Board shall have the final power to determine all questions
of policy and expediency that may arise in the administration of the Plan.
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the Company
shall be granted and the provisions of each offering of such rights (which need
not be identical).
(ii) To designate from time to time which Affiliates of the Company shall
be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and rights granted under it, and to
establish, amend and revoke rules and regulations for its administration. The
Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan, in a manner and to the extent it shall deem necessary
or expedient to make the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the Company
and its Affiliates and to carry out the intent that the Plan be treated as an
"employee stock purchase plan" within the meaning of Section 423 of the Code.
(c) The Board may delegate administration of the Plan to a Committee composed
of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
<PAGE>
3. Shares Subject to the Plan.
(a) Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to rights granted under
the Plan shall not exceed in the aggregate seven hundred thousand (700,000)
shares of the Company's common stock (the "Common Stock"). If any right granted
under the Plan shall for any reason terminate without having been exercised, the
Common Stock not purchased under such right shall again become available for the
Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. Grant of Rights; Offering.
The Board or the Committee may from time to time grant or provide for the
grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate, which shall comply with the requirements of Section 423(b)(5) of
the Code that all employees granted rights to purchase stock under the Plan
shall have the same rights and privileges. The terms and conditions of an
Offering shall be incorporated by reference into the Plan and treated as part of
the Plan. The provisions of separate Offerings need not be identical, but each
Offering shall include (through incorporation of the provisions of this Plan by
reference in the document comprising the Offering or otherwise) the period
during which the Offering shall be effective, which period shall not exceed
twenty-seven (27) months beginning with the Offering Date, and the substance of
the provisions contained in paragraphs 5 through 8, inclusive.
5. Eligibility.
(a) Rights may be granted only to employees of the Company or, as the Board
or the Committee may designate as provided in subparagraph 2(b), to employees of
any Affiliate of the Company. Except as provided in subparagraph 5(b), an
employee of the Company or any Affiliate shall not be eligible to be granted
rights under the Plan, unless, on the Offering Date, such employee has been in
the employ of the Company or any Affiliate for such continuous period preceding
such grant as the Board or the Committee may require, but in no event shall the
required period of continuous employment be greater than two (2) years. In
addition, unless otherwise determined by the Board or the Committee and set
forth in the terms of the applicable Offering, no employee of the Company or any
Affiliate shall be eligible to be granted rights under the Plan, unless, on the
Offering Date, such employee's customary employment with the Company or such
Affiliate is for at least twenty (20) hours per week and at least five (5)
months per calendar year.
(b) The Board or the Committee may provide that, each person who, during the
course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(i) the date on which such right is granted shall be the "Offering Date"
of such right for all purposes, including determination of the exercise price of
such right;
(ii) the period of the Offering with respect to such right shall begin on
its Offering Date and end coincident with the end of such Offering; and
(iii) the Board or the Committee may provide that if such person first
becomes an eligible employee within a specified period of time before the end of
the Offering, he or she will not receive any right under that Offering.
(c) No employee shall be eligible for the grant of any rights under the Plan
if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of
this subparagraph 5(c), the rules of Section 424(d) of
<PAGE>
the Code shall apply in determining the stock ownership of any employee, and
stock which such employee may purchase under all outstanding rights and options
shall be treated as stock owned by such employee.
(d) An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such employee's rights to purchase stock of the Company
or any Affiliate to accrue at a rate which exceeds twenty-five thousand dollars
($25,000) of fair market value of such stock (determined at the time such rights
are granted) for each calendar year in which such rights are outstanding at any
time.
(e) Officers of the Company and any designated Affiliate shall be eligible to
participate in Offerings under the Plan, provided, however, that the Board may
provide in an Offering that certain employees who are highly compensated
employees within the meaning of Section 423(b)(4)(D) of the Code shall not be
eligible to participate.
6. Rights; Purchase Price.
(a) On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase up to the number of
shares of Common Stock of the Company purchasable with a percentage designated
by the Board or the Committee not exceeding ten percent (10%) of such employee's
Earnings (as defined in subparagraph 7(a)) during the period which begins on the
Offering Date (or such later date as the Board or the Committee determines for a
particular Offering) and ends on the date stated in the Offering, which date
shall be no later than the end of the Offering. The Board or the Committee
shall establish one or more dates during an Offering (the "Purchase Date(s)") on
which rights granted under the Plan shall be exercised and purchases of Common
Stock carried out in accordance with such Offering.
(b) In connection with each Offering made under the Plan, the Board or the
Committee may specify a maximum number of shares that may be purchased by any
employee as well as a maximum aggregate number of shares that may be purchased
by all eligible employees pursuant to such Offering. In addition, in connection
with each Offering that contains more than one Purchase Date, the Board or the
Committee may specify a maximum aggregate number of shares which may be
purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.
(c) The purchase price of stock acquired pursuant to rights granted under the
Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair market value
of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair market value
of the stock on the Purchase Date.
7. Participation; Withdrawal; Termination.
(a) An eligible employee may become a participant in the Plan pursuant to an
Offering by delivering a participation agreement to the Company within the time
specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employee's Earnings during the
Offering. "Earnings" is defined as an employee's regular salary or wages
(including amounts thereof elected to be deferred by the employee, that would
otherwise have been paid, under any arrangement established by the Company that
is intended to comply with Section 125, Section 401(k), Section 402(h) or
Section 403(b) of the Code or that provides non-qualified deferred
compensation), which shall include overtime pay and commissions, but shall
exclude bonuses, incentive pay, profit sharing, other remuneration paid directly
to the employee, the cost of employee benefits paid for by the Company or an
Affiliate, education or tuition reimbursements, imputed income arising under any
group insurance or benefit program, traveling expenses, business and moving
expense reimbursements, income received in connection with stock options,
contributions made by the Company or an Affiliate under any employee benefit
plan, and similar items of compensation, as determined by the Board or the
Committee. The payroll deductions made for each participant shall be credited
to an account for such participant under the Plan and shall be deposited with
the general funds of
<PAGE>
the Company. A participant may reduce (including to zero) or increase such
payroll deductions, and an eligible employee may begin such payroll deductions,
after the beginning of any Offering only as provided for in the Offering. A
participant may make additional payments into his or her account only if
specifically provided for in the Offering and only if the participant has not
had the maximum amount withheld during the Offering.
(b) At any time during an Offering, a participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides.
Such withdrawal may be elected at any time prior to the end of the Offering
except as provided by the Board or the Committee in the Offering. Upon such
withdrawal from the Offering by a participant, the Company shall distribute to
such participant all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan but such
participant will be required to deliver a new participation agreement in order
to participate in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating employee's employment with the
Company and any designated Affiliate, for any reason, and the Company shall
distribute to such terminated employee all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have been used to
acquire stock for the terminated employee), under the Offering, without
interest.
(d) Rights granted under the Plan shall not be transferable by a participant
otherwise than by will or the laws of descent and distribution, or by a
beneficiary designation as provided in paragraph 14 and, otherwise during his or
her lifetime, shall be exercisable only by the person to whom such rights are
granted.
8. Exercise.
(a) On each Purchase Date specified therefor in the relevant Offering, each
participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of whole shares of stock of the Company, up to
the maximum number of shares permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering. No
fractional shares shall be issued upon the exercise of rights granted under the
Plan. The amount, if any, of accumulated payroll deductions remaining in each
participant's account after the purchase of shares which is less than the amount
required to purchase one share of stock on the final Purchase Date of an
Offering shall be held in each such participant's account for the purchase of
shares under the next Offering under the Plan, unless such participant withdraws
from such next Offering, as provided in subparagraph 7(b), or is no longer
eligible to be granted rights under the Plan, as provided in paragraph 5, in
which case such amount shall be distributed to the participant after such final
Purchase Date, without interest. The amount, if any, of accumulated payroll
deductions remaining in any participant's account after the purchase of shares
which is equal to the amount required to purchase whole shares of stock on the
final Purchase Date of an Offering shall be distributed in full to the
participant after such Purchase Date, without interest.
(b) No rights granted under the Plan may be exercised to any extent unless
the shares to be issued upon such exercise under the Plan (including rights
granted thereunder) are covered by an effective registration statement pursuant
to the Securities Act of 1933, as amended (the "Securities Act") and the Plan is
in material compliance with all applicable state, foreign and other securities
and other laws applicable to the Plan. If on a Purchase Date in any Offering
hereunder the Plan is not so registered or in such compliance, no rights granted
under the Plan or any Offering shall be exercised on such Purchase Date, and the
Purchase Date shall be delayed until the Plan is subject to such an effective
registration statement and such compliance, except that the Purchase Date shall
not be delayed more than twelve (12) months and the Purchase Date shall in no
event be more than twenty-seven (27) months from the Offering Date. If on the
Purchase Date of any Offering hereunder, as delayed to the maximum extent
permissible, the Plan is not registered and in such compliance, no rights
granted under the Plan or any Offering shall be exercised and all payroll
deductions accumulated during the Offering (reduced to the extent, if any, such
deductions have been used to acquire stock) shall be distributed to the
participants, without interest.
<PAGE>
9. Covenants of the Company.
(a) During the terms of the rights granted under the Plan, the Company shall
keep available at all times the number of shares of stock required to satisfy
such rights.
(b) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.
10. Use of Proceeds from Stock.
Proceeds from the sale of stock pursuant to rights granted under the Plan
shall constitute general funds of the Company.
11. Rights as a Stockholder.
A participant shall not be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to rights granted under
the Plan unless and until the participant's shareholdings acquired upon exercise
of rights under the Plan are recorded in the books of the Company.
12. Adjustments upon Changes in Stock.
(a) If any change is made in the stock subject to the Plan, or subject to any
rights granted under the Plan (through merger, consolidation, reorganization,
recapitalization, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan and outstanding rights will be
appropriately adjusted in the class(es) and maximum number of shares subject to
the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding rights. Such adjustments shall be made by the Board or
the Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a "transaction not involving the receipt of consideration by
the Company.")
(b) In the event of: (1) a dissolution or liquidation of the Company; (2) a
merger or consolidation in which the Company is not the surviving corporation;
(3) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; or (4) any other capital reorganization
in which more than fifty percent (50%) of the shares of the Company entitled to
vote are exchanged, then, as determined by the Board in its sole discretion (i)
any surviving corporation may assume outstanding rights or substitute similar
rights for those under the Plan, (ii) such rights may continue in full force and
effect, or (iii) participants' accumulated payroll deductions may be used to
purchase Common Stock immediately prior to the transaction described above and
the participants' rights under the ongoing Offering terminated.
13. Amendment of the Plan.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(i) Increase the number of shares reserved for rights under the Plan;
(ii) Modify the provisions as to eligibility for participation in the Plan
(to the extent such modification requires stockholder approval in order for the
Plan to obtain employee stock purchase plan treatment under Section 423 of the
Code
<PAGE>
or to comply with the requirements of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended ("Rule 16b-3")); or
(iii) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to obtain employee stock purchase
plan treatment under Section 423 of the Code or to comply with the requirements
of Rule 16b-3.
It is expressly contemplated that the Board may amend the Plan in any respect
the Board deems necessary or advisable to provide eligible employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee stock purchase plans
and/or to bring the Plan and/or rights granted under it into compliance
therewith.
(b) Rights and obligations under any rights granted before amendment of the
Plan shall not be impaired by any amendment of the Plan, except with the consent
of the person to whom such rights were granted, or except as necessary to comply
with any laws or governmental regulations, or except as necessary to ensure that
the Plan and/or rights granted under the Plan comply with the requirements of
Section 423 of the Code.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.
(b) Such designation of beneficiary may be changed by the participant at any
time by written notice. In the event of the death of a participant and in the
absence of a beneficiary validly designated under the Plan who is living at the
time of such participant's death, the Company shall deliver such shares and/or
cash to the executor or administrator of the estate of the participant, or if no
such executor or administrator has been appointed (to the knowledge of the
Company), the Company, in its sole discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
15. Termination or Suspension of the Plan.
(a) The Board in its discretion, may suspend or terminate the Plan at any
time. No rights may be granted under the Plan while the Plan is suspended or
after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except as expressly provided in the Plan or with the consent of the person
to whom such rights were granted, or except as necessary to comply with any laws
or governmental regulation, or except as necessary to ensure that the Plan
and/or rights granted under the Plan comply with the requirements of Section 423
of the Code.
16. Effective Date of Plan.
The Plan shall become effective on the day immediately prior to the
effectiveness of the Company's initial public offering of shares of common stock
(the "Effective Date"), but no rights granted under the Plan shall be exercised
unless and until the Plan has been approved by the stockholders of the Company
within twelve (12) months before or after the date the Plan is adopted by the
Board or the Committee, which date may be prior to the Effective Date.
<PAGE>
EXHIBIT 10.10
BERNAL CORPORATE PARK
---------------------
SYCAMORE PLAZA I
----------------
OFFICE LEASE
BETWEEN
PATRICIAN ASSOCIATES, INC.
("LANDLORD")
AND
DOCUMENTUM, INC.
("TENANT")
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C>
1 TERM....................................................... 2
2 POSSESSION................................................. 2
3 BASIC RENT................................................. 4
4 RENTAL ADJUSTMENT.......................................... 5
5 SECURITY DEPOSIT........................................... 9
6 USE........................................................ 10
7 NOTICES.................................................... 12
8 BROKERS.................................................... 12
9 HOLDING OVER............................................... 12
10 TAXES ON TENANT'S PROPERTY................................. 13
11 CONDITION OF PREMISES...................................... 13
12 ALTERATIONS................................................ 14
13 REPAIRS.................................................... 15
14 LIENS...................................................... 16
15 ENTRY BY LANDLORD.......................................... 16
16 UTILITIES AND SERVICES..................................... 17
17 BANKRUPTCY................................................. 18
18 INDEMNIFICATION............................................ 18
19 DAMAGE TO TENANT'S PROPERTY................................ 19
20 INSURANCE.................................................. 19
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
21 DAMAGE OR DESTRUCTION..................................... 21
22 EMINENT DOMAIN............................................ 23
23 DEFAULTS AND REMEDIES..................................... 23
24 ASSIGNMENT AND SUBLETTING................................. 25
25 SUBORDINATION............................................. 27
26 ESTOPPEL CERTIFICATE...................................... 28
27 SIGNAGE................................................... 29
28 RULES AND REGULATIONS..................................... 30
29 CONFLICT OF LAWS.......................................... 30
30 SUCCESSORS AND ASSIGNS.................................... 30
31 SURRENDER OF PREMISES..................................... 30
32 ATTORNEYS' FEES........................................... 30
33 PERFORMANCE BY TENANT..................................... 30
34 MORTGAGEE PROTECTION...................................... 31
35 DEFINITION OF LANDLORD.................................... 31
36 WAIVER.................................................... 32
37 IDENTIFICATION OF TENANT.................................. 32
38 PARKING................................................... 32
39 TERMS AND HEADINGS........................................ 33
40 EXAMINATION OF LEASE...................................... 33
41 TIME...................................................... 33
42 PRIOR AGREEMENT: AMENDMENTS............................... 33
43 SEPARABILITY.............................................. 33
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
44 RECORDING.................................................. 34
45 CONSENTS................................................... 34
46 LIMITATION ON LIABILITY.................................... 34
47 RIDERS..................................................... 35
48 EXHIBITS................................................... 35
49 MODIFICATION FOR LENDER.................................... 35
50 WAIVER OF LIEN RIGHTS...................................... 35
51 OPTION TO EXTEND........................................... 36
52 LANDLORD'S CONDITION....................................... 37
</TABLE>
iii
<PAGE>
LIST OF EXHIBITS
----------------
EXHIBIT A-1 The Premises
EXHIBIT A-2 The Project
EXHIBIT B Work Letter Agreement
EXHIBIT C Standards for Utilities and Services
EXHIBIT D Rules and Regulations
EXHIBIT E Parking Rules and Regulations
EXHIBIT F Form of Tenant's Letter of Credit
EXHIBIT G Schedule of Tenant's Leasehold Interest Value
EXHIBIT H Subordination, Non-Disturbance and Attornment Agreement
iv
<PAGE>
BERNAL CORPORATE PARK
SYCAMORE PLAZA I
THIS LEASE is made as of June 22, 1998 by and between PATRICIAN
ASSOCIATES, INC., a California corporation ("Landlord"), and DOCUMENTUM, INC., a
California corporation ("Tenant").
Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord that certain four-story office building ("Building") to be constructed
by Landlord at 6801 Koll Center Parkway with an area of approximately one
hundred twenty-two thousand four hundred forty-two (122,442) rentable square
feet as shown on EXHIBIT A-1 (the "Premises"). As an appurtenant right to
-----------
Tenant's leasing of the Premises, Landlord hereby grants to Tenant, for the
benefit of Tenant and its employees, suppliers, shippers, customers and
invitees, during the term of this Lease, the non-exclusive right to use, in
common with others entitled to such use, (i) those portions of the common areas
within the Project and within Bernal Corporate Park which are improved from time
to time for use as parking areas, driveways, sidewalks, landscaped areas, or for
other common purposes including, for example the fitness center and conference
room currently available to the tenants of Bernal Corporate Park, and (ii) all
easements, licenses and similar rights and privileges relating to or appurtenant
to the Building or the Project and created or existing from time to time under
any written agreements. For purposes of this Lease, all references herein to
the "Project" shall mean the Building plus the parcel of land upon which the
Building is constructed, including all parking facilities, driveways, sidewalks,
plazas, and landscaped areas appurtenant to the Building and within such parcel
of land, as more particularly shown on the site plan attached as EXHIBIT A-2.
-----------
Landlord and Tenant have also entered into a lease of even date herewith for
approximately sixty-three thousand six hundred thirty-two (63,632) rentable
square feet of space in the building to be constructed at 6701 Koll Center
Parkway, Pleasanton, California ("Sycamore Plaza II Lease"). The Premises shall
be measured in accordance with the Building Managers and Owners Association
Standard ANSI-Z65.1 (1996) to determine the rentable and usable area of the
Premises. Tenant shall have the right to verify the measurement of the
Premises, at Tenant's expense, prior to the Commencement Date using the
foregoing BOMA standards.
The parties hereto agree that said letting and hiring is upon and
subject to the terms, covenants and conditions herein set forth. Landlord and
Tenant each covenant, as a material part of the consideration for this Lease to
keep and perform each and all of said terms, covenants and conditions for which
such party is liable hereunder and that this Lease is made upon the condition of
such performance.
Prior to the commencing of the term of this Lease the Premises shall
be improved by the Tenant Improvements described in the Work Letter marked
EXHIBIT B attached hereto. Tenant shall contribute the sum of Two Million Five
- ---------
Hundred Thousand and no/100ths Dollars ($2,500,000.00) toward the cost of the
Tenant Improvements to the Premises ("Tenant's Contribution"). Tenant's
Contribution shall be due upon execution of this Lease and shall be non-
refundable to Tenant except as provided in paragraph 2(d).
<PAGE>
ARTICLE 1
---------
TERM
----
(a) The term of this Lease shall be for seven (7) years unless sooner
terminated as hereinafter provided, commencing upon the date ("Commencement
Date") which is the earlier of:
(i) Completion of the Base Building and substantial completion
(as defined in the Work Letter) of the Tenant Improvements to the Premises
described in the Work Letter (subject to the provisions of Paragraph 8 of the
Work Letter) and the tender of possession of the Premises to Tenant, subject
only to completion of "punch- list" items which do not in the aggregate
materially interfere with Tenant's ability to occupy the Premises for the use
contemplated herein, or
(ii) The date that Tenant opened for business in the Premises,
and ending on the last day of the last month in the term of this Lease, unless
such term shall be sooner terminated as hereinafter provided. As soon as the
Commencement Date is determined, the parties shall execute a written
acknowledgment setting forth the precise commencement and termination dates of
this Lease. Failure to enter into such an amendment, however, shall not affect
Tenant's liability hereunder. Reference in this Lease to a "Lease Year" shall
mean each successive twelve month period commencing with the Commencement Date.
Landlord and Tenant estimate that the Commencement Date shall be June 1, 1999.
(b) Tenant shall be permitted to access the Premises approximately two
(2) weeks prior to the Commencement Date for the purpose of taking preparatory
measures in contemplation of its occupancy, including but not limited to,
installing fixtures and furniture, computer equipment, telecommunications
equipment, and other personal property, subject to all of the terms and
conditions of this Lease, except the obligation to pay Basic Rent or Direct
Expenses, provided that Tenant's access does not unreasonably interfere with
completion of the Tenant Improvements.
ARTICLE 2
---------
POSSESSION
----------
(a) Landlord shall use diligent efforts to complete the Base Building
and the Tenant Improvements promptly. Tenant agrees, however, that if Landlord
is unable to deliver possession of the Premises to Tenant on or before June 1,
1999, subject to the provisions of paragraphs 2(b) and 2(c), this Lease shall
not be void or voidable, nor shall Landlord be liable to Tenant for any loss or
damage resulting therefrom, but in such event the term of this Lease shall not
commence until Landlord tenders possession of the Premises to Tenant with the
Tenant Improvements substantially completed. If Landlord completes construction
of the Tenant Improvements and Base Building, including access thereto, prior to
the date scheduled in the Work Letter, Landlord shall deliver possession of the
Premises to Tenant upon such completion and the term of this Lease shall
commence five (5) days after Landlord has notified Tenant of such completion.
<PAGE>
(b) If the Commencement Date has not occurred by July 1, 1999 for any
reason other than Tenant Delays (as defined in the Work Letter) or delays caused
by Force Majeure (as defined herein), then Tenant shall be entitled to one (1)
day of free Basic Rent for each day of delay in substantial completion that
occurs from and after July 1, 1999 (as such date may be extended by Tenant
Delays and Force Majeure delays) until the earlier of the Commencement Date or
December 1, 1999; provided, however, that no more than sixty (60) days of Force
Majeure delays may accrue at any time between the date this Lease is fully
executed and December 1, 1999 before Tenant is entitled to begin accruing free
Basic Rent. If, however, the Commencement Date has not occurred by December 1,
1999, but Tenant has not elected to terminate this Lease as permitted in
paragraph 2(c) below, Tenant shall not be entitled to accrue any additional days
of free Basic Rent beyond December 1, 1999, regardless of when the Commencement
Date actually occurs. If the completion of the Base Building and/or the Tenant
Improvements is delayed due to inclement weather, strikes or other labor
disturbances, material shortages, casualties, or other causes beyond Landlord's
reasonable control ("Force Majeure"), Landlord shall notify Tenant in writing
within two (2) business days after the occurrence thereof that an event of Force
Majeure has occurred and will delay the Commencement Date, and in such event the
date for substantial completion of the Base Building and the Tenant Improvements
shall be extended for the period of time reasonably attributable to the
occurrence of such Force Majeure.
(c) If Landlord has not obtained a building permit for the Base
Building by October 15, 1998, then Tenant may cancel this Lease by delivery of
written notice to Landlord no later than October 31, 1998. Furthermore, if the
Commencement Date has not occurred by December 1, 1999 for any reason other than
Tenant Delays, then Tenant may cancel this Lease by delivery of written notice
to Landlord no later than December 31, 1999. Landlord shall have the right to
cancel this Lease if the Commencement Date has not occurred due to more than 365
days of delay caused by Force Majeure. In such event, Landlord may cancel this
Lease by written notice to Tenant within thirty (30) days after the occurrence
of the 365th day of Force Majeure delays. Upon cancellation of this Lease by
either party, Landlord shall return to Tenant all sums previously deposited with
Landlord by Tenant, Tenant shall return to Landlord the letter of credit
provided by Landlord under paragraph 2(d) below, and neither party shall have
any further liability to the other under this Lease. If either party elects to
cancel this Lease as permitted herein, such cancellation and the return of all
sums previously paid by Tenant shall be in lieu of any free rent to which Tenant
may be entitled under paragraph 2(b), shall be Tenant's sole and exclusive
remedy for Landlord's inability to obtain a building permit for the Base
Building by October 15, 1998, or to complete the Base Building and the Tenant
Improvements by December 1, 1999, as the case may be, and Landlord shall have no
liability to Tenant for any other damages or losses suffered or incurred by
Tenant as a result thereof.
(d) Landlord shall deliver to Tenant, upon execution of this Lease, an
irrevocable standby letter of credit in the amount of $2,500,000.00 issued by
NationsBank and naming Tenant as beneficiary thereunder, as security for the
return of Tenant's Contribution in the event this Lease is canceled by either
Landlord or Tenant pursuant to paragraph 2(c) above, or as a result of a
"Landlord Default" that occurs any time prior to the Commencement Date. The
letter of credit shall be issued initially for a term of twelve (12) months and
shall be renewed automatically for consecutive periods of one (1) month until
the Commencement Date occurs. Upon the occurrence of the Commencement Date, the
letter of credit shall be canceled and returned to
<PAGE>
Landlord. Tenant shall have the right to draw upon the letter of credit for the
full amount thereof if: (i) Landlord fails to return Tenant's Contribution to
Tenant within thirty (30) days after a notice of cancellation is delivered by
Tenant or Landlord pursuant to paragraph 2(c); (ii) a Landlord Default occurs
prior to the Commencement Date; or (iii) at any time prior to the Commencement
Date, Tenant does not receive written notice from either Landlord or the issuing
bank, at least ten (10) days prior to the expiration of the letter of credit,
that the letter of credit is being renewed for another month. Tenant shall not,
however, be permitted to draw upon the letter of credit prior to December 1,
1999 except in the event of a Landlord Default that occurs prior to the
Commencement Date or a failure to renew the letter of credit that occurs prior
to December 1, 1998. Drawing upon the letter of credit shall be conditioned only
upon presentation of the original letter of credit to the issuer thereof
accompanied by either (i) a copy of Tenant's notice of cancellation to Landlord
or Landlord's notice of cancellation to Tenant, pursuant to paragraph 2(c), or
(ii) a certified statement by Tenant that a Landlord Default has occurred prior
to the Commencement Date. The letter of credit shall not be mortgaged, assigned
or encumbered in any manner whatsoever by Landlord. For purposes of this
paragraph 2(d), a "Landlord Default" shall mean only the following: a default by
Landlord under any mortgage or deed of trust recorded against the Project,
including any mortgage or deed of trust in favor of Landlord's construction
lender; the filing by or against Landlord of a petition to have Landlord
adjudged a bankrupt or a petition for reorganization or arrangement under any
law relating to bankruptcy (unless, in the case of a petition filed against
Landlord, the same is dismissed within sixty days); the appointment of a trustee
or receiver to take possession of substantially all of Landlord's assets or of
Landlord's interest in this Lease, where possession is not restored to Landlord
within thirty days; or the attachment, execution or other judicial seizure of
substantially all of Landlord's assets located or of Landlord's interest in this
Lease where such seizure is not discharged within thirty days. Landlord shall
notify Tenant in writing of any default by Landlord under any mortgage or deed
of trust recorded against the Project that occurs prior to the Commencement Date
and shall use reasonable efforts to secure a similar covenant from the holders
of any mortgage or deed of trust recorded against the Project prior to the
Commencement Date.
ARTICLE 3
---------
BASIC RENT
----------
(a) Tenant agrees to pay Landlord Basic Rent for the Premises as
follows:
Months of Term Basic Rent/Per Month
-------------- --------------------
80,000 sq. ft. 1 through 30 $133,600.00/month
31 through 60 $138,400.00/month
61 through 84 $149,600.00./month
42,442 sq. ft. (plus or minus) 1 through 60 $ 95,495.00/month
61 through 84 $ 99,739.00/month
The Basic Rent shall be paid monthly, in advance on the first (1st) day of each
calendar month during the term, commencing on the first (1st) month of the Lease
term and continuing on the first
<PAGE>
day of each month thereafter, except that the first (1st) month's rent shall be
paid on execution hereof. If Tenant's obligation to pay rent commences or ends
on a day other than the first day of a calendar month, then the rental for such
period shall be prorated in the proportion that the number of days this Lease is
in effect during such period bears to thirty. In addition to the Basic Rent,
Tenant agrees to pay as additional rental the amount of rental adjustments and
other charges required by this Lease. All rental shall be paid to Landlord,
without prior demand and without any deduction or offset, except as otherwise
expressly provided herein, in lawful money of the United States of America, at
the address of Landlord designated on the signature page of this Lease or to
such other person or at such other place as Landlord may from time to time
designate in writing.
(b) Late Charges. In the event Tenant fails to pay any installment
------------
of rent when due or Tenant fails to make any other payment for which Tenant is
obligated under this Lease when due, and such failure continues for more than
three (3) business days after the date such rent or other payment is due, then
Tenant shall pay to Landlord a late charge equal to 5% of the amount due to
compensate Landlord for the extra costs incurred as a result of such late
payment; provided, however, that Landlord agrees to waive such late charge for
the first instance in any calendar year that any rent or other payment is not
paid within such three-day period.
ARTICLE 4
---------
RENTAL ADJUSTMENT
-----------------
(a) For the purpose of this Article 4, the following terms are defined
as follows:
(i) Tenant's Percentage. That portion of the Project occupied
-------------------
by Tenant divided by the total rentable square footage of the Project, which
shall be one hundred percent (100%).
(ii) Direct Expenses Base. The amount of the annual Direct
--------------------
Expenses which Landlord has included in Basic Rent, which amount is Tenant's
Percentage of the actual Direct Expenses for the Project for the third through
fourteenth months of the term.
(iii) Direct Expenses. The term "Direct Expenses" shall
---------------
include:
(A) All real and personal property taxes and assessments
(excluding those assessments described in Paragraph 4(a)(iii)(E)) imposed by any
governmental authority or agency on the Project and the land on which the
Project is located (including a pro-rata portion of any taxes levied on any
common areas); any assessments levied in lieu of taxes; any non-progressive tax
on or measured by gross rentals received from the rental of space in the
Project; and any other costs levied or assessed by, or at the direction of, any
federal, state, or local government authority in connection with the use or
occupancy of the Project or the parking facilities serving the Project; any tax
on this transaction or any document to which Tenant is a party creating or
transferring an interest in the Project, and any expenses, including the
reasonable cost of attorneys or experts, reasonably incurred by Landlord in
seeking reduction by the taxing authority of the above-referenced taxes, less
tax refunds obtained as a result of an application for review thereof; but shall
not include any net income, franchise, capital stock, estate or inheritance
taxes. Tenant's
<PAGE>
obligation to pay any assessments included within real property taxes and
assessments shall be calculated on the basis of the amount due if Landlord had
allowed the assessment to go to bond and the same were paid over the longest
period available. For the purposes of this Article 4, the real property taxes
and assessments included in the Direct Expenses Base shall be calculated as if
the Tenant Improvements were fully constructed and the Project, including the
Base Building and the Tenant Improvements, were fully assessed for real property
tax purposes.
(B) Operating costs consisting of costs incurred by Landlord
in maintaining and operating the Project, exclusive of costs required to be
capitalized for federal income tax purposes, and including (without limiting the
generality of the foregoing) the following: costs of utilities, supplies and
insurance, cost of services of independent contractors, managers and other
suppliers, cost of compensation (including employment taxes and fringe benefits)
of all persons who perform regular and recurring duties connected with the
management, operation, maintenance, and repair of the Project, its equipment,
parking facilities and the common areas, including, without limitation,
engineers, janitors (unless Tenant has elected to provide janitorial service to
the Premises as permitted in paragraph 16(b)), foremen, floor waxers, window
washers, watchmen and gardeners, cost of maintaining, repairing and replacing
landscaping, sprinkler systems, concrete walkways, paved parking areas, signs,
and site lighting.
(C) Amortization of such capital improvements as Landlord
may have installed for the purpose of reducing operating costs, but only to the
extent of the actual savings in operating costs realized as result of such
capital improvement(s). The cost of such capital improvements, together with
interest at the maximum rate allowed by law, shall be amortized over such
reasonable period as Landlord shall determine, and only the monthly amortized
cost shall be included in Direct Expenses monthly.
(D) Any costs required by the CC&R's, as defined in Article
6, affecting the Project or by any corporation, committee or association formed
in connection therewith,
(E) Assessments. Tenant acknowledges that the Project is
-----------
subject to assessments levied to secure bonds sold by the City of Pleasanton
pursuant to Consolidated Reassessment District 1993-1. Such assessments shall be
Landlord's responsibility throughout the term of this Lease. Tenant hereby
consents to the formation of any other districts formed for maintenance,
utilities, landscaping, lighting, special service zones, fire district, water
district, road extensions, traffic mitigation, sports facilities or other
improvements in the Premises or Bernal Corporate Park and to the re-financing of
any assessment districts. Tenant hereby waives any right of notice and protest
in connection with the formation and continued existence of the assessment
districts; provided, however, that Tenant shall retain the right to contest the
amount of any new assessments levied against the Premises or the Project during
the term of this Lease. Tenant shall execute all documents, including, but not
limited to, petitions and formal waivers of notice and protest of formation,
evidencing such consent and waiver upon request of Landlord or the City of
Pleasanton.
(iv) Exclusions from Direct Expenses. Direct Expenses shall not
-------------------------------
include any of the following: (A) depreciation and other non-cash items; (B)
costs of tenants'
<PAGE>
improvements; (C) capital items (except to the extent expressly permitted under
paragraph 4(a)(iii)(C)); (D) payments of principal and interest on debt; (E)
leasing commissions; (F) cost of any goods and services (including utilities)
for which any tenants or other occupants of the Project separately reimburse
Landlord; (G) costs incurred to perform or correct any tenant improvement work;
(H) costs of correcting defects in or inadequacy of the initial design of the
structure of the Building; (I) legal fees (except as expressly provided for in
paragraph 4(a)(iii)(A)); (J) amounts paid to affiliates of Landlord (i.e.,
persons or entities controlled by, under common control with, or which control,
Landlord) for services to the Project, to the extent that the costs of such
services exceed competitive costs for such services were they not rendered by an
affiliate of Landlord; (K) expenses in connection with services or other
benefits provided to one of more tenants but which are not generally available
to other tenants of the Project; (L) wages of any employee above the level of
Building manager and chief engineer; (M) space planning fees, architectural
fees, engineering fees (other than those relating to the general operation of
the Project), marketing, advertising or any expense incurred in connection with
the development or leasing of the Project; (N) costs associated with the
operation of the business of the legal entity which constitutes Landlord as the
same is separate from the costs of operation of the Project, including legal
entity formation and internal entity accounting; (O) any late fees or penalties
or similar fees incurred by Landlord, except to the extent attributable to
Tenant's late payment of Basic Rent, Direct Expenses or any other sums due under
this Lease; (P) any debt losses, rent losses or reserves for bad debt; (Q) any
expenses incurred for use of any public portions of the Project including, but
not limited to, shows and promotions; (R) the costs of installing an
observatory, broadcasting facility, luncheon club, athletic or recreational
club, and the costs of operating and maintaining any of the foregoing which are
in excess of the costs of services provided to other tenants of the Project
generally; (S) costs of adding any additional space to the Project after the
original construction; (T) costs of any repairs to the Project in accordance
with the provisions of Articles 21 (Damage and Destruction) and 22 (Eminent
Domain) of this Lease; (U) Landlord's incremental costs incurred by reasons of
Landlord's breach of any lease in the Project and any cost incurred by reason of
the breach by other tenants of the Project of such tenants' leases (to the
extent recoverable from such tenants); (V) unrecovered expenses incurred as a
consequence of the grossly negligent operation and maintenance of the Project by
Landlord or Landlord's employees; and (W) any fines, penalties, costs or
expenses incurred in connection with the investigation, removal, monitoring,
clean-up or other remediation of any contamination, or threatened contamination,
by Toxic Materials in, on or under the Premises or the Project.
(b) Payment of Direct Expenses.
--------------------------
(i) If Tenant's Percentage of the Direct Expenses paid or
incurred by Landlord for any calendar year of the term exceeds the Direct
Expenses Base, then Tenant shall pay such excess as additional rent. For each
calendar year, or portion thereof, after the first 12 full calendar months of
the term, Tenant shall pay Tenant's Percentage of Landlord's estimate of the
amount by which Direct Expenses for that year shall exceed the Direct Expenses
Base ("Landlord's Estimate"). This estimated amount shall be divided into twelve
equal monthly installments. Tenant shall pay to Landlord, concurrently with the
regular monthly rent payment next due following the receipt of such statement,
an amount equal to one monthly installment multiplied by the number of months
from January in the calendar year in which said statement is submitted to the
month of such payment, both months inclusive. Subsequent installments shall be
payable concurrently with the
<PAGE>
regular monthly rent payments for the balance of that calendar year and shall
continue until the next calendar year's statement is rendered.
(ii) As soon as possible after the end of each calendar year,
Landlord shall provide Tenant with a statement showing the amount of Tenant's
Percentage of the actual Direct Expenses for such calendar year, the amount of
Landlord's Estimate actually paid by Tenant and the amount of the Direct
Expenses Base. Thereafter, Landlord shall reconcile the above amounts and shall
either bill Tenant for the balance due (payable on demand by Landlord) or credit
any overpayment by Tenant towards the next monthly installment of Landlord's
Estimate falling due, or refund such overpayment to Tenant at the expiration of
the Lease, as the case may be. For purposes of making these calculations, in no
event shall Tenant's Percentage of the Direct Expenses be deemed to be less than
the Direct Expenses Base.
(iii) Within ninety (90) days after receipt of Landlord's
statement setting forth the actual Direct Expenses ("Landlord's Statement"),
Tenant shall have the right to audit at Landlord's local offices, at Tenant's
expense, Landlord's accounts and records relating to Direct Expenses. Such audit
shall be conducted by a certified public accountant approved by Landlord, which
approval shall not be unreasonably withheld. If such audit reveals that Landlord
has overcharged Tenant, the amount overcharged shall be paid to Tenant within
thirty (30) days after the audit is concluded, together with interest thereon at
the rate of ten percent (10%) per annum, from the date that payment of such
Direct Expenses was made by Tenant until reimbursement of the overcharge is made
to Tenant. In addition, if Landlord's Statement exceeds the actual Direct
Expenses which should have been charged to Tenant by more than five percent
(5%), the cost of the audit shall be paid by Landlord. Tenant and Tenant's
accountant shall keep any information gained by such audit confidential and
shall not disclose such information to any other party.
(iv) If Landlord fails to do so within a reasonable time after
written request by Tenant, then Tenant, at its cost, shall have the right at any
time to seek a reduction in or otherwise contest any taxes or assessments for
which it is obligated to reimburse Landlord under this Article 4 and/or under
Article 10, by action or proceeding against the entity with authority to assess
or impose the same. Landlord further agrees, however, that if any action taken
by Landlord to seek a reduction in or otherwise contest any taxes or assessments
would prevent Tenant from taking any such action or otherwise prejudice Tenant's
right in such action if Landlord were unsuccessful in seeking a reduction in or
otherwise contesting such taxes or assessments, then Landlord and Tenant shall
cooperate in jointly contesting such taxes or assessments. Landlord shall not be
required to join in any proceeding or action brought separately by Tenant unless
the provisions of applicable laws or regulations or the like require that such
proceeding or action be brought by or in the name of Landlord, in which event
Landlord shall join in such proceeding or action or permit it to be brought in
Landlord's name, provided that Tenant protects, indemnifies, and holds Landlord
free and harmless from and against any liability, cost or expense in connection
with such proceeding or contest. Tenant shall continue, during the pendency of
such proceeding or action, to pay the taxes and assessments due as determined by
Landlord pursuant to this Article 4 and/or Article 10. If Tenant is successful
in such action or proceeding, Landlord shall reimburse to Tenant Tenant's share
of the reduction in taxes realized by Tenant in such contest or proceeding
within thirty (30) days after the amount of such reduction has been determined
and Landlord has received the applicable refund.
