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 March 31, 1997
[ ] 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 0-25864
AVANT! CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 94-3133226
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1208 East Arques Avenue
Sunnyvale, California 94086
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (408) 738-8881
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. [ x ] Yes [ ] No
The number of shares outstanding of the registrant's common stock as of April
30, 1997 was 25,596,346.
<PAGE>
AVANT! CORPORATION
FORM 10-Q
March 31, 1997
<TABLE>
INDEX
<CAPTION>
PART 1. FINANCIAL INFORMATION Page
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 1997 and
December 31, 1996 1
Consolidated Statements of Income for the Three Months
Ended March 31, 1997 and 1996 2
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1997 and 1996 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 6
PART 2. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 12
Item 3. Defaults Upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signature Page 13
Exhibit Index 14
</TABLE>
<PAGE>
PART 1. FINANCIAL INFORMATION
<TABLE>
Item 1. Financial Statements
AVANT! CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
March 31, December 31,
1997 1996
--------- ---------
(unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 73,602 $ 33,067
Short-term investments 55,883 84,256
Accounts receivable, net 11,816 13,321
Deferred income taxes 5,872 6,450
Prepaid income taxes -- 1,254
Other assets 8,533 7,892
--------- ---------
Total current assets 155,706 146,240
Equipment, furniture and fixtures, net 10,366 8,929
Capitalized software, net 46 62
Other assets 975 872
--------- ---------
Total assets $ 167,093 $ 156,103
========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of capital lease obligations $ 31 $ 52
Accounts payable 1,791 1,716
Accrued compensation 4,861 4,082
Accrued income taxes 1,846 --
Other accrued liabilities 6,692 9,947
Current portion of technology acquisition payable 963 642
Deferred revenue 15,417 13,824
--------- ---------
Total current liabilities 31,601 30,263
Deferred rent 61 71
Other noncurrent liabilities 43 43
Technology acquisition payable, less current portion 498 903
--------- ---------
Total liabilities 32,203 31,280
--------- ---------
Commitments and contingencies
Shareholders' equity:
Series A convertible preferred stock, $.000l par value;
5,000 shares authorized;
no shares issued and outstanding in 1997 and 1996 -- --
Common stock, $.0001 par value; 50,000 shares authorized;
25,288 and 24,952 shares issued and outstanding
at March 31, 1997 and December 31,1996, respectively 3 3
Additional paid-in capital 113,562 110,583
Deferred compensation (2,520) (2,820)
Net unrealized loss on short-term investments (111) (75)
Retained earnings 23,956 17,132
--------- ---------
Total shareholders' equity 134,890 124,823
--------- ---------
Total liabilities and shareholders' equity $ 167,093 $ 156,103
========= =========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
1
<PAGE>
AVANT! CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended
March 31,
-------------------------
1997 1996
-------- --------
Revenue:
Software $ 23,998 $ 18,603
Services 7,195 4,944
-------- --------
Total revenue 31,193 23,547
-------- --------
Costs and expenses:
Costs of software 448 615
Costs of services 3,018 1,935
Selling and marketing 8,222 6,242
Research and development 5,965 5,269
General and administrative 3,806 2,735
-------- --------
Total operating expenses 21,459 16,796
-------- --------
Income from operations 9,734 6,751
Interest income 1,069 908
Other income (expense) (140) 0
-------- --------
Income before income taxes 10,663 7,659
Provision for income taxes 3,839 2,745
-------- --------
Net income $ 6,824 $ 4,914
======== ========
Net income per common share $ 0.25 $ 0.19
======== ========
Weighted average number of
common and common equivalent
shares outstanding 27,298 26,120
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
AVANT! CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<CAPTION>
Three Months Ended
March 31,
------------------------------
1997 1996
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,824 $ 4,914
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 973 696
Amortization of capitalized software costs 16 27
Amortization of deferred compensation 300 40
Deferred income taxes 578 (607)
Deferred rent (10) 64
Stock compensation expense (benefit) 27 (26)
Changes in operating assets and liabilities:
Accounts receivable, net 1,505 (434)
Prepaid income taxes and other assets 510 (1,955)
Accounts payable 75 983
Accrued compensation 779 (16)
Accrued income taxes