<PAGE>
(c) Even though the term has expired and Tenant has vacated the
Premises, when the final determination is made of Tenant's Percentage of Direct
Expenses for the year in which this Lease terminates, Tenant shall immediately
pay any increase due over the estimated expenses paid and, conversely, any
overpayment made in the event said expenses decrease shall be promptly rebated
by Landlord to Tenant.
ARTICLE 5
---------
SECURITY DEPOSIT
----------------
(a) Upon execution of this Lease, Tenant shall deposit with Landlord
an irrevocable standby letter of credit in the amount of One Million Seven
Hundred Thousand and no/100ths Dollars ($1,700,000.00) issued by Union Bank of
California (or another bank reasonably acceptable to Landlord), and naming
Landlord as beneficiary thereunder, as security for the faithful performance by
Tenant of all of Tenant's obligations under this Lease and the Sycamore Plaza II
Lease. The letter of credit shall be in the form attached as EXHIBIT F to this
---------
Lease. If Tenant fails to pay when due any rent or other sum due under this
Lease and such failure continues after notice from Landlord and the expiration
of any applicable grace period, regardless of whether Tenant has filed a
petition in bankruptcy under the federal bankruptcy laws, or if Tenant,
following the filing of any such petition, rejects this Lease or the Sycamore
Plaza II Lease, then Landlord may (but shall not be required to) draw upon the
letter of credit and use, apply or retain all or any part of the security
deposit for the payment of any rent or other sum then due and unpaid, or for the
payment of any other amount which Landlord may spend or become obligated to
spend by reason of Tenant's breach or to compensate Landlord for any other loss
or damage which Landlord may suffer by reason of Tenant's breach. If any
portion of the letter of credit is drawn upon by Landlord for such purposes,
Tenant shall, within ten (10) days after written demand by Landlord, deposit a
replacement letter of credit with Landlord in the amount of the original letter
of credit. Tenant's failure to do so shall be a material breach of this Lease.
The letter of credit, or so much thereof as remains after the curing of any
default of Tenant hereunder, shall be returned to Tenant at the expiration of
the Lease term and surrender of the Premises by Tenant.
(b) The letter of credit shall be issued for a term of at least twelve
(12) months and shall be renewed automatically for consecutive twelve (12) month
periods for the entire term of this Lease subject, however, to reduction as
provided in paragraph 5(c) or 5(d). If at any time during the term of this
Lease Landlord does not receive written notice from Tenant, at least ten (10)
days prior to the expiration of any twelve (12) month term of the letter of
credit, that the letter of credit is being renewed for another twelve (12)
months, then Landlord shall have the right to draw upon the letter of credit for
the full amount thereof. Drawing upon the letter of credit shall be conditioned
only upon presentation of the original letter of credit to the issuer thereof
accompanied by a certified statement from Landlord that Tenant is in default
under the Lease which default is continuing after notice and the expiration of
any applicable grace period. The letter of credit shall not be mortgaged,
assigned or encumbered in any manner whatsoever by Tenant. The use, application
or retention of the letter of credit, or any portion thereof, by Landlord shall
not prevent Landlord from exercising any other right or remedy provided by this
Lease or by law, it being intended that Landlord shall not first be required to
proceed against the letter of credit, and such use, application or retention
shall not operate as a limitation on any recovery to which Landlord may
otherwise be entitled.
<PAGE>
(c) Provided that Tenant is not then in default under this Lease, the
security deposit shall be reduced to One Million Two Hundred Thousand and
no/100ths Dollars ($1,200,000.00) as of April 1, 2001, and Eight Hundred
Thousand and no/100ths Dollars ($800,000.00) as of April 1, 2002. Provided that
Tenant is not then in default under this Lease, as of April 1, 2003, and for the
balance of the term, the security deposit retained by Landlord for this Lease
shall be equal to one monthly installment of the Basic Rent then payable under
this Lease.
(d) If at any time during the term of this Lease the cross-default
provision set forth in paragraph 23(a)(v) of this Lease is terminated as
provided in paragraph 24(f) or paragraph 35, Tenant shall replace the letter of
credit then held by Landlord with two (2) separate letters of credit to be held
by Landlord or, if applicable, Landlord's successor or successors-in-interest,
as security for the performance of Tenant's obligations under this Lease and the
Sycamore Plaza II Lease, respectively. The amount of the replacement letter of
credit to be delivered by Tenant as security for this Lease shall be determined
by multiplying the amount of the letter of credit then held by Landlord by a
fraction, the numerator of which shall be the rentable area of the Premises and
the denominator of which shall be the total rentable area of the Premises plus
the premises occupied by Tenant under the Sycamore Plaza II Lease. Tenant's
failure to provide Landlord with the replacement letters of credit at least ten
(10) days prior to the effective date of an approved assignment, or within ten
(10) days after written notice from Landlord of a pending transfer or conveyance
of title to the Project, as applicable, shall constitute a default under this
Lease.
ARTICLE 6
---------
USE
---
(a) Tenant shall use the Premises for general office, administrative,
sales demonstrations, training classes, and software development, and shall not
use or permit the Premises to be used for any other purpose without the prior
written consent of Landlord, which consent shall not be unreasonably withheld.
Nothing contained herein shall be deemed to give Tenant any exclusive right to
such use in the Project. Tenant shall not use or occupy the Premises in
violation of law or of the certificate of occupancy issued for the Building or
Project, and shall, upon written notice from Landlord, discontinue any use of
the Premises which is declared by any governmental authority having jurisdiction
to be a violation of law or of said certificate of occupancy. Tenant shall
comply with any direction of any governmental authority having jurisdiction
which shall, by reason of the nature of Tenant's use or occupancy of the
Premises, impose any duty upon Tenant or Landlord with respect to the Premises
or with respect to the use or occupation thereof. Tenant's shall not do or
permit to be done anything which will invalidate or increase the cost of any
fire, extended coverage or any other insurance policy covering the Building
and/or Project and/or property located therein and shall comply with all rules,
orders, regulations and requirements of the Insurance Service Offices, formerly
known as the Pacific Fire Rating Bureau or any other organization performing a
similar function. Tenant shall promptly, upon demand, reimburse Landlord for
any additional premium charged for such policy by reason of Tenant's failure to
comply with the provisions of this Article. Tenant shall not do or permit
anything to be done in or about the Premises which will in any way unreasonably
obstruct or unreasonably interfere with the rights of other tenants or occupants
of the Project or Bernal Corporate Park, or injure or annoy them, or use or
allow the Premises to be used for any improper, immoral, unlawful or
objectionable purpose, nor shall Tenant cause, maintain
<PAGE>
or permit any nuisance in, on or about the Premises. Tenant shall not commit or
suffer to be committed any waste in or upon the Premises.
(b) Tenant acknowledges that Landlord has recorded covenants,
conditions and restrictions against the Premises on February 18, 1987 as
Instrument Number 87/046032 in the Official Records of Alameda County (the
"CC&Rs"), a true and correct copy of which has been previously delivered to
Tenant. Tenant's use of the Premises shall be subject to and Tenant shall
comply with the CC&R's, as the same may be amended from time to time, provided,
however, that any amendment or modification thereof shall not materially
adversely affect Tenant's use and enjoyment of the Premises or access thereto.
Tenant acknowledges that there have been and may be from time to time recorded
easements and/or declarations granting or declaring easements for parking,
utilities, fire or emergency access, and other matters. Tenant's use of the
Premises shall be subject to and Tenant shall comply with any and all such
easements and declarations. Tenant's use of the Premises shall be subject to
such guidelines as may from time to time be prepared by Landlord or the Bernal
Corporate Park Owner's Association in their reasonable discretion.
(c) Tenant acknowledges that governmental entities with jurisdiction
over the Premises may, from time to time promulgate laws, rules, plans and
regulations affecting the use of the Premises, including, but not limited to,
traffic management plans and energy conservation plans. Tenant's use of the
Premises shall be subject to and Tenant shall comply with any and all such laws,
rules, plans, and regulations. Notwithstanding the foregoing or anything to the
contrary contained in this Lease, Tenant shall not be responsible for compliance
with any laws, codes, ordinances, rules, regulations or other governmental
directives, including without limitation, the Americans with Disabilities Act
(collectively, "Applicable Laws") which require any alterations or improvements
to any portions of the Project other than the Premises, unless such compliance
is required solely as a result of any other alterations or improvements made to
the Premises by Tenant. Furthermore, if any capital improvements are required
to the Premises to comply with any Applicable Laws (other than capital
improvements which are required solely as a result of any other alterations or
improvements made to the Premises by Tenant, which shall be made at Tenant's
sole expense), such improvements shall be made by Landlord and the cost of such
capital improvements, together with interest at the maximum rate allowed by law,
shall be amortized over such reasonable period as Landlord shall determine, and
Tenant shall reimburse Landlord, monthly, as additional rent, the monthly
amortized cost of such improvement that is allocable to the then remaining term
of this Lease. Notwithstanding anything herein to the contrary, Landlord shall
be solely responsible for the cost of any alterations or improvements, including
capital improvements, to the structural portions of the Building, the Building
elevators, the restrooms, and the base Building electrical, mechanical, plumbing
and HVAC systems installed by Landlord prior to the Commencement Date, and the
common areas of the Project, which are required to comply with any Applicable
Laws.
(d) Tenant, at its sole cost, shall comply with all laws relating to
Tenant's storage, use and disposal of hazardous, toxic or radioactive matter,
including those materials identified in Sections 66680 through 66685 of Title 33
of the California Code of Regulations as they may be amended from time to time
(collectively "Toxic Materials"). If Tenant does store, use or dispose of any
Toxic Materials, other than normal amounts of cleaning supplies and office
products, Tenant shall notify Landlord in writing at least ten (10) days prior
to their first appearance on the Premises. Landlord represents and warrants to
Tenant that, to the best of Landlord's actual
<PAGE>
knowledge without independent investigation or inquiry, as of the date of this
Lease (i) there are no underground storage tanks located on the Project, (ii)
there has been no release onto or under the Project of any Toxic Materials in
violation of applicable environmental laws, and (iii) Landlord has received no
notices of any pending litigation, clean-up orders or other governmental action
with respect to the environmental condition of the Project. For the purposes of
this paragraph 6(d), the "actual knowledge of Landlord" shall be limited to the
actual knowledge of Loryssa Rippey and Timothy Wirta.
ARTICLE 7
---------
NOTICES
-------
Any notice required or permitted to be given hereunder must be in
writing and may be given by personal delivery or by mail, and if given by mail
shall be deemed sufficiently given if sent by registered or certified mail
addressed to Tenant at the Project, or to Landlord at its address set forth at
the end of this Lease. Either party may specify a different address for notice
purposes by written notice to the other except that the Landlord may in any
event use the Premises as Tenant's address for notice purposes.
ARTICLE 8
---------
BROKERS
-------
Tenant and Landlord warrants that it has had no dealings with any real
estate broker or agent in connection with the negotiation of this Lease, except
Parkway Properties, Inc. and Colliers Parrish International whose commission
shall be payable by Landlord, and that it knows of no other real estate broker
or agent who is or might be entitled to a commission in connection with the
Lease. If Tenant or Landlord, as the case may be, has dealt with any other
person or real estate broker with respect to leasing or renting space in the
Project, Tenant or Landlord, as the case may be, shall be solely responsible for
the payment of any fee due said person or firm and Tenant or Landlord, as the
case may be, shall hold the other party free and harmless against any liability
in respect thereto, including attorneys' fees and costs.
ARTICLE 9
---------
HOLDING OVER
------------
If Tenant holds over after the expiration or earlier termination of
the term hereof without the express written consent of Landlord, Tenant shall
become a Tenant at sufferance only, at a rental rate equal to one hundred
twenty-five percent (125%) of the rent in effect upon the date of such
expiration for the first sixty (60) days of any such holdover, and one hundred
fifty percent (150%) of the rent in effect upon the date of such expiration for
any holdover continuing after such 60-day period (subject to adjustment as
provided in Paragraph 4 hereof and prorated on a daily basis), and otherwise
subject to the terms, covenants and conditions herein specified, so far as
applicable. Acceptance by Landlord of rent after such expiration or earlier
termination shall not result in a renewal of this Lease. The foregoing
provisions of this Article 9 are in addition to and do not affect Landlord's
right of re-entry or any rights of Landlord hereunder or as otherwise provided
by law. If Tenant fails to surrender the Premises upon the expiration of this
Lease despite demand to do so by Landlord, Tenant shall indemnify and hold
Landlord harmless from all loss or
<PAGE>
liability, including without limitation, any claim made by any succeeding tenant
founded on or resulting from such failure to surrender and any attorneys' fees
and costs.
ARTICLE 10
----------
TAXES ON TENANT'S PROPERTY
--------------------------
(a) Tenant shall be liable for and shall pay, at least ten days before
delinquency, all taxes levied against any personal property or trade fixtures
placed by Tenant in or about the Premises. If any such taxes on Tenant's
personal property or trade fixtures are levied against Landlord or Landlord's
property of if the assessed value of the Premises is increased by the inclusion
therein of a value placed upon such personal property or trade fixtures of
Tenant and if Landlord, after written notice to Tenant, pays the taxes based
upon such increased assessment, which Landlord shall have the right to do
regardless of the validity thereof, but only under proper protest if requested
by Tenant, Tenant shall, upon demand, repay to Landlord the taxes so levied
against Landlord, or the portion of such taxes resulting from such increase in
the assessment.
(b) If the Tenant Improvements in the Premises, whether installed,
and/or paid for by Landlord or Tenant and whether or not affixed to the real
property so as to become a part thereof, are assessed for real property tax
purposes at a valuation higher than the valuation at which Tenant Improvements
conforming to Landlord's "Project Standard" in other space in the Project are
assessed (which for purposes of this paragraph shall mean tenant improvement
costs in excess of $30.00 per rentable square foot for hard construction costs
only [i.e., exclusive of architectural and engineering fees, permit fees, and
construction management fees]), then the real property taxes and assessment
levied against the Project by reason of such excess assessed valuation shall be
deemed to be taxes levied against personal property of Tenant and shall be
governed by the provisions of Paragraph 10(a), above. If the records of the
County Assessor are available and sufficiently detailed to serve as a basis for
determining whether said Tenant Improvements are assessed at a higher valuation
than Landlord's Project Standard, such records shall be binding on both the
Landlord and the Tenant. If the records of the County Assessor are not
available or sufficiently detailed to serve as a basis for making said
determination, the actual cost of construction shall be used.
ARTICLE 11
----------
CONDITION OF PREMISES
---------------------
<PAGE>
(a) Landlord represents and warrants, that as of the Commencement
Date, to the best of its knowledge, the Premises and the Building shall be
constructed in compliance with all Applicable Laws. Landlord further warrants
to Tenant that the Base Building and Tenant Improvements constructed by Landlord
shall be (i) free from material structural defects and shall not violate the
CC&R's or any other covenants or restrictions of record, and (ii) constructed in
compliance in all material respects with the Base Building Plans and the Tenant
Improvement Plans approved by Landlord and Tenant subject to any changes
implemented in such plans in accordance with the procedures set forth in the
Work Letter. Subject to the foregoing, Tenant acknowledges that neither
Landlord nor any agent of Landlord has made any representation or warranty with
respect to the Premises or the Project or with respect to the suitability of
either for the conduct of Tenant's business. Subject to Landlord's
representations and warranties and Landlord's obligation to complete any punch-
list items as provided in paragraph 9 of the Work Letter, and excluding any
latent defects, the taking of possession of the Premises by Tenant shall
conclusively establish that the Premises were in satisfactory condition at such
time.
(b) If it is determined that any of the warranties in paragraph 11(a)
have been violated in any respect, then it shall be the obligation of Landlord,
after receipt of written notice from Tenant setting forth with specificity the
nature of the violation, to promptly correct the condition(s) constituting such
violation at Landlord's sole cost. Landlord shall assign to Tenant Landlord's
rights under all contractors' and manufacturers' warranties relating to the
Tenant Improvements (provided, however, that Landlord may reserve joint
enforcement rights under such warranties to the extent of Landlord's continuing
obligations or warranties hereunder), and shall cooperate with Tenant in all
reasonable respects in any enforcement of such warranties.
ARTICLE 12
----------
ALTERATIONS
-----------
(a) Tenant shall make no alterations, additions or improvements in or
to the Premises without Landlord's prior written consent, which shall not be
unreasonably withheld; provided, however, that Landlord's consent shall not be
required for any alterations, additions or improvements to the Premises that (i)
do not cost more than $15,000 per work of improvement nor more than $50,000
cumulatively per annum, and (ii) do not affect any structural or exterior
portion of the Building or the Building's electrical, plumbing or HVAC systems,
except that Landlord's consent shall, in any event, be required for any
demolition of any alterations, additions or improvements to the Premises. All
work shall be performed by contractors or mechanics approved by Landlord and
shall be done in a good and workmanlike manner. Tenant covenants and agrees
that all work done by Tenant shall be performed in full compliance with all
Applicable Laws and in full compliance with the rules, regulations and
requirements of the Insurance Service Offices formerly known as the Pacific Fire
Rating Bureau, and of any similar body. Before commencing any work, Tenant
shall give Landlord at least ten days written notice of the proposed
commencement of such work and shall, if the cost of such alterations exceeds
$50,000 and if so requested by Landlord, secure at Tenant's own cost and
expense, a completion and lien indemnity bond, reasonably satisfactory to
Landlord, for said work. Tenant further covenants and agrees that any
mechanic's lien filed against the Premises or against the Building or Project
for work claimed to have been done for, or materials claimed to have been
furnished to, Tenant will be discharged by Tenant, by bond or otherwise, within
ten days after the filing thereof, at the cost and expense of Tenant. All
<PAGE>
alterations, additions or improvements upon the Premises made by either party,
including (without limiting the generality of the foregoing) all wallcovering,
built-in cabinet work, paneling and the like, shall become the property of
Landlord, and shall remain upon, and be surrendered with the Premises, as a part
thereof, at the end of the term hereof, except that Landlord may, by written
notice to Tenant given to Tenant at the time that Landlord grants its consent to
any alterations, additions or improvements, require Tenant to remove such
alterations, additions and improvements at the expiration or sooner termination
of this Lease, and in such event Tenant shall repair all damage resulting from
such removal or, at Landlord's option, shall pay to Landlord all costs arising
from such removal. Landlord and Tenant agree, however, that the Tenant
Improvements shall become the property of Landlord upon installation, shall
remain upon and be surrendered with the Premises at the expiration or sooner
termination of this Lease, and Tenant shall have no obligation to remove the
Tenant Improvements from the Premises.
(b) All articles of personal property and all business and trade
fixtures, machinery and equipment, furniture and movable partitions owned by
Tenant or installed by Tenant at its expense in the Premises shall be and remain
the property of Tenant and may be removed by Tenant at any time during the lease
term when Tenant is not in default hereunder. If Tenant shall fail to remove
all of its effects from the Premises upon termination of this Lease for any
cause whatsoever, Landlord may, at its option, remove the same in accordance
with applicable law, and store said effects without liability to Tenant for loss
thereof. In such event, Tenant agrees to pay Landlord upon demand any and all
expenses incurred in such removal, including court costs and attorneys' fees and
storage charges on such effects for any length of time that the same shall be in
Landlord's possession. Landlord may, at its option, without notice, sell said
effects, or any of the same, at private sale and without legal process, for such
price as Landlord may obtain and apply the proceeds of such sale upon any
amounts due under this Lease from Tenant to Landlord and upon the expense
incident to the removal and sale of said effects.
ARTICLE 13
----------
REPAIRS
-------
(a) Subject to Landlord's representations and warranties contained
herein and the punch list items, by entry hereunder, Tenant accepts the Premises
as being in good and sanitary order, condition and repair, excluding any latent
defects. Tenant shall keep, maintain and preserve the Premises in good
condition and repair. Tenant shall, upon the expiration or sooner termination
of the term hereof, surrender the Premises to Landlord in the same condition as
when received, usual and ordinary wear and tear and damage due to casualty or
condemnation excepted. Except as expressly provided in EXHIBIT B attached
---------
hereto, Landlord shall have no obligation to alter, remodel, improve, decorate
or paint the Premises or any part thereof. The parties hereto affirm that
Landlord has made no representations to Tenant respecting the condition of the
Premises or the Project except as specifically herein set forth.
(b) Anything contained in Paragraph 13(a) above to the contrary
notwithstanding, Landlord shall repair and maintain the structural portions of
the Building, including the foundations, building shell, and roof structure, all
at Landlord's expense. Landlord shall also repair and maintain the common areas
and the basic plumbing, elevators, life safety systems and other building
systems, including heating, ventilating, air conditioning and electrical systems
<PAGE>
installed or furnished by Landlord, and perform roof membrane repair and
maintenance to the Premises; the cost of such repairs and maintenance shall be
included in Direct Expenses as provided in Article 4, except to the extent such
repair, maintenance or replacement is required by the gross negligence or
willful misconduct of Landlord, its agents or employees or a breach by Landlord
of its obligations under this Lease. Landlord shall not be liable for any
failure to make any such repairs or to perform any maintenance unless such
failure shall persist for an unreasonable time after written notice of the need
of such repairs or maintenance is given to Landlord by Tenant. Except as
provided in Article 21 hereof, there shall be no abatement of rent and no
liability of Landlord by reason of any injury to or interference with Tenant's
business arising from the making of any repairs, alterations or improvements in
or to any portion of the Building, Project or the Premises or in or to fixtures,
appurtenances and equipment therein. Tenant waives the right to make repairs at
Landlord's expense under any law, statute or ordinance now or hereafter in
effect.
ARTICLE 14
----------
LIENS
-----
Tenant shall not permit any mechanic's, materialmen's or other liens
to be filed against the Building or Project, nor against Tenant's leasehold
interest in the Premises. Landlord shall have the right at all reasonable times
to post and keep posted on the Premises any notices which it deems necessary for
protection from such liens. If any such liens are filed, Landlord may, without
waiving its rights and remedies based on such breach of Tenant and without
releasing Tenant from any of its obligations, cause such liens to be released by
any means it shall deem proper, including payments in satisfaction of the claim
giving rise to such lien. Tenant shall pay to Landlord, within ten (10) days
after invoice, any sum paid by Landlord to remove such liens, together with
interest at the maximum rate per annum permitted by law from the date of such
payment by Landlord.
ARTICLE 15
----------
ENTRY BY LANDLORD
-----------------
Landlord reserves and shall with reasonable notice (except in the case
of emergencies and regularly scheduled janitorial services) have the right to
enter the Premises to inspect the same, to supply janitorial service and any
service to be provided by Landlord to Tenant hereunder, to show the Premises to
prospective purchasers or tenants (but as to tenants only during the last nine
(9) months of the term), to post notices of nonresponsibility, to alter, improve
or repair the Premises or any other portion of the Building or Project, all
without being deemed guilty of any eviction of Tenant and without abatement of
rent. Landlord may, in order to carry out such purposes, erect scaffolding and
other necessary structures where reasonably required by the character of the
work to be performed, provided that the business of Tenant shall be interfered
with as little as is reasonably practicable. Tenant hereby waives any claim
for damages for any injury or inconvenience to or interference with Tenant's
business, any loss of occupancy or quiet enjoyment of the Premises, and any
other loss in, upon and about the Premises. Landlord shall at all times have
and retain a key with which to unlock all doors in the Premises, excluding
Tenant's vaults and safes. Landlord shall have the right to use any and all
means which Landlord may deem proper to open said doors in an emergency in order
to obtain entry to the Premises provided Landlord shall promptly repair any
damage to the Premises caused by such entry. Any entry to the Premises obtained
by Landlord by any of said means, or otherwise, shall not be construed or deemed
to be a forcible or
<PAGE>
unlawful entry into the Premises, or any eviction of Tenant from the Premises or
any portion thereof, and any damages caused to the Premises on account thereof
shall be paid by Landlord. It is understood and agreed that no provision of this
Lease shall be construed as obligating Landlord to perform any repairs,
alterations or decorations except as otherwise expressly agreed herein by
Landlord.
ARTICLE 16
----------
UTILITIES AND SERVICES
----------------------
(a) Landlord agrees to furnish or cause to be furnished to the
Premises the utilities and services described in the Standards for Utilities and
Services, attached hereto as EXHIBIT C, subject to the conditions and in
---------
accordance with the standards set forth therein. Landlord's failure to furnish
any of the foregoing items when such failure is caused by:
(i) Accident, breakage, or repairs,
(ii) Strikes, lockouts or other labor disturbance or labor
dispute of any character,
(iii) Governmental regulation, moratorium or other
governmental action,
(iv) Inability despite the exercise of reasonable diligence
to obtain electricity, water or fuel, or by
(v) Any other cause beyond Landlord's reasonable control,
shall not result in any liability to Landlord.
In addition, Tenant shall not be entitled to any abatement or reduction of rent
by reason of such failure, no eviction of Tenant shall result from such failure
and Tenant shall not be relieved from the performance of any covenant or
agreement in this Lease because of such failure; provided, however, that if any
such failure shall continue for more than three (3) consecutive business days
and as result of such failure Tenant's use of or access to the Premises is
materially impaired, then Tenant shall be entitled to a proportionate abatement
of rent for the period and to the extent of such impairment if, and only if, the
failure was caused by the negligence or willful misconduct of Landlord, its
agents or employees or by a breach of this Lease by Landlord, or such abatement
of rent will be covered by Landlord's rent loss insurance. In the event of any
failure, stoppage or interruption thereof, Landlord shall diligently attempt to
resume service promptly.
(b) Tenant shall have the right, at Tenant's election, to provide
janitorial service to the Premises at Tenant's sole cost and expense through a
contractor approved by Landlord, which approval shall not be unreasonably
withheld, and in such event the cost of providing janitorial service to the
Premises shall be excluded from Direct Expenses.
(c) Subject to Tenant's receipt of all necessary approvals from the
City of Pleasanton and under the CC&R's, Tenant shall have the right to install
and operate, at Tenant's
<PAGE>
sole cost and expense, an emergency power generator on the Project at a location
mutually acceptable to Landlord and Tenant. The use and operation of such
generator, including periodic testing, shall be subject to such reasonable rules
as Landlord may establish prior to installation of the generator.
ARTICLE 17
----------
BANKRUPTCY
----------
If Tenant shall file a petition in bankruptcy under any provision of
the Bankruptcy Code as then in effect, or if Tenant shall be adjudicated a
bankrupt in involuntary bankruptcy proceedings and such adjudication shall not
have been vacated within sixty days from the date thereof, or if a receiver or
trustee shall be appointed of Tenant's property and the order appointing such
receiver or trustee shall not be set aside or vacated within sixty days after
the entry thereof, or if Tenant shall assign Tenant's estate or effects for the
benefit of creditors, or if this Lease shall, by operation of law or otherwise,
pass to any person or persons other than Tenant, then in any such event Landlord
may terminate this Lease, if Landlord so elects, with or without notice of such
election and with entry or action by Landlord. In such case, notwithstanding
any other provisions of this Lease, Landlord, in addition to any and all rights
and remedies allowed by law or equity, shall, upon such termination, be entitled
to recover damages in the amount provided in Paragraph 23(b) hereof. Neither
Tenant nor any person claiming through or under Tenant or by virtue of any
statute or order of any court shall be entitled to possession of the Premises
but shall surrender the Premises to landlord. Nothing contained herein shall
limit or prejudice the right of Landlord to recover damages by reason of any
such termination equal to the maximum allowed by any statute or rule of law in
effect at the time when, and governing the proceedings in which, such damages
are to be proved; whether or not such amount is greater, equal to, or less than
the amount of damages recoverable under the provisions of this Article 17.
<PAGE>
ARTICLE 18
----------
INDEMNIFICATION
---------------
Tenant shall indemnify, defend and hold Landlord harmless from all
claims arising from Tenant's use of the Premises or the conduct of its business
or from any activity, work, or thing done, permitted or suffered by Tenant in or
about the Premises except to the extent arising from the negligence or willful
misconduct of Landlord, its agents, or employees or from a breach by Landlord of
its obligations under this Lease. Tenant shall further indemnify, defend and
hold Landlord harmless from all claims arising from any breach or default in the
performance of any obligation to be performed by Tenant under the terms of this
Lease, or arising from the negligence or willful misconduct of Tenant or of its
agents or employees, and from and against all costs, attorneys' fees, expenses
and liabilities incurred in or about such claim or any action or proceeding
brought thereon. In case any action or proceeding shall be brought against
Landlord by reason of any such claim, Tenant upon notice from Landlord shall
defend the same at Tenant's expense by counsel approved in writing by Landlord.
Tenant, as a material part of the consideration to Landlord, hereby assumes all
risk of damage to property or injury to person in, upon or about the Premises
from any cause whatsoever except that which is caused by the failure of Landlord
to observe any of the terms and conditions of this Lease where such failure has
persisted for an unreasonable period of time after written notice of such
failure. Tenant hereby waives all its claims in respect thereof against
Landlord.
ARTICLE 19
----------
DAMAGE TO TENANT'S PROPERTY
---------------------------
Notwithstanding the provisions of Article 18 to the contrary, Landlord
or its agents shall not be liable for (i) any damage to any property entrusted
to employees of the Project, (ii) loss or damage to any property by theft or
otherwise, (iii) any damage to property resulting from fire, explosion, falling
plaster, steam, gas, electricity, water or rain which may leak from any part of
the Project or from the pipes, appliances or plumbing work therein or from the
roof, street or sub-surface or from any other place or resulting from dampness
or from any other cause whatsoever except to the extent any such loss or damage
is caused by the negligence or willful misconduct of Landlord, its agents or
employees or a breach by Landlord of its obligations under this Lease and such
loss or damage is not covered by under any insurance Tenant is required to carry
pursuant to paragraph 20(a) or any other insurance Tenant elects to carry.
Landlord or its agents shall not be liable for interference with light or other
incorporeal hereditaments. Tenant shall give prompt notice to Landlord in case
of fire or accidents in the Premises or in the Project or of defects therein or
in the fixtures or equipment of which Tenant has actual knowledge.
ARTICLE 20
----------
INSURANCE
---------
(a) Tenant shall, during the term hereof and any other period of
occupancy, at its sole cost and expense, keep in full force and effect the
following insurance:
(i) Standard form property insurance insuring against the perils
of fire, extended coverage, vandalism, malicious mischief, special extended
coverage ("All-Risk") and
<PAGE>
sprinkler leakage. This insurance policy shall be upon all property owned by
Tenant, for which Tenant is legally liable or that was installed at Tenant's
expense, and which is located in the Project including, without limitation,
furniture, fittings, installations, fixtures (other than Tenant Improvements
installed by Landlord), and any other personal property in an amount not less
than ninety percent of the full replacement cost thereof. In the event that
there shall be a dispute as to the amount which comprises full replacement cost,
the decision of Landlord or any mortgagees of Landlord shall be conclusive. This
insurance policy shall also be upon direct or indirect loss of Tenant's earnings
attributable to Tenant's inability to use fully or obtain access to the Premises
or Project in an amount as will properly reimburse Tenant.
(ii) Commercial General Liability Insurance insuring Tenant
against any liability arising out of the lease, use, occupancy or maintenance of
the Premises and all areas appurtenant thereto. Such insurance shall be in the
amount of $5,000,000 Combined Single Limit for injury to, or death of one or
more persons in an occurrence, and for damage to tangible property (including
loss of use) in an occurrence, with such liability amount to be adjusted from
year to year to reflect increases in the Consumer Price Index. The policy shall
insure the hazards of premises and operation, contractual liability (covering
the Indemnity contained in Paragraph 18 hereof) and shall (1) name Landlord as
an additional insured, and (2) contain a cross liability provision, and (3)
contain a provision that "the insurance provided the Landlord hereunder shall be
primary and non-contributing with any other insurance available to the
Landlord."
(iii) Workers' Compensation and Employer's Liability insurance
(as required by state law).
(iv) Any other form or forms of insurance as Tenant or Landlord
or any mortgagees of Landlord may reasonably require from time to time in form,
in amounts and for insurance risks against which a prudent tenant would protect
itself.
(b) All policies shall be written in a form satisfactory to Landlord
and shall be taken out with insurance companies holding a General Policyholders
Rating of "A" and a Financial Rating of "X" or better, as set forth in the most
current issue of Bests Insurance Guide. Within ten days after the execution of
this Lease, Tenant shall deliver to Landlord copies of policies or certificates
evidencing the existence of the amounts and forms of coverage satisfactory to
Landlord. No such policy shall be cancelable or reducible in coverage except
after thirty days prior written notice to Landlord. Tenant shall, within ten
days prior to the expiration of such policies, furnish Landlord with renewals or
"binders" thereof, or Landlord may order such insurance and charge the cost
thereof to Tenant as additional rent. If Landlord obtains any insurance that is
the responsibility of Tenant under this section, Landlord shall deliver to
Tenant a written statement setting forth the cost of any such insurance and
showing in reasonable detail the manner in which it has been computed.
(c) Landlord shall, during the term hereof, keep in full force and
effect the following insurance, which Landlord shall obtain at competitive
rates:
(i) Commercial general liability insurance against claims for
personal injury, death or property damage arising out of the use, occupancy, or
maintenance of the
<PAGE>
Project (other than the Premises), in a combined single limit amount of not less
than $5,000,000 per occurrence, and $5,000,000 in the aggregate. Such policy
shall name Tenant as an additional insured with respect to the common areas of
the Project.
(ii) A policy of "all risk" or "causes of loss - special form"
property insurance on the Building, including the Tenant Improvements but
excluding Tenant's trade fixtures and equipment, in the amount of the full
replacement cost thereof as determined from time to time by Landlord's
insurance agent, but in any event not less than every three years.
(d) Notwithstanding any other provision of this Lease to the contrary,
Landlord and Tenant each hereby waive all rights of recovery against the other
on account of loss or damage occasioned to such waiving party for its property
or the property of others under its control to the extent that such loss or
damage is insured against under any insurance policies which may be in force at
the time of such loss or damage or which are required to be maintained by this
Lease, even if such damage may have been caused by the negligence of the other
party, its agents or employees. Tenant and Landlord shall, upon obtaining
policies of insurance required hereunder, give notice to the insurance carrier
that the foregoing mutual waiver of subrogation is contained in this Lease and
Tenant and Landlord shall cause each insurance policy obtained by such party to
provide that the insurance company waives all right of recovery by way of
subrogation against either Landlord or Tenant in connection with any damage
covered by such policy.
ARTICLE 21
----------
DAMAGE OR DESTRUCTION
---------------------
(a) If there is damage to the Premises which was caused by a peril
required to be covered or actually covered by insurance pursuant to Article 20
above ("Insured Loss"), or if there is damage to the Premises which is not an
Insured Loss but the estimated restoration cost is not more than ten percent
(10%) of the then actual replacement cost of the Premises, then, in either
event, Landlord shall repair such damage to the Premises (but not any damage to
Tenant's trade fixtures, equipment, furniture or other personal property) at
Landlord's expense, as promptly as possible, and this Lease shall continue in
full force and effect, except as otherwise provided below.
(b) If there is damage to the Premises that is not an Insured Loss,
and the estimated restoration cost exceeds ten percent (10%) of the then actual
replacement cost of the Premises, then Landlord may, at Landlord's option,
either (i) repair such damage to the Premises (but not any damage to Tenant's
trade fixtures, equipment, furniture or other personal property), at Landlord's
expense, as promptly as possible, in which event this Lease shall continue in
full force and effect, or (ii) give notice to Tenant within thirty (30) days
after the date of the occurrence of such damage of Landlord's intention to
terminate this Lease as of the date of the occurrence of such damage. If
Landlord elects to terminate this Lease, Tenant shall have the right, within ten
(10) days after receipt of such notice, to give Landlord notice of Tenant's
intention to pay for the cost to restore the Premises, in which event this Lease
shall continue in full force and effect and Landlord shall proceed to make such
repairs as soon as reasonably possible after Tenant has deposited with Landlord
an amount equal to (A) the estimated cost of such repairs less (B) ten percent
(10%) of the then actual replacement cost of the Premises. Landlord shall be
responsible for such portion of the cost of the repairs equal to ten percent
(10%) of the then actual replacement cost of the Premises.
<PAGE>
If Tenant does not give notice within such 10-day period, this Lease shall be
terminated as of the date of the occurrence of such damage.
(c) Upon any termination of this Lease under any of the provisions of
this Article 21, the parties shall be released without further obligation to the
other from the date possession of the Premises is surrendered to Landlord except
for items which have therefore accrued and are then unpaid. If Landlord elects
to terminate this Lease under any of the provisions of this Article 21, Landlord
shall compensate Tenant for the loss of Tenant's leasehold interest, which shall
be determined as the date of the casualty in accordance with the schedule
attached as EXHIBIT G. The foregoing shall not, however, create any legal or
---------
equitable property right in favor of Tenant unless and until Landlord terminates
this Lease as permitted under this Article 21.
(d) In the event of repair, reconstruction and restoration by Landlord
as herein provided, the rental payable under this Lease shall be abated
proportionately with the degree to which Tenant's use of the Premises is
impaired during the period of such repair, reconstruction or restoration.
Tenant shall not be entitled to any compensation or damages for loss in the use
of the whole or any part of the Premises and/or any inconvenience or annoyance
occasioned by such damage, repair, reconstruction or restoration.
(e) Notwithstanding anything to the contrary contained in this Article
21, if Landlord is delayed or prevented from completing the repair or
restoration of the damaged Premises within fifteen (15) months after the
occurrence of such damage or destruction by reason of acts of God, war,
governmental restrictions, inability to procure the necessary labor or
materials, or other cause beyond the reasonable control of Landlord, either
Landlord or Tenant may terminate this Lease as of the end of said fifteen (15)
month period.
(f) If Landlord is obligated to or elects to repair or restore as
herein provided, Landlord shall be obligated to make repair or restoration only
of those portions of the Project and the Premises which were originally provided
at Landlord's expense, and the repair and restoration of items not provided at
Landlord's expense shall be the obligation of Tenant.
(g) Notwithstanding anything to the contrary herein, if there is
damage to the Premises, whether or not an Insured Loss, which cannot be repaired
within one hundred eighty (180) days after the date of the casualty (the
"Estimated Rebuilding Period"), as reasonably estimated by an architect or
engineer jointly selected by Landlord and Tenant, Tenant shall have the right to
terminate this Lease as of the date of such damage. Landlord and Tenant shall
use reasonable efforts to obtain a written estimate of the repair period within
thirty (30) days after the date of damage. If Tenant desires to exercise its
termination option, Tenant shall give Landlord written notice of such exercise
within thirty (30) days after Tenant obtains written notice of the estimated
repair period. If Landlord has not completed the restoration of the Premises
within sixty (60) days after the Estimated Rebuilding Period, Tenant shall have
the right to terminate this Lease upon written notice to Landlord given at any
time prior to the expiration of such 60-day period. If Landlord is required or
elects to restore the Premises under the provisions of this Article 21 and does
not commence such restoration within one hundred twenty (120) days after the
date of such damage, Tenant may, at Tenant's option, terminate this Lease by
giving Landlord written notice thereof at any time prior to
<PAGE>
the expiration of such 120-day period. In such event, this Lease shall terminate
as of the date of such notice to Landlord.
(h) If at any time during the last year of the term of this Lease
there is a casualty to the Premises (whether or not an Insured Loss) such that
Tenant's use or occupancy of the Premises is materially impaired and the
Premises cannot be restored within thirty (30) days after the date of such
casualty, either Landlord or Tenant may terminate this Lease as of the date of
such casualty by written notice to the other within forty-five (45) days after
the date of the occurrence of such damage. If, however, at the time of such
damage Tenant has an option to extend the term of this Lease and the time for
exercise of such option has not then expired, then Tenant shall have a period of
forty-five (45) days from the date of the casualty to elect to exercise the
option to extend by delivery of written notice to Landlord. If Tenant exercises
such option during such 45-day period, and provided Landlord is otherwise
obligated to, or elects to repair such damage under the provisions of this
Article 21, Landlord shall, at Landlord's expense, repair such damage as soon as
reasonably possible, and this Lease shall continue in full force and effect. If
Tenant fails to exercise such option during such 45-day period, then Landlord
may, at Landlord's option, terminate this Lease effective as of the date of the
casualty, giving notice to Tenant of Landlord's election to do so within ten
(10) days after the expiration of such 45-day period.
(i) The provisions of California Civil Code 1932, Subsection 2, and
1933, Subsection 4, which permit termination of a lease upon destruction of the
Leased Premises, are hereby waived by Tenant; and the provisions of this Article
shall govern in case of such destruction.
ARTICLE 22
----------
EMINENT DOMAIN
--------------
In case all of the Premises, or such part thereof as shall
substantially interfere with Tenant's use and occupancy thereof, or all access
thereto, shall be taken for any public or quasi-public purpose by any lawful
power or authority by exercise of the right of appropriation, condemnation or
eminent domain, or sold to prevent such taking, either party shall have the
right to terminate this Lease effective as of the date possession is required to
be surrendered to said authority. Tenant shall not assert any claim against
Landlord or the taking authority for any compensation because of such taking,
and Landlord shall be entitled to receive the entire amount of any award without
deduction for any estate or interest of Tenant, except that Landlord agrees that
Tenant shall be entitled to receive an amount which is not more than seven
percent (7%) of Landlord's award to compensate Tenant for the loss of Tenant's
leasehold interest. In the event the amount of property or the type of estate
taken shall not substantially interfere with the conduct of Tenant's business,
in Tenant's good faith judgment, Landlord shall be entitled to the entire amount
of the award without deduction for any estate or interest of Tenant, Landlord
shall restore the Premises to substantially their same condition prior to such
partial taking, and a proportionate allowance shall be made to Tenant for the
rent corresponding to the time during which, and to the part of the Premises of
which, Tenant shall be so deprived on account of such taking and restoration.
Nothing contained in this paragraph shall be deemed to give Landlord any
interest in any award made to Tenant for the taking of personal property and
fixtures belonging to Tenant or for Tenant's relocation expenses.
ARTICLE 23
----------
<PAGE>
DEFAULTS AND REMEDIES
---------------------
(a) The occurrence of any one or more of the following events shall
constitute a default hereunder by Tenant:
(i) The abandonment of the Premises by Tenant.
(ii) The failure by Tenant to make any payment of rent or
additional rent or any other payment required to be made by Tenant hereunder, as
and when due, where such failure shall continue for a period of seven (7) days
after written notice thereof from Landlord to Tenant; provided however, that any
such notice shall be in lieu of, and not in addition to, any notice required
under California Code of Civil Procedure Section 1161 regarding unlawful
detainer actions.
(iii) The failure by Tenant to observe or perform any of the
express or implied covenants or provisions of this Lease to be observed or
performed by Tenant, other than as specified in Subparagraph 23(a)(i) or (ii)
above, where such failure shall continue for a period of thirty (30) days after
written notice thereof from Landlord to Tenant. Any such notice shall be in lieu
of, and not in addition to, any notice required under California Code of Civil
Procedure Section 1161 regarding unlawful detainer actions. If the nature of
Tenant's default is such that more than thirty (30) days are reasonably required
for its cure, then Tenant shall not be deemed to be in default if Tenant shall
commence such cure within said thirty-day period and thereafter diligently
prosecute such cure to completion.
(iv) (1) The making by Tenant of any general assignment for the
benefit of creditors; (2) the filing by or against Tenant of a petition to have
Tenant adjudged a bankrupt or a petition for reorganization or arrangement under
any law relating to bankruptcy (unless, in the case of a petition filed against
Tenant, the same is dismissed within sixty days); (3) the appointment of a
trustee or receiver to take possession of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease, where possession
is not restored to Tenant within thirty days; or (4) the attachment, execution
or other judicial seizure of substantially all of Tenant's assets located at the
Premises or of Tenant's interest in this Lease where such seizure is not
discharged within thirty days.
(v) A default by Tenant under the Sycamore Plaza II Lease
(subject to the provisions of paragraphs 24(f) and 35).
(b) In the event of any such default by Tenant, in addition to any
other remedies available to Landlord at law or in equity, Landlord shall have
the immediate option to terminate this Lease and all rights of Tenant hereunder.
In the event that Landlord shall elect to so terminate this Lease then Landlord
may recover from Tenant:
(i) The worth at the time of award of any unpaid rent which had
been earned at the time of such termination; plus
<PAGE>
(ii) The worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; plus
(iii) The worth at the time of award of the amount by which the
unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided; plus
(iv) Any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform Tenant's
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom.
As used in Subparagraph 23(b)(i) and (ii) above, the "worth at the time of
award" is computed by allowing interest at the maximum rate permitted by law.
As used in Subparagraph 23(b)(iii) above, the "worth at the time of award" is
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent.
(c) In the event of any such default by Tenant, Landlord shall also
have the right, with or without terminating this Lease, to re-enter the Premises
and remove all persons and property from the Premises; such property may be
removed and stored in a public warehouse or elsewhere at the cost of and for the
account of Tenant. No re-entry or taking possession of the Premises by Landlord
pursuant to this Paragraph 23(C) shall be construed as an election to terminate
this Lease unless a written notice of such intention is given to Tenant or
unless the termination thereof is decreed by a court of competent jurisdiction.
(d) In the event of a default by Tenant under Paragraph 23(a)(iv)
above, the unenforceability of certain remedies to which Landlord may otherwise
be entitled under this Lease or at law shall not prevent Landlord from
exercising any other remedies that Landlord may have against Tenant for any
other default by Tenant including, without limitation, the right to draw upon
the letter of credit as provided in Article 5 of this Lease.
(e) All rights, options and remedies of Landlord contained in this
Lease shall be constructed and held to be cumulative, and no one of them shall
be exclusive of the other, and Landlord shall have the right to pursue any one
or all of such remedies or any other remedy or relief which may be provided by
law, whether or not stated in this Lease. No waiver of any default of Tenant
hereunder shall be implied from any acceptance by Landlord of any rent or other
payments due hereunder or any omission by Landlord to take any action on account
of such default if such default persists or is repeated, and no express waiver
shall affect defaults other than as specified in said waiver. The consent or
approval of Landlord to or of any act by Tenant requiring Landlord's consent or
approval shall not be deemed to waive or render unnecessary Landlord's consent
or approval to or of any subsequent similar acts by Tenant.
(f) The chronic delinquency by Tenant in the payment of Basic Rent or
any other payments required to be paid by Tenant under this Lease shall
constitute a default hereunder by Tenant. "Chronic delinquency" shall mean
failure by Tenant to pay Basic Rent, or any other payments required to be paid
by Tenant under this Lease within seven (7) days after written notice
<PAGE>
thereof for any three (3) occasions (consecutive or non-consecutive) during any
twelve (12) month period. In the event of a chronic delinquency, Landlord shall
have the right, at Landlord's option, to require that Basic Rent be paid by
Tenant quarterly, in advance.
(g) Landlord shall not be deemed to be in default in the performance
of any obligation required to be performed by it hereunder unless and until it
has failed to perform such obligation within thirty (30) days after receipt of
written notice by Tenant to Landlord specifying the nature of such default, or
as soon as reasonably possible after notice from Tenant in the event that
Landlord's failure to perform its obligation will result in immediate threat of
personal injury or property damage. If, however, the nature of Landlord's
obligation is such that more than thirty (30) days are required for its
performance, then Landlord shall not be deemed to be in default if it shall
commence such performance within such thirty (30) day period and thereafter
diligently prosecute the same to completion.
ARTICLE 24
----------
ASSIGNMENT AND SUBLETTING
-------------------------
(a) Tenant shall not voluntarily assign its interest in this Lease or
in the Premises, or sublease all or any part of the Premises, or allow any other
person or entity to occupy or use all or any part of the Premises, without first
obtaining Landlord's prior written consent which consent shall not be
unreasonably withheld. Any assignment or sublease without Landlord's prior
written consent shall be voidable, at Landlord's election, and shall constitute
a default. In no event shall Tenant be permitted to encumber this Lease or
Tenant's leasehold interest in the Premises. No consent to any assignment or
sublease shall constitute a further waiver of the provisions of this paragraph.
Tenant shall notify Landlord in writing of Tenant's intent to sublease or assign
this Lease and Landlord shall, within thirty days of receipt of such written
notice, elect one of the following:
(i) Consent to such proposed assignment or sublease;
(ii) Refuse such consent, which refusal shall be on reasonable
grounds; or
(iii) In the event of a proposed assignment, elect to terminate
this Lease, or in the event of a proposed sublease of all or any portion of the
Premises for the then remaining term of this Lease, elect to terminate this
Lease with respect to the portion of the Premises to be subleased.
(b) As a condition for granting its consent to any assignment or
sublease, sixty days prior to any anticipated assignment or sublease Tenant
shall give Landlord written notice (the "Assignment Notice"), which shall set
forth the name, address and business of the proposed assignee or sublessee,
information (including references) concerning the character, ownership, and
financial condition of the proposed assignee or sublessee, and the Assignment
Date, any ownership or commercial relationship between Tenant and the proposed
assignee or sublessee, and the consideration of all other material terms and
conditions of the proposed assignment or sublease, all in such detail as
Landlord shall reasonably require. If Landlord requests additional detail, the
Assignment Notice shall not be deemed to have been received until Landlord
receives such
<PAGE>
additional detail, and Landlord may withhold consent to any assignment or
sublease until such additional detail is provided to it. Further, upon any
default by Tenant hereunder, Landlord may require that the sublessee or assignee
remit directly to Landlord on a monthly basis, all monies due to Tenant by said
assignee or sublessee.
(c) The consent by Landlord to any assignment or subletting shall not
be construed as relieving Tenant or any assignee of this Lease or sublessee of
the Premises from obtaining the express written consent of Landlord to any
further assignment or subletting or as releasing Tenant or any assignee or
sublessee of Tenant from any liability or obligation hereunder whether or not
then accrued. In the event Landlord shall consent to an assignment or sublease,
Tenant shall pay Landlord as Additional Rent a reasonable attorneys' and
administrative fee not to exceed $500 for costs incurred in connection with
evaluating the Assignment Notice. This section shall be fully applicable to all
further sales, hypothecations, transfers, assignments and subleases of any
portion of the Premises by any successor or assignee of Tenant, or any sublessee
of the Premises.
(d) As used in this section, the subletting of substantially all of
the Premises for substantially all of the remaining term of this Lease shall be
deemed an assignment rather than a sublease. Notwithstanding the foregoing,
Landlord's consent shall not be required for any assignment or sublease to a
parent, subsidiary or affiliate of Tenant or to an entity resulting from a
merger, consolidation or reorganization, or any entity or person which acquires
all or substantially all of the assets or stock of Tenant, provided that, in the
event of an assignment, the assignee first executes, acknowledges and delivers
to Landlord an agreement whereby the assignee agrees to be bound by all of the
covenants and agreements in this Lease which Tenant has agreed to keep, observe
or perform, that the assignee agrees that the provisions of this section shall
be binding upon it as if it were the original Tenant hereunder and that if the
assignment is made in connection with a merger or other acquisition, the
assignee shall have a net worth (determined in accordance with generally
accepted accounting principles consistently applied) immediately after such
assignment which is at least equal to the net worth (as so determined) of Tenant
at the commencement of this Lease.
(e) Except as provided above, Landlord's consent to any assignment or
sublease shall not be unreasonably withheld. A condition to such consent shall
be delivery by Tenant to Landlord of a true copy of any such assignment or
sublease. If for any proposed assignment or sublease Tenant receives rent or
other consideration, either initially or over the term of the assignment or
sublease, in excess of the rent called for hereunder, or, in case of the
sublease of a portion of the Premises, in excess of such rent fairly allocable
to such portion, after appropriate adjustments to assure that all other payments
called for hereunder are taken into account, Tenant shall pay to Landlord as
additional rent hereunder one-half (1/2) of the excess of each such payment of
rent or other consideration received by Tenant after first deducting any
reasonable and customary brokerage commission, attorney's fees, advertising
costs, tenant improvement costs and/or tenant improvement allowances paid by
Tenant in connection with the assignment or sublease. Such excess shall be paid
to Landlord promptly after its receipt by Tenant. Landlord's waiver or consent
to any assignment or subletting shall not relieve Tenant from any obligation
under this Lease and Tenant shall remain directly and primarily liable to
Landlord under this Lease for the full term hereof. The parties intend that the
preceding sentence shall not apply to any sublease rentals respecting a portion
of the Premises that during the entire term of this Lease was not occupied by
Tenant for its own use,
<PAGE>
but was always subleased by Tenant and/or kept vacant. For the purpose of this
section, the rent for each square foot of floor space in the Premises shall be
deemed equal.
(f) If Landlord grants its consent to any assignment of this Lease as
provided in paragraph 24(a), the cross-default provision contained in paragraph
23(a)(v) of this Lease shall be automatically terminated as of the effective
date of such assignment.
ARTICLE 25
----------
SUBORDINATION
-------------
Without the necessity of any additional document being executed by
Tenant for the purpose of effecting a subordination, and at the election of
Landlord or any mortgagee with a lien on the Project or any ground lessor with
respect to the Project, this Lease shall be subject and subordinate at all times
to:
(i) All ground leases or underlying leases which may now exist or
hereafter be executed affecting the Project or the land upon which the Project
is situated or both,
(ii) The lien of any mortgage or deed of trust which may now
exist or hereafter be executed in any amount for which the Project, land, ground
leases or underlying leases, or Landlord's interest or estate in any of said
items is specified as security provided, however, that with respect to any
mortgage or deed of trust recorded against the Premises as of the Commencement
Date, Landlord obtains and delivers to Tenant prior to the Commencement Date a
non-disturbance and attornment agreement, in a form reasonably acceptable to
Tenant, executed by the holder of any such mortgage or deed of trust which
provides that in the event of any foreclosure of the mortgage or deed of trust,
or deed in lieu of foreclosure, this Lease shall not be terminated so long as
Tenant is not in default hereunder beyond any applicable grace or cure period
provided for herein. Concurrently with the execution of this Lease by Landlord,
Landlord shall obtain and deliver to Tenant a Subordination, Non-Disturbance and
Attornment Agreement in the form attached as EXHIBIT H, executed by Landlord and
---------
Principal Mutual Life Insurance Company. Notwithstanding the foregoing, Landlord
shall have the right to subordinate or cause to be subordinated any such ground
leases or underlying leases or any such liens to the Lease. In the event that
any ground lease or underlying lease terminates for any reason or any mortgage
or deed of trust is foreclosed or a conveyance in lieu of foreclosure is made
for any reason, Tenant shall, notwithstanding any subordination, attorn to and
become the Tenant of the successor in interest to Landlord, provided such
successor assumes in writing Landlord's obligations hereunder. Tenant covenants
and agrees to execute and deliver, within ten (10) days after written request by
Landlord, and in the form requested by Landlord, any additional documents
evidencing the priority or subordination of this Lease with respect to any such
ground leases or underlying leases or the lien of any such mortgage or deed of
trust so long as such document is reasonably satisfactory Tenant and provides
for the non-disturbance of Tenant upon any termination of such ground lease or
any foreclosure of the mortgage or deed of trust as described herein.
(iii) The CC&R's as described in Article 6.
ARTICLE 26
----------
<PAGE>
ESTOPPEL CERTIFICATE
--------------------
(a) Within ten days following any written request from the other,
Tenant or Landlord shall execute and deliver to the other a statement
certifying:
(i) The date of commencement of this Lease;
(ii) The fact that this Lease is unmodified and in full force and
effect (or, if there have been modifications hereto, that this Lease is in full
force and effect, and stating the date and nature of such modifications);
(iii) The date to which the rental and other sums payable
under this Lease have been paid;
(iv) That there are no current defaults under this Lease by
either Landlord or Tenant except as specified in the responding party's
statement; and
(v) Such other matters reasonably requested by Landlord or
Tenant, as applicable.
Landlord and Tenant intend that any statement delivered pursuant to this Article
26 may be relied upon by any mortgagee, beneficiary, purchaser or prospective
purchaser of the Building or Project or any interest therein, or any equipment
lessor or purchaser of Tenant's stock or any assets of Tenant, as the case may
be.
(b) Tenant's or Landlord's failure to deliver such statement within
such time shall be conclusive upon such party, as the case may be:
(i) That this Lease is in full force and effect, without
modification except as may be represented by the requesting party,
(ii) That there are no uncured defaults in the requesting
party's performance, and
(iii) That not more than one month's rental has been paid in
advance.
ARTICLE 27
----------
SIGNAGE
-------
(a) Subject to the receipt of all necessary approvals from the City of
Pleasanton, Tenant shall have the right to install two (2) Tenant identification
signs on the exterior of the Building and to have its name placed on the
monument tombstone at the entry to the Project. The exact location of such
signs shall be agreed to by Landlord and Tenant, subject to any restrictions
imposed by the City of Pleasanton and the CC&R's. The size, design and other
physical characteristics of Tenant's signage shall be subject to the Design
Guidelines imposed by the
<PAGE>
CC&R's. The cost of such signs, including installation, maintenance and repair,
shall be paid by Tenant. Tenant shall have no other right to maintain a Tenant
identification sign in any other location in, on or about the Premises, the
Project, or Bernal Corporate Park and shall not display or erect any Tenant
identification sign, display or other advertising material within the Premises
that is visible from the exterior of the Building. If Tenant fails to maintain
its exterior signage or if Tenant fails to remove such signage upon termination
of this Lease, Landlord may do so at Tenant's expense and Tenant's reimbursement
to Landlord for such amounts shall be deemed additional rent.
(b) The rights to such exterior building signage and monument signage
are personal to Documentum, Inc. and may not be transferred or assigned except
to (i) a parent, subsidiary or affiliate of Documentum, Inc., or (ii) a
transferee approved in writing by Landlord pursuant to paragraph 24(a)(i) of
this Lease; provided, however, that if Landlord, in its good faith judgment and
reasonable opinion determines that any transferee approved by Landlord is not of
reputable or good character, consistent with the other tenants of the Project,
Landlord may deny such sign rights to such transferee if Landlord so notifies
Tenant in writing at the time of Landlord's consent to the proposed transfer.
If Landlord fails to so notify Tenant, the transferee approved by Landlord shall
be entitled to the same signage rights granted to Documentum, Inc. hereunder.
ARTICLE 28
----------
RULES AND REGULATIONS
---------------------
Tenant shall faithfully observe and comply with the "Rules and
Regulations," a copy of which is attached hereto and marked EXHIBIT D, and all
---------
reasonable and nondiscriminatory modifications thereof and additions thereto
from time to time put into effect by Landlord. Landlord shall not be
responsible to Tenant for the violation or non-performance by any other tenant
or occupant of the Project of any of said Rules and Regulations.
ARTICLE 29
----------
CONFLICT OF LAWS
----------------
This Lease shall be governed by and construed pursuant to the laws of
the State of California.
ARTICLE 30
----------
SUCCESSORS AND ASSIGNS
----------------------
Except as otherwise provided in this Lease, all of the covenants,
conditions and provisions of this Lease shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns.
ARTICLE 31
----------
SURRENDER OF PREMISES
---------------------
The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not work a merger, and shall, at the option of
Landlord, operate as an assignment to it of any or all subleases and
subtenancies.
<PAGE>
ARTICLE 32
----------
ATTORNEYS' FEES
---------------
If either Landlord or Tenant brings any action for any relief against
the other arising out of this Lease, the losing party shall pay to the
prevailing party its reasonable attorneys' fees and costs.(including attorneys'
fees on appeal, and costs and expenses incurred in out-of-court negotiations,
workouts and/or settlements or in seeking relief from stay or otherwise seeking
to protect its rights in any bankruptcy proceeding). In addition, the
prevailing party shall be entitled to its attorneys' fees, costs and expenses
incurred in post-judgment proceedings to collect and enforce a judgment. This
provision is separate and several and shall survive the merger of this Lease
into any judgment on this Lease
ARTICLE 33
----------
PERFORMANCE BY TENANT
---------------------
All covenants and agreements to be performed by Tenant under any of
the terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of rent, except as otherwise expressly
provided herein. If Tenant shall fail to pay any sum of money owed to any party
other than Landlord, for which it is liable hereunder or if Tenant shall fail to
perform any other act on its part to be performed hereunder and such failure
shall continue for ten (10) days after written notice thereof by Landlord (or
such longer period as may be expressly provided for in this Lease), Landlord
may, without waiving or releasing Tenant from obligations of Tenant, but shall
not be obligated to, make any such payment or perform any such other act to be
made or performed by Tenant. All sums so paid by Landlord and all necessary
incidental costs shall be payable to Landlord within ten (10) days after demand
therefor. Tenant covenants to pay any such sums and Landlord shall have (in
addition to any other right or remedy of Landlord) all rights and remedies in
the event of the non-payment thereof by Tenant as are set forth in Article 23
hereof.
ARTICLE 34
----------
MORTGAGEE PROTECTION
--------------------
In the event of any default on the part of Landlord, Tenant will give
notice by registered or certified mail to any beneficiary of a deed of trust or
mortgage covering the Premises whose address shall have been furnished to
Tenant. Such beneficiary or mortgagee shall have thirty (30) days after receipt
of written notice from Tenant specifying the nature of Landlord's default to
cure such default; provided, however, that if the nature of Landlord's
obligation is such that more than thirty (30) days are required for its
performance, then such beneficiary or mortgagee shall have such additional time
as is reasonably necessary to cure such default so long as it commences such
performance within such thirty (30) day period and thereafter diligently
prosecute the same to completion.
ARTICLE 35
----------
DEFINITION OF LANDLORD
----------------------
<PAGE>
The term "Landlord", as used in this Lease, so far as covenants or
obligations on the part of Landlord are concerned, shall be limited to mean and
include only the owner or owners, at the time in question, of the fee title of
the Premises or the lessees under any ground lease, if any. In the event of any
transfer, assignment or other conveyance or transfers of any such title,
Landlord herein named (and in case of any subsequent transfers or conveyances,
the then grantor) shall be automatically freed and relieved from and after the
date of such transfer, assignment or conveyance of all liability as respects the
performance of any covenants or obligations on the part of Landlord contained in
this Lease thereafter to be performed. Without further agreement, the
transferee of such title shall be deemed to have assumed and agreed to observe
and perform any and all obligations of Landlord hereunder, during its ownership
of the Premises. Landlord may transfer its interest in the Premises without the
consent of Tenant and such transfer or subsequent transfer shall not be deemed a
violation on Landlord's part of any of the terms and conditions of this Lease.
In the event that Landlord transfers or conveys the Project to a third party
(other than a parent, subsidiary or affiliate of Landlord) and either retains
title to the project known as Sycamore Plaza II or transfers or conveys title to
Sycamore Plaza II to another third party (other than a parent, subsidiary or
affiliate of Landlord) the cross-default provisions set forth in paragraph
23(a)(v) shall be automatically terminated as of the date of such transfer or
conveyance.
ARTICLE 36
----------
WAIVER
------
The waiver by Landlord or Tenant of any breach of any term, covenant
or condition herein contained shall not be deemed to be a waiver of any
subsequent breach of the same or any other term, covenant or condition herein
contained, nor shall any custom or practice which may grow up between the
parties in the administration of the terms hereof be deemed a waiver of or in
any way affect the right of Landlord or Tenant to insist upon the performance by
the other in strict accordance with said terms. The subsequent acceptance of
rent hereunder by Landlord shall not be deemed to be a waiver of any preceding
breach by Tenant or any term, covenant or condition of this Lease, other than
the failure of Tenant to pay the particular rent so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
rent.
ARTICLE 37
----------
IDENTIFICATION OF TENANT
------------------------
If more than one person executes this Lease as Tenant:
(i) Each of them is jointly and severally liable for the
keeping, observing and performing of all of the terms, covenants, conditions,
provisions and agreements of this Lease to be kept, observed and performed by
Tenant, and
(ii) The term "Tenant" as used in this Lease shall mean and
include each of them jointly and severally. The act of or notice from, or notice
to refund to, or the signature of any one or more of them, with respect to the
tenancy of this Lease, including, but not limited to any renewal, extension,
expiration, termination or modification of this Lease, shall be binding upon
each and all of the persons executing this Lease as Tenant with the same force
and effect as if each and all of them had so acted or so given or received such
notice or refund or so signed.
<PAGE>
ARTICLE 38
----------
PARKING
-------
The use by Tenant, its employees and invitees, of the parking
facilities of the Project shall be on the terms and conditions set forth in
EXHIBIT E attached hereto and by this reference incorporated herein and shall be
- ---------
subject to such other agreement between Landlord and Tenant as may hereinafter
be established. Tenant, its employees and invitees shall use no more than four
(4) non-exclusive parking spaces per one thousand (1,000) rentable square feet
of leased space. Tenant's total parking allocation for the Premises and the
premises at 6701 Koll Center Parkway shall include twenty (20) parking spaces
designated as visitor parking for the exclusive use of Tenant's visitors, which
shall be located near the entrances to the Premises and the building at 6701
Koll Center Parkway, with no more than five (5) of such visitor parking spaces
to be located at the entrance to the building at 6701 Koll Center Parkway.
Tenant's visitor parking spaces at 6701 Koll Center Parkway shall be located in
a manner that will permit a reasonable number of additional visitor parking
spaces near the entrance to the building for other tenants of the building.
Tenant's use of the parking spaces shall be confined to the Project. If, in
Landlord's reasonable business judgment, it becomes necessary, Landlord shall
exercise due diligence to cause the creation of cross-parking easements and such
other agreements as are necessary to permit Tenant, its employees and invitees
to use parking spaces on the properties and buildings of Bernal Corporate Park,
which are separate legal parcels from the Project. Tenant acknowledges that
other tenants of the Project and the tenants of the other buildings, their
employees and invitees, may be given the right to park at the Project.
ARTICLE 39
----------
TERMS AND HEADINGS
------------------
The words "Landlord" and "Tenant" as used herein shall include the
plural as well as the singular. Words used in any gender include other genders.
The paragraph headings of this Lease are not a part of this Lease and shall have
no effect upon the construction or interpretation of any part hereof.
ARTICLE 40
----------
EXAMINATION OF LEASE
--------------------
Submission of this instrument for examination or signature by Tenant
does not constitute a reservation of or option for lease, and it is not
effective as a lease or otherwise until execution by and delivery to both
Landlord and Tenant.
ARTICLE 41
----------
TIME
----
Time is of the essence with respect to the performance of every
provision of this Lease in which time or performance is a factor.
ARTICLE 42
----------
<PAGE>
PRIOR AGREEMENT: AMENDMENTS
---------------------------
This Lease contains all of the agreements of the parties hereto with
respect to any matter covered or mentioned in this Lease, and no prior agreement
or understanding pertaining to any such matter shall be effective for any
purpose. No provisions of this Lease may be amended or added to except by an
agreement in writing signed by the parties hereto or their respective successors
in interest.
ARTICLE 43
----------
SEPARABILITY
------------
Any provision of this Lease which shall prove to be invalid, void or
illegal in no way affects, impairs or invalidates any other provision hereof,
any such other provisions shall remain in full force and effect.
ARTICLE 44
----------
RECORDING
---------
Promptly following full execution of this Lease, Landlord and Tenant
shall execute a short form memorandum of this Lease mutually acceptable to
Landlord and Tenant. Tenant shall be permitted to record such memorandum at
Tenant's expense. Tenant shall, within ten (10) days after written request by
Landlord, execute and deliver to Landlord a quitclaim deed in recordable form
and prepared by Landlord, quitclaiming, releasing and remising to Landlord any
right, title and interest of Tenant in and to the Premises and the Project
pursuant to this Lease.
ARTICLE 45
----------
CONSENTS
--------
Whenever the consent of either party is required hereunder such
consent shall not be unreasonably withheld.
ARTICLE 46
----------
LIMITATION ON LIABILITY
-----------------------
In consideration of the benefits accruing hereunder, Tenant and all
successors and assigns covenant and agree that, in the event of any actual or
alleged failure, breach or default under this Lease by Landlord:
(a) The sole and exclusive remedy shall be against the Landlord's
interest in the Project;
(b) No partner, officer, agent or employee of Landlord shall be sued
or named as a party in any suit or action (except as may be necessary to secure
jurisdiction of Landlord);
<PAGE>
(c) No service or process shall be made against any partner, officer,
agent or employee of Landlord (except as may be necessary to secure jurisdiction
of Landlord);
(d) No partner, officer, agent or employee of Landlord shall be
required to answer or otherwise plead to any service of process;
(e) No judgment will be taken against any partner, officer, agent or
employee of Landlord;
(f) Any judgment taken against any partner, officer, agent or
employee of Landlord may be vacated and set aside at any time nunc pro nunc;
(g) No writ of execution will ever be levied against the assets of
any partner, officer, agent or employee of Landlord;
(h) The covenants and agreements set forth in this Article 46 are
enforceable both by Landlord and also by any partner, officer, agent or
employee of Landlord.
ARTICLE 47
----------
RIDERS
------
Clauses, plats and riders, if any, signed by Landlord and Tenant and
affixed to this Lease are a part hereof.
ARTICLE 48
----------
EXHIBITS
--------
All Exhibits attached hereto are incorporated into this Lease.
ARTICLE 49
----------
MODIFICATION FOR LENDER
-----------------------
If, in connection with obtaining construction, interim or permanent
financing for the Project the lender shall request reasonable modifications in
this Lease as a condition to such financing, Tenant will not unreasonably
withhold, delay or defer its consent thereto, provided that such modifications
do not increase the obligations of Tenant hereunder or materially adversely
affect the leasehold interest hereby created or Tenant's rights hereunder.
ARTICLE 50
----------
WAIVER OF LIEN RIGHTS
---------------------
Notwithstanding anything in this Lease to the contrary, Landlord
waives any right, title and interest Landlord now has, or may hereafter have,
whether statutory or otherwise, to any trade fixtures, equipment, furniture,
signs, books and records, inventory or other personal property of Tenant
(singly, and/or collectively, "Collateral"). Landlord further agrees that
Tenant shall have the right to mortgage, pledge, hypothecate or grant a security
interest in any such Collateral as security for its obligations under any future
equipment lease or other financing arrangement related
<PAGE>
to the conduct of Tenant's business at the Premises. Landlord further agrees to
execute and deliver any UCC filing statement or other documentation reasonably
acceptable to Landlord that may be required to subordinate Landlord's interest
in the Collateral in connection with any such future lease or financing
arrangement, including, but not limited to, any real estate consent or waiver
forms reasonably acceptable to Landlord, including those submitted by any
vendors, equipment lessors or chattel mortgagees. All trade fixtures, signs,
equipment, furniture, or other personal property of whatever kind or nature kept
or installed at the Premises by Tenant may be removed by Tenant in the ordinary
course of business at any time and from time to time during the term of this
Lease. Landlord shall further acknowledge that the property covered by the
consent or waiver forms may be removed from the Premises by the vendor,
equipment lessor or chattel mortgagee at any time prior to termination of this
Lease upon any default by Tenant in the terms of such lease, chattel mortgage or
similar documents, free and clear of any claim or lien of Landlord in and to
such property provided that such lessor or mortgagee agrees in writing to give
Landlord prior notice of any intended removal and to be responsible for the
repair of any damage to the Premises caused by such removal.
ARTICLE 51
----------
OPTION TO EXTEND
----------------
Provided that Tenant is not in default hereunder, either at the time
of exercise or at the time the extended term commences, Tenant shall have the
option to extend the initial seven (7) year term of this Lease for one (1)
additional period of five (5) years ("Option Period") on the same terms,
covenants and conditions provided herein, except that upon such renewal the
Basic Rent due hereunder shall be the then fair market rental value of the
Premises. The then fair market rental value of the Premises' shall be defined
to mean the fair market rental value of the Premises as of the commencement of
the Option Period, taking into consideration the uses permitted under this
Lease, the quality, size, design and location of the Premises, and the rent for
comparable space located in Pleasanton. Tenant shall exercise its option by
giving Landlord written notice ("Option Notice") at least two hundred seventy
(270) days but not more than three hundred sixty (360) days prior to the
expiration of the initial term of this Lease. This option to extend is personal
to Tenant and may not be transferred or assigned to any third party, except
Tenant affiliates and permitted transferees pursuant to Article 24 of this
Lease.
<PAGE>
ARTICLE 52
----------
LANDLORD'S CONDITION
--------------------
This Lease is subject to the approval of Landlord's investment
committee which Landlord shall use diligent efforts to obtain no later than ten
(10) business days after this Lease has been fully executed. This condition is
for the sole benefit of Landlord and may be waived or deemed satisfied at
Landlord at Landlord's option.
IN WITNESS WHEREOF, the parties have executed this Lease as of the date
first above written.
LANDLORD:
Patrician Associates, Inc., a Its:______________________________
California corporation
By:_______________________________
Its:______________________________
By:_________________________________
Its:________________________________
By:_________________________________
Its:________________________________
TENANT:
Documentum, Inc., a California corporation
By:_________________________________
<PAGE>
ADDRESS:
Patrician Associates, Inc.
c/o Parkway Properties, Inc., ADDRESS:
7011 Koll Center, Suite 210
Pleasanton, California 94566 Documentum, Inc.
5671 Gibraltar Drive
Pleasanton, California 94588-8547
EXHIBIT A
---------
<PAGE>
OUTLINE OF TENANT'S FLOOR PLAN
------------------------------
EXHIBIT A
---------
<PAGE>
THE PROJECT
-----------
EXHIBIT A-1
-----------
<PAGE>
WORK LETTER AGREEMENT
---------------------
RECITALS
A. Concurrently with the execution of this Work Letter Agreement ("Work
Letter"), Landlord and Tenant have entered into a lease (the "Lease") covering
certain premises (the "Premises") more particularly described in EXHIBIT A
---------
attached to the Lease. This Work Letter is attached to and made a part of the
Lease. The capitalized terms used herein shall have the meanings set forth in
the Lease, unless otherwise defined herein.
B. In order to induce Tenant to enter into the Lease and in consideration
of the mutual covenants hereinafter contained, Landlord and Tenant hereby agree
as follows with respect to the construction of the Base Building and the Tenant
Improvements (defined below):
1. COMPLETION SCHEDULE
Within thirty (30) days after the full execution of this Lease,
Landlord shall deliver to Tenant, for Tenant's review and approval, a schedule
(the "Work Schedule") setting forth a timetable for the planning and completion
of the Base Building and the installation of the Tenant Improvements to be
constructed in the Premises. The Work Schedule shall set forth each of the
various items of work to be done by or approval to be given by Landlord and
Tenant in connection with the completion of the Base Building and the Tenant
Improvements. Such schedule shall be submitted to Tenant for its approval and,
upon approval by both Landlord and Tenant, such schedule shall become the basis
for completing the Base Building and the Tenant Improvements. If Tenant shall
fail to approve the Work Schedule, as it may be modified after discussions
between Landlord and Tenant, within seven (7) working days after the date such
schedule is first received by Tenant, the Work Schedule shall be deemed
approved.
2. BASE BUILDING
Landlord shall construct at Landlord's sole expense the building shell
and improvements, including the Site Improvements defined below, but excluding
the Tenant Improvements, to be constructed at 6801 Koll Center Parkway
(collectively, the "Base Building") in all material respects in accordance with
the drawings prepared by Korth Sunseri Hagey for Sycamore Plaza, project 96108,
including sheets A0.1 through A11.2 dated May 22, 1998, sheets S1.1 through
S4.5, E0.1 through E2.1, M2.3, P0.1 through 6.1, all dated May 15, 1998; Kier &
Wright topographic drawing C.1 dated April 30, 1998, and grading and paving
plans, notes and details C.2 through C.7 dated April 30, 1998; landscape
drawings by David Gates and Associates, sheets L0.1 through L4.1 dated May 19,
1998; and Korth Sunseri Hagey Project Manual, including specifications dated
May, 1998 (collectively, the "Base Building Plans"). The Base Building shall
include, without limitation, the building lobby (including all restrooms),
interior stairways, elevator, central HVAC system, and sprinkler system
distribution, including upright heads, and, subject to receipt of all necessary
approvals from the City of Pleasanton, a covered walkway at ground level between
the Building and the building at 6701 Koll Center Parkway. HVAC distribution
from the
EXHIBIT B
---------
Page 1 of 8
<PAGE>
main trunk line shall be a Tenant Improvements Cost as described below. Landlord
shall complete construction of the Base Building in a good and workmanlike
manner in compliance with all Applicable Laws and the building permit issued by
the City of Pleasanton for such construction. For purposes of this Work Letter,
the Site Improvements shall mean the parking areas, driveways, walkways,
landscaping and other improvements to the common areas of the Project that are
depicted on the site plan attached as EXHIBIT B-1 hereto and incorporated
-----------
herein.
3. TENANT IMPROVEMENTS
Reference herein to "Tenant Improvements" shall include all work to be
done in the Premises pursuant to the Tenant Improvement Plans described in
Paragraph 5 below, including but not limited to partitioning, doors, ceilings,
floor coverings, finishes, (including paint and wallcovering) electrical,
(including lighting, switching, outlets, etc.) plumbing, heating, ventilating
and air conditioning, fire protection, cabinets and other mill work, all as more
particularly described therein
4. TENANT'S SPACE PLAN
Tenant shall retain a space planner to prepare preliminary and final
space plans required in connection with the construction of the Tenant
Improvements to the Premises. Tenant shall cause its space planner to prepare
and submit to Landlord, no later than September 15, 1998, a final space plan for
Tenant's proposed Tenant Improvements to the Premises ("Space Plan"). Tenant's
Space Plan shall be sufficient to enable the Architect to prepare working
drawings for the Tenant Improvements pursuant to paragraph 5 below. Within ten
(10) business days after receipt of Tenant's Space Plan, Landlord shall notify
Tenant of Landlord's approval or disapproval thereof, specifying in reasonable
detail the basis for Landlord's disapproval, if applicable. The architect
("Architect") shall be selected by Tenant from among the following firms:
Interform; Ambiance Associates, Gensler and Associates; Korth, Sunseri and
Hagey; RMW and Associates; Michael Willis & Associates; or other similarly
qualified architect approved by Landlord.
5. FINAL PRICING AND DRAWING SCHEDULE
(a) After the preparation of the Space Plan and after Landlord's
written approval thereof, in accordance with the Work Schedule, Landlord enter
into a contract with the Architect and shall cause the Architect to prepare and
submit to Tenant the final working drawings and specifications ("Tenant
Improvement Plans"). Such working drawings shall be approved by Landlord and
Tenant in accordance with the Work Schedule. If Tenant disapproves any part of
the Tenant Improvement Plans, Tenant's disapproval shall provide objections with
sufficient particularity for the Architect to revise the Tenant Improvements
Plans. Such revisions shall be subject to Landlord's approval, which shall not
be unreasonably withheld. Following final approval of the Tenant Improvement
Plans by Landlord and Tenant, such plans be submitted by Landlord to the
appropriate governmental body for plan checking and a building permit.
EXHIBIT B
---------
Page 2 of 8
<PAGE>
(b) Concurrent with the plan checking, Landlord shall cause Devcon
Construction (the "General Contractor") to prepare and deliver to Landlord and
Tenant a final pricing for construction of the Tenant Improvements ("Final
Pricing"), taking into account any modifications which may be required to
reflect changes in the plans and specifications required by the City of
Pleasanton. Prior to determining the Final Pricing, Landlord shall cause the
General Contractor to solicit bids from three (3) subcontractors for each of the
subtrades, including final clean-up. Tenant shall have the right to nominate
one subcontractor to bid each of the subtrades, provided that the subcontractors
nominated by Tenant are licensed, qualified contractors experienced with jobs of
similar size and complexity and provided that such subcontractors are signatory
to appropriate labor unions. Additionally, Tenant shall have the right to
review the bid documentation package to ensure that it allows for competitive
bidding. If Landlord selects a subcontractor for any subtrade whose bid is five
percent (5%) greater than the lowest bid obtained by Landlord for such subtrade,
that is otherwise comparable in scope and quality to the lowest bid, then
Landlord shall be responsible for that portion of the bid in excess of one
hundred five percent (105%) of the lowest bid, which excess amount shall not be
included in the cost of the Tenant Improvements for the purpose of allocating
the same between Landlord and Tenant pursuant hereto.
(c) Landlord shall deliver the Final Pricing, including a line item
detailed breakdown, to Tenant for Tenant's review and approval. The Final
Pricing shall include the General Contractor's overhead and profit (not to
exceed 2.75% of the total hard construction costs, which excludes permits and
fees, plans and testing and inspections), and general conditions (not to exceed
$71,808.00) which includes supervision and clean-up during construction
(excluding final clean-up). Landlord agrees that if Tenant reasonably deems any
subcontractor trade item to be excessively high, Landlord will cause such trade
to be rebid, but in such event any delays attributable to or resulting from such
rebidding shall be considered a Tenant Delay as described in paragraph 8(b)
below. Tenant shall, within ten (10) business days after receipt of the Final
Pricing, notify Landlord in writing of Tenant's approval or disapproval of the
Final Pricing, which will include specific terms objected to and the reasons
therefor, if applicable. If Tenant disapproves the Final Pricing, Landlord and
Tenant will promptly meet to discuss modifications to the Tenant Improvement
Plans and the Final Pricing.
6. CONSTRUCTION OF TENANT IMPROVEMENTS
(a) After the Tenant Improvement Plans and the Final Pricing have been
approved by Landlord and Tenant and Landlord has obtained a building permit for
the Tenant Improvements, Landlord shall enter into a construction contract with
the General Contractor for installation of the Tenant Improvements in accordance
with the Tenant Improvement Plans. Landlord shall supervise the completion of
such work and shall use diligent efforts to secure completion of the work in
accordance with the Work Schedule and this Work Letter.
(b) Landlord shall complete construction of the Tenant Improvements in
a good and workmanlike manner in compliance with all Applicable Laws and the
building permit issued by the City of Pleasanton for such construction.
Landlord shall correct any latent defects in the Tenant Improvements and/or the
Base Building and any other incomplete or defective items that
EXHIBIT B
---------
Page 3 of 8
<PAGE>
were not reasonably discoverable by Tenant during Tenant's walk-through
inspection of the Premises.
7. PAYMENT OF COST OF THE TENANT IMPROVEMENTS
(a) Landlord shall provide Tenant with an allowance of Seven Hundred
Forty-Four Thousand Seven Hundred Thirteen and no/100ths Dollars ($744,713.00)
for the design and construction of the Tenant Improvements to the Premises
("Tenant Improvement Allowance"). Tenant shall pay to Landlord the sum of Two
Million Five Hundred Thousand and no/100ths Dollars ($2,500,000.00) as Tenant's
contribution toward the Tenant Improvement Costs ("Tenant's Contribution").
Tenant shall pay Tenant's Contribution to Landlord in cash upon execution of the
Lease. Any Tenant Improvement Costs in excess of the Tenant Improvement
Allowance plus Tenant's Contribution hall be paid by Tenant in cash within
thirty (30) days after Landlord has provided Tenant with an itemized invoice for
such additional costs, provided that such additional costs are not caused by a
Landlord Delay. In addition to the Tenant Improvement Allowance, Landlord shall
provide, at Landlord's expense, data communications conduit between the Premises
and the building at 6701 Koll Center Parkway and between these two (2) buildings
and the buildings known as Bernal Corporate Plaza I and II.
(b) Tenant's Contribution shall be non-refundable to Tenant except as
provided in paragraph 2(d) of the Lease. Landlord shall not be required to keep
Tenant's Contribution in a separate account or otherwise segregated from
Landlord's funds and Tenant shall not be entitled to any interest on Tenant's
contribution. Furthermore, in the event of any default by Tenant under this
Lease that occurs at any time prior to the Commencement Date, specifically
including any default that occurs at any time prior to commencement of
construction of the Base Building and/or the Tenant Improvements, Landlord shall
be entitled to retain the entire amount of Tenant's Contribution to compensate
Landlord for damages resulting from Tenant's default. In no event, however,
shall Tenant's Contribution be deemed liquidated damages nor shall Landlord's
retention of Tenant's Contribution prevent Landlord from exercising any other
right or remedy provided by this Lease or by law and such retention shall not
operate as a limitation on any recovery to which Landlord may otherwise be
entitled.
(c) The Tenant Improvement Allowance and Tenant's Contribution may be
used for the following costs ("Tenant Improvement Costs"):
(i) Payment of the cost of preparing the space plan (not to
exceed $0.15 per square foot) and the services of the Architect, including
preparation of the final working drawings and specifications, mechanical,
electrical and structural drawings, and all other aspects of the Tenant
Improvement Plans (not to exceed $0.85 per square foot);
(ii) The payment of permit and license fees relating to
construction of the Tenant Improvements;
(iii) A project management fee equal to $129,788.52 (four
percent (4%) of ($26.50 x 122,442 sq. ft.));
EXHIBIT B
-----------
Page 4 of 8
<PAGE>
(iv) Construction of the Tenant Improvements, including,
without limitation, the following:
(1) Installation within the Premises of all partitioning,
doors, floor coverings, finishes, ceilings, wall coverings and painting,
millwork and similar items;
(2) All electrical wiring, lighting fixtures, outlets and
switches, and other electrical work to be installed within the Premises;
(3) The furnishing and installation of all duct work,
terminal boxes, defusers and accessories required for the completion of the
heating, ventilation and air conditioning systems within the Premises, including
the cost of meter and key control for after-hour air conditioning;
(4) Any additional Tenant requirements including, but not
limited to odor control, special heating, ventilation and air conditioning,
noise or vibration control or other special systems;
(5) All fire and life safety control systems such as fire
walls, sprinklers, halon, fire alarms, including piping, wiring and accessories
installed within the Premises;
(6) All plumbing, fixtures, pipes, and accessories to be
installed within the Premises; and
(7) Landlord shall provide telephone conduit only from the
telephone jacks in the walls to the top of the ceiling at those locations
specified in the Tenant Improvement Plans. Tenant shall be responsible for
pulling all wires from the service boards to the individual jacks.
(d) If the Tenant Improvement Costs (as determined by the Final
Pricing approved by Landlord and Tenant) exceed the Tenant Improvement Allowance
plus Tenant's Contribution, one-half (1/2) of the excess costs shall be paid by
Tenant to Landlord in cash within thirty (30) days after Landlord has provided
Tenant with an itemized invoice for such excess costs, and the balance shall be
paid by Tenant upon substantial completion of the Tenant Improvements; provided,
however, that if such additional cost is attributable to Landlord Delays, then
such additional cost shall be paid by Landlord.
(e) If, after the Tenant Improvement Plans and the Final Pricing have
been approved, Tenant shall require any changes or substitutions to the Tenant
Improvement Plans, one-half (1/2) of any additional costs therefor, including
architectural and space planning fees, which are in excess of the Tenant
Improvement Allowance plus Tenant's Contribution shall be paid by Tenant to
Landlord within thirty (30) days after Landlord has provided Tenant with an
itemized invoice for such additional costs, and the balance shall be paid by
Tenant upon substantial completion of the Tenant Improvements.
EXHIBIT B
-----------
Page 5 of 8
<PAGE>
(f) For purposes of this Work Letter, a "Landlord Delay" shall mean
any delay in the substantial completion of the Tenant Improvements caused by any
act or omission by Landlord, its agents or contractors, including, without
limitation, any delay (i) attributable to changes in or additions to the Base
Building Plans, the Tenant Improvement Plans and/or the Tenant Improvements
after the same have been approved by Landlord and Tenant, and (ii) attributable
to the failure of Landlord to pay when due, any amounts required to be paid by
Landlord in connection with completion of the Base Building and the Tenant
Improvements pursuant to the Lease or this Work Letter except to the extent that
such failure is due to Tenant's failure to pay any additional Tenant Improvement
Costs as required under paragraph 7(d) or 7(e) of this Work Letter.
8. COMPLETION AND RENTAL COMMENCEMENT DATE
(a) The commencement of the term of this Lease and Tenant's obligation
for the payment of rental under the Lease shall not commence until substantial
completion of construction of the Base Building and the Tenant Improvements.
For purposes of the Lease and this Work Letter, "substantial completion" of the
Tenant Improvements shall mean (i) the Base Building is complete and in
compliance with all Applicable Laws and all of the Base Building systems are
operational to the extent necessary to service the Premises; (ii) Landlord has
sufficiently completed all the work required to be performed by Landlord in
accordance with this Work Letter (except punch-list items which Landlord shall
thereafter promptly complete as provided in paragraph 9 below) to enable Tenant
to conduct its business operations (assuming installation by Tenant of all
cabling systems, equipment, fixtures, furnishings, and other personal property
necessary to conduct its business operations); (iii) Landlord has obtained a
certificate of occupancy, or its equivalent, for the Building (except to the
extent receipt of such certificate of occupancy, or its equivalent, is delayed
by any Tenant Delay); (iv) Tenant has been provided with the parking spaces and
parking privileges to which it is entitled under the Lease; (v) Tenant has been
delivered reasonable access to the Premises sufficient to allow Tenant to
install its freestanding work stations, fixtures, furniture, equipment, and
telecommunication and computer cabling systems; and (vi) Tenant has received a
non-disturbance agreement in form reasonably acceptable to Tenant signed by
Landlord and each ground lessor, mortgagee or deed of trust holder which is of
record prior to the Commencement Date of this Lease, the receipt of which shall
be a condition to this Lease.
(b) However, if there shall be a delay in substantial completion of
the Base Building and/or the Tenant Improvements as a result of any act or
omission of Tenant, its agents or contractors, including, without limitation,
any of the following (each, a "Tenant Delay"): (i) Tenant's failure to approve
any item or perform any other obligation in accordance with and by the date
specified in the Work Schedule; (ii) Tenant's request for any materials,
finishes or installations which are not readily available, if Landlord notifies
Tenant prior to final approval of the Tenant Improvement Plans that use of such
materials, finishes or installations will negatively impact the completion
schedule (including an estimate of the anticipated delays associated with such
materials, finishes or installations) and Tenant nevertheless elects to use such
materials, finishes or installations; (iii) Tenant's changes in the Tenant
Improvement Plans after their approval by Tenant; (iv) rebidding of any
subtrades at Tenant's request; or (v) interference with Landlord's work caused
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<PAGE>
by Tenant or by Tenant's contractors or subcontractors if Tenant does not cease
such interference within two (2) business days after Landlord notifies Tenant of
the existence of such interference; then the commencement of the term of this
Lease and the rental commencement date shall be accelerated by the number of
days of such delay.
9. PUNCHLIST
Upon substantial completion of the Tenant Improvements, or as soon
thereafter as reasonably practicable, Landlord, Tenant and Tenant's space
planner shall inspect the Premises and the Tenant Improvements and develop a
punch-list of those minor corrections of construction or decoration details and
minor mechanical adjustments that are required to cause any applicable portion
of the Tenant Improvements to conform to the Tenant Improvement Plans. Upon
completion of such punch-list, Landlord shall promptly commence and complete
correction of such punch-list items in a manner that minimizes interference with
Tenant's business, but in no event later than thirty (30) days after submission
of such punch-list items to Landlord, subject to reasonable availability of
necessary materials.
10. RISK OF LOSS
Landlord shall bear the risk of loss for all materials, work,
installations, and decorations brought onto or installed in the Premises or the
Building by Landlord or Landlord's agents, employees or contractors in
connection with the construction of the Tenant Improvements and/or the Base
Building prior to the Commencement Date, and neither Tenant nor Tenant's agents
or employees or any party acting on behalf of Tenant shall be liable for any
damage, loss or destruction thereof.
11. CHANGE REQUESTS
Any request by Tenant for a change in the Tenant Improvements after
final approval of the Tenant Improvement Plans by Landlord and Tenant (a "Change
Request") shall be presented to Landlord in writing and shall be accompanied by
all information necessary to clearly identify and explain the proposed change.
As soon as practicable after receipt of such Change Request, Landlord shall
notify Tenant in writing of the estimated cost of such Change Request as well as
the estimated increase in construction time caused by the Change Request, if
any. Tenant shall approve such estimates in writing within two (2) business
days after receipt of Landlord's notice. Upon receipt of such written approval,
Landlord shall be authorized to cause the General Contractor to proceed with
implementation of the Change Request. If Tenant disputes such estimates, or
fails to approve in writing such estimates within such two (2) business day
period, Landlord shall not be required to proceed with such Change Request, and
all costs incurred by Landlord or the General Contractor in preparing such
estimates shall be included in the cost of the Tenant Improvements, which cost
shall be paid by Tenant. If Landlord is instructed by Tenant to proceed with a
Change Request prior to determination of the increased cost or increased
construction time resulting from such Change Request and without approval of
such increase by Tenant, the amount thereof shall be determined by Landlord upon
completion of the Tenant Improvements, subject only to Landlord furnishing to
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<PAGE>
Tenant appropriate back-up information from the General Contractor concerning
the increased costs and increased construction time, if any.
In witness whereof, this Work Letter Agreement is executed as of the date
first written above.
LANDLORD: ADDRESS:
Patrician Associates, Inc., a California Patrician Associates, Inc.
corporation c/o Parkway Properties, Inc.,
7011 Koll Center, Suite 210
By:_________________________________ Pleasanton, California 94566
Its:________________________________
By:_________________________________
Its:________________________________
TENANT: ADDRESS:
Documentum, Inc., a Documentum, Inc.
California corporation 5671 Gibraltar Drive
Pleasanton, CA 94588-8547
By:_________________________________
Its:________________________________
By:_________________________________
Its:________________________________
EXHIBIT B
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<PAGE>
STANDARDS FOR UTILITIES AND SERVICES
------------------------------------
The following Standards for Utilities and Services are in effect.
Landlord reserves the right to adopt nondiscriminatory modifications and
additions hereto:
Landlord shall:
(a) On Monday through Friday, except holidays, from 7 A.M. to 6 P.M.
(and other times for a reasonable additional charge to be fixed by Landlord as
provided in paragraph (b) below), ventilate the Premises and furnish air
conditioning or heating on such days and hours, when in the judgment of Landlord
it may be required for the comfortable occupancy of the Premises. The air
conditioning system achieves maximum cooling when the window coverings are
closed. Landlord shall not be responsible for room temperatures if Tenant does
not keep all window coverings in the Premises closed whenever the system is in
operation. Tenant agrees to cooperate fully at all times with Landlord, and to
abide by all regulations and requirements which Landlord may reasonably
prescribe for the proper function and protection of said air conditioning
system. Tenant agrees not to connect any apparatus, device, conduit or pipe to
the Building chilled and hot water air conditioning supply lines. Tenant
further agrees that neither Tenant nor its servants, employees, agents,
visitors, licensees or contractors shall at any time enter mechanical
installations or facilities of the Building or adjust, tamper with, touch or
otherwise in any manner affect said installations or facilities. The cost of
maintenance and service calls to adjust and regulate the air conditioning system
shall be charged to Tenant if the need for maintenance work results from
Tenant's failure to comply with its obligations under this section, including
keeping window coverings closed as needed. Such work shall be charged at hourly
rates equal to Landlord's actual cost.
(b) Landlord shall furnish to Tenant after-hours heating and air
conditioning at the actual cost for such after-hours use including a reasonable
estimate of maintenance expenses attributable to such after-hours use. No other
fees or mark-ups will be charged by Landlord for Tenant's after-hours HVAC use.
Landlord shall bill Tenant monthly for such after-hours usage and Tenant shall
pay such charges to Landlord, as additional rent, within 20 days after receipt
of Landlord's statement of such charges.
(c) Landlord shall furnish to the Premises electric current sufficient
for normal office use. Tenant shall be entitled to use up to four (4) watts per
rentable square foot for connected electrical power to the Premises, exclusive
of ceiling lights and electricity for operation of the HVAC system. Any
reasonable costs for the installation and operation of any additional HVAC
equipment which may be required due to electrical usage in excess of three (3)
watts per rentable square foot of connected electrical power to the Premises,
including maintenance costs and utility charges, shall be paid by Tenant. If a
separate meter is not installed at Tenant's cost, such excess cost will be
established by an estimate agreed upon by Landlord and Tenant, and if the
parties fail to agree, as established by an independent licensed engineer. Said
estimates to be reviewed and adjusted quarterly. Tenant agrees not to use any
apparatus or device in, or upon, or about the Premises which may in any way
increase the amount of such services usually furnished or supplied to said
Premises, and Tenant further agrees not to connect any apparatus or device with
wires,
EXHIBIT B
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<PAGE>
conduits or pipes, or other means by which such services are supplied, for the
purpose of using additional or unusual amounts of such services without written
consent of Landlord, which shall not be unreasonably withheld. Should Tenant use
the same to excess, the refusal on the part of Tenant to pay within ten (10)
days after demand of Landlord the amount established by Landlord for such excess
charge shall constitute a breach of the obligation to pay rent under this Lease
and shall entitle Landlord to the rights therein granted for such breach. At all
times Tenant's use of electric current shall never exceed the capacity of the
feeders to the Building or the risers or wiring installation and Tenant shall
not install or use or permit the installation or use of any computer, larger
than personal computer, or electronic data processing equipment in the Premises,
without the prior written consent of Landlord, which shall not be unreasonably
withheld.
(d) Water will be available in public areas for drinking and lavatory
purposes only, but if Tenant requires, uses or consumes water for any purposes
in addition to ordinary drinking and lavatory purposes of which fact Tenant
constitutes Landlord to be the sole judge, in its reasonable opinion, Landlord
may install a water meter and thereby measure Tenant's water consumption for all
purposes. Tenant shall pay Landlord for the cost of the meter and the cost of
the installation thereof and throughout the duration of Tenant's occupancy,
Tenant shall keep said meter and installation equipment in good working order
and repair at Tenant's own cost and expense, in default of which Landlord may
cause such meter and equipment to be replaced or repaired and collect the cost
thereof from Tenant. Tenant agrees to pay for water consumed, as shown on said
meter, as and when bills are rendered, and on default in making such payment,
Landlord may pay such charges and collect the same from Tenant. Any such costs
or expenses incurred, or payments made by Landlord for any of the reasons or
purposes hereinabove stated shall be deemed to be additional rent payable by
Tenant and collectible by Landlord as such.
(e) Provide janitor service to the Premises, provided the same are
kept reasonably in order by Tenant, and if to be kept clean by Tenant, no one
other than persons approved by Landlord shall be permitted to enter the Premises
for such purposes. If the Premises are not used exclusively as offices
(including Tenant's climate-controlled room), they shall be kept clean and in
order by Tenant, at Tenant's expense, and to the satisfaction of Landlord, and
by persons approved by Landlord. Tenant shall pay to Landlord the cost of
removal of any of Tenant's refuse and rubbish, to the extent that the same
exceeds the refuse and rubbish usually attendant upon the use of the Premises as
offices.
(f) Landlord reserves the right to stop service of the elevator,
plumbing, ventilation, air conditioning and electric systems, when necessary, by
reason of accident or emergency or for repairs, alterations or improvements
which, in the good faith judgment of Landlord, are necessary, until said
repairs, alterations or improvements shall have been completed. Landlord shall
provide Tenant with such prior notice of any intended stoppage in service as is
reasonable under the circumstances. Landlord shall have no responsibility or
liability for failure to supply elevator facilities, plumbing, ventilating, air
conditioning or electric service, when prevented from so doing by strike or
accident or by any cause beyond Landlord's reasonable control, or by laws,
rules, orders, ordinances, directions, regulations or requirements of any
federal, state, county or municipal authority or inability by exercise of
reasonable diligence by Landlord to obtain gas, oil or other suitable fuel. It
is expressly understood and agreed that any covenants on Landlord's part
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<PAGE>
to furnish any service pursuant to any of the terms, covenants, conditions,
provisions or agreements of this Lease, or to perform any act or thing for the
benefit of Tenant, shall not be deemed breached if Landlord is unable to furnish
or perform the same by virtue of a strike or labor trouble or any other cause
whatsoever beyond Landlord's control.
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<PAGE>
RULES AND REGULATIONS
---------------------
Sycamore Plaza I & II
1. Except as specifically provided in the Lease to which these Rules and
Regulations are attached, no sign, placard, picture, advertisement, name or
notice shall be installed or displayed on any part of the outside or inside of
the Building without the prior written consent of Landlord, which shall not be
unreasonably withheld Landlord shall have the right to remove, at Tenant's
expense and without notice, any sign installed or displayed in violation of this
rule.
2. If Landlord reasonably objects in writing to any curtains, blinds,
shades, screens or hanging plants or other similar objects attached to or used
in connection with any window or door of the Premises, or placed on any
windowsill, which is visible from the exterior of the Premises, Tenant shall
immediately discontinue such use. Tenant shall not place anything against or
near glass partitions or doors or windows which may appear unsightly from
outside the Premises.
3. Tenant shall not obstruct any sidewalks, halls, passages, exits,
entrances, elevators, escalators, or stairways of the Project. The halls,
passages, exits, entrances, elevators, and stairways are not open to the general
public, but are open, subject to reasonable regulation, to Tenant's business
invitees. Landlord shall in all cases retain the right to control and prevent
access thereto of all persons whose presence in the reasonable judgment of
Landlord would be prejudicial to the safety, character and reputation of the
Project; provided that nothing herein contained shall be construed to prevent
such access to persons with whom any tenant normally deals in the ordinary
course of its business, unless such persons are engaged in illegal or unlawful
activities. No tenant and no employee or invitee of any tenant shall go upon
the roof of any building of the Project.
4. The directory of the building will be provided exclusively for the
display of the name and location of tenants only, and Landlord reserves the
right to exclude any other names therefrom.
5.
6. Landlord will furnish Tenant, free of charge, with two keys to each
door lock in the Premises. Landlord may make a reasonable charge for any
additional keys. Tenant shall not alter any lock or install a new additional
lock or bolt on any door of its Premises. Tenant, upon the termination of its
tenancy, shall deliver to Landlord the keys of all doors which have been
furnished to Tenant, and in the event of loss of any keys so furnished, shall
pay Landlord therefor.
7. If Tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain, and comply with, Landlord's written
instructions, if any, in their installation.
8. Tenant shall not place a load upon any floor of the Premises which
exceeds the load per square foot which such floor was designed to carry and
which is allowed by law. Landlord shall have the right to prescribe the weight
of all equipment or other machinery or apparatus brought into the Project.
Heavy objects shall, if considered necessary by Landlord, stand on such
platforms as determined by Landlord to be reasonably necessary to properly
distribute the weight, which
EXHIBIT D
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<PAGE>
platforms shall be provided at Tenant's expense. Business machines and
mechanical equipment belonging to Tenant, which cause noise or vibration that
may be transmitted to the structure of the Premises to such a degree to be
objectionable to Landlord, shall be placed and maintained by Tenant, at Tenant's
expense, on vibration eliminators or other devices sufficient to eliminate noise
or vibration. The moving companies employed to move such equipment in or out of
the Premises must be reasonably acceptable to Landlord. Landlord will not be
responsible for loss of, or damage to, any such equipment or other property from
any cause, and all damage done to the Premises, by maintaining or moving such
equipment or other property shall be repaired at the expense of Tenant.
9. Tenant shall not use or keep in the Premises any kerosene, gasoline or
inflammable or combustible fluid or material other than those limited quantities
necessary for the operation or maintenance of office equipment. Tenant shall
not use or permit to be used in the Premises any foul or noxious gas or
substance, or permit or allow the Premises to be occupied or used in a manner
injurious to Landlord or other occupants of the Project by reason of noise,
odors or vibrations, nor shall Tenant bring into or keep in or about the
Premises any birds or animals.
10. Tenant shall not use any method of heating or air-conditioning other
than that supplied by Landlord.
11. Tenant shall not waste electricity, water or air-conditioning and
agrees to cooperate fully with Landlord to assure the most effective operation
of the Premises' heating and air-conditioning and to comply with any
governmental energy-saving rules, laws or regulations of which Tenant has actual
notice. Tenant shall keep corridor doors closed, and shall close window
coverings at the end of each business day.
12. Landlord reserves the right, exercisable with notice but without
liability to Tenant, to change the name and street address of the Premises.
13. Landlord reserves the right to exclude from the Project between the
hours of 6 p.m. and 7 a.m. the following day, or such other hours as may be
established from time to time by Landlord, and on Sundays and legal holidays,
any person unless that person is known to the person or employee in charge of
the Project and has a pass or is properly identified. Tenant shall be
responsible for all persons for whom it requests passes and shall be liable to
Landlord for all acts of such persons. Landlord shall not be liable for damages
for any error with regard to the admission to or exclusion from the Project of
any person. Landlord reserves the right to prevent access to the Project in
case of invasion, mob, riot, public excitement or other commotion by closing the
doors or by other appropriate action.
14. Tenant shall close and lock the doors of its Premises and entirely
shut off all water faucets or other water apparatus, and electricity, gas or air
outlets before tenant and its employees leave the Premises.
15. Tenant shall not obtain for use on the Premises ice, drinking water,
food beverages, towel or other similar services upon the Premises, except at
such hours and under such regulations
EXHIBIT D
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<PAGE>
as may be fixed by Landlord. The foregoing shall not, however, prevent Tenant
from installing and operating a refrigerator, coffee maker and/or microwave oven
in any kitchen or lunchroom in the Premises.
16. The toilet rooms, toilets, urinals, wash bowls and other apparatus
shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be thrown
therein. The expense of any breakage, stoppage of damage resulting from the
violation of this rule shall be borne by the tenant who, or whose employees or
invitees, shall have caused it.
17. Tenant shall not sell, or permit the sale at retail, of newspapers,
magazines, periodicals, theater tickets or any other goods or merchandise to the
general public in or on the Premises. Tenant shall not make any room-to-room
solicitation of business from other tenants in the Project. Tenant shall not
use the Premises for any business or activity other than that specifically
provided for in Tenant's Lease.
18. Tenant shall not install any radio or television antenna, loudspeaker
or other devices on the roof or exterior walls of the Premises. Tenant shall
not interfere with radio or television broadcasting or reception from or in the
Project or elsewhere.
19. Tenant shall not mark, drive nails, screw or drill into the
partitions, woodwork or plaster or in any way deface the Premises or any part
thereof, except in accordance with the provisions of the Lease pertaining to
alterations. Tenant shall not cut or bore holes for wires. Tenant shall not
affix any floor covering to the floor of the Premises in any manner except as
reasonably approved by Landlord. Tenant shall repair any damage resulting from
noncompliance with this rule.
20. Tenant shall not install, maintain or operate upon the Premises any
vending machines without the written consent of Landlord, which shall not be
unreasonably withheld.
21. Canvassing, soliciting and distributing of handbills or any other
written material, and peddling in the Project are prohibited, and Tenant shall
cooperate to prevent such activities.
22. Landlord reserves the right to exclude or expel from the Project any
person who, in Landlord's good faith judgment, is intoxicated or under the
influence of liquor or drugs or who is in violation of any of the Rules and
Regulations of the Project.
23. Tenant shall store all its trash and garbage within its Premises or in
other facilities provided by Landlord at the Premises. Tenant shall not place
in any trash box or receptacle any material which cannot be disposed of in the
ordinary and customary manner of trash and garbage disposal. All garbage and
refuse disposal shall be made in accordance with directions reasonably issued
from time to time by Landlord.
24. The Premises shall not be used for the storage of merchandise held for
sale to the general public, or for lodging or for manufacturing of any kind, nor
shall the Premises be used for
EXHIBIT D
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<PAGE>
any improper, immoral or objectionable purpose. No cooking shall be done or
permitted on the Premises without Landlord's consent, except that use by Tenant
of Underwriter's Laboratory approved equipment for brewing coffee, tea, hot
chocolate and similar beverages or use of microwave ovens for employee use shall
be permitted, provided that such equipment and use is in accordance with all
Applicable Laws.
25. Tenant shall not use in the Premises any hand truck except those
equipped with rubber tires and side guards or such other material-handling
equipment as Landlord may approve. Tenant shall not bring any other vehicles of
any kind into the Premises.
26. Without the written consent of Landlord, Tenant shall not use the name
of the Project in connection with or in promoting or advertising the business of
Tenant except as Tenant's address.
27. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental agency.
28. Tenant and its employees, guests and invitees shall not enter into the
waterways located in the Project. No object of any kind may be floated or
submerged in the waterways, and no foreign substance of any kind may be thrown
in the waterways. The expense of any breakage or damage to any mechanical
equipment related to the waterways resulting from violation of this rule or any
expense incurred restoring the waterways to their normal condition shall be
borne by the tenant who, or whose employees or invitees, shall have caused such
damage.
29. Tenant assumes any and all responsibility for protecting its Premises
from theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed.
30. Tenant's requirements will be attended to only upon written request to
the Project management office by an authorized individual. Employees of
Landlord shall not perform any work or do anything outside of their regular
duties unless under special instructions from Landlord, and no employee of
Landlord will admit any person (Tenant or otherwise) to any office without
specific instructions from Landlord.
31. Landlord may waive any one or more of these Rules and Regulations for
the benefit of Tenant or any other tenant, but no such waiver by Landlord shall
be construed as a waiver of such Rules and Regulations in favor of Tenant or any
other tenant, nor prevent Landlord from thereafter enforcing any such Rules and
Regulations against any or all of the tenants of the Project.
32. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of Tenant's lease of its Premises in the
Project.
33. Landlord reserves the right to make such other and reasonable Rules
and Regulations as, in its judgment, may from time to time be needed for safety
and security, for care and cleanliness
EXHIBIT D
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<PAGE>
of the Project and for the preservation of good order therein, provided that any
such Rules and Regulations do not materially impair Tenant's use of or access to
the Premises. Tenant agrees to abide by all such Rules and Regulations
hereinabove stated and any additional rules and regulations which are adopted.
In particular, tenant shall comply at all times with the City of Pleasanton's
Transportation Systems Management Ordinance (TSM Ordinance, Chapter 17.24,
Pleasanton Municipal Code), as said Ordinance may be amended from time to time."
34. Tenant shall be responsible for the observance of all of the foregoing
rules by Tenant's employees, agents, clients, customers, invitees and guests.
EXHIBIT D
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<PAGE>
PARKING RULES AND REGULATIONS
-----------------------------
The following rules and regulations shall govern use of the parking facilities
which are appurtenant to the Building.
1. All claimed damage or loss must be reported and itemized in writing
delivered to the Landlord within ten business days after any claimed damage or
loss occurs or as promptly as practicable. Court actions by Tenant for any
claim must be filed in the court of jurisdiction where a claimed loss occurred.
Landlord is not responsible for damage by water, fire, or defective brakes, or
parts, or for the act of omissions of others, or for articles left in the car.
Landlord is not responsible for loss of use.
2. Tenant shall not park or permit the parking of any vehicle under its
control in any parking areas designated by Landlord as areas for parking by
visitors to the Building. Tenant shall not leave vehicles in the parking areas
overnight (other than company-owned automobiles which may be parked overnight in
a designated location agreed to by Landlord and Tenant) nor park any vehicles in
the parking areas other than automobiles, motorcycles, motor driven or non-motor
driven bicycles or four-wheeled trucks.
3. Parking stickers or any other device or form of identification supplied
by Landlord as a condition of use of the Parking Facilities shall remain the
property of Landlord. Such parking identification device must be displayed as
requested and may not be mutilated in any manner. The serial number of the
parking identification device may not be obliterated. Devices are not
transferable and any device in the possession of an unauthorized holder will be
void.
4. No extended term storage of vehicles shall be permitted. Overnight
parking of company-owned automobiles only shall be permitted in a designated
location agreed to by Landlord and Tenant.
5. Vehicles must be parked entirely within the painted stall lines of a
single parking stall.
6. All directional signs and arrows must be observed.
7. The speed limit within all parking areas shall be 5 miles per hour.
8. Parking is prohibited:
(a) in areas not striped for parking;
(b) in aisles;
(c) where "no parking" signs are posed;
(d) on ramps;
EXHIBIT E
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<PAGE>
(e) in cross hatched areas; and
(f) in such other areas as may be designated by Landlord or Landlord's
Parking Operator.
9. Every parker is required to park and lock his own vehicle. All
responsibility for damage to vehicles is assumed by the parker.
10. Loss or theft of parking identification devices from automobiles must
be reported immediately, and a lost or stolen report must be filed by the
customer at that time. Landlord has the right to exclude any car from the
parking facilities that does not have an identification.
11. Any parking identification devices reported lost or stolen found on
any unauthorized car will be confiscated and the illegal holder will be subject
to prosecution.
12. Any lost or stolen parking identification devices which are found must
be reported immediately to avoid confusion.
13. Washing, waxing, cleaning or servicing of any vehicle in any area not
specifically reserved for such purpose is prohibited.
14. Landlord reserves the right to refuse the sale of monthly stickers or
other parking identification devices to any tenant or person and/or his agents
or representatives who willfully refuse to comply with these Rules and
Regulations and all unposted City, State or Federal ordinances, laws or
agreements.
15. Landlord reserves the right to modify and/or adopt such other
reasonable and non-discriminatory rules and regulations for the parking
facilities as it deems necessary for the operation of the parking facilities.
Landlord may refuse to permit any person who violates these rules to park in the
parking facilities, and any violation of the rules shall subject the car to
removal.
EXHIBIT E
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<PAGE>
BERNAL CORPORATE PARK
---------------------
SYCAMORE PLAZA II
-----------------
OFFICE LEASE
BETWEEN
PATRICIAN ASSOCIATES, INC.
("LANDLORD")
AND
DOCUMENTUM, INC.
("TENANT")
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
ARTICLE PAGE
- ------- ----
<S> <C>
1 TERM......................................................... 2
2 POSSESSION................................................... 2
3 BASIC RENT................................................... 4
4 RENTAL ADJUSTMENT............................................ 5
5 SECURITY DEPOSIT............................................. 8
6 USE.......................................................... 10
7 NOTICES...................................................... 12
8 BROKERS...................................................... 12
9 HOLDING OVER................................................. 12
10 TAXES ON TENANT'S PROPERTY................................... 12
11 CONDITION OF PREMISES........................................ 13
12 ALTERATIONS.................................................. 14
13 REPAIRS...................................................... 15
14 LIENS........................................................ 15
15 ENTRY BY LANDLORD............................................ 16
16 UTILITIES AND SERVICES....................................... 16
17 BANKRUPTCY................................................... 17
18 INDEMNIFICATION.............................................. 18
19 DAMAGE TO TENANT'S PROPERTY.................................. 18
20 INSURANCE.................................................... 19
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
21 DAMAGE OR DESTRUCTION........................................ 20
22 EMINENT DOMAIN............................................... 22
23 DEFAULTS AND REMEDIES........................................ 23
24 ASSIGNMENT AND SUBLETTING.................................... 25
25 SUBORDINATION................................................ 27
26 ESTOPPEL CERTIFICATE......................................... 28
27 SIGNAGE...................................................... 29
28 RULES AND REGULATIONS........................................ 29
29 CONFLICT OF LAWS............................................. 29
30 SUCCESSORS AND ASSIGNS....................................... 30
31 SURRENDER OF PREMISES........................................ 30
32 ATTORNEYS' FEES.............................................. 30
33 PERFORMANCE BY TENANT........................................ 30
34 MORTGAGEE PROTECTION......................................... 31
35 DEFINITION OF LANDLORD....................................... 31
36 WAIVER....................................................... 31
37 IDENTIFICATION OF TENANT..................................... 32
38 PARKING...................................................... 32
39 TERMS AND HEADINGS........................................... 32
40 EXAMINATION OF LEASE......................................... 33
41 TIME......................................................... 33
42 PRIOR AGREEMENT: AMENDMENTS.................................. 33
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
43 SEPARABILITY................................................. 33
44 RECORDING.................................................... 33
45 CONSENTS..................................................... 33
46 LIMITATION ON LIABILITY...................................... 34
47 RIDERS....................................................... 34
48 EXHIBITS..................................................... 34
49 MODIFICATION FOR LENDER...................................... 35
50 WAIVER OF LIEN RIGHTS........................................ 35
51 EXPANSION RIGHTS............................................. 35
52 OPTION TO EXTEND............................................. 36
53 LANDLORD'S CONDITION......................................... 37
</TABLE>
LIST OF EXHIBITS
----------------
EXHIBIT A-1 The Premises
EXHIBIT A-2 The Project
EXHIBIT B Work Letter Agreement
EXHIBIT C Standards for Utilities and Services
EXHIBIT D Rules and Regulations
EXHIBIT E Parking Rules and Regulations
EXHIBIT F Tenant's Letter of Credit
EXHIBIT G Subordination, Non-Disturbance and Attornment Agreement
iii
<PAGE>
BERNAL CORPORATE PARK
SYCAMORE PLAZA II
THIS LEASE is made as of June 22, 1998 by and between PATRICIAN
ASSOCIATES, Inc., a California corporation ("Landlord"), and DOCUMENTUM, INC., a
California corporation ("Tenant").
Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord the Premises (the "Premises") outlined on the floor plan attached
hereto and marked EXHIBIT A-1, the Premises being agreed, for the purposes of
-----------
this Lease, to have an area of approximately sixty-three thousand six hundred
thirty-two (63,632) rentable square feet and being situated on the third and
fourth floors of that certain four-story office building to be constructed at
6701 Koll Center Parkway, Pleasanton, California 94566 (the "Building"). The
Building shall contain approximately one hundred twenty-two thousand four
hundred forty-two (122,442) rentable square feet of space. As an appurtenant
right to Tenant's leasing of the Premises, Landlord hereby grants to Tenant, for
the benefit of Tenant and its employees, suppliers, shippers, customers and
invitees, during the term of this Lease, the non-exclusive right to use, in
common with others entitled to such use, (i) those portions of the common areas
within the Project and within Bernal Corporate Park which are improved from time
to time for use as parking areas, driveways, sidewalks, landscaped areas, or for
other common purposes including, for example the fitness center and conference
room currently available to the tenants of Bernal Corporate Park, and (ii) all
easements, licenses and similar rights and privileges relating to or appurtenant
to the Building or the Project and created or existing from time to time under
any written agreements. For purposes of this Lease, all references herein to
the "Project" shall mean the Building plus the parcel of land upon which the
Building is constructed, including all parking facilities, driveways, sidewalks,
plazas, and landscaped areas appurtenant to the Building and within such parcel
of land, as more particularly shown on the site plan attached as EXHIBIT A-2.
-----------
The Premises shall consist initially of approximately thirty-one thousand seven
hundred eighty-three (31,783) rentable square feet, located on the fourth floor
of the Building ("Suite 400"), and upon substantial completion of the Tenant
Improvements for Suite 300, the Premises shall be further expanded to include
an additional thirty-one thousand eight hundred forty-nine (31,849) rentable
square feet on the third floor of the Building as shown on EXHIBIT A-1 ("Suite
-----------
300"). Landlord and Tenant have also entered into a lease of even date herewith
for the building to be constructed at 6801 Koll Center Parkway, Pleasanton,
California, consisting of approximately one hundred twenty-two thousand four
hundred forty-two (122,442) rentable square feet ("Sycamore Plaza I Lease").
The Premises shall be measured in accordance with the Building Managers and
Owners Association Standard ANSI-Z65.1 (1996) to determine the rentable and
usable area of the Premises. Tenant shall have the right to verify the
measurement of the Premises, at Tenant's expense, prior to the Commencement Date
using the foregoing BOMA standards.
The parties hereto agree that said letting and hiring is upon and
subject to the terms, covenants and conditions herein set forth. Landlord and
Tenant each covenant, as a material part of the consideration for this Lease to
keep and perform each and all of said terms, covenants and conditions for which
such party is liable hereunder and that this Lease is made upon the condition of
such performance.
<PAGE>
Prior to the commencing of the term of this Lease the Premises shall
be improved by the Tenant Improvements described in the Work Letter marked
EXHIBIT B attached hereto.
- ---------
ARTICLE 1
---------
TERM
----
(a) The term of this Lease shall be for approximately seventy-seven
(77) months, unless sooner terminated as hereinafter provided, commencing upon
the date ("Commencement Date") which is the earlier of:
(i) Completion of the Base Building and substantial completion
(as defined in the Work Letter) of the Tenant Improvements to Suite 400 of the
Premises described in the Work Letter (subject to the provisions of Paragraph 8
of the Work Letter) and the tender of possession of those Premises to Tenant,
subject only to completion of "punch- list" items which do not in the aggregate
materially interfere with Tenant's ability to occupy the Premises for the use
contemplated herein, or
(ii) The date that Tenant opened for business in Suite 400 of
the Premises,
and ending on the date which is seven (7) years from the commencement date of
the Sycamore Plaza I Lease, unless such term shall be sooner terminated as
hereinafter provided. As soon as the Commencement Date is determined, the
parties shall execute a written acknowledgment setting forth the precise
commencement and termination dates of this Lease. Failure to enter into such an
amendment, however, shall not affect Tenant's liability hereunder. Reference in
this Lease to a "Lease Year" shall mean each successive twelve month period
commencing with the Commencement Date.
Landlord and Tenant anticipate that the Commencement Date will occur on or about
January 1, 2000 and that substantial completion of the Tenant Improvements for
Suite 300 will occur on or about April 1, 2000.
(b) Tenant shall be permitted to access Suite 400 of the Premises
approximately two (2) weeks prior to the Commencement Date and Suite 300 of the
Premises approximately two (2) weeks prior to the anticipated completion of the
Tenant Improvements to Suite 300 for the purpose of taking preparatory measures
in contemplation of its occupancy, including but not limited to, installing
fixtures and furniture, computer equipment, telecommunications equipment, and
other personal property, subject to all of the terms and conditions of this
Lease, except the obligation to pay Basic Rent or Direct Expenses, provided that
Tenant's access does not unreasonably interfere with completion of the Tenant
Improvements.
ARTICLE 2
---------
POSSESSION
----------
(a) Landlord shall use diligent efforts to complete the Base Building
and the Tenant Improvements promptly. Tenant agrees, however, that if Landlord
is unable to deliver
<PAGE>
possession of Suite 400 to Tenant on or before January 1, 2000 or if Landlord is
unable to deliver possession of Suite 300 to Tenant by April 1, 2000, subject to
the provisions of paragraphs 2(b) and 2(c), this Lease shall not be void or
voidable, nor shall Landlord be liable to Tenant for any loss or damage
resulting therefrom, but in such event the term of this Lease shall not commence
until Landlord tenders possession of Suite 400 of the Premises to Tenant with
the Tenant Improvements substantially completed. If Landlord completes
construction of such Tenant Improvements and Base Building, including access
thereto, prior to the date scheduled in the Work Letter, Landlord shall deliver
possession of Suite 400 of the Premises to Tenant upon such completion and the
term of this Lease shall commence five (5) days after Landlord has notified
Tenant of such completion.
(b) If the Commencement Date has not occurred by February 1, 2000 for
any reason other than Tenant Delays (as defined in the Work Letter) or delays
caused by Force Majeure (as defined herein), then Tenant shall be entitled to
one (1) day of free Basic Rent for each day of delay in substantial completion
that occurs from and after February 1, 2000 (as such date may be extended by
Tenant Delays and Force Majeure delays) until the earlier of the Commencement
Date or July 1, 2000; provided, however, that no more than sixty (60) days of
Force Majeure delays may accrue at any time between the date this Lease is fully
executed and July 1, 2000 before Tenant is entitled to begin accruing free Basic
Rent. If, however, the Commencement Date has not occurred by July 1, 2000, but
Tenant has not elected to terminate this Lease as permitted in paragraph 2(c)
below, Tenant shall not be entitled to accrue any additional days of free Basic
Rent beyond July 1, 2000, regardless of when the Commencement Date actually
occurs. If the completion of the Base Building and/or the Tenant Improvements
is delayed due to inclement weather, strikes or other labor disturbances,
material shortages, casualties, or other causes beyond Landlord's reasonable
control ("Force Majeure"), Landlord shall notify Tenant in writing within two
(2) business days after the occurrence thereof that an event of Force Majeure
has occurred and will delay the Commencement Date, and in such event the date
for substantial completion of the Base Building and the Tenant Improvements
shall be extended for the period of time reasonably attributable to the
occurrence of such Force Majeure.
(c) If Landlord has not obtained a building permit for the base
building to be constructed at 6801 Koll Center Parkway by October 15, 1998,
Tenant may cancel this Lease by delivery of written notice to Landlord no later
than October 31, 1998. Furthermore, if the Commencement Date has not occurred
by July 1, 2000 for any reason other than Tenant Delays, then Tenant may cancel
this Lease by delivery of written notice to Landlord no later than July 31,
2000. Landlord shall have the right to cancel this Lease if the Commencement
Date has not occurred due to more than 365 days of delay caused by Force
Majeure. In such event, Landlord may terminate this Lease by written notice to
Tenant within thirty (30) days after the occurrence of the 365th day of Force
Majeure delays. Upon cancellation of this Lease by either party, Landlord shall
return to Tenant all sums previously deposited with Landlord by Tenant under
this Lease, and neither party shall have any further liability to the other
under this Lease. If either party elects to cancel this Lease as permitted
herein, such cancellation and the return of all sums previously paid by Tenant
shall be in lieu of any free rent to which Tenant may be entitled under
paragraph 2(b), shall be Tenant's sole and exclusive remedy for Landlord's
inability to obtain the building permit for the building at 6801 Koll Center
Parkway by October 15, 1998 or to complete the Base Building and the Tenant
Improvements by July 1, 2000, as the case may be, and Landlord shall have no
liability to Tenant for any other damages or losses suffered or incurred by
Tenant as a result thereof.
<PAGE>
ARTICLE 3
---------
BASIC RENT
----------
(a) Tenant agrees to pay Landlord Basic Rent for the Premises as
follows:
<TABLE>
<CAPTION>
Months of Term Basic Rent/Per Month
-------------- --------------------
<S> <C> <C>
Suite 400 1 through 77* $76,279.00/month
Suite 300 4 through 77* $74,845.00/month
</TABLE>
* The number of months reflected in this schedule for the term of the Lease is
based upon an anticipated Commencement Date of January 1, 2000. The term of the
Lease shall expire on the date which is seven (7) years from the commencement
date of the Sycamore Plaza I Lease and Basic Rent shall be paid in the foregoing
amounts through such date. Similarly, the commencement of Basic Rent for Suite
300 is based upon an anticipated completion date of April 1, 2000 for the Tenant
Improvements to Suite 300. Subject to the provisions of paragraph 8 of the Work
Letter Agreement, Basic Rent for Suite 300 shall commence on the date of
substantial completion of the Tenant Improvements for Suite 300.
The Basic Rent shall be paid monthly, in advance on the first (1st) day of each
calendar month during the term, commencing on the first (1st) month of the Lease
term and continuing on the first day of each month thereafter, except that the
first (1st) month's rent shall be paid on execution hereof. If Tenant's
obligation to pay rent commences or ends on a day other than the first day of a
calendar month, then the rental for such period shall be prorated in the
proportion that the number of days this Lease is in effect during such period
bears to thirty. In addition to the Basic Rent, Tenant agrees to pay as
additional rental the amount of rental adjustments and other charges required by
this Lease. All rental shall be paid to Landlord, without prior demand and
without any deduction or offset, except as otherwise expressly provided herein,
in lawful money of the United States of America, at the address of Landlord
designated on the signature page of this Lease or to such other person or at
such other place as Landlord may from time to time designate in writing.
(b) Late Charges. In the event Tenant fails to pay any installment
------------
of rent when due or Tenant fails to make any other payment for which Tenant is
obligated under this Lease when due, and such failure continues for more than
three (3) business days after the date such rent or other payment is due, then
Tenant shall pay to Landlord a late charge equal to 5% of the amount due to
compensate Landlord for the extra costs incurred as a result of such late
payment; provided, however, that Landlord agrees to waive such late charge for
the first instance in any calendar year that any rent or other payment is not
paid within such three-day period.
<PAGE>
ARTICLE 4
---------
RENTAL ADJUSTMENT
-----------------
(a) For the purpose of this Article 4, the following terms are defined
as follows:
(i) Tenant's Percentage. That portion of the Project occupied
-------------------
by Tenant divided by the total rentable square footage of the Project. Upon
completion of the working drawings for the Tenant Improvements to the Premises,
Landlord and Tenant shall execute a memorandum stating Tenant's Percentage as of
the Commencement Date and as of the date of completion of the Tenant
Improvements for Suite 300.
(ii) Direct Expenses Base. The amount of the annual Direct
--------------------
Expenses which Landlord has included in Basic Rent, which amount is Tenant's
Percentage of the actual Direct Expenses for the Project known as Sycamore Plaza
I for the third through fourteenth months of the term of the Sycamore Plaza I
Lease.
(iii) Direct Expenses. The term "Direct Expenses" shall
---------------
include:
(A) All real and personal property taxes and assessments
(excluding those assessments described in Paragraph 4(a)(iii)(E)) imposed by any
governmental authority or agency on the Project and the land on which the
Project is located (including a pro-rata portion of any taxes levied on any
common areas); any assessments levied in lieu of taxes; any non-progressive tax
on or measured by gross rentals received from the rental of space in the
Project; and any other costs levied or assessed by, or at the direction of, any
federal, state, or local government authority in connection with the use or
occupancy of the Project or the parking facilities serving the Project; any tax
on this transaction or any document to which Tenant is a party creating or
transferring an interest in the Project, and any expenses, including the
reasonable cost of attorneys or experts, reasonably incurred by Landlord in
seeking reduction by the taxing authority of the above-referenced taxes, less
tax refunds obtained as a result of an application for review thereof; but shall
not include any net income, franchise, capital stock, estate or inheritance
taxes. Tenant's obligation to pay any assessments included within real property
taxes and assessments shall be calculated on the basis of the amount due if
Landlord had allowed the assessment to go to bond and the same were paid over
the longest period available.
(B) Operating costs consisting of costs incurred by Landlord
in maintaining and operating the Project, exclusive of costs required to be
capitalized for federal income tax purposes, and including (without limiting the
generality of the foregoing) the following: costs of utilities, supplies and
insurance, cost of services of independent contractors, managers and other
suppliers, cost of compensation (including employment taxes and fringe benefits)
of all persons who perform regular and recurring duties connected with the
management, operation, maintenance, and repair of the Project, its equipment,
parking facilities and the common areas, including, without limitation,
engineers, janitors (unless Tenant has elected to provide janitorial service to
the Premises as permitted in paragraph 16(b)), foremen, floor waxers, window
washers, watchmen and gardeners, cost of maintaining, repairing and replacing
landscaping, sprinkler systems, concrete walkways, paved parking areas, signs,
and site lighting.
<PAGE>
(C) Amortization of such capital improvements as Landlord
may have installed for the purpose of reducing operating costs, but only to the
extent of the actual savings in operating costs realized as a result of such
capital improvement(s). The cost of such capital improvements, together with
interest at the maximum rate allowed by law, shall be amortized over such
reasonable period as Landlord shall determine, and only the monthly amortized
cost shall be included in Direct Expenses monthly.
(D) Any costs required by the CC&R's, as defined in Article
6, affecting the Project or by any corporation, committee or association formed
in connection therewith,
(E) Assessments. Tenant acknowledges that the Project is
-----------
subject to assessments levied to secure bonds sold by the City of Pleasanton
pursuant to Consolidated Reassessment District 1993-1. Such assessments shall be
Landlord's responsibility throughout the term of this Lease. Tenant hereby
consents to the formation of any other districts formed for maintenance,
utilities, landscaping, lighting, special service zones, fire district, water
district, road extensions, traffic mitigation, sports facilities or other
improvements in the Premises or Bernal Corporate Park and to the re-financing of
any assessment districts. Tenant hereby waives any right of notice and protest
in connection with the formation and continued existence of the assessment
districts; provided, however, that Tenant shall retain the right to contest the
amount of any new assessments levied against the Premises or the Project during
the term of this Lease. Tenant shall execute all documents, including, but not
limited to, petitions and formal waivers of notice and protest of formation,
evidencing such consent and waiver upon request of Landlord or the City of
Pleasanton.
(iv) Exclusions from Direct Expenses. Direct Expenses shall not
-------------------------------
include any of the following: (A) depreciation and other non-cash items; (B)
costs of tenants' improvements; (C) capital items (except to the extent
expressly permitted under paragraph 4(a)(iii)(C)); (D) payments of principal and
interest on debt; (E) leasing commissions; (F) cost of any goods and services
(including utilities) for which any tenants or other occupants of the Project
separately reimburse Landlord; (G) costs incurred to perform or correct any
tenant improvement work; (H) costs of correcting defects in or inadequacy of the
initial design of the structure of the Building; (I) legal fees (except as
expressly provided for in paragraph 4(a)(iii)(A)); (J) amounts paid to
affiliates of Landlord (i.e., persons or entities controlled by, under common
control with, or which control, Landlord) for services to the Project, to the
extent that the costs of such services exceed competitive costs for such
services were they not rendered by an affiliate of Landlord; (K) expenses in
connection with services or other benefits provided to one of more tenants but
which are not generally available to other tenants of the Project; (L) wages of
any employee above the level of Building manager and chief engineer; (M) space
planning fees, architectural fees, engineering fees (other than those relating
to the general operation of the Project), marketing, advertising or any expense
incurred in connection with the development or leasing of the Project; (N) costs
associated with the operation of the business of the legal entity which
constitutes Landlord as the same is separate from the costs of operation of the
Project, including legal entity formation and internal entity accounting; (O)
any late fees or penalties or similar fees incurred by Landlord, except to the
extent attributable to Tenant's late payment of Basic Rent, Direct Expenses or
any other sums due under this Lease; (P) any debt losses, rent losses or
reserves for bad debt; (Q) any expenses incurred
<PAGE>
for use of any public portions of the Project including, but not limited to,
shows and promotions; (R) the costs of installing an observatory, broadcasting
facility, luncheon club, athletic or recreational club, and the costs of
operating and maintaining any of the foregoing which are in excess of the costs
of services provided to other tenants of the Project generally; (S) costs of
adding any additional space to the Project after the original construction; (T)
costs of any repairs to the Project in accordance with the provisions of
Articles 21 (Damage and Destruction) and 22 (Eminent Domain) of this Lease; (U)
Landlord's incremental costs incurred by reasons of Landlord's breach of any
lease in the Project and any cost incurred by reason of the breach by other
tenants of the Project of such tenants' leases (to the extent recoverable from
such tenants); (V) unrecovered expenses incurred as a consequence of the grossly
negligent operation and maintenance of the Project by Landlord or Landlord's
employees; and (W) any fines, penalties, costs or expenses incurred in
connection with the investigation, removal, monitoring, clean-up or other
remediation of any contamination, or threatened contamination, by Toxic
Materials in, on or under the Premises or the Project.
(b) Payment of Direct Expenses.
--------------------------
(i) If Tenant's Percentage of the Direct Expenses paid or
incurred by Landlord for any calendar year of the term exceeds the Direct
Expenses Base, then Tenant shall pay such excess as additional rent. For each
calendar year, or portion thereof, Tenant shall pay Tenant's Percentage of
Landlord's estimate of the amount by which Direct Expenses for that year shall
exceed the Direct Expenses Base ("Landlord's Estimate"). This estimated amount
shall be divided into twelve equal monthly installments. Tenant shall pay to
Landlord, concurrently with the regular monthly rent payment next due following
the receipt of such statement, an amount equal to one monthly installment
multiplied by the number of months from January in the calendar year in which
said statement is submitted to the month of such payment, both months inclusive.
Subsequent installments shall be payable concurrently with the regular monthly
rent payments for the balance of that calendar year and shall continue until the
next calendar year's statement is rendered. If at any time during the term of
this Lease the Project is less than ninety-five percent (95%) occupied, then any
Direct Expenses affected by occupancy levels shall be grossed up to reflect an
occupancy of ninety-five percent (95%) for such period.
(ii) As soon as possible after the end of each calendar year,
Landlord shall provide Tenant with a statement showing the amount of Tenant's
Percentage of the actual Direct Expenses for such calendar year, the amount of
Landlord's Estimate actually paid by Tenant and the amount of the Direct
Expenses Base. Thereafter, Landlord shall reconcile the above amounts and shall
either bill Tenant for the balance due (payable on demand by Landlord) or credit
any overpayment by Tenant towards the next monthly installment of Landlord's
Estimate falling due, or refund such overpayment to Tenant at the expiration of
the Lease, as the case may be. For purposes of making these calculations, in no
event shall Tenant's Percentage of the Direct Expenses be deemed to be less than
the Direct Expenses Base.
(iii) Within ninety (90) days after receipt of Landlord's
statement setting forth the actual Direct Expenses ("Landlord's Statement"),
Tenant shall have the right to audit at Landlord's local offices, at Tenant's
expense, Landlord's accounts and records relating to Direct Expenses. Such audit
shall be conducted by a certified public accountant approved by Landlord, which
approval shall not be unreasonably withheld. If such audit reveals that Landlord
<PAGE>
has overcharged Tenant, the amount overcharged shall be paid to Tenant
within thirty (30) days after the audit is concluded, together with interest
thereon at the rate of ten percent (10%) per annum, from the date that payment
of such Direct Expenses was made by Tenant until reimbursement of the overcharge
is made to Tenant. In addition, if Landlord's Statement exceeds the actual
Direct Expenses which should have been charged to Tenant by more than five
percent (5%), the cost of the audit shall be paid by Landlord. Tenant and
Tenant's accountant shall keep any information gained by such audit confidential
and shall not disclose such information to any other party.
(iv) If Landlord fails to do so within a reasonable time after
written request by Tenant, then Tenant, at its cost, shall have the right at any
time to seek a reduction in or otherwise contest any taxes or assessments for
which it is obligated to reimburse Landlord under this Article 4 and/or under
Article 10, by action or proceeding against the entity with authority to assess
or impose the same. Landlord further agrees, however, that if any action taken
by Landlord to seek a reduction in or otherwise contest any taxes or assessments
would prevent Tenant from taking any such action or otherwise prejudice Tenant's
right in such action if Landlord were unsuccessful in seeking a reduction in or
otherwise contesting such taxes or assessments, then Landlord and Tenant shall
cooperate in jointly contesting such taxes or assessments. Landlord shall not be
required to join in any proceeding or action brought separately by Tenant unless
the provisions of applicable laws or regulations or the like require that such
proceeding or action be brought by or in the name of Landlord, in which event
Landlord shall join in such proceeding or action or permit it to be brought in
Landlord's name, provided that Tenant protects, indemnifies, and holds Landlord
free and harmless from and against any liability, cost or expense in connection
with such proceeding or contest. Tenant shall continue, during the pendency of
such proceeding or action, to pay the taxes and assessments due as determined by
Landlord pursuant to this Article 4 and/or Article 10. If Tenant is successful
in such action or proceeding, Landlord shall reimburse to Tenant Tenant's share
of the reduction in taxes realized by Tenant in such contest or proceeding
within thirty (30) days after the amount of such reduction has been determined
and Landlord has received the applicable refund.
(c) Even though the term has expired and Tenant has vacated the
Premises, when the final determination is made of Tenant's Percentage of Direct
Expenses for the year in which this Lease terminates, Tenant shall immediately
pay any increase due over the estimated expenses paid and, conversely, any
overpayment made in the event said expenses decrease shall be promptly rebated
by Landlord to Tenant.
ARTICLE 5
---------
SECURITY DEPOSIT
----------------
(a) Upon execution of this Lease, Tenant shall have deposited with
Landlord, pursuant to Article 5 of the Sycamore Plaza I Lease, an irrevocable
standby letter of credit in the amount of One Million Seven Hundred Thousand and
no/100ths Dollars ($1,700,000.00) issued by Union Bank of California (or another
bank reasonably acceptable to Landlord), and naming Landlord as beneficiary
thereunder, as security for the faithful performance by Tenant of all of
Tenant's obligations under this Lease and the Sycamore Plaza I Lease. The
letter of credit shall be in the form attached as EXHIBIT F to this Lease. If
---------
Tenant fails to pay when due any rent or other sum due under this Lease and such
failure continues after notice from Landlord and the expiration of any
<PAGE>
applicable grace period, regardless of whether Tenant has filed a petition in
bankruptcy under the federal bankruptcy laws, or if Tenant, following the filing
of any such petition, rejects this Lease or the Sycamore Plaza I Lease, then
Landlord may (but shall not be required to) draw upon the letter of credit and
use, apply or retain all or any part of the security deposit for the payment of
any rent or other sum then due and unpaid, or for the payment of any other
amount which Landlord may spend or become obligated to spend by reason of
Tenant's breach or to compensate Landlord for any other loss or damage which
Landlord may suffer by reason of Tenant's breach. If any portion of the letter
of credit is drawn upon by Landlord for such purposes, Tenant shall, within ten
(10) days after written demand by Landlord, deposit a replacement letter of
credit with Landlord in the amount of the original letter of credit. Tenant's
failure to do so shall be a material breach of this Lease. The letter of
credit, or so much thereof as remains after the curing of any default of Tenant
hereunder, shall be returned to Tenant at the expiration of the Lease term and
surrender of the Premises by Tenant.
(b) The letter of credit shall be issued for a term of at least twelve
(12) months and shall be renewed automatically for consecutive twelve (12) month
periods for the entire term of this Lease subject, however, to reduction as
provided in paragraph 5(c) or 5(d). If at any time during the term of this
Lease Landlord does not receive written notice from the issuing bank, at least
ten (10) days prior to the expiration of any twelve (12) month term of the
letter of credit, that the letter of credit is being renewed for another twelve
(12) months, then Landlord shall have the right to draw upon the letter of
credit for the full amount thereof. Drawing upon the letter of credit shall be
conditioned only upon presentation of the original letter of credit to the
issuer thereof accompanied by a certified statement from Landlord that Tenant is
in default under the Lease which default is continuing after notice and the
expiration of any applicable grace period. The letter of credit shall not be
mortgaged, assigned or encumbered in any manner whatsoever by Tenant. The use,
application or retention of the letter of credit, or any portion thereof, by
Landlord shall not prevent Landlord from exercising any other right or remedy
provided by this Lease or by law, it being intended that Landlord shall not
first be required to proceed against the letter of credit, and such use,
application or retention shall not operate as a limitation on any recovery to
which Landlord may otherwise be entitled.
(c) Provided that Tenant is not then in default under this Lease, the
total security deposit shall be reduced to One Million Two Hundred Thousand and
no/100ths Dollars ($1,200,000.00) as of April 1, 2001, and Eight Hundred
Thousand and no/100ths Dollars ($800,000.00) as of April 1, 2002. Provided that
Tenant is not then in default under this Lease, as of April 1, 2003, and for the
balance of the term, the security deposit retained by Landlord for this Lease
shall be equal to one monthly installment of the Base Rent then payable under
this Lease. At such time Tenant may, at Tenant's option, replace the letter of
credit with a cash deposit.
(d) If at any time during the term of this Lease the cross-default
provision set forth in paragraph 23(a)(v) of this Lease is terminated as
provided in paragraph 24(f) or paragraph 35, Tenant shall replace the letter of
credit then held by Landlord with two (2) separate letters of credit to be held
by Landlord or, if applicable, Landlord's successor or successors-in-interest,
as security for the performance of Tenant's obligations under this Lease and the
Sycamore Plaza I Lease, respectively. The amount of the replacement letter of
credit to be delivered by Tenant as security for this Lease shall be determined
by multiplying the amount of the letter of credit then held
<PAGE>
by Landlord by a fraction, the numerator of which shall be the rentable area of
the Premises and the denominator of which shall be the total rentable area of
the Premises plus the premises occupied by Tenant under the Sycamore Plaza I
Lease. Tenant's failure to provide Landlord with the replacement letters of
credit at least ten (10) days prior to the effective date of an approved
assignment, or within ten (10) days after written notice from Landlord of a
pending transfer or conveyance of title to the Project, as applicable, shall
constitute a default under this Lease.
ARTICLE 6
---------
USE
---
(a) Tenant shall use the Premises for general office, administrative,
sales demonstrations, training classes, and software development, and shall not
use or permit the Premises to be used for any other purpose without the prior
written consent of Landlord, which consent shall not be unreasonably withheld.
Nothing contained herein shall be deemed to give Tenant any exclusive right to
such use in the Project. Tenant shall not use or occupy the Premises in
violation of law or of the certificate of occupancy issued for the Building or
Project, and shall, upon written notice from Landlord, discontinue any use of
the Premises which is declared by any governmental authority having jurisdiction
to be a violation of law or of said certificate of occupancy. Tenant shall
comply with any direction of any governmental authority having jurisdiction
which shall, by reason of the nature of Tenant's use or occupancy of the
Premises, impose any duty upon Tenant or Landlord with respect to the Premises
or with respect to the use or occupation thereof. Tenant's shall not do or
permit to be done anything which will invalidate or increase the cost of any
fire, extended coverage or any other insurance policy covering the Building
and/or Project and/or property located therein and shall comply with all rules,
orders, regulations and requirements of the Insurance Service Offices, formerly
known as the Pacific Fire Rating Bureau or any other organization performing a
similar function. Tenant shall promptly, upon demand, reimburse Landlord for
any additional premium charged for such policy by reason of Tenant's failure to
comply with the provisions of this Article. Tenant shall not do or permit
anything to be done in or about the Premises which will in any way unreasonably
obstruct or unreasonably interfere with the rights of other tenants or occupants
of the Project or Bernal Corporate Park, or injure or annoy them, or use or
allow the Premises to be used for any improper, immoral, unlawful or
objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance
in, on or about the Premises. Tenant shall not commit or suffer to be committed
any waste in or upon the Premises.
(b) Tenant acknowledges that Landlord has recorded covenants,
conditions and restrictions against the Premises on February 18, 1987 as
Instrument Number 87/046032 in the Official Records of Alameda County (the
"CC&Rs"), a true and correct copy of which has been previously delivered to
Tenant. Tenant's use of the Premises shall be subject to and Tenant shall
comply with the CC&R's, as the same may be amended from time to time, provided,
however, that any amendment or modification thereof shall not materially
adversely affect Tenant's use and enjoyment of the Premises or access thereto.
Tenant acknowledges that there have been and may be from time to time recorded
easements and/or declarations granting or declaring easements for parking,
utilities, fire or emergency access, and other matters. Tenant's use of the
Premises shall be subject to and Tenant shall comply with any and all such
easements and declarations. Tenant's use of the Premises shall be subject to
such guidelines as may from time to time be prepared by Landlord or the Bernal
Corporate Park Owner's Association in their reasonable discretion.
<PAGE>
(c) Tenant acknowledges that governmental entities with jurisdiction
over the Premises may, from time to time promulgate laws, rules, plans and
regulations affecting the use of the Premises, including, but not limited to,
traffic management plans and energy conservation plans. Tenant's use of the
Premises shall be subject to and Tenant shall comply with any and all such laws,
rules, plans, and regulations. Notwithstanding the foregoing or anything to the
contrary contained in this Lease, Tenant shall not be responsible for compliance
with any laws, codes, ordinances, rules, regulations or other governmental
directives, including without limitation, the Americans with Disabilities Act
(collectively, "Applicable Laws") which require any alterations or improvements
to any portions of the Project other than the Premises, unless such compliance
is required solely as a result of any other alterations or improvements made to
the Premises by Tenant. Furthermore, if any capital improvements are required
to the Premises to comply with any Applicable Laws (other than capital
improvements which are required solely as a result of any other alterations or
improvements made to the Premises by Tenant, which shall be made at Tenant's
sole expense), such improvements shall be made by Landlord and the cost of such
capital improvements, together with interest at the maximum rate allowed by law,
shall be amortized over such reasonable period as Landlord shall determine, and
Tenant shall reimburse Landlord, monthly, as additional rent, the monthly
amortized cost of such improvement that is allocable to the then remaining term
of this Lease. Notwithstanding anything herein to the contrary Landlord shall
be solely responsible for the cost of any alterations or improvements, including
capital improvements, to the structural portions of the Building, the Building
elevators, the restrooms, and the base Building electrical, mechanical, plumbing
and HVAC systems installed by Landlord prior to the Commencement Date, and the
common areas of the Project, which are required to comply with any Applicable
Laws.
(d) Tenant, at its sole cost, shall comply with all laws relating to
Tenant's storage, use and disposal of hazardous, toxic or radioactive matter,
including those materials identified in Sections 66680 through 66685 of Title 33
of the California Code of Regulations as they may be amended from time to time
(collectively "Toxic Materials"). If Tenant does store, use or dispose of any
Toxic Materials, other than normal amounts of cleaning supplies and office
products, Tenant shall notify Landlord in writing at least ten (10) days prior
to their first appearance on the Premises. Landlord represents and warrants to
Tenant that, to the best of Landlord's actual knowledge without independent
investigation or inquiry, as of the date of this Lease (i) there are no
underground storage tanks located on the Project, (ii) there has been no release
onto or under the Project of any Toxic Materials in violation of applicable
environmental laws, and (iii) Landlord has received no notices of any pending
litigation, clean-up orders or other governmental action with respect to the
environmental condition of the Project. For the purposes of this paragraph
6(d), the "actual knowledge of Landlord" shall be limited to the actual
knowledge of Loryssa Rippey and Timothy Wirta.
<PAGE>
ARTICLE 7
---------
NOTICES
-------
Any notice required or permitted to be given hereunder must be in
writing and may be given by personal delivery or by mail, and if given by mail
shall be deemed sufficiently given if sent by registered or certified mail
addressed to Tenant at the Project, or to Landlord at its address set forth at
the end of this Lease. Either party may specify a different address for notice
purposes by written notice to the other except that the Landlord may in any
event use the Premises as Tenant's address for notice purposes.
ARTICLE 8
---------
BROKERS
-------
Tenant and Landlord warrants that it has had no dealings with any real
estate broker or agent in connection with the negotiation of this Lease, except
Parkway Properties, Inc. and Colliers Parrish International whose commission
shall be payable by Landlord, and that it knows of no other real estate broker
or agent who is or might be entitled to a commission in connection with the
Lease. If Tenant or Landlord, as the case may be, has dealt with any other
person or real estate broker with respect to leasing or renting space in the
Project, Tenant or Landlord, as the case may be, shall be solely responsible for
the payment of any fee due said person or firm and Tenant or Landlord, as the
case may be, shall hold the other party free and harmless against any liability
in respect thereto, including attorneys' fees and costs.
ARTICLE 9
---------
HOLDING OVER
------------
If Tenant holds over after the expiration or earlier termination of
the term hereof without the express written consent of Landlord, Tenant shall
become a Tenant at sufferance only, at a rental rate equal to one hundred
twenty-five percent (125%) of the rent in effect upon the date of such
expiration for the first sixty (60) days of any such holdover, and one hundred
fifty percent (150%) of the rent in effect upon the date of such expiration for
any holdover continuing after such 60-day period (subject to adjustment as
provided in Paragraph 4 hereof and prorated on a daily basis), and otherwise
subject to the terms, covenants and conditions herein specified, so far as
applicable. Acceptance by Landlord of rent after such expiration or earlier
termination shall not result in a renewal of this Lease. The foregoing
provisions of this Article 9 are in addition to and do not affect Landlord's
right of re-entry or any rights of Landlord hereunder or as otherwise provided
by law. If Tenant fails to surrender the Premises upon the expiration of this
Lease despite demand to do so by Landlord, Tenant shall indemnify and hold
Landlord harmless from all loss or liability, including without limitation, any
claim made by any succeeding tenant founded on or resulting from such failure to
surrender and any attorneys' fees and costs.
ARTICLE 10
----------
TAXES ON TENANT'S PROPERTY
--------------------------
(a) Tenant shall be liable for and shall pay, at least ten days before
delinquency, all taxes levied against any personal property or trade fixtures
placed by Tenant in or
<PAGE>
about the Premises. If any such taxes on Tenant's personal property or trade
fixtures are levied against Landlord or Landlord's property of if the assessed
value of the Premises is increased by the inclusion therein of a value placed
upon such personal property or trade fixtures of Tenant and if Landlord, after
written notice to Tenant, pays the taxes based upon such increased assessment,
which Landlord shall have the right to do regardless of the validity thereof,
but only under proper protest if requested by Tenant, Tenant shall, upon demand,
repay to Landlord the taxes so levied against Landlord, or the portion of such
taxes resulting from such increase in the assessment.
(b) If the Tenant Improvements in the Premises, whether installed,
and/or paid for by Landlord or Tenant and whether or not affixed to the real
property so as to become a part thereof, are assessed for real property tax
purposes at a valuation higher than the valuation at which Tenant Improvements
conforming to Landlord's "Project Standard" in other space in the Project are
assessed (which for purposes of this paragraph shall mean tenant improvement
costs in excess of $30.00 per rentable square foot for hard construction costs
[i.e., exclusive of architectural and engineering fees, permit fees, and
construction management fees]), then the real property taxes and assessment
levied against the Project by reason of such excess assessed valuation shall be
deemed to be taxes levied against personal property of Tenant and shall be
governed by the provisions of Paragraph 10(a), above. If the records of the
County Assessor are available and sufficiently detailed to serve as a basis for
determining whether said Tenant Improvements are assessed at a higher valuation
than Landlord's Project Standard, such records shall be binding on both the
Landlord and the Tenant. If the records of the County Assessor are not
available or sufficiently detailed to serve as a basis for making said
determination, the actual cost of construction shall be used.
ARTICLE 11
----------
CONDITION OF PREMISES
---------------------
(a) Landlord represents and warrants, that as of the Commencement
Date, to the best of its knowledge, the Premises and the Building shall be
constructed in compliance with all Applicable Laws. Landlord further warrants
to Tenant that the Base Building and Tenant Improvements constructed by Landlord
shall be (i) free from material structural defects and shall not violate the
CC&R's or any other covenants or restrictions of record, and (ii) constructed in
compliance in all material respects with the Base Building Plans and the Tenant
Improvement Plans approved by Landlord and Tenant subject to any changes
implemented in such plans in accordance with the procedures set forth in the
Work Letter. Subject to the foregoing, and except as otherwise expressly
provided in this Lease, Tenant acknowledges that neither Landlord nor any agent
of Landlord has made any representation or warranty with respect to the Premises
or the Project or with respect to the suitability of either for the conduct of
Tenant's business. Subject to Landlord's representations and warranties and
Landlord's obligation to complete any punch-list items as provided in paragraph
9 of the Work Letter, and excluding any latent defects, the taking of possession
of the Premises by Tenant shall conclusively establish that the Premises were in
satisfactory condition at such time.
(b) If it is determined that any of the warranties in paragraph 11(a)
have been violated in any respect, then it shall be the obligation of Landlord,
after receipt of written notice from Tenant setting forth with specificity the
nature of the violation, to promptly correct the condition(s) constituting such
violation at Landlord's sole cost. Landlord shall assign to Tenant Landlord's
rights under all contractors' and manufacturers' warranties relating to the
Tenant Improvements (provided,
<PAGE>
however, that Landlord may reserve joint enforcement rights under such
warranties to the extent of Landlord's continuing obligations or warranties
hereunder), and shall cooperate with Tenant in all reasonable respects in any
enforcement of such warranties.
ARTICLE 12
----------
ALTERATIONS
-----------
(a) Tenant shall make no alterations, additions or improvements in or
to the Premises without Landlord's prior written consent, which shall not be
unreasonably withheld; provided, however, that Landlord's consent shall not be
required for any alterations, additions or improvements to the Premises that (i)
do not cost more than $15,000 per work of improvement nor more than $50,000
cumulatively per annum, and (ii) do not affect any structural or exterior
portion of the Building or the Building's electrical, plumbing or HVAC systems,
except that Landlord's consent shall, in any event, be required for any
demolition of any alterations, additions or improvements to the Premises. All
work shall be performed by contractors or mechanics approved by Landlord and
shall be done in a good and workmanlike manner. Tenant covenants and agrees
that all work done by Tenant shall be performed in full compliance with all
Applicable Laws and in full compliance with the rules, regulations and
requirements of the Insurance Service Offices formerly known as the Pacific Fire
Rating Bureau, and of any similar body. Before commencing any work, Tenant
shall give Landlord at least ten days written notice of the proposed
commencement of such work and shall, if the cost of such alterations exceeds
$50,000 and if so requested by Landlord, secure at Tenant's own cost and
expense, a completion and lien indemnity bond, reasonably satisfactory to
Landlord, for said work. Tenant further covenants and agrees that any
mechanic's lien filed against the Premises or against the Building or Project
for work claimed to have been done for, or materials claimed to have been
furnished to, Tenant will be discharged by Tenant, by bond or otherwise, within
ten days after the filing thereof, at the cost and expense of Tenant. All
alterations, additions or improvements upon the Premises made by either party,
including (without limiting the generality of the foregoing) all wallcovering,
built-in cabinet work, paneling and the like, shall become the property of
Landlord, and shall remain upon, and be surrendered with the Premises, as a part
thereof, at the end of the term hereof, except that Landlord may, by written
notice to Tenant given to Tenant at the time that Landlord grants its consent to
any alterations, additions or improvements, require Tenant to remove such
alterations, additions and improvements at the expiration or sooner termination
of this Lease, and in such event Tenant shall repair all damage resulting from
such removal or, at Landlord's option, shall pay to Landlord all costs arising
from such removal. Landlord and Tenant agree, however, that the Tenant
Improvements shall become the property of Landlord upon installation and shall
remain upon and be surrendered with the Premises at the expiration or sooner
termination of this Lease, and Tenant shall have no obligation to remove the
Tenant Improvements from the Premises.
(b) All articles of personal property and all business and trade
fixtures, machinery and equipment, furniture and movable partitions owned by
Tenant or installed by Tenant at its expense in the Premises shall be and remain
the property of Tenant and may be removed by Tenant at any time during the lease
term when Tenant is not in default hereunder. If Tenant shall fail to remove
all of its effects from the Premises upon termination of this Lease for any
cause whatsoever, Landlord may, at its option, remove the same in accordance
with applicable law, and store said effects without liability to Tenant for loss
thereof. In such event, Tenant agrees to pay
<PAGE>
Landlord upon demand any and all expenses incurred in such removal, including
court costs and attorneys' fees and storage charges on such effects for any
length of time that the same shall be in Landlord's possession. Landlord may, at
its option, without notice, sell said effects, or any of the same, at private
sale and without legal process, for such price as Landlord may obtain and apply
the proceeds of such sale upon any amounts due under this Lease from Tenant to
Landlord and upon the expense incident to the removal and sale of said effects.
ARTICLE 13
----------
REPAIRS
-------
(a) Subject to Landlord's representations and warranties contained
herein and the punch list items, by entry hereunder, Tenant accepts the Premises
as being in good and sanitary order, condition and repair, excluding any latent
defects. Tenant shall keep, maintain and preserve the Premises in good
condition and repair. Tenant shall, upon the expiration or sooner termination
of the term hereof, surrender the Premises to Landlord in the same condition as
when received, usual and ordinary wear and tear and damage due to casualty or
condemnation excepted. Except as expressly provided in EXHIBIT B attached
---------
hereto, Landlord shall have no obligation to alter, remodel, improve, decorate
or paint the Premises or any part thereof. The parties hereto affirm that
Landlord has made no representations to Tenant respecting the condition of the
Premises or the Project except as specifically herein set forth.
(b) Anything contained in Paragraph 13(a) above to the contrary
notwithstanding, Landlord shall repair and maintain the structural portions of
the Building, including the foundations, building shell, and roof structure, all
at Landlord's expense. Landlord shall also repair and maintain the common areas
and the basic plumbing, elevators, life safety systems and other building
systems, including heating, ventilating, air conditioning and electrical systems
installed or furnished by Landlord, and perform roof membrane repair and
maintenance to the Premises; the cost of such repairs and maintenance shall be
included in Direct Expenses as provided in Article 4, except to the extent such
repair, maintenance or replacement is required by the gross negligence or
willful misconduct of Landlord, its agents or employees or a breach by Landlord
of its obligations under this Lease. Landlord shall not be liable for any
failure to make any such repairs or to perform any maintenance unless such
failure shall persist for an unreasonable time after written notice of the need
of such repairs or maintenance is given to Landlord by Tenant. Except as
provided in Article 21 hereof, there shall be no abatement of rent and no
liability of Landlord by reason of any injury to or interference with Tenant's
business arising from the making of any repairs, alterations or improvements in
or to any portion of the Building, Project or the Premises or in or to fixtures,
appurtenances and equipment therein. Tenant waives the right to make repairs at
Landlord's expense under any law, statute or ordinance now or hereafter in
effect.
ARTICLE 14
----------
LIENS
-----
Tenant shall not permit any mechanic's, materialmen's or other liens
to be filed against the Building or Project, nor against Tenant's leasehold
interest in the Premises. Landlord shall have the right at all reasonable times
to post and keep posted on the Premises any notices which it deems necessary for
protection from such liens. If any such liens are filed, Landlord may, without
<PAGE>
waiving its rights and remedies based on such breach of Tenant and without
releasing Tenant from any of its obligations, cause such liens to be released by
any means it shall deem proper, including payments in satisfaction of the claim
giving rise to such lien. Tenant shall pay to Landlord, within ten (10) days
after invoice, any sum paid by Landlord to remove such liens, together with
interest at the maximum rate per annum permitted by law from the date of such
payment by Landlord.
ARTICLE 15
----------
ENTRY BY LANDLORD
-----------------
Landlord reserves and shall with reasonable notice (except in the case
of emergencies and regularly scheduled janitorial services) have the right to
enter the Premises to inspect the same, to supply janitorial service and any
service to be provided by Landlord to Tenant hereunder, to show the Premises to
prospective purchasers or tenants (but as to tenants only during the last nine
(9) months of the term), to post notices of nonresponsibility, to alter, improve
or repair the Premises or any other portion of the Building or Project, all
without being deemed guilty of any eviction of Tenant and without abatement of
rent. Landlord may, in order to carry out such purposes, erect scaffolding and
other necessary structures where reasonably required by the character of the
work to be performed, provided that the business of Tenant shall be interfered
with as little as is reasonably practicable. Tenant hereby waives any claim
for damages for any injury or inconvenience to or interference with Tenant's
business, any loss of occupancy or quiet enjoyment of the Premises, and any
other loss in, upon and about the Premises. Landlord shall at all times have
and retain a key with which to unlock all doors in the Premises, excluding
Tenant's vaults and safes. Landlord shall have the right to use any and all
means which Landlord may deem proper to open said doors in an emergency in order
to obtain entry to the Premises provided Landlord shall promptly repair any
damage to the Premises caused by such entry. Any entry to the Premises obtained
by Landlord by any of said means, or otherwise, shall not be construed or deemed
to be a forcible or unlawful entry into the Premises, or any eviction of Tenant
from the Premises or any portion thereof, and any damages caused to the Premises
on account thereof shall be paid by Landlord. It is understood and agreed that
no provision of this Lease shall be construed as obligating Landlord to perform
any repairs, alterations or decorations except as otherwise expressly agreed
herein by Landlord.
ARTICLE 16
----------
UTILITIES AND SERVICES
----------------------
(a) Landlord agrees to furnish or cause to be furnished to the
Premises the utilities and services described in the Standards for Utilities and
Services, attached hereto as EXHIBIT C, subject to the conditions and in
---------
accordance with the standards set forth therein. Landlord's failure to furnish
any of the foregoing items when such failure is caused by:
(i) Accident, breakage, or repairs,
(ii) Strikes, lockouts or other labor disturbance or labor
dispute of any character,
(iii) Governmental regulation, moratorium or other
governmental action,
<PAGE>
(iv) Inability despite the exercise of reasonable diligence to
obtain electricity, water or fuel, or by
(v) Any other cause beyond Landlord's reasonable control,
shall not result in any liability to Landlord.
In addition, Tenant shall not be entitled to any abatement or reduction of rent
by reason of such failure, no eviction of Tenant shall result from such failure
and Tenant shall not be relieved from the performance of any covenant or
agreement in this Lease because of such failure; provided, however, that if any
such failure shall continue for more than three (3) consecutive business days
and as result of such failure Tenant's use of or access to the Premises is
materially impaired, then Tenant shall be entitled to a proportionate abatement
of rent for the period and to the extent of such impairment if, and only if, the
failure was caused by the negligence or willful misconduct of Landlord, its
agents or employees or by a breach of this Lease by Landlord, or such abatement
of rent will be covered by Landlord's rent loss insurance. In the event of any
failure, stoppage or interruption thereof, Landlord shall diligently attempt to
resume service promptly.
(b) Tenant shall have the right, at Tenant's election, to provide
janitorial service to the Premises at Tenant's sole cost and expense through a
contractor approved by Landlord, which approval shall not be unreasonably
withheld, and in such event the cost of providing janitorial service to the
Premises shall be excluded from Direct Expenses.
(c) Subject to Tenant's receipt of all necessary approvals from the
City of Pleasanton and under the CC&R's, Tenant shall have the right to install
and operate, at Tenant's sole cost and expense, an emergency power generator on
the Project at a location mutually acceptable to Landlord and Tenant. The use
and operation of such generator, including periodic testing, shall be subject to
such reasonable rules as Landlord may establish prior to installation of the
generator.
ARTICLE 17
----------
BANKRUPTCY
----------
If Tenant shall file a petition in bankruptcy under any provision of
the Bankruptcy Code as then in effect, or if Tenant shall be adjudicated a
bankrupt in involuntary bankruptcy proceedings and such adjudication shall not
have been vacated within sixty days from the date thereof, or if a receiver or
trustee shall be appointed of Tenant's property and the order appointing such
receiver or trustee shall not be set aside or vacated within sixty days after
the entry thereof, or if Tenant shall assign Tenant's estate or effects for the
benefit of creditors, or if this Lease shall, by operation of law or otherwise,
pass to any person or persons other than Tenant, then in any such event Landlord
may terminate this Lease, if Landlord so elects, with or without notice of such
election and with entry or action by Landlord. In such case, notwithstanding
any other provisions of this Lease, Landlord, in addition to any and all rights
and remedies allowed by law or equity, shall, upon such termination, be entitled
to recover damages in the amount provided in Paragraph 23(b) hereof. Neither
Tenant nor any person claiming through or under Tenant or by virtue of any
statute or order of any court shall be entitled to possession of the Premises
but shall surrender the Premises to landlord. Nothing contained herein shall
limit or prejudice the right of Landlord to
<PAGE>
recover damages by reason of any such termination equal to the maximum allowed
by any statute or rule of law in effect at the time when, and governing the
proceedings in which, such damages are to be proved; whether or not such amount
is greater, equal to, or less than the amount of damages recoverable under the
provisions of this Article 17.
ARTICLE 18
----------
INDEMNIFICATION
---------------
Tenant shall indemnify, defend and hold Landlord harmless from all
claims arising from Tenant's use of the Premises or the conduct of its business
or from any activity, work, or thing done, permitted or suffered by Tenant in or
about the Premises except to the extent arising from the negligence or willful
misconduct of Landlord, its agents, or employees or from a breach by Landlord of
its obligations under this Lease. Tenant shall further indemnify, defend and
hold Landlord harmless from all claims arising from any breach or default in the
performance of any obligation to be performed by Tenant under the terms of this
Lease, or arising from the negligence or willful misconduct of Tenant or of its
agents or employees, and from and against all costs, attorneys' fees, expenses
and liabilities incurred in or about such claim or any action or proceeding
brought thereon. In case any action or proceeding shall be brought against
Landlord by reason of any such claim, Tenant upon notice from Landlord shall
defend the same at Tenant's expense by counsel approved in writing by Landlord.
Tenant, as a material part of the consideration to Landlord, hereby assumes all
risk of damage to property or injury to person in, upon or about the Premises
from any cause whatsoever except that which is caused by the failure of Landlord
to observe any of the terms and conditions of this Lease where such failure has
persisted for an unreasonable period of time after written notice of such
failure. Tenant hereby waives all its claims in respect thereof against
Landlord.
ARTICLE 19
----------
DAMAGE TO TENANT'S PROPERTY
---------------------------
Notwithstanding the provisions of Article 18 to the contrary, Landlord
or its agents shall not be liable for (i) any damage to any property entrusted
to employees of the Project, (ii) loss or damage to any property by theft or
otherwise, (iii) any damage to property resulting from fire, explosion, falling
plaster, steam, gas, electricity, water or rain which may leak from any part of
the Project or from the pipes, appliances or plumbing work therein or from the
roof, street or sub-surface or from any other place or resulting from dampness
or from any other cause whatsoever except to the extent any such loss or damage
is caused by the negligence or willful misconduct of Landlord, its agents or
employees or a breach by Landlord of its obligations under this Lease and such
loss or damage is not covered by under any insurance Tenant is required to carry
pursuant to paragraph 20(a) or any other insurance Tenant elects to carry.
Landlord or its agents shall not be liable for interference with light or other
incorporeal hereditaments. Tenant shall give prompt notice to Landlord in case
of fire or accidents in the Premises or in the Project or of defects therein or
in the fixtures or equipment of which Tenant has actual knowledge.
<PAGE>
ARTICLE 20
----------
INSURANCE
---------
(a) Tenant shall, during the term hereof and any other period of
occupancy, at its sole cost and expense, keep in full force and effect the
following insurance:
(i) Standard form property insurance insuring against the perils
of fire, extended coverage, vandalism, malicious mischief, special extended
coverage ("All-Risk") and sprinkler leakage. This insurance policy shall be upon
all property owned by Tenant, for which Tenant is legally liable or that was
installed at Tenant's expense, and which is located in the Project including,
without limitation, furniture, fittings, installations, fixtures (other than
Tenant Improvements installed by Landlord), and any other personal property in
an amount not less than ninety percent of the full replacement cost thereof. In
the event that there shall be a dispute as to the amount which comprises full
replacement cost, the decision of Landlord or any mortgagees of Landlord shall
be conclusive. This insurance policy shall also be upon direct or indirect loss
of Tenant's earnings attributable to Tenant's inability to use fully or obtain
access to the Premises or Project in an amount as will properly reimburse
Tenant.
(ii) Commercial General Liability Insurance insuring Tenant
against any liability arising out of the lease, use, occupancy or maintenance of
the Premises and all areas appurtenant thereto. Such insurance shall be in the
amount of $5,000,000 Combined Single Limit for injury to, or death of one or
more persons in an occurrence, and for damage to tangible property (including
loss of use) in an occurrence, with such liability amount to be adjusted from
year to year to reflect increases in the Consumer Price Index. The policy shall
insure the hazards of premises and operation, contractual liability (covering
the Indemnity contained in Paragraph 18 hereof) and shall (1) name Landlord as
an additional insured, and (2) contain a cross liability provision, and (3)
contain a provision that "the insurance provided the Landlord hereunder shall be
primary and non-contributing with any other insurance available to the
Landlord."
(iii) Workers' Compensation and Employer's Liability insurance
(as required by state law).
(iv) Any other form or forms of insurance as Tenant or Landlord
or any mortgagees of Landlord may reasonably require from time to time in form,
in amounts and for insurance risks against which a prudent tenant would protect
itself.
(b) All policies shall be written in a form satisfactory to Landlord
and shall be taken out with insurance companies holding a General Policyholders
Rating of "A" and a Financial Rating of "X" or better, as set forth in the most
current issue of Bests Insurance Guide. Within ten days after the execution of
this Lease, Tenant shall deliver to Landlord copies of policies or certificates
evidencing the existence of the amounts and forms of coverage satisfactory to
Landlord. No such policy shall be cancelable or reducible in coverage except
after thirty days prior written notice to Landlord. Tenant shall, within ten
days prior to the expiration of such policies, furnish Landlord with renewals or
"binders" thereof, or Landlord may order such insurance and charge the cost
thereof to Tenant as additional rent. If Landlord obtains any insurance that is
the responsibility of Tenant under this section, Landlord shall deliver to
Tenant a written statement
<PAGE>
setting forth the cost of any such insurance and showing in reasonable detail
the manner in which it has been computed.
(c) Landlord shall, during the term hereof, keep in full force and
effect the following insurance, which Landlord shall obtain at competitive
rates:
(i) Commercial general liability insurance against claims for
personal injury, death or property damage arising out of the use, occupancy, or
maintenance of the Project (other than the Premises), in a combined single limit
amount of not less than $5,000,000 per occurrence, and $5,000,000 in the
aggregate. Such policy shall name Tenant as an additional insured with respect
to the common areas of the Project.
(ii) A policy of "all risk" or "causes of loss - special form"
property insurance on the Building, including the Tenant Improvements but
excluding Tenant's trade fixtures and equipment, in the amount of the full
replacement cost thereof as determined from time to time by Landlord's
insurance agent, but in any event not less than every three years.
(d) Notwithstanding any other provision of this Lease to the contrary,
Landlord and Tenant each hereby waive all rights of recovery against the other
on account of loss or damage occasioned to such waiving party for its property
or the property of others under its control to the extent that such loss or
damage is insured against under any insurance policies which may be in force at
the time of such loss or damage or which are required to be maintained by this
Lease, even if such damage may have been caused by the negligence of the other
party, its agents or employees. Tenant and Landlord shall, upon obtaining
policies of insurance required hereunder, give notice to the insurance carrier
that the foregoing mutual waiver of subrogation is contained in this Lease and
Tenant and Landlord shall cause each insurance policy obtained by such party to
provide that the insurance company waives all right of recovery by way of
subrogation against either Landlord or Tenant in connection with any damage
covered by such policy.
ARTICLE 21
----------
DAMAGE OR DESTRUCTION
---------------------
(a) If there is damage to the Premises which was caused by a peril
required to be covered or actually covered by insurance pursuant to Article 20
above ("Insured Loss"), or if there is damage to the Premises which is not an
Insured Loss but the estimated restoration cost is not more than ten percent
(10%) of the then actual replacement cost of the Premises, then, in either
event, Landlord shall repair such damage to the Premises (but not any damage to
Tenant's trade fixtures, equipment, furniture or other personal property) at
Landlord's expense, as promptly as possible, and this Lease shall continue in
full force and effect, except as otherwise provided below.
(b) If there is damage to the Premises that is not an Insured Loss,
and the estimated restoration cost exceeds ten percent (10%) of the then actual
replacement cost of the Premises, then Landlord may, at Landlord's option,
either (i) repair such damage to the Premises (but not any damage to Tenant's
trade fixtures, equipment, furniture or other personal property), at Landlord's
expense, as promptly as possible, in which event this Lease shall continue in
full force and effect, or (ii) give notice to Tenant within thirty (30) days
after the date of the occurrence of such
<PAGE>
damage of Landlord's intention to terminate this Lease as of the date of the
occurrence of such damage. If Landlord elects to terminate this Lease, Tenant
shall have the right, within ten (10) days after receipt of such notice, to give
Landlord notice of Tenant's intention to pay for the cost to restore the
Premises, in which event this Lease shall continue in full force and effect and
Landlord shall proceed to make such repairs as soon as reasonably possible after
Tenant has deposited with Landlord an amount equal to (A) the estimated cost of
such repairs less (B) ten percent (10%) of the then actual replacement cost of
the Premises. Landlord shall be responsible for such portion of the cost of the
repairs equal to ten percent (10%) of the then actual replacement cost of the
Premises. If Tenant does not give notice within such 10-day period, this Lease
shall be terminated as of the date of the occurrence of such damage.
(c) Upon any termination of this Lease under any of the provisions of
this Article 21, the parties shall be released without further obligation to the
other from the date possession of the Premises is surrendered to Landlord except
for items which have therefore accrued and are then unpaid.
(d) In the event of repair, reconstruction and restoration by Landlord
as herein provided, the rental payable under this Lease shall be abated
proportionately with the degree to which Tenant's use of the Premises is
impaired during the period of such repair, reconstruction or restoration.
Tenant shall not be entitled to any compensation or damages for loss in the use
of the whole or any part of the Premises and/or any inconvenience or annoyance
occasioned by such damage, repair, reconstruction or restoration.
(e) Notwithstanding anything to the contrary contained in this Article
21, if Landlord is delayed or prevented from completing the repair or
restoration of the damaged Premises within fifteen (15) months after the
occurrence of such damage or destruction by reason of acts of God, war,
governmental restrictions, inability to procure the necessary labor or
materials, or other cause beyond the reasonable control of Landlord, either
Landlord or Tenant may terminate this Lease as of the end of said fifteen (15)
month period.
(f) If Landlord is obligated to or elects to repair or restore as
herein provided, Landlord shall be obligated to make repair or restoration only
of those portions of the Project and the Premises which were originally provided
at Landlord's expense, and the repair and restoration of items not provided at
Landlord's expense shall be the obligation of Tenant.
(g) Notwithstanding anything to the contrary herein, if there is
damage to the Premises, whether or not an Insured Loss, which cannot be repaired
within one hundred eighty (180) days after the date of the casualty (the
"Estimated Rebuilding Period"), as reasonably estimated by an architect or
engineer jointly selected by Landlord and Tenant, Tenant shall have the right to
terminate this Lease as of the date of such damage. Landlord and Tenant shall
use reasonable efforts to obtain a written estimate of the repair period within
thirty (30) days after the date of damage. If Tenant desires to exercise its
termination option, Tenant shall give Landlord written notice of such exercise
within thirty (30) days after Tenant obtains written notice of the estimated
repair period. If Landlord has not completed the restoration of the Premises
within sixty (60) days after the Estimated Rebuilding Period, Tenant shall have
the right to terminate this Lease upon written notice to Landlord given at any
time prior to the expiration of such 60-day period. If Landlord is required
<PAGE>
or elects to restore the Premises under the provisions of this Article 21 and
does not commence such restoration within one hundred twenty (120) days after
the date of such damage, Tenant may, at Tenant's option, terminate this Lease by
giving Landlord written notice thereof at any time prior to the expiration of
such 120-day period. In such event, this Lease shall terminate as of the date of
such notice to Landlord.
(h) If at any time during the last year of the term of this Lease
there is a casualty to the Premises (whether or not an Insured Loss) such that
Tenant's use or occupancy of the Premises is materially impaired and the
Premises cannot be restored within thirty (30) days after the date of such
casualty, either Landlord or Tenant may terminate this Lease as of the date of
such casualty by written notice to the other within forty-five (45) days after
the date of the occurrence of such damage. If, however, at the time of such
damage Tenant has an option to extend the term of this Lease and the time for
exercise of such option has not then expired, then Tenant shall have a period of
forty-five (45) days from the date of the casualty to elect to exercise the
option to extend by delivery of written notice to Landlord. If Tenant exercises
such option during such 45-day period, and provided Landlord is otherwise
obligated to, or elects to repair such damage under the provisions of this
Article 21, Landlord shall, at Landlord's expense, repair such damage as soon as
reasonably possible, and this Lease shall continue in full force and effect. If
Tenant fails to exercise such option during such 45-day period, then Landlord
may, at Landlord's option, terminate this Lease effective as of the date of the
casualty, giving notice to Tenant of Landlord's election to do so within ten
(10) days after the expiration of such 45-day period.
(i) The provisions of California Civil Code 1932, Subsection 2, and
1933, Subsection 4, which permit termination of a lease upon destruction of the
Leased Premises, are hereby waived by Tenant; and the provisions of this Article
shall govern in case of such destruction.
ARTICLE 22
----------
EMINENT DOMAIN
--------------
In case all of the Premises, or such part thereof as shall
substantially interfere with Tenant's use and occupancy thereof, or all access
thereto, shall be taken for any public or quasi-public purpose by any lawful
power or authority by exercise of the right of appropriation, condemnation or
eminent domain, or sold to prevent such taking, either party shall have the
right to terminate this Lease effective as of the date possession is required to
be surrendered to said authority. Tenant shall not assert any claim against
Landlord or the taking authority for any compensation because of such taking,
and Landlord shall be entitled to receive the entire amount of any award without
deduction for any estate or interest of Tenant, except that Landlord agrees that
Tenant shall be entitled to receive an amount which is not more than seven
percent (7%) of Landlord's award to compensate Tenant for the loss of Tenant's
leasehold interest. In the event the amount of property or the type of estate
taken shall not substantially interfere with the conduct of Tenant's business,
in Tenant's good faith judgment, Landlord shall be entitled to the entire amount
of the award without deduction for any estate or interest of Tenant, Landlord
shall restore the Premises to substantially their same condition prior to such
partial taking, and a proportionate allowance shall be made to Tenant for the
rent corresponding to the time during which, and to the part of the Premises of
which, Tenant shall be so deprived on account of such taking and restoration.
Nothing contained in this paragraph shall be deemed to give Landlord any
interest in any award
<PAGE>
made to Tenant for the taking of personal property and fixtures belonging to
Tenant or for Tenant's relocation expenses.
ARTICLE 23
----------
DEFAULTS AND REMEDIES
---------------------
(a) The occurrence of any one or more of the following events shall
constitute a default hereunder by Tenant:
(i) The abandonment of the Premises by Tenant.
(ii) The failure by Tenant to make any payment of rent or
additional rent or any other payment required to be made by Tenant hereunder, as
and when due, where such failure shall continue for a period of seven (7) days
after written notice thereof from Landlord to Tenant; provided however, that any
such notice shall be in lieu of, and not in addition to, any notice required
under California Code of Civil Procedure Section 1161 regarding unlawful
detainer actions.
(iii) The failure by Tenant to observe or perform any of the
express or implied covenants or provisions of this Lease to be observed or
performed by Tenant, other than as specified in Subparagraph 23(a)(i) or (ii)
above, where such failure shall continue for a period of thirty (30) days after
written notice thereof from Landlord to Tenant. Any such notice shall be in lieu
of, and not in addition to, any notice required under California Code of Civil
Procedure Section 1161 regarding unlawful detainer actions. If the nature of
Tenant's default is such that more than thirty (30) days are reasonably required
for its cure, then Tenant shall not be deemed to be in default if Tenant shall
commence such cure within said thirty-day period and thereafter diligently
prosecute such cure to completion.
(iv) (1) The making by Tenant of any general assignment for the
benefit of creditors; (2) the filing by or against Tenant of a petition to
have Tenant adjudged a bankrupt or a petition for reorganization or arrangement
under any law relating to bankruptcy (unless, in the case of a petition filed
against Tenant, the same is dismissed within sixty days); (3) the appointment
of a trustee or receiver to take possession of substantially all of Tenant's
assets located at the Premises or of Tenant's interest in this Lease, where
possession is not restored to Tenant within thirty days; or (4) the
attachment, execution or other judicial seizure of substantially all of Tenant's
assets located at the Premises or of Tenant's interest in this Lease where such
seizure is not discharged within thirty days.
(v) A default by Tenant under the Sycamore Plaza I Lease
(subject to the provisions of paragraphs 24(f) and 35).
(b) In the event of any such default by Tenant, in addition to any
other remedies available to Landlord at law or in equity, Landlord shall have
the immediate option to terminate this Lease and all rights of Tenant hereunder.
In the event that Landlord shall elect to so terminate this Lease then Landlord
may recover from Tenant:
<PAGE>
(i) The worth at the time of award of any unpaid rent which had
been earned at the time of such termination; plus
(ii) The worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that Tenant proves could have been
reasonably avoided; plus
(iii) The worth at the time of award of the amount by which the
unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided; plus
(iv) Any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform Tenant's
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom.
As used in Subparagraph 23(b)(i) and (ii) above, the "worth at the time of
award" is computed by allowing interest at the maximum rate permitted by law.
As used in Subparagraph 23(b)(iii) above, the "worth at the time of award" is
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent.
(c) In the event of any such default by Tenant, Landlord shall also
have the right, with or without terminating this Lease, to re-enter the Premises
and remove all persons and property from the Premises; such property may be
removed and stored in a public warehouse or elsewhere at the cost of and for the
account of Tenant. No re-entry or taking possession of the Premises by Landlord
pursuant to this Paragraph 23(C) shall be construed as an election to terminate
this Lease unless a written notice of such intention is given to Tenant or
unless the termination thereof is decreed by a court of competent jurisdiction.
(d) In the event of a default by Tenant under Paragraph 23(a)(iv)
above, the unenforceability of certain remedies to which Landlord may otherwise
be entitled under this Lease or at law shall not prevent Landlord from
exercising any other remedies that Landlord may have against Tenant for any
other default by Tenant including, without limitation, the right to draw upon
the letter of credit as provided in Article 5 of this Lease.
(e) All rights, options and remedies of Landlord contained in this
Lease shall be constructed and held to be cumulative, and no one of them shall
be exclusive of the other, and Landlord shall have the right to pursue any one
or all of such remedies or any other remedy or relief which may be provided by
law, whether or not stated in this Lease. No waiver of any default of Tenant
hereunder shall be implied from any acceptance by Landlord of any rent or other
payments due hereunder or any omission by Landlord to take any action on account
of such default if such default persists or is repeated, and no express waiver
shall affect defaults other than as specified in said waiver. The consent or
approval of Landlord to or of any act by Tenant requiring Landlord's consent or
approval shall not be deemed to waive or render unnecessary Landlord's consent
or approval to or of any subsequent similar acts by Tenant.
<PAGE>
(f) The chronic delinquency by Tenant in the payment of Basic Rent or
any other payments required to be paid by Tenant under this Lease shall
constitute a default hereunder by Tenant. "Chronic delinquency" shall mean
failure by Tenant to pay Basic Rent, or any other payments required to be paid
by Tenant under this Lease within seven (7) days after written notice thereof
for any three (3) occasions (consecutive or non-consecutive) during any twelve
(12) month period. In the event of a chronic delinquency, Landlord shall have
the right, at Landlord's option, to require that Basic Rent be paid by Tenant
quarterly, in advance.
(g) Landlord shall not be deemed to be in default in the performance
of any obligation required to be performed by it hereunder unless and until it
has failed to perform such obligation within thirty (30) days after receipt of
written notice by Tenant to Landlord specifying the nature of such default, or
as soon as reasonably possible after notice from Tenant in the event that
Landlord's failure to perform its obligation will result in immediate threat of
personal injury or property damage. If, however, the nature of Landlord's
obligation is such that more than thirty (30) days are required for its
performance, then Landlord shall not be deemed to be in default if it shall
commence such performance within such thirty (30) day period and thereafter
diligently prosecute the same to completion.
ARTICLE 24
----------
ASSIGNMENT AND SUBLETTING
-------------------------
(a) Tenant shall not voluntarily assign its interest in this Lease or
in the Premises, or sublease all or any part of the Premises, or allow any other
person or entity to occupy or use all or any part of the Premises, without first
obtaining Landlord's prior written consent which consent shall not be
unreasonably withheld. Any assignment or sublease without Landlord's prior
written consent shall be voidable, at Landlord's election, and shall constitute
a default. In no event shall Tenant be permitted to encumber this Lease or
Tenant's leasehold interest in the Premises. No consent to any assignment or
sublease shall constitute a further waiver of the provisions of this paragraph.
Tenant shall notify Landlord in writing of Tenant's intent to sublease or assign
this Lease and Landlord shall, within thirty days of receipt of such written
notice, elect one of the following:
(i) Consent to such proposed assignment or sublease;
(ii) Refuse such consent, which refusal shall be on reasonable
grounds; or
(iii) In the event of a proposed assignment, elect to terminate
this Lease, or in the event of a proposed sublease of all or any portion of the
Premises for the then remaining term of this Lease, elect to terminate this
Lease with respect to the portion of the Premises to be subleased.
(b) As a condition for granting its consent to any assignment or
sublease, sixty days prior to any anticipated assignment or sublease Tenant
shall give Landlord written notice (the "Assignment Notice"), which shall set
forth the name, address and business of the proposed assignee or sublessee,
information (including references) concerning the character, ownership, and
financial condition of the proposed assignee or sublessee, and the Assignment
Date, any ownership or
<PAGE>
commercial relationship between Tenant and the proposed assignee or sublessee,
and the consideration of all other material terms and conditions of the proposed
assignment or sublease, all in such detail as Landlord shall reasonably require.
If Landlord requests additional detail, the Assignment Notice shall not be
deemed to have been received until Landlord receives such additional detail, and
Landlord may withhold consent to any assignment or sublease until such
additional detail is provided to it. Further, upon any default by Tenant
hereunder, Landlord may require that the sublessee or assignee remit directly to
Landlord on a monthly basis, all monies due to Tenant by said assignee or
sublessee.
(c) The consent by Landlord to any assignment or subletting shall not
be construed as relieving Tenant or any assignee of this Lease or sublessee of
the Premises from obtaining the express written consent of Landlord to any
further assignment or subletting or as releasing Tenant or any assignee or
sublessee of Tenant from any liability or obligation hereunder whether or not
then accrued. In the event Landlord shall consent to an assignment or sublease,
Tenant shall pay Landlord as Additional Rent a reasonable attorneys' and
administrative fee not to exceed $500 for costs incurred in connection with
evaluating the Assignment Notice. This section shall be fully applicable to all
further sales, hypothecations, transfers, assignments and subleases of any
portion of the Premises by any successor or assignee of Tenant, or any sublessee
of the Premises.
(d) As used in this section, the subletting of substantially all of
the Premises for substantially all of the remaining term of this Lease shall be
deemed an assignment rather than a sublease. Notwithstanding the foregoing,
Landlord's consent shall not be required for any assignment or sublease to a
parent, subsidiary or affiliate of Tenant or to an entity resulting from a
merger, consolidation or reorganization, or any entity or person which acquires
all or substantially all of the assets or stock of Tenant, provided that, in the
event of an assignment, the assignee first executes, acknowledges and delivers
to Landlord an agreement whereby the assignee agrees to be bound by all of the
covenants and agreements in this Lease which Tenant has agreed to keep, observe
or perform, that the assignee agrees that the provisions of this section shall
be binding upon it as if it were the original Tenant hereunder and that if the
assignment is made in connection with a merger or other acquisition, the
assignee shall have a net worth (determined in accordance with generally
accepted accounting principles consistently applied) immediately after such
assignment which is at least equal to the net worth (as so determined) of Tenant
at the commencement of this Lease.
(e) Except as provided above, Landlord's consent to any assignment or
sublease shall not be unreasonably withheld. A condition to such consent shall
be delivery by Tenant to Landlord of a true copy of any such assignment or
sublease. If for any proposed assignment or sublease Tenant receives rent or
other consideration, either initially or over the term of the assignment or
sublease, in excess of the rent called for hereunder, or, in case of the
sublease of a portion of the Premises, in excess of such rent fairly allocable
to such portion, after appropriate adjustments to assure that all other payments
called for hereunder are taken into account, Tenant shall pay to Landlord as
additional rent hereunder one-half (1/2) of the excess of each such payment of
rent or other consideration received by Tenant after first deducting any
reasonable and customary brokerage commission, attorney's fees, advertising
costs, tenant improvement costs and/or tenant improvement allowances paid by
Tenant in connection with the assignment or sublease. Such excess shall be paid
to Landlord promptly after its receipt by Tenant. Landlord's waiver or consent
to any assignment or subletting shall not relieve Tenant from any obligation
under this Lease and Tenant
<PAGE>
shall remain directly and primarily liable to Landlord under this Lease for the
full term hereof. The parties intend that the preceding sentence shall not apply
to any sublease rentals respecting a portion of the Premises that during the
entire term of this Lease was not occupied by Tenant for its own use, but was
always subleased by Tenant and/or kept vacant. For the purpose of this section,
the rent for each square foot of floor space in the Premises shall be deemed
equal.
(f) If Landlord grants its consent to any assignment of this Lease as
provided in paragraph 24(a), the cross-default provision contained in paragraph
23(a)(v) of this Lease shall be automatically terminated as of the effective
date of such assignment.
ARTICLE 25
----------
SUBORDINATION
-------------
Without the necessity of any additional document being executed by
Tenant for the purpose of effecting a subordination, and at the election of
Landlord or any mortgagee with a lien on the Project or any ground lessor with
respect to the Project, this Lease shall be subject and subordinate at all times
to:
(i) All ground leases or underlying leases which may now exist
or hereafter be executed affecting the Project or the land upon which the
Project is situated or both,
(ii) The lien of any mortgage or deed of trust which may now
exist or hereafter be executed in any amount for which the Project, land, ground
leases or underlying leases, or Landlord's interest or estate in any of said
items is specified as security provided, however, that with respect to any
mortgage or deed of trust recorded against the Premises as of the Commencement
Date, Landlord obtains and delivers to Tenant prior to the Commencement Date a
non-disturbance and attornment agreement, in a form reasonably acceptable to
Tenant, executed by the holder of any such mortgage or deed of trust which
provides that in the event of any foreclosure of the mortgage or deed of trust,
or deed in lieu of foreclosure, this Lease shall not be terminated so long as
Tenant is not in default hereunder beyond any applicable grace or cure period
provided for herein. Concurrently with the execution of this Lease by Landlord,
Landlord shall obtain and deliver to Tenant a Subordination, Non-Disturbance and
Attornment Agreement in the form attached as EXHIBIT G, executed by Landlord and
---------
Principal Mutual Life Insurance Company. Notwithstanding the foregoing,
Landlord shall have the right to subordinate or cause to be subordinated any
such ground leases or underlying leases or any such liens to the Lease. In the
event that any ground lease or underlying lease terminates for any reason or any
mortgage or deed of trust is foreclosed or a conveyance in lieu of foreclosure
is made for any reason, Tenant shall, notwithstanding any subordination, attorn
to and become the Tenant of the successor in interest to Landlord, provided such
successor assumes in writing Landlord's obligations hereunder. Tenant covenants
and agrees to execute and deliver, within ten (10) days after written request by
Landlord, and in the form requested by Landlord, any additional documents
evidencing the priority or subordination of this Lease with respect to any such
ground leases or underlying leases or the lien of any such mortgage or deed of
trust so long as such document is reasonably satisfactory Tenant and provides
for the non-disturbance of Tenant upon any termination of such ground lease or
any foreclosure of the mortgage or deed of trust as described herein.
<PAGE>
(iii) The CC&R's as described in Article 6.
ARTICLE 26
----------
ESTOPPEL CERTIFICATE
--------------------
(a) Within ten days following any written request from the other,
Tenant or Landlord shall execute and deliver to the other a statement
certifying:
(i) The date of commencement of this Lease;
(ii) The fact that this Lease is unmodified and in full force and
effect (or, if there have been modifications hereto, that this Lease is in full
force and effect, and stating the date and nature of such modifications);
(iii) The date to which the rental and other sums payable
under this Lease have been paid;
(iv) That there are no current defaults under this Lease by
either Landlord or Tenant except as specified in the responding party's
statement; and
(v) Such other matters reasonably requested by Landlord or
Tenant, as applicable.
Landlord and Tenant intend that any statement delivered pursuant to this Article
26 may be relied upon by any mortgagee, beneficiary, purchaser or prospective
purchaser of the Building or Project or any interest therein, or any equipment
lessor or purchaser of Tenant's stock or any assets of Tenant, as the case may
be.
(b) Tenant's or Landlord's failure to deliver such statement within
such time shall be conclusive upon such party, as the case may be:
(i) That this Lease is in full force and effect, without
modification except as may be represented by the requesting party,
(ii) That there are no uncured defaults in the requesting
party's performance, and
(iii) That not more than one month's rental has been paid in
advance.
<PAGE>
ARTICLE 27
----------
SIGNAGE
-------
(a) Subject to the receipt of all necessary approvals from the City of
Pleasanton, Tenant shall have the right to install one (1) Tenant identification
sign on the exterior of the Building and to have its name placed on the monument
tombstone at the entry to the Project. The exact location of Tenant's building
signage shall be agreed to by Landlord and Tenant, subject to any restrictions
imposed by the City of Pleasanton and the CC&R's. The size, design and other
physical characteristics of Tenant's signage shall be subject to the Design
Guidelines imposed by the CC&R's. The cost of such signs, including
installation, maintenance and repair, shall be paid by Tenant. Tenant shall
have no other right to maintain a Tenant identification sign in any other
location in, on or about the Premises, the Project, or Bernal Corporate Park and
shall not display or erect any Tenant identification sign, display or other
advertising material within the Premises that is visible from the exterior of
the Building. If Tenant fails to maintain its exterior signage or if Tenant
fails to remove such signage upon termination of this Lease, Landlord may do so
at Tenant's expense and Tenant's reimbursement to Landlord for such amounts
shall be deemed additional rent.
(b) The rights to such exterior building signage and monument signage
are personal to Documentum, Inc. and may not be transferred or assigned except
to (i) a parent, subsidiary or affiliate of Documentum, Inc., or (ii) a
transferee approved in writing by Landlord pursuant to paragraph 24(a)(i) of
this Lease; provided, however, that if Landlord, in its good faith judgment and
reasonable opinion determines that any transferee approved by Landlord is not of
reputable or good character, consistent with the other tenants of the Project,
Landlord may deny such sign rights to such transferee if Landlord so notifies
Tenant in writing at the time of Landlord's consent to the proposed transfer.
If Landlord fails to so notify Tenant, the transferee approved by Landlord shall
be entitled to the same signage rights granted to Documentum, Inc. hereunder.
ARTICLE 28
----------
RULES AND REGULATIONS
---------------------
Tenant shall faithfully observe and comply with the "Rules and
Regulations," a copy of which is attached hereto and marked EXHIBIT D, and all
---------
reasonable and nondiscriminatory modifications thereof and additions thereto
from time to time put into effect by Landlord. Landlord shall not be
responsible to Tenant for the violation or non-performance by any other tenant
or occupant of the Project of any of said Rules and Regulations.
ARTICLE 29
----------
CONFLICT OF LAWS
----------------
This Lease shall be governed by and construed pursuant to the laws of
the State of California.
<PAGE>
ARTICLE 30
----------
SUCCESSORS AND ASSIGNS
----------------------
Except as otherwise provided in this Lease, all of the covenants,
conditions and provisions of this Lease shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns.
ARTICLE 31
----------
SURRENDER OF PREMISES
---------------------
The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not work a merger, and shall, at the option of
Landlord, operate as an assignment to it of any or all subleases and
subtenancies.
ARTICLE 32
----------
ATTORNEYS' FEES
---------------
If either Landlord or Tenant brings any action for any relief against
the other arising out of this Lease, the losing party shall pay to the
prevailing party its reasonable attorneys' fees and costs.(including attorneys'
fees on appeal, and costs and expenses incurred in out-of-court negotiations,
workouts and/or settlements or in seeking relief from stay or otherwise seeking
to protect its rights in any bankruptcy proceeding). In addition, the
prevailing party shall be entitled to its attorneys' fees, costs and expenses
incurred in post-judgment proceedings to collect and enforce a judgment. This
provision is separate and several and shall survive the merger of this Lease
into any judgment on this Lease.
ARTICLE 33
----------
PERFORMANCE BY TENANT
---------------------
All covenants and agreements to be performed by Tenant under any of
the terms of this Lease shall be performed by Tenant at Tenant's sole cost and
expense and without any abatement of rent, except as otherwise expressly
provided herein. If Tenant shall fail to pay any sum of money owed to any party
other than Landlord, for which it is liable hereunder or if Tenant shall fail to
perform any other act on its part to be performed hereunder and such failure
shall continue for ten (10) days after written notice thereof by Landlord (or
such longer period as may be expressly provided for in this Lease), Landlord
may, without waiving or releasing Tenant from obligations of Tenant, but shall
not be obligated to, make any such payment or perform any such other act to be
made or performed by Tenant. All sums so paid by Landlord and all necessary
incidental costs shall be payable to Landlord within ten (10) days after demand
therefor. Tenant covenants to pay any such sums and Landlord shall have (in
addition to any other right or remedy of Landlord) all rights and remedies in
the event of the non-payment thereof by Tenant as are set forth in Article 23
hereof.
<PAGE>
ARTICLE 34
----------
MORTGAGEE PROTECTION
--------------------
In the event of any default on the part of Landlord, Tenant will give
notice by registered or certified mail to any beneficiary of a deed of trust or
mortgage covering the Premises whose address shall have been furnished to
Tenant. Such beneficiary or mortgagee shall have thirty (30) days after receipt
of written notice from Tenant specifying the nature of Landlord's default to
cure such default; provided, however, that if the nature of Landlord's
obligation is such that more than thirty (30) days are required for its
performance, then such beneficiary or mortgagee shall have such additional time
as is reasonably necessary to cure such default so long as it commences such
performance within such thirty (30) day period and thereafter diligently
prosecute the same to completion.
ARTICLE 35
----------
DEFINITION OF LANDLORD
----------------------
The term "Landlord", as used in this Lease, so far as covenants or
obligations on the part of Landlord are concerned, shall be limited to mean and
include only the owner or owners, at the time in question, of the fee title of
the Premises or the lessees under any ground lease, if any. In the event of any
transfer, assignment or other conveyance or transfers of any such title,
Landlord herein named (and in case of any subsequent transfers or conveyances,
the then grantor) shall be automatically freed and relieved from and after the
date of such transfer, assignment or conveyance of all liability as respects the
performance of any covenants or obligations on the part of Landlord contained in
this Lease thereafter to be performed. Without further agreement, the
transferee of such title shall be deemed to have assumed and agreed to observe
and perform any and all obligations of Landlord hereunder, during its ownership
of the Premises. Landlord may transfer its interest in the Premises without the
consent of Tenant and such transfer or subsequent transfer shall not be deemed a
violation on Landlord's part of any of the terms and conditions of this Lease.
In the event that Landlord transfers or conveys the Project to a third party
(other than a parent, subsidiary or affiliate of Landlord) and either retains
title to the project known as Sycamore Plaza I or transfers or conveys title to
Sycamore Plaza I to another third party (other than a parent, subsidiary or
affiliate of Landlord) the cross-default provisions set forth in paragraph
23(a)(v) shall be automatically terminated as of the date of such transfer or
conveyance.
ARTICLE 36
----------
WAIVER
------
The waiver by Landlord or Tenant of any breach of any term, covenant
or condition herein contained shall not be deemed to be a waiver of any
subsequent breach of the same or any other term, covenant or condition herein
contained, nor shall any custom or practice which may grow up between the
parties in the administration of the terms hereof be deemed a waiver of or in
any way affect the right of Landlord or Tenant to insist upon the performance by
the other in strict accordance with said terms. The subsequent acceptance of
rent hereunder by Landlord shall not be deemed to be a waiver of any preceding
breach by Tenant or any term, covenant or condition of this Lease, other than
the failure of Tenant to pay the particular rent so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of acceptance of such
rent.
<PAGE>
ARTICLE 37
----------
IDENTIFICATION OF TENANT
------------------------
If more than one person executes this Lease as Tenant:
(i) Each of them is jointly and severally liable for the
keeping, observing and performing of all of the terms, covenants, conditions,
provisions and agreements of this Lease to be kept, observed and performed by
Tenant, and
(ii) The term "Tenant" as used in this Lease shall mean and
include each of them jointly and severally. The act of or notice from, or notice
to refund to, or the signature of any one or more of them, with respect to the
tenancy of this Lease, including, but not limited to any renewal, extension,
expiration, termination or modification of this Lease, shall be binding upon
each and all of the persons executing this Lease as Tenant with the same force
and effect as if each and all of them had so acted or so given or received such
notice or refund or so signed.
ARTICLE 38
----------
PARKING
-------
The use by Tenant, its employees and invitees, of the parking
facilities of the Project shall be on the terms and conditions set forth in
EXHIBIT E attached hereto and by this reference incorporated herein and shall be
- ---------
subject to such other agreement between Landlord and Tenant as may hereinafter
be established. Tenant, its employees and invitees shall use no more than four
(4) non-exclusive parking spaces per one thousand (1,000) rentable square feet
of leased space. Tenant's parking allocation shall include twenty (20) parking
spaces designated as visitor parking for the exclusive use of Tenant's visitors,
which shall be located near the entrances to the Building and the building at
6801 Koll Center Parkway, with no more than five (5) of such visitor parking
spaces to be located at the entrance to the Building. Tenant's visitor parking
spaces at the Project shall be located in a manner that will permit a reasonable
number of additional visitor parking spaces near the entrance to the Building
for other tenants of the Building. Tenant's use of the parking spaces shall be
confined to the Project. If, in Landlord's reasonable business judgment, it
becomes necessary, Landlord shall exercise due diligence to cause the creation
of cross-parking easements and such other agreements as are necessary to permit
Tenant, its employees and invitees to use parking spaces on the properties and
buildings of Bernal Corporate Park, which are separate legal parcels from the
Project. Tenant acknowledges that other tenants of the Project and the tenants
of the other buildings, their employees and invitees, may be given the right to
park at the Project.
ARTICLE 39
----------
TERMS AND HEADINGS
------------------
The words "Landlord" and "Tenant" as used herein shall include the
plural as well as the singular. Words used in any gender include other genders.
The paragraph headings of this Lease are not a part of this Lease and shall have
no effect upon the construction or interpretation of any part hereof.
<PAGE>
ARTICLE 40
----------
EXAMINATION OF LEASE
--------------------
Submission of this instrument for examination or signature by Tenant
does not constitute a reservation of or option for lease, and it is not
effective as a lease or otherwise until execution by and delivery to both
Landlord and Tenant.
ARTICLE 41
----------
TIME
----
Time is of the essence with respect to the performance of every
provision of this Lease in which time or performance is a factor.
ARTICLE 42
----------
PRIOR AGREEMENT: AMENDMENTS
---------------------------
This Lease contains all of the agreements of the parties hereto with
respect to any matter covered or mentioned in this Lease, and no prior agreement
or understanding pertaining to any such matter shall be effective for any
purpose. No provisions of this Lease may be amended or added to except by an
agreement in writing signed by the parties hereto or their respective successors
in interest.
ARTICLE 43
----------
SEPARABILITY
------------
Any provision of this Lease which shall prove to be invalid, void or
illegal in no way affects, impairs or invalidates any other provision hereof,
any such other provisions shall remain in full force and effect.
ARTICLE 44
----------
RECORDING
---------
Promptly following full execution of this Lease, Landlord and Tenant
shall execute a short form memorandum of this Lease mutually acceptable to
Landlord and Tenant. Tenant shall be permitted to record such memorandum at
Tenant's expense. Tenant shall, within ten (10) days after written request by
Landlord, execute and deliver to Landlord a quitclaim deed in recordable form
and prepared by Landlord, quitclaiming, releasing and remising to Landlord any
right, title and interest of Tenant in and to the Premises and the Project
pursuant to this Lease.
ARTICLE 45
----------
CONSENTS
--------
Whenever the consent of either party is required hereunder such
consent shall not be unreasonably withheld.
<PAGE>
ARTICLE 46
----------
LIMITATION ON LIABILITY
-----------------------
In consideration of the benefits accruing hereunder, Tenant and all
successors and assigns covenant and agree that, in the event of any actual or
alleged failure, breach or default under this Lease by Landlord:
(a) The sole and exclusive remedy shall be against the Landlord's
interest in the Project;
(b) No partner, officer, agent or employee of Landlord shall be sued
or named as a party in any suit or action (except as may be necessary to secure
jurisdiction of Landlord);
(c) No service or process shall be made against any partner, officer,
agent or employee of Landlord (except as may be necessary to secure jurisdiction
of Landlord);
(d) No partner, officer, agent or employee of Landlord shall be
required to answer or otherwise plead to any service of process;
(e) No judgment will be taken against any partner, officer, agent or
employee of Landlord;
(f) Any judgment taken against any partner, officer, agent or employee
of Landlord may be vacated and set aside at any time nunc pro nunc;
(g) No writ of execution will ever be levied against the assets of any
partner, officer, agent or employee of Landlord;
(h) The covenants and agreements set forth in this Article 46 are
enforceable both by Landlord and also by any partner, officer, agent or
employee of Landlord.
Nothing contained in this Article 46 is intended to deny Tenant or its
successors and assigns from asserting causes of action against any partner,
officer, agent or employee of Landlord that do not arise from a failure, breach
or default under this Lease by Landlord.
ARTICLE 47
----------
RIDERS
------
Clauses, plats and riders, if any, signed by Landlord and Tenant and
affixed to this Lease are a part hereof.
ARTICLE 48
----------
EXHIBITS
--------
All Exhibits attached hereto are incorporated into this Lease.
<PAGE>
ARTICLE 49
----------
MODIFICATION FOR LENDER
-----------------------
If, in connection with obtaining construction, interim or permanent
financing for the Project the lender shall request reasonable modifications in
this Lease as a condition to such financing, Tenant will not unreasonably
withhold, delay or defer its consent thereto, provided that such modifications
do not increase the obligations of Tenant hereunder or materially adversely
affect the leasehold interest hereby created or Tenant's rights hereunder.
ARTICLE 50
----------
WAIVER OF LIEN RIGHTS
---------------------
Notwithstanding anything in this Lease to the contrary, Landlord
waives any right, title and interest Landlord now has, or may hereafter have,
whether statutory or otherwise, to any trade fixtures, equipment, furniture,
signs, books and records, inventory or other personal property of Tenant
(singly, and/or collectively, "Collateral"). Landlord further agrees that
Tenant shall have the right to mortgage, pledge, hypothecate or grant a security
interest in any such Collateral as security for its obligations under any future
equipment lease or other financing arrangement related to the conduct of
Tenant's business at the Premises. Landlord further agrees to execute and
deliver any UCC filing statement or other documentation reasonably acceptable to
Landlord that may be required to subordinate Landlord's interest in the
Collateral in connection with any such future lease or financing arrangement,
including, but not limited to, any real estate consent or waiver forms
reasonably acceptable to Landlord, including those submitted by any vendors,
equipment lessors or chattel mortgagees. All trade fixtures, signs, equipment,
furniture, or other personal property of whatever kind or nature kept or
installed at the Premises by Tenant may be removed by Tenant in the ordinary
course of business at any time and from time to time during the term of this
Lease. Landlord shall further acknowledge that the property covered by the
consent or waiver forms may be removed from the Premises by the vendor,
equipment lessor or chattel mortgagee at any time prior to termination of this
Lease upon any default by Tenant in the terms of such lease, chattel mortgage or
similar documents, free and clear of any claim or lien of Landlord in and to
such property provided that such lessor or mortgagee agrees in writing to give
Landlord prior notice of any intended removal and to be responsible for the
repair of any damage to the Premises caused by such removal.
ARTICLE 51
----------
EXPANSION RIGHTS
----------------
Provided that Tenant is not then in default of any of its obligations
under this Lease, including the Work Letter, Tenant shall have a right of first
refusal to lease any portion of the remaining approximately 58,810 square feet
of the Building on the following terms and conditions (the "Additional Space").
If at any time prior to September 2, 1998, Landlord receives a written offer to
lease all or any portion of the Additional Space on terms and conditions
acceptable to Landlord, Landlord shall notify Tenant of the location and
approximate area of the Additional Space (the "Offered Space") to which such
offer applies ("Landlord's Notice"). Tenant shall have five (5) business days
after receipt of Landlord's Notice to notify Landlord in writing of Tenant's
election to lease the Offered Space. If Tenant notifies Landlord of Tenant's
election to lease the Offered
<PAGE>
Space within such five-day period, the lease of the Offered Space shall be on
the same terms and conditions set forth herein with respect to the Premises,
including Basic Rent at the rate of $2.40 per rentable square foot and a Tenant
Improvement Allowance of $26.50 per rentable square foot of the Offered Space,
with an occupancy and rent commencement date not earlier than the Commencement
Date of this Lese and not later than April 1, 2000, and Landlord and Tenant
shall amend this Lease to add the Offered Space to the Premises, increase the
Basic Rent and Tenant's Percentage, and make such other modifications to this
Lease as may be appropriate based upon the increased area of the Premises. If,
however, Tenant fails to notify Landlord of Tenant's election to lease the
Offered Space within such five-day period, Landlord shall have the right to
lease the Offered Space to any third party on such terms and conditions as
Landlord shall elect without any further notice to Tenant.
ARTICLE 52
----------
OPTION TO EXTEND
----------------
Provided that Tenant is not in default hereunder, either at the time
of exercise or at the time the extended term commences, Tenant shall have the
option to extend the initial term of this Lease for one (1) additional period of
five (5) years ("Option Period") on the same terms, covenants and conditions
provided herein, except that upon such renewal the Basic Rent due hereunder
shall be the then fair market rental value of the Premises. The "then fair
market rental value of the Premises" shall be defined to mean the fair market
rental value of the Premises as of the commencement of the Option Period, taking
into consideration the uses permitted under this Lease, the quality, size,
design and location of the Premises, and the rent for comparable space located
in Pleasanton. Tenant shall exercise its option by giving Landlord written
notice ("Option Notice") at least two hundred seventy (270) days but not more
than three hundred sixty (360) days prior to the expiration of the initial term
of this Lease. This option to extend is personal to Tenant and may not be
transferred or assigned to any third party, except Tenant affiliates and
permitted transferees pursuant to Article 24 of this Lease.
<PAGE>
ARTICLE 53
----------
LANDLORD'S CONDITION
--------------------
This Lease is subject to the approval of Landlord's investment
committee which Landlord shall use diligent efforts to obtain no later than ten
(10) business days after this Lease has been fully executed. This condition is
for the sole benefit of Landlord and may be waived or deemed satisfied at
Landlord's option.
IN WITNESS WHEREOF, the parties have executed this Lease as of the date
first above written.
LANDLORD:
Patrician Associates, Inc., a California ADDRESS:
corporation
Patrician Associates, Inc.
By:_______________________________ c/o Parkway Properties, Inc.,
Its:______________________________ 7011 Koll Center Parkway, Suite 210
Pleasanton, California 94566
By:_______________________________
Its:______________________________
TENANT:
Documentum, Inc., a California corporation ADDRESS:
By:_______________________________ Documentum, Inc.
Its:______________________________ 5671 Gibraltar Drive
Pleasanton, California 94588-8547
By:_______________________________
Its:______________________________
<PAGE>
OUTLINE OF TENANT'S FLOOR PLAN
------------------------------
EXHIBIT A
---------
<PAGE>
THE PROJECT
-----------
EXHIBIT A-1
-----------
<PAGE>
WORK LETTER AGREEMENT
---------------------
RECITALS
A. Concurrently with the execution of this Work Letter Agreement ("Work
Letter"), Landlord and Tenant have entered into a lease (the "Lease") covering
certain premises (the "Premises") more particularly described in EXHIBIT A-1
-----------
attached to the Lease. This Work Letter is attached to and made a part of the
Lease. The capitalized terms used herein shall have the meanings set forth in
the Lease, unless otherwise defined herein.
B. In order to induce Tenant to enter into the Lease and in consideration
of the mutual covenants hereinafter contained, Landlord and Tenant hereby agree
as follows with respect to the construction of the Base Building and the Tenant
Improvements (defined below):
1. COMPLETION SCHEDULE
Within thirty (30) days after the full execution of this Lease,
Landlord shall deliver to Tenant, for Tenant's review and approval, a schedule
(the "Work Schedule") setting forth a timetable for the planning and completion
of the Base Building and the installation of the Tenant Improvements to be
constructed in the Premises. The Work Schedule shall set forth each of the
various items of work to be done by or approval to be given by Landlord and
Tenant in connection with the completion of the Base Building and the Tenant
Improvements. Such schedule shall be submitted to Tenant for its approval and,
upon approval by both Landlord and Tenant, such schedule shall become the basis
for completing the Base Building and the Tenant Improvements. If Tenant shall
fail to approve the Work Schedule, as it may be modified after discussions
between Landlord and Tenant, within seven (7) working days after the date such
schedule is first received by Tenant, the Work Schedule shall be deemed
approved.
2. BASE BUILDING
Landlord shall construct at Landlord's sole expense the building shell
and improvements, including the Site Improvements defined below, but excluding
the Tenant Improvements, to be constructed at 6701 Koll Center Parkway
(collectively, the "Base Building") in all material respects in accordance with
the drawings prepared by Korth Sunseri Hagey for Sycamore Plaza, project 96108,
including sheets A0.1 through A11.2 dated May 22, 1998, sheets S1.1 through
S4.5, E0.1 through E2.1, M2.3, P0.1 through 6.1, all dated May 15, 1998; Kier &
Wright topographic drawing C.1 dated April 30, 1998, and grading and paving
plans, notes and details C.2 through C.7 dated April 30, 1998; landscape
drawings by David Gates and Associates, sheets L0.1 through L4.1 dated May 19,
1998; and Korth Sunseri Hagey Project Manual, including specifications dated
May, 1998 (collectively, the "Base Building Plans"). The Base Building shall
include, without limitation, the building lobby (including all restrooms),
interior stairways, elevator, central HVAC system, and sprinkler system
distribution including upright heads, and, subject to receipt of all necessary
approvals from the City of Pleasanton, a covered walkway at ground level between
the Building and the building at 6801 Koll Center Parkway. HVAC distribution
from the
EXHIBIT B
---------
Page 1 of 8
<PAGE>
main trunk line shall be a Tenant Improvements Cost as described below.
Landlord shall complete construction of the Base Building in a good and
workmanlike manner in compliance with all Applicable Laws and the building
permit issued by the City of Pleasanton for such construction. For purposes of
this Work Letter, the Site Improvements shall mean the parking areas, driveways,
walkways, landscaping and other improvements to the common areas of the Project
that are depicted on the site plan attached as EXHIBIT B-1 hereto and
-----------
incorporated herein.
3. TENANT IMPROVEMENTS
Reference herein to "Tenant Improvements" shall include all work to be
done in the Premises pursuant to the Tenant Improvement Plans described in
Paragraph 5 below, including but not limited to partitioning, doors, ceilings,
floor coverings, finishes, (including paint and wallcovering) electrical,
(including lighting, switching, outlets, etc.) plumbing, heating, ventilating
and air conditioning, fire protection, cabinets and other mill work, all as more
particularly described therein
4. TENANT'S SPACE PLAN
Tenant shall retain a space planner to prepare preliminary and final
space plans required in connection with the construction of the Tenant
Improvements to the Premises. Tenant shall cause its space planner to prepare
and submit to Landlord, no later than April 15, 1999, a final space plan for
Tenant's proposed Tenant Improvements to the Premises ("Space Plan"). Tenant's
Space Plan shall be sufficient to enable the Architect to prepare working
drawings for the Tenant Improvements pursuant to paragraph 5 below. Within ten
(10) business days after receipt of Tenant's Space Plan, Landlord shall notify
Tenant of Landlord's approval or disapproval thereof, specifying in reasonable
detail the basis for Landlord's disapproval, if applicable. The architect
("Architect") shall be selected by Tenant from among the following firms:
Interform; Ambiance Associates; Gensler and Associates; Korth, Sunseri and
Hagey; RMW and Associates; Michael Willis & Associates; or other similarly
qualified architect approved by Landlord.
5. FINAL PRICING AND DRAWING SCHEDULE
(a) After the preparation of the Space Plan and after Landlord's
written approval thereof, in accordance with the Work Schedule, Landlord enter
into a contract with the Architect and shall cause the Architect to prepare and
submit to Tenant the final working drawings and specifications ("Tenant
Improvement Plans"). Such working drawings shall be approved by Landlord and
Tenant in accordance with the Work Schedule. If Tenant disapproves any part of
the Tenant Improvement Plans, Tenant's disapproval shall provide objections with
sufficient particularity for the Architect to revise the Tenant Improvements
Plans. Such revisions shall be subject to Landlord's approval, which shall not
be unreasonably withheld. Following final approval of the Tenant Improvement
Plans by Landlord and Tenant, such plans be submitted by Landlord to the
appropriate governmental body for plan checking and a building permit.
EXHIBIT B
---------
Page 2 of 8
<PAGE>
(b) Concurrent with the plan checking, Landlord shall cause Devcon
Construction (the "General Contractor") to prepare and deliver to Landlord and
Tenant a final pricing for construction of the Tenant Improvements ("Final
Pricing"), taking into account any modifications which may be required to
reflect changes in the plans and specifications required by the City of
Pleasanton. Prior to determining the Final Pricing, Landlord shall cause the
General Contractor to solicit bids from three (3) subcontractors for each of the
subtrades, including final clean-up. Tenant shall have the right to nominate
one subcontractor to bid each of the subtrades, provided that the subcontractors
nominated by Tenant are licensed, qualified contractors experienced with jobs of
similar size and complexity and provided that such subcontractors are signatory
to appropriate labor unions. Additionally, Tenant shall have the right to
review the bid documentation package to ensure that it allows for competitive
bidding. If Landlord selects a subcontractor for any subtrade whose bid is five
percent (5%) greater than the lowest bid obtained by Landlord for such subtrade,
that is otherwise comparable in scope and quality to the lowest bid, then
Landlord shall be responsible for that portion of the bid in excess of one
hundred five percent (105%) of the lowest bid, which excess amount shall not be
included in the cost of the Tenant Improvements for the purpose of allocating
the same between Landlord and Tenant pursuant hereto.
(c) Landlord shall deliver the Final Pricing, including a line item
detailed breakdown, to Tenant for Tenant's review and approval. The Final
Pricing shall include the General Contractor's overhead and profit (not to
exceed 2.75% of the total hard construction costs, which excludes permits and
fees, plans and testing and inspections), and general conditions (not to exceed
$59,024.00) which includes supervision and clean-up during construction
(excluding final clean-up). Landlord agrees that if Tenant reasonably deems any
subcontractor trade item to be excessively high, Landlord will cause such trade
to be rebid, but in such event any delays attributable to or resulting from such
rebidding shall be considered a Tenant Delay as described in paragraph 8(b)
below. Tenant shall, within ten (10) business days after receipt of the Final
Pricing, notify Landlord in writing of Tenant's approval or disapproval of the
Final Pricing, which will include specific terms objected to and the reasons
therefor, if applicable. If Tenant disapproves the Final Pricing, Landlord and
Tenant will promptly meet to discuss modifications to the Tenant Improvement
Plans and the Final Pricing.
6. CONSTRUCTION OF TENANT IMPROVEMENTS
(a) After the Tenant Improvement Plans and the Final Pricing have been
approved by Landlord and Tenant and Landlord has obtained a building permit for
the Tenant Improvements, Landlord shall enter into a construction contract with
the General Contractor for installation of the Tenant Improvements in accordance
with the Tenant Improvement Plans. Landlord shall supervise the completion of
such work and shall use diligent efforts to secure completion of the work in
accordance with the Work Schedule and this Work Letter.
(b) Landlord shall complete construction of the Tenant Improvements in
a good and workmanlike manner in compliance with all Applicable Laws and the
building permit issued by the City of Pleasanton for such construction.
Landlord shall correct any latent defects in the Tenant Improvements and/or the
Base Building and any other incomplete or defective items that
EXHIBIT B
---------
Page 3 of 8
<PAGE>
were not reasonably discoverable by Tenant during Tenant's walk-through
inspection of the Premises.
7. PAYMENT OF COST OF THE TENANT IMPROVEMENTS
(a) Landlord shall provide Tenant with an allowance of Twenty-Six and
50/100ths Dollars ($26.50) per rentable square foot of the Premises for the
design and construction of the Tenant Improvements ("Tenant Improvement
Allowance"). In addition to the Tenant Improvement Allowance, Landlord shall
provide, at Landlord's expense, data communications conduit between the Premises
and the building at 6801 Koll Center Parkway and between these two (2) buildings
and the buildings known as Bernal Corporate Plaza I and II.
(b) The Tenant Improvement Allowance may be used for the following
costs ("Tenant Improvement Costs"):
(i) Payment of the cost of preparing the space plan (not to
exceed $0.15 per square foot) and the services of the Architect, including
preparation of the final working drawings and specifications, mechanical,
electrical and structural drawings, and all other aspects of the Tenant
Improvement Plans (not to exceed $0.85 per square foot);
(ii) The payment of permit and license fees relating to
construction of the Tenant Improvements;
(iii) A project management fee equal to $67,449.92 (four
percent (4%) of ($26.50 x 63,632 sq. ft.));
(iv) Construction of the Tenant Improvements, including,
without limitation, the following:
(1) Installation within the Premises of all partitioning,
doors, floor coverings, finishes, ceilings, wall coverings and painting,
millwork and similar items;
(2) All electrical wiring, lighting fixtures, outlets and
switches, and other electrical work to be installed within the Premises;
(3) The furnishing and installation of all duct work,
terminal boxes, defusers and accessories required for the completion of the
heating, ventilation and air conditioning systems within the Premises, including
the cost of meter and key control for after-hour air conditioning;
(4) Any additional Tenant requirements including, but not
limited to odor control, special heating, ventilation and air conditioning,
noise or vibration control or other special systems;
EXHIBIT B
---------
Page 4 of 8
<PAGE>
(5) All fire and life safety control systems such as fire
walls, sprinklers, halon, fire alarms, including piping, wiring and accessories
installed within the Premises;
(6) All plumbing, fixtures, pipes, and accessories to
be installed within the Premises; and
(7) Landlord shall provide telephone conduit only from the
telephone jacks in the walls to the top of the ceiling at those locations
specified in the Tenant Improvement Plans. Tenant shall be responsible for
pulling all wires from the service boards to the individual jacks.
(c) If the Tenant Improvement Costs (as determined by the Final
Pricing approved by Landlord and Tenant) exceed the Tenant Improvement
Allowance, one-half (1/2) of the excess costs shall be paid by Tenant to
Landlord in cash within thirty (30) days after Landlord has provided Tenant with
an itemized invoice for such excess costs, and the balance shall be paid by
Tenant upon substantial completion of the Tenant Improvements; provided,
however, that if such additional cost is attributable to Landlord Delays, then
such additional cost shall be paid by Landlord.
(d) If, after the Tenant Improvement Plans and the Final Pricing have
been approved, Tenant shall require any changes or substitutions to the Tenant
Improvement Plans, one-half (1/2) of any additional costs therefor including
architectural and space planning fees, which are in excess of the Tenant
Improvement Allowance shall be paid by Tenant to Landlord within thirty (30)
days after Landlord has provided Tenant with an itemized invoice for such
additional costs, and the balance shall be paid by Tenant upon substantial
completion of the Tenant Improvements.
(e) For purposes of this Work Letter, a "Landlord Delay" shall mean
any delay in the substantial completion of the Tenant Improvements caused by any
act or omission by Landlord, its agents or contractors, including, without
limitation, any delay (I) attributable to changes in or additions to the Base
Building Plans, the Tenant Improvement Plans and/or the Tenant Improvements
after the same have been approved by Landlord and Tenant, and (ii) attributable
to the failure of Landlord to pay when due, any amounts required to be paid by
Landlord in connection with completion of the Base Building and the Tenant
Improvements pursuant to the Lease or this Work Letter except to the extent that
such failure is due to Tenant's failure to pay any additional Tenant Improvement
Costs as required under paragraph 7(d) or 7(e) of this Work Letter.
8. COMPLETION AND RENTAL COMMENCEMENT DATE
(a) The commencement of the term of this Lease and Tenant's obligation
for the payment of rental under the Lease shall not commence until substantial
completion of construction of the Base Building and the Tenant Improvements.
For purposes of the Lease and this Work Letter, "substantial completion" of the
Tenant Improvements shall mean (i) the Base Building is complete and in
compliance with all Applicable Laws and all of the Base Building systems are
operational to the extent necessary to service the Premises; (ii) Landlord has
sufficiently completed
EXHIBIT B
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<PAGE>
all the work required to be performed by Landlord in accordance with this Work
Letter (except punch-list items which Landlord shall thereafter promptly
complete as provided in paragraph 9 below) to enable Tenant to conduct its
business operations (assuming installation by Tenant of all cabling systems,
equipment, fixtures, furnishings, and other personal property necessary to
conduct its business operations); (iii) Landlord has obtained a certificate of
occupancy, or its equivalent, for the Building (except to the extent receipt of
such certificate of occupancy, or its equivalent, is delayed by any Tenant
Delay); (iv) Tenant has been provided with the parking spaces and parking
privileges to which it is entitled under the Lease; (v) Tenant has been
delivered reasonable access to the Premises sufficient to allow Tenant to
install its freestanding work stations, fixtures, furniture, equipment, and
telecommunication and computer cabling systems; and (vi) Tenant has received a
non-disturbance agreement in form reasonably acceptable to Tenant signed by
Landlord and each ground lessor, mortgagee or deed of trust holder which is of
record prior to the Commencement Date of this Lease, the receipt of which shall
be a condition to this Lease.
(b) However, if there shall be a delay in substantial completion of
the Base Building and/or the Tenant Improvements as a result of any act or
omission of Tenant, its agents or contractors, including, without limitation,
any of the following (each, a "Tenant Delay"): (I) Tenant's failure to approve
any item or perform any other obligation in accordance with and by the date
specified in the Work Schedule; (ii) Tenant's request for any materials,
finishes or installations which are not readily available, if Landlord notifies
Tenant prior to final approval of the Tenant Improvement Plans that use of such
materials, finishes or installations will negatively impact the completion
schedule (including an estimate of the anticipated delays associated with such
materials, finishes or installations) and Tenant nevertheless elects to use such
materials, finishes or installations; (iii) Tenant's changes in the Tenant
Improvement Plans after their approval by Tenant; (iv) rebidding of any
subtrades at Tenant's request; or (v) interference with Landlord's work caused
by Tenant or by Tenant's contractors or subcontractors if Tenant does not cease
such interference within two (2) business days after Landlord notifies Tenant of
the existence of such interference; then the commencement of the term of this
Lease and the rental commencement date shall be accelerated by the number of
days of such delay.
9. PUNCHLIST
Upon substantial completion of the Tenant Improvements, or as soon
thereafter as reasonably practicable, Landlord, Tenant and Tenant's space
planner shall inspect the Premises and the Tenant Improvements and develop a
punch-list of those minor corrections of construction or decoration details and
minor mechanical adjustments that are required to cause any applicable portion
of the Tenant Improvements to conform to the Tenant Improvement Plans. Upon
completion of such punch-list, Landlord shall promptly commence and complete
correction of such punch-list items in a manner that minimizes interference with
Tenant's business, but in no event later than thirty (30) days after submission
of such punch-list items to Landlord, subject to reasonable availability of
necessary materials.
10. RISK OF LOSS
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<PAGE>
Landlord shall bear the risk of loss for all materials, work,
installations, and decorations brought onto or installed in the Premises or the
Building by Landlord or Landlord's agents, employees or contractors in
connection with the construction of the Tenant Improvements and/or the Base
Building prior to the Commencement Date, and neither Tenant nor Tenant's agents
or employees or any party acting on behalf of Tenant shall be liable for any
damage, loss or destruction thereof.
11. CHANGE REQUESTS
Any request by Tenant for a change in the Tenant Improvements after
final approval of the Tenant Improvement Plans by Landlord and Tenant (a "Change
Request") shall be presented to Landlord in writing and shall be accompanied by
all information necessary to clearly identify and explain the proposed change.
As soon as practicable after receipt of such Change Request, Landlord shall
notify Tenant in writing of the estimated cost of such Change Request as well as
the estimated increase in construction time caused by the Change Request, if
any. Tenant shall approve such estimates in writing within two (2) business
days after receipt of Landlord's notice. Upon receipt of such written approval,
Landlord shall be authorized to cause the General Contractor to proceed with
implementation of the Change Request. If Tenant disputes such estimates, or
fails to approve in writing such estimates within such two (2) business day
period, Landlord shall not be required to proceed with such Change Request, and
all costs incurred by Landlord or the General Contractor in preparing such
estimates shall be included in the cost of the Tenant Improvements, which cost
shall be paid by Tenant. If Landlord is instructed by Tenant to proceed with a
Change Request prior to determination of the increased cost or increased
construction time resulting from such Change Request and without approval of
such increase by Tenant, the amount thereof shall be determined by Landlord upon
completion of the Tenant Improvements, subject only to Landlord furnishing to
Tenant appropriate back-up information from the General Contractor concerning
the increased costs and increased construction time, if any.
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<PAGE>
In witness whereof, this Work Letter Agreement is executed as of the date
first written above.
LANDLORD:
Patrician Associates, Inc., a California ADDRESS:
corporation
Patrician Associates, Inc.
By:_______________________________ c/o Parkway Properties, Inc.,
Its:______________________________ 7011 Koll Center Parkway, Suite 210
Pleasanton, California 94566
By:_______________________________
Its:______________________________
TENANT:
Documentum, Inc., a ADDRESS:
California corporation
Documentum, Inc.
By:_______________________________ 5671 Gibraltar Drive
Its:______________________________ Pleasanton, CA 94588-8547
By:_______________________________
Its:______________________________
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<PAGE>
STANDARDS FOR UTILITIES AND SERVICES
------------------------------------
The following Standards for Utilities and Services are in effect.
Landlord reserves the right to adopt nondiscriminatory modifications and
additions hereto:
Landlord shall:
(a) On Monday through Friday, except holidays, from 7 A.M. to 6 P.M.
(and other times for a reasonable additional charge to be fixed by Landlord as
provided in paragraph (b) below), ventilate the Premises and furnish air
conditioning or heating on such days and hours, when in the judgment of Landlord
it may be required for the comfortable occupancy of the Premises. The air
conditioning system achieves maximum cooling when the window coverings are
closed. Landlord shall not be responsible for room temperatures if Tenant does
not keep all window coverings in the Premises closed whenever the system is in
operation. Tenant agrees to cooperate fully at all times with Landlord, and to
abide by all regulations and requirements which Landlord may reasonably
prescribe for the proper function and protection of said air conditioning
system. Tenant agrees not to connect any apparatus, device, conduit or pipe to
the Building chilled and hot water air conditioning supply lines. Tenant
further agrees that neither Tenant nor its servants, employees, agents,
visitors, licensees or contractors shall at any time enter mechanical
installations or facilities of the Building or adjust, tamper with, touch or
otherwise in any manner affect said installations or facilities. The cost of
maintenance and service calls to adjust and regulate the air conditioning system
shall be charged to Tenant if the need for maintenance work results from
Tenant's failure to comply with its obligations under this section, including
keeping window coverings closed as needed. Such work shall be charged at hourly
rates equal to Landlord's actual cost.
(b) Landlord shall furnish to Tenant after-hours heating and air
conditioning at the actual cost for such after-hours use including a reasonable
estimate of maintenance expenses attributable to such after-hours use. No other
fees or mark-ups will be charged by Landlord for Tenant's after-hours HVAC use.
Landlord shall bill Tenant monthly for such after-hours usage and Tenant shall
pay such charges to Landlord, as additional rent, within 20 days after receipt
of Landlord's statement of such charges.
(c) Landlord shall furnish to the Premises electric current sufficient
for normal office use. Tenant shall be entitled to use up to four (4) watts per
rentable square foot for connected electrical power to the Premises, exclusive
of ceiling lights and electricity for operation of the HVAC system. Any
reasonable costs for the installation and operation of any additional HVAC
equipment which may be required due to electrical usage in excess of three (3)
watts per rentable square foot of connected electrical power to the Premises,
including maintenance costs and utility charges, shall be paid by Tenant. If a
separate meter is not installed at Tenant's cost, such excess cost will be
established by an estimate agreed upon by Landlord and Tenant, and if the
parties fail to agree, as established by an independent licensed engineer. Said
estimates to be reviewed and adjusted quarterly. Tenant agrees not to use any
apparatus or device in, or upon, or about the Premises which may in any way
increase the amount of such services usually furnished or supplied to said
Premises, and Tenant further agrees not to connect any apparatus or device with
wires,
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<PAGE>
conduits or pipes, or other means by which such services are supplied, for the
purpose of using additional or unusual amounts of such services without written
consent of Landlord, which shall not be unreasonably withheld. Should Tenant use
the same to excess, the refusal on the part of Tenant to pay within ten (10)
days after demand of Landlord the amount established by Landlord for such excess
charge shall constitute a breach of the obligation to pay rent under this Lease
and shall entitle Landlord to the rights therein granted for such breach. At all
times Tenant's use of electric current shall never exceed the capacity of the
feeders to the Building or the risers or wiring installation and Tenant shall
not install or use or permit the installation or use of any computer, larger
than personal computer, or electronic data processing equipment in the Premises,
without the prior written consent of Landlord, which shall not be unreasonably
withheld.
(d) Water will be available in public areas for drinking and lavatory
purposes only, but if Tenant requires, uses or consumes water for any purposes
in addition to ordinary drinking and lavatory purposes of which fact Tenant
constitutes Landlord to be the sole judge, in its reasonable opinion, Landlord
may install a water meter and thereby measure Tenant's water consumption for all
purposes. Tenant shall pay Landlord for the cost of the meter and the cost of
the installation thereof and throughout the duration of Tenant's occupancy,
Tenant shall keep said meter and installation equipment in good working order
and repair at Tenant's own cost and expense, in default of which Landlord may
cause such meter and equipment to be replaced or repaired and collect the cost
thereof from Tenant. Tenant agrees to pay for water consumed, as shown on said
meter, as and when bills are rendered, and on default in making such payment,
Landlord may pay such charges and collect the same from Tenant. Any such costs
or expenses incurred, or payments made by Landlord for any of the reasons or
purposes hereinabove stated shall be deemed to be additional rent payable by
Tenant and collectible by Landlord as such.
(e) Provide janitor service to the Premises, provided the same are
kept reasonably in order by Tenant, and if to be kept clean by Tenant, no one
other than persons approved by Landlord shall be permitted to enter the Premises
for such purposes. If the Premises are not used exclusively as offices
(including Tenant's climate-controlled room), they shall be kept clean and in
order by Tenant, at Tenant's expense, and to the satisfaction of Landlord, and
by persons approved by Landlord. Tenant shall pay to Landlord the cost of
removal of any of Tenant's refuse and rubbish, to the extent that the same
exceeds the refuse and rubbish usually attendant upon the use of the Premises as
offices.
(f) Landlord reserves the right to stop service of the elevator,
plumbing, ventilation, air conditioning and electric systems, when necessary, by
reason of accident or emergency or for repairs, alterations or improvements
which, in the good faith judgment of Landlord, are necessary, until said
repairs, alterations or improvements shall have been completed. Landlord shall
provide Tenant with such prior notice of any intended stoppage in service as is
reasonable under the circumstances. Landlord shall have no responsibility or
liability for failure to supply elevator facilities, plumbing, ventilating, air
conditioning or electric service, when prevented from so doing by strike or
accident or by any cause beyond Landlord's reasonable control, or by laws,
rules, orders, ordinances, directions, regulations or requirements of any
federal, state, county or municipal authority or inability by exercise of
reasonable diligence by Landlord to obtain gas, oil or other suitable fuel. It
is expressly understood and agreed that any covenants on Landlord's part
EXHIBIT C
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<PAGE>
to furnish any service pursuant to any of the terms, covenants, conditions,
provisions or agreements of this Lease, or to perform any act or thing for the
benefit of Tenant, shall not be deemed breached if Landlord is unable to furnish
or perform the same by virtue of a strike or labor trouble or any other cause
whatsoever beyond Landlord's control.
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<PAGE>
RULES AND REGULATIONS
---------------------
Sycamore Plaza I & II
1. Except as specifically provided in the Lease to which these Rules and
Regulations are attached, no sign, placard, picture, advertisement, name or
notice shall be installed or displayed on any part of the outside or inside of
the Building without the prior written consent of Landlord, which shall not be
unreasonably withheld Landlord shall have the right to remove, at Tenant's
expense and without notice, any sign installed or displayed in violation of this
rule.
2. If Landlord reasonably objects in writing to any curtains, blinds,
shades, screens or hanging plants or other similar objects attached to or used
in connection with any window or door of the Premises, or placed on any
windowsill, which is visible from the exterior of the Premises, Tenant shall
immediately discontinue such use. Tenant shall not place anything against or
near glass partitions or doors or windows which may appear unsightly from
outside the Premises.
3. Tenant shall not obstruct any sidewalks, halls, passages, exits,
entrances, elevators, escalators, or stairways of the Project. The halls,
passages, exits, entrances, elevators, and stairways are not open to the general
public, but are open, subject to reasonable regulation, to Tenant's business
invitees. Landlord shall in all cases retain the right to control and prevent
access thereto of all persons whose presence in the reasonable judgment of
Landlord would be prejudicial to the safety, character and reputation of the
Project; provided that nothing herein contained shall be construed to prevent
such access to persons with whom any tenant normally deals in the ordinary
course of its business, unless such persons are engaged in illegal or unlawful
activities. No tenant and no employee or invitee of any tenant shall go upon
the roof of any building of the Project.
4. The directory of the building will be provided exclusively for the
display of the name and location of tenants only, and Landlord reserves the
right to exclude any other names therefrom.
5. Intentionally deleted.
6. Landlord will furnish Tenant, free of charge, with two keys to each
door lock in the Premises. Landlord may make a reasonable charge for any
additional keys. Tenant shall not alter any lock or install a new additional
lock or bolt on any door of its Premises. Tenant, upon the termination of its
tenancy, shall deliver to Landlord the keys of all doors which have been
furnished to Tenant, and in the event of loss of any keys so furnished, shall
pay Landlord therefor.
7. If Tenant requires telegraphic, telephonic, burglar alarm or similar
services, it shall first obtain, and comply with, Landlord's written
instructions, if any, in their installation.
8. Tenant shall not place a load upon any floor of the Premises which
exceeds the load per square foot which such floor was designed to carry and
which is allowed by law. Landlord shall have the right to prescribe the weight
of all equipment or other machinery or apparatus brought into the Project.
Heavy objects shall, if considered necessary by Landlord, stand on such
platforms as determined by Landlord to be reasonably necessary to properly
distribute the weight, which
EXHIBIT D
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<PAGE>
platforms shall be provided at Tenant's expense. Business machines and
mechanical equipment belonging to Tenant, which cause noise or vibration that
may be transmitted to the structure of the Premises to such a degree to be
objectionable to Landlord, shall be placed and maintained by Tenant, at Tenant's
expense, on vibration eliminators or other devices sufficient to eliminate noise
or vibration. The moving companies employed to move such equipment in or out of
the Premises must be reasonably acceptable to Landlord. Landlord will not be
responsible for loss of, or damage to, any such equipment or other property from
any cause, and all damage done to the Premises, by maintaining or moving such
equipment or other property shall be repaired at the expense of Tenant.
9. Tenant shall not use or keep in the Premises any kerosene, gasoline or
inflammable or combustible fluid or material other than those limited quantities
necessary for the operation or maintenance of office equipment. Tenant shall
not use or permit to be used in the Premises any foul or noxious gas or
substance, or permit or allow the Premises to be occupied or used in a manner
injurious to Landlord or other occupants of the Project by reason of noise,
odors or vibrations, nor shall Tenant bring into or keep in or about the
Premises any birds or animals.
10. Tenant shall not use any method of heating or air-conditioning other
than that supplied by Landlord.
11. Tenant shall not waste electricity, water or air-conditioning and
agrees to cooperate fully with Landlord to assure the most effective operation
of the Premises' heating and air-conditioning and to comply with any
governmental energy-saving rules, laws or regulations of which Tenant has actual
notice. Tenant shall keep corridor doors closed, and shall close window
coverings at the end of each business day.
12. Landlord reserves the right, exercisable with notice but without
liability to Tenant, to change the name and street address of the Premises.
13. Landlord reserves the right to exclude from the Project between the
hours of 6 p.m. and 7 a.m. the following day, or such other hours as may be
established from time to time by Landlord, and on Sundays and legal holidays,
any person unless that person is known to the person or employee in charge of
the Project and has a pass or is properly identified. Tenant shall be
responsible for all persons for whom it requests passes and shall be liable to
Landlord for all acts of such persons. Landlord shall not be liable for damages
for any error with regard to the admission to or exclusion from the Project of
any person. Landlord reserves the right to prevent access to the Project in
case of invasion, mob, riot, public excitement or other commotion by closing the
doors or by other appropriate action.
14. Tenant shall close and lock the doors of its Premises and entirely
shut off all water faucets or other water apparatus, and electricity, gas or air
outlets before tenant and its employees leave the Premises.
15. Tenant shall not obtain for use on the Premises ice, drinking water,
food beverages, towel or other similar services upon the Premises, except at
such hours and under such regulations
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<PAGE>
as may be fixed by Landlord. The foregoing shall not, however, prevent Tenant
from installing and operating a refrigerator, coffee maker and/or microwave oven
in any kitchen or lunchroom in the Premises.
16. The toilet rooms, toilets, urinals, wash bowls and other apparatus
shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be thrown
therein. The expense of any breakage, stoppage of damage resulting from the
violation of this rule shall be borne by the tenant who, or whose employees or
invitees, shall have caused it.
17. Tenant shall not sell, or permit the sale at retail, of newspapers,
magazines, periodicals, theater tickets or any other goods or merchandise to the
general public in or on the Premises. Tenant shall not make any room-to-room
solicitation of business from other tenants in the Project. Tenant shall not
use the Premises for any business or activity other than that specifically
provided for in Tenant's Lease.
18. Tenant shall not install any radio or television antenna, loudspeaker
or other devices on the roof or exterior walls of the Premises. Tenant shall
not interfere with radio or television broadcasting or reception from or in the
Project or elsewhere.
19. Tenant shall not mark, drive nails, screw or drill into the
partitions, woodwork or plaster or in any way deface the Premises or any part
thereof, except in accordance with the provisions of the Lease pertaining to
alterations. Tenant shall not cut or bore holes for wires. Tenant shall not
affix any floor covering to the floor of the Premises in any manner except as
reasonably approved by Landlord. Tenant shall repair any damage resulting from
noncompliance with this rule.
20. Tenant shall not install, maintain or operate upon the Premises any
vending machines without the written consent of Landlord, which shall not be
unreasonably withheld.
21. Canvassing, soliciting and distributing of handbills or any other
written material, and peddling in the Project are prohibited, and Tenant shall
cooperate to prevent such activities.
22. Landlord reserves the right to exclude or expel from the Project any
person who, in Landlord's good faith judgment, is intoxicated or under the
influence of liquor or drugs or who is in violation of any of the Rules and
Regulations of the Project.
23. Tenant shall store all its trash and garbage within its Premises or in
other facilities provided by Landlord at the Premises. Tenant shall not place
in any trash box or receptacle any material which cannot be disposed of in the
ordinary and customary manner of trash and garbage disposal. All garbage and
refuse disposal shall be made in accordance with directions reasonably issued
from time to time by Landlord.
24. The Premises shall not be used for the storage of merchandise held for
sale to the general public, or for lodging or for manufacturing of any kind, nor
shall the Premises be used for
EXHIBIT D
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<PAGE>
any improper, immoral or objectionable purpose. No cooking shall be done or
permitted on the Premises without Landlord's consent, except that use by Tenant
of Underwriter's Laboratory approved equipment for brewing coffee, tea, hot
chocolate and similar beverages or use of microwave ovens for employee use shall
be permitted, provided that such equipment and use is in accordance with all
applicable federal, state, county and city laws, codes, ordinances, rules and
regulations.
25. Tenant shall not use in the Premises any hand truck except those
equipped with rubber tires and side guards or such other material-handling
equipment as Landlord may approve. Tenant shall not bring any other vehicles of
any kind into the Premises.
26. Without the written consent of Landlord, Tenant shall not use the name
of the Project in connection with or in promoting or advertising the business of
Tenant except as Tenant's address.
27. Tenant shall comply with all safety, fire protection and evacuation
procedures and regulations established by Landlord or any governmental agency.
28. Tenant and its employees, guests and invitees shall not enter into the
waterways located in the Project. No object of any kind may be floated or
submerged in the waterways, and no foreign substance of any kind may be thrown
in the waterways. The expense of any breakage or damage to any mechanical
equipment related to the waterways resulting from violation of this rule or any
expense incurred restoring the waterways to their normal condition shall be
borne by the tenant who, or whose employees or invitees, shall have caused such
damage.
29. Tenant assumes any and all responsibility for protecting its Premises
from theft, robbery and pilferage, which includes keeping doors locked and other
means of entry to the Premises closed.
30. Tenant's requirements will be attended to only upon written request to
the Project management office by an authorized individual. Employees of
Landlord shall not perform any work or do anything outside of their regular
duties unless under special instructions from Landlord, and no employee of
Landlord will admit any person (Tenant or otherwise) to any office without
specific instructions from Landlord.
31. Landlord may waive any one or more of these Rules and Regulations for
the benefit of Tenant or any other tenant, but no such waiver by Landlord shall
be construed as a waiver of such Rules and Regulations in favor of Tenant or any
other tenant, nor prevent Landlord from thereafter enforcing any such Rules and
Regulations against any or all of the tenants of the Project.
32. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of Tenant's lease of its Premises in the
Project.
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33. Landlord reserves the right to make such other and reasonable Rules
and Regulations as, in its judgment, may from time to time be needed for safety
and security, for care and cleanliness of the Project and for the preservation
of good order therein, provided that any such Rules and Regulations do not
materially impair Tenant's use of or access to the Premises. Tenant agrees to
abide by all such Rules and Regulations hereinabove stated and any additional
rules and regulations which are adopted. In particular, tenant shall comply at
all times with the City of Pleasanton's Transportation Systems Management
Ordinance (TSM Ordinance, Chapter 17.24, Pleasanton Municipal Code), as said
Ordinance may be amended from time to time."
34. Tenant shall be responsible for the observance of all of the foregoing
rules by Tenant's employees, agents, clients, customers, invitees and guests.
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<PAGE>
PARKING RULES AND REGULATIONS
-----------------------------
The following rules and regulations shall govern use of the parking facilities
which are appurtenant to the Building.
1. All claimed damage or loss must be reported and itemized in writing
delivered to the Landlord within ten business days after any claimed damage or
loss occurs or as promptly as practicable. Court actions by Tenant for any
claim must be filed in the court of jurisdiction where a claimed loss occurred.
Landlord is not responsible for damage by water, fire, or defective brakes, or
parts, or for the act of omissions of others, or for articles left in the car.
Landlord is not responsible for loss of use.
2. Tenant shall not park or permit the parking of any vehicle under its
control in any parking areas designated by Landlord as areas for parking by
visitors to the Building. Tenant shall not leave vehicles in the parking areas
overnight (other than company-owned automobiles which may be parked overnight in
a designated location agreed to by Landlord and Tenant) nor park any vehicles in
the parking areas other than automobiles, motorcycles, motor driven or non-motor
driven bicycles or four-wheeled trucks.
3. Parking stickers or any other device or form of identification supplied
by Landlord as a condition of use of the Parking Facilities shall remain the
property of Landlord. Such parking identification device must be displayed as
requested and may not be mutilated in any manner. The serial number of the
parking identification device may not be obliterated. Devices are not
transferable and any device in the possession of an unauthorized holder will be
void.
4. No extended term storage of vehicles shall be permitted. Overnight
parking of company-owned automobiles only shall be permitted in a designated
location agreed to by Landlord and Tenant.
5. Vehicles must be parked entirely within the painted stall lines of a
single parking stall.
6. All directional signs and arrows must be observed.
7. The speed limit within all parking areas shall be 5 miles per hour.
8. Parking is prohibited:
(a) in areas not striped for parking;
(b) in aisles;
(c) where "no parking" signs are posed;
(d) on ramps;
EXHIBIT E
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<PAGE>
(e) in cross hatched areas; and
(f) in such other areas as may be designated by Landlord or
Landlord's Parking Operator.
9. Every parker is required to park and lock his own vehicle. All
responsibility for damage to vehicles is assumed by the parker.
10. Loss or theft of parking identification devices from automobiles must
be reported immediately, and a lost or stolen report must be filed by the
customer at that time. Landlord has the right to exclude any car from the
parking facilities that does not have an identification.
11. Any parking identification devices reported lost or stolen found on
any unauthorized car will be confiscated and the illegal holder will be subject
to prosecution.
12. Any lost or stolen parking identification devices which are found must
be reported immediately to avoid confusion.
13. Washing, waxing, cleaning or servicing of any vehicle in any area not
specifically reserved for such purpose is prohibited.
14. Landlord reserves the right to refuse the sale of monthly stickers or
other parking identification devices to any tenant or person and/or his agents
or representatives who willfully refuse to comply with these Rules and
Regulations and all unposted City, State or Federal ordinances, laws or
agreements.
15. Landlord reserves the right to modify and/or adopt such other
reasonable and non-discriminatory rules and regulations for the parking
facilities as it deems necessary for the operation of the parking facilities.
Landlord may refuse to permit any person who violates these rules to park in the
parking facilities, and any violation of the rules shall subject the car to
removal.
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<PAGE>
EXHIBIT 10.18
DOCUMENTUM, INC.
1996 NON-OFFICER EQUITY INCENTIVE PLAN
Adopted by Board on October 16, 1996
As Amended On
MARCH 6, 1997
DECEMBER 17,1997
JANUARY 7, 1998
FEBRUARY 5, 1998
JULY 10, 1998
AUGUST 6, 1998
1. PURPOSES.
(a) The purpose of the 1996 Non-Officer Equity Incentive (The "NSO Plan")
is to provide a means by which selected Employees of and Consultants to the
Company, and its Affiliates, may be given an opportunity to benefit from
increases in value of the stock of the Company through the granting of (i)
Nonstatutory Stock Options, (ii) stock bonuses, and (iii) rights to purchase
restricted stock, all as defined below.
(b) The Company, by means of the NSO Plan, seeks to retain the services of
persons (other than Directors and Employees serving as Officers of the Company
or its Affiliates) who are now Employees of or Consultants to the Company or its
Affiliates, to secure and retain the services of new Employees and Consultants,
and to provide incentives for such persons to exert maximum efforts for the
success of the Company and its Affiliates.
(c) The Company intends that the Stock Awards issued under the NSO Plan
shall, in the discretion of the Board or any Committee to which responsibility
for administration of the NSO Plan has been delegated pursuant to subsection
3(c), be either (i) Nonstatutory Stock Options granted pursuant to Section 6
hereof, or (ii) stock bonuses or rights to purchase restricted stock granted
pursuant to Section 7 hereof.
2. DEFINITIONS.
<PAGE>
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f), respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the NSO Plan.
(e) "COMPANY" means Documentum, Inc., a Delaware corporation.
(f) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include those
persons who render services as a Director.
(g) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means that the
service of an individual to the Company, whether as an Employee or Consultant,
is not interrupted or terminated. The Board, in its sole discretion, may
determine whether Continuous Status as an Employee or Consultant shall be
considered interrupted in the case of: (i) any leave of absence approved by the
Board, including sick leave, military leave, or any other personal leave; or
(ii) transfers between locations of the Company or between the Company,
Affiliates or their successors.
(h) "DIRECTOR" means a member of the Board.
(i) "DISABILITY" means permanent and total disability as defined in
Section 22(e)(3) of the Code.
(j) "EMPLOYEE" means any person employed by the Company or any Affiliate
of the Company. Neither service as a Director nor payment of a director's fee by
the Company shall be sufficient to constitute "employment" by the Company.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(l) "FAIR MARKET VALUE" means, as of any date, the value of the common
stock of the Company, determined as follows:
(1) If the common stock is listed on any established stock exchange
or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of
<PAGE>
common stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such exchange or market (or the
exchange or market with the greatest volume of trading in the Company's common
stock) on the date of determination, and if the date of determination was not a
market trading day, then on the last market trading day prior to the date of
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.
(2) In the absence of such markets for the common stock, the Fair
Market Value shall be determined in good faith by the Board.
(m) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an incentive stock option pursuant to Section 422 of the Code and the
regulations promulgated thereunder.
(n) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(o) "OPTION" means a stock option granted pursuant to the NSO Plan.
(p) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the NSO
Plan.
(q) "OPTIONEE" means an Employee or Consultant who holds an outstanding
Option.
(r) "NSO PLAN" means this 1996 Non-Officer Equity Incentive Plan.
(s) "STOCK AWARD" means any right granted under the NSO Plan, including
any Option, any stock bonus and any right to purchase restricted stock.
(t) "STOCK AWARD AGREEMENT" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the NSO Plan.
3. ADMINISTRATION.
(a) The NSO Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).
<PAGE>
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the NSO Plan:
(1) To determine from time to time which of the persons eligible
under the NSO Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; whether a Stock Award will be a Nonstatutory Stock Option, a
stock bonus, a right to purchase restricted stock, or a combination of the
foregoing; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive stock pursuant to a Stock Award; and the number of shares with respect
to which a Stock Award shall be granted to each such person.
(2) To construe and interpret the NSO Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the NSO Plan or in any Stock Award
Agreement, in a manner and to the extent it shall deem necessary or expedient to
make the NSO Plan fully effective.
(3) To amend the NSO Plan or a Stock Award as provided in Section
12.
(4) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the NSO Plan.
(c) The Board may delegate administration of the NSO Plan to a committee
composed of one or more members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the NSO Plan, the powers theretofore
possessed by the Board (and references in this NSO Plan to the Board shall
thereafter be to the Committee), subject, however, to such resolutions, not
inconsistent with the provisions of the NSO Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest
in the Board the administration of the NSO Plan.
4. SHARES SUBJECT TO THE NSO PLAN.
(a) Subject to the provisions of Section11 relating to adjustments upon
changes in stock, the number of shares of stock that may be issued pursuant to
Stock Awards shall not exceed in the aggregate two million three hundred seventy
five thousand (2,375,000) shares of the Company's common stock. If any Stock
Award shall for any reason expire or otherwise terminate, in whole or in part,
without having been exercised in full, the stock not acquired under such Stock
Award shall revert to and again become available for issuance under the NSO
PLAN.
<PAGE>
(b) The stock subject to the NSO PLAN may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
Stock Awards may be granted only to Employees or Consultants who are not
(i) Officers, (ii) Directors, or (iii) then subject to Section 16 of the
Exchange Act.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) PRICE. The exercise price of each Nonstatutory Stock Option shall be
not less than eighty-five percent (85%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted.
(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment arrangement, except that payment of the common
stock's "par value" (as defined in the Delaware General Corporation Law) shall
not be made by deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other common stock of the
Company) with the person to whom the Option is granted or to whom the Option is
transferred pursuant to subsection 6(d), or (C) in any other form of legal
consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be payable
at least annually and shall be charged at the minimum rate of interest necessary
to avoid the treatment as interest, under any applicable provisions of the Code,
of any amounts other than amounts stated to be interest under the deferred
payment arrangement.
(d) TRANSFERABILITY. An Option shall not be transferable except by will
or by the laws of descent and distribution (and shall be exercisable during the
lifetime of the person to whom the
<PAGE>
Option is granted only by such person) unless the applicable Option Agreement
expressly provides for other transferability. Notwithstanding the foregoing, the
person to whom the Option is granted may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who, in
the event of the death of the Optionee, shall thereafter be entitled to exercise
the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The vesting provisions of
individual Options may vary. The provisions of this subsection 6(e) are subject
to any Option provisions governing the minimum number of shares as to which an
Option may be exercised.
(f) TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP. In the event an
Optionee's Continuous Status as an Employee or Consultant terminates (other than
upon the Optionee's death or disability), the Optionee may exercise his or her
Option (to the extent that the Optionee was entitled to exercise it as of the
date of termination) but only within such period of time ending on the earlier
of (i) the date three (3) months following the termination of the Optionee's
Continuous Status as an Employee or Consultant (or such longer or shorter period
specified in the Option Agreement), or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, at the date of termination, the
Optionee is not entitled to exercise his or her entire Option, the shares
covered by the unexercisable portion of the Option shall revert to the NSO PLAN.
If, after termination, the Optionee does not exercise his or her Option within
the time specified in the Option Agreement, the Option shall terminate, and the
shares covered by such Option shall revert to and again become available for
issuance under the NSO PLAN.
An Optionee's Option Agreement may also provide that if the exercise of the
Option following the termination of the Optionee's Continuous Status as an
Employee or Consultant (other than upon the Optionee's death or disability)
would result in liability under Section 16(b) of the Exchange Act, then the
Option shall terminate on the earlier of (i) the expiration of the term of the
Option set forth in the Option Agreement, or (ii) the tenth (10th) day after the
last date on which such exercise would result in such liability under Section
16(b) of the Exchange Act. Finally, an Optionee's Option Agreement may also
provide that if the exercise of the Option following the termination of the
Optionee's Continuous Status as an Employee or Consultant (other than upon the
Optionee's death or disability) would be prohibited at any time solely because
the issuance of
<PAGE>
shares would violate the registration requirements under the Act, then the
Option shall terminate on the earlier of (i) the expiration of the term of the
Option set forth in the first paragraph of this subsection 6(f), or (ii) the
expiration of a period of three (3) months after the termination of the
Optionee's Continuous Status as an Employee or Consultant during which the
exercise of the Option would not be in violation of such registration
requirements.
(g) Disability of Optionee. In the event an Optionee's Continuous Status
as an Employee or Consultant terminates as a result of the Optionee's
Disability, the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination), but only
within such period of time ending on the earlier of (i) the date six (6) months
following such termination (or such longer or shorter period specified in the
Option Agreement), or (ii) the expiration of the term of the Option as set forth
in the Option Agreement. If, at the date of termination, the Optionee is not
entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the NSO PLAN. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the NSO PLAN.
(h) Death of Optionee. In the event of the death of an Optionee during, or
within a period specified in the Option Agreement after the termination of, the
Optionee's Continuous Status as an Employee or Consultant, the Option may be
exercised (to the extent the Optionee was entitled to exercise the Option as of
the date of death) by the Optionee's estate, by a person who acquired the right
to exercise the Option by bequest or inheritance, but only within the period
ending on the earlier of (i) the date twelve (12) months following the date of
death (or such longer or shorter period specified in the Option Agreement), or
(ii) the expiration of the term of such Option as set forth in the Option
Agreement. If, at the time of death, the Optionee was not entitled to exercise
his or her entire Option, the shares covered by the unexercisable portion of the
Option shall revert to and again become available for issuance under the NSO
PLAN. If, after death, the Option is not exercised within the time specified
herein, the Option shall terminate, and the shares covered by such Option shall
revert to and again become available for issuance under the NSO PLAN.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The terms and conditions of stock bonus or restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate agreements need not be identical, but each stock bonus or
restricted stock purchase agreement shall include (through incorporation of
provisions
<PAGE>
hereof by reference in the agreement or otherwise) the substance of each of the
following provisions as appropriate:
(a) Purchase Price. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such agreement, but in no event shall the purchase
price be less than eighty-five percent (85%) of the stock's Fair Market Value on
the date such award is made. Notwithstanding the foregoing, the Board or the
Committee may determine that eligible participants in the NSO PLAN may be
awarded stock pursuant to a stock bonus agreement in consideration for past
services actually rendered to the Company or for its benefit.
(b) Transferability. No rights under a stock bonus or restricted stock
purchase agreement shall be transferable except by will or the laws of descent
and distribution, unless the applicable Stock Award Agreement expressly provides
for other transferability.
(c) Consideration. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment or other arrangement, except that payment of the common stock's
"par value" (as defined in the Delaware General Corporation Law) shall not be
made by deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other common stock of the
Company) with the person to whom the stock is sold; or (iii) in any other form
of legal consideration that may be acceptable to the Board or the Committee in
its discretion. Notwithstanding the foregoing, the Board or the Committee to
which administration of the NSO PLAN has been delegated may award stock pursuant
to a stock bonus agreement in consideration for past services actually rendered
to the Company or for its benefit.
(d) Vesting. Shares of stock sold or awarded under the NSO PLAN may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee.
(e) Termination of Employment or Consulting Relationship. In the event a
Participant's Continuous Status as an Employee or Consultant terminates, the
Company may repurchase or otherwise reacquire, subject to the limitations
described in subsection 7(d), any or all of the shares of stock held by that
person which have not vested as of the date of termination under the terms of
the stock bonus or restricted stock purchase agreement between the Company and
such person.
8. COVENANTS OF THE COMPANY.
<PAGE>
(a) During the terms of the Stock Awards, the Company shall keep available
at all times the number of shares of stock required to satisfy such Stock
Awards.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the NSO PLAN such authority as may be required
to issue and sell shares of stock upon exercise of the Stock Award; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act of 1933, as amended (the "Securities Act") either the NSO
PLAN, any Stock Award or any stock issued or issuable pursuant to any such Stock
Award. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the NSO PLAN,
the Company shall be relieved from any liability for failure to issue and sell
stock upon exercise of such Stock Awards unless and until such authority is
obtained.
9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
10. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which a Stock
Award may first be exercised or the time during which a Stock Award or any part
thereof will vest pursuant to subsection 6(e) or 7(d), notwithstanding the
provisions in the Stock Award stating the time at which it may first be
exercised or the time during which it will vest.
(b) Neither an Employee or Consultant, nor any person to whom a Stock Award
is transferred under subsection 6(d) or 7(b) shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares subject
to such Stock Award unless and until such person has satisfied all requirements
for exercise of the Stock Award pursuant to its terms.
(c) Nothing in the NSO PLAN or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee, Consultant or other
holder of Stock Awards any right to continue in the employ of the Company or any
Affiliate (or to continue acting as a Consultant) or shall affect the right of
the Company or any Affiliate to terminate the employment of any Employee with or
without cause, or to terminate the relationship of any Consultant in accordance
with the terms of that Consultant's agreement with the Company or Affiliate to
which such Consultant is providing services.
<PAGE>
(d) Securities Law Compliance. The Company may require any person to whom
a Stock Award is granted, or any person to whom a Stock Award is transferred
pursuant to subsection 6(d) or 7(b), as a condition of exercising or acquiring
stock under any Stock Award, (1) to give written assurances satisfactory to the
Company as to such person's knowledge and experience in financial and business
matters and/or to employ a purchaser representative reasonably satisfactory to
the Company who is knowledgeable and experienced in financial and business
matters, and that he or she is capable of evaluating, alone or together with the
purchaser representative, the merits and risks of exercising the Stock Award;
and (2) to give written assurances satisfactory to the Company stating that such
person is acquiring the stock subject to the Stock Award for such person's own
account and not with any present intention of selling or otherwise distributing
the stock. The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective registration statement under the Securities Act, or
(ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may require the holder of the Stock
Award to provide such other representations, written assurances or information
which the Company shall determine is necessary, desirable or appropriate to
comply with applicable securities and other laws as a condition of granting a
Stock Award to such person or permitting the holder of the Stock Award to
exercise the Stock Award. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the NSO PLAN as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.
(e) Withholding. To the extent provided by the terms of a Stock Award
Agreement, the person to whom a Stock Award is granted may satisfy any federal,
state or local tax withholding obligation relating to the exercise or
acquisition of stock under a Stock Award by any of the following means or by a
combination of such means: (1) tendering a cash payment; (2) authorizing the
Company to withhold shares from the shares of the common stock otherwise
issuable to the participant as a result of the exercise or acquisition of stock
under the Stock Award; or (3) delivering to the Company owned and unencumbered
shares of the common stock of the Company.
11. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the NSO PLAN, or subject
to any Stock Award, without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company),
<PAGE>
the NSO PLAN will be appropriately adjusted in the class(es) and the maximum
number of shares subject to the NSO PLAN pursuant to subsection 4(a), and the
outstanding Stock Awards will be appropriately adjusted in the class(es) and
number of shares and price per share of stock subject to such outstanding Stock
Awards. Such adjustments shall be made by the Board or the Committee, the
determination of which shall be final, binding and conclusive. (The conversion
of any convertible securities of the Company shall not be treated as a
"transaction not involving the receipt of consideration by the Company.")
(b) In the event of: (1) a dissolution, liquidation or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise, then to the extent permitted by applicable law: (i) any
surviving corporation or an Affiliate of such surviving corporation shall assume
any Stock Awards outstanding under the NSO PLAN or shall substitute similar
Stock Awards for those outstanding under the NSO PLAN, or (ii) such Stock Awards
shall continue in full force and effect. In the event any surviving corporation
and its Affiliates refuse to assume or continue such Stock Awards, or to
substitute similar Stock Awards for those outstanding under the NSO PLAN, then,
with respect to Stock Awards held by persons then performing services as
Employees or Consultants, the time during which such Stock Awards may be
exercised shall be accelerated and the Stock Awards terminated if not exercised
prior to such event.
12. AMENDMENT OF THE NSO PLAN AND STOCK AWARDS.
(a) The Board at any time, and from time to time, may amend the NSO PLAN.
(b) The Board, in its sole discretion, may submit the NSO PLAN and/or any
amendment to the NSO PLAN for stockholder approval.
(c) It is expressly contemplated that the Board may amend the NSO PLAN in
any respect the Board deems necessary or advisable to provide those eligible
with the maximum benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder.
(d) Rights and obligations under any Stock Award granted before amendment
of the NSO PLAN shall not be impaired by any amendment of the NSO PLAN unless
(i) the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.
<PAGE>
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Stock Award; provided, however, that the rights and obligations
under any Stock Award shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
13. TERMINATION OR SUSPENSION OF THE NSO PLAN.
(a) The Board may suspend or terminate the NSO PLAN at any time. Unless
sooner terminated, the NSO PLAN shall terminate on October 15, 2006, which shall
be within ten (10) years from the date the NSO PLAN is adopted by the Board. No
Stock Awards may be granted under the NSO PLAN while the NSO PLAN is suspended
or after it is terminated.
(b) Rights and obligations under any Stock Award granted while the NSO PLAN
is in effect shall not be impaired by suspension or termination of the NSO PLAN,
except with the written consent of the person to whom the Stock Award was
granted.
14. EFFECTIVE DATE OF NSO PLAN.
The NSO PLAN shall become effective on October 16, 1996.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Company's
Form 10-Q for the period ended June 30, 1998 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1998
<PERIOD-START> APR-01-1998 JAN-01-1998
<PERIOD-END> JUN-30-1998 JUN-30-1998
<CASH> 14,754 0
<SECURITIES> 79,624 0
<RECEIVABLES> 24,574 0
<ALLOWANCES> 2,827 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 122,816 0
<PP&E> 20,522 0
<DEPRECIATION> (9,277) 0
<TOTAL-ASSETS> 140,061 0
<CURRENT-LIABILITIES> 32,549 0
<BONDS> 0 0
0 0
0 0
<COMMON> 16 0
<OTHER-SE> 107,496 0
<TOTAL-LIABILITY-AND-EQUITY> 140,061 0
<SALES> 18,716 35,767
<TOTAL-REVENUES> 28,432 53,509
<CGS> 703 1,906
<TOTAL-COSTS> 6,664 12,913
<OTHER-EXPENSES> 18,003 36,680
<LOSS-PROVISION> 620 651
<INTEREST-EXPENSE> 11 16
<INCOME-PRETAX> 4,804 6,060
<INCOME-TAX> 1,633 2,399
<INCOME-CONTINUING> 3,171 3,661
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 3,171 3,661
<EPS-PRIMARY> .20 .23
<EPS-DILUTED> .19 .22
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENT.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-START> JUL-01-1996 JAN-01-1996
<PERIOD-END> SEP-30-1996 SEP-30-1996
<CASH> 0 8,139
<SECURITIES> 0 46,836
<RECEIVABLES> 0 8,267
<ALLOWANCES> 0 (788)
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 63,402
<PP&E> 0 8,153
<DEPRECIATION> 0 2,866
<TOTAL-ASSETS> 0 69,095
<CURRENT-LIABILITIES> 0 12,645
<BONDS> 0 0
0 0
0 0
<COMMON> 0 14
<OTHER-SE> 0 56,092
<TOTAL-LIABILITY-AND-EQUITY> 0 69,095
<SALES> 9,127 23,768
<TOTAL-REVENUES> 12,036 30,925
<CGS> 476 1,397
<TOTAL-COSTS> 2,208 6,049
<OTHER-EXPENSES> 8,408 22,220
<LOSS-PROVISION> 16 25
<INTEREST-EXPENSE> 31 101
<INCOME-PRETAX> 2,080 4,233
<INCOME-TAX> (728) (1,482)
<INCOME-CONTINUING> 1,352 2,751
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,352 2,751
<EPS-PRIMARY> .10 .20
<EPS-DILUTED> .09 .19
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> APR-01-1997 JAN-01-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<CASH> 9,033 0
<SECURITIES> 46,857 0
<RECEIVABLES> 12,846 0
<ALLOWANCES> 860 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 70,009 0
<PP&E> 14,159 0
<DEPRECIATION> 5,010 0
<TOTAL-ASSETS> 80,631 0
<CURRENT-LIABILITIES> 17,733 0
<BONDS> 0 0
0 0
0 0
<COMMON> 14 0
<OTHER-SE> 62,884 0
<TOTAL-LIABILITY-AND-EQUITY> 62,898 0
<SALES> 12,007 23,069
<TOTAL-REVENUES> 17,310 32,347
<CGS> 411 797
<TOTAL-COSTS> 3,322 6,198
<OTHER-EXPENSES> 12,373 23,260
<LOSS-PROVISION> 31 (146)
<INTEREST-EXPENSE> 11 33
<INCOME-PRETAX> 2,167 3,886
<INCOME-TAX> 720 (1,322)
<INCOME-CONTINUING> 1,447 2,564
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 1,447 2,564
<EPS-PRIMARY> .10 .18
<EPS-DILUTED> .10 .17
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-START> JUL-01-1997 JAN-01-1997
<PERIOD-END> SEP-30-1997 SEP-30-1997
<CASH> 8,915 0
<SECURITIES> 48,226 0
<RECEIVABLES> 16,850 0
<ALLOWANCES> 1,145 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 76,859 0
<PP&E> 15,765 0
<DEPRECIATION> 5,891 0
<TOTAL-ASSETS> 87,188 0
<CURRENT-LIABILITIES> 21,785 0
<BONDS> 0 0
0 0
0 0
<COMMON> 14 0
<OTHER-SE> 65,389 0
<TOTAL-LIABILITY-AND-EQUITY> 87,188 0
<SALES> 14,215 37,284
<TOTAL-REVENUES> 19,669 52,016
<CGS> 678 1,475
<TOTAL-COSTS> 3,844 10,042
<OTHER-EXPENSES> 13,218 36,478
<LOSS-PROVISION> 448 302
<INTEREST-EXPENSE> 4 36
<INCOME-PRETAX> 3,071 6,957
<INCOME-TAX> 1,044 2,366
<INCOME-CONTINUING> 2,027 4,591
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 2,027 4,591
<EPS-PRIMARY> .14 .32
<EPS-DILUTED> .14 .31
</TABLE>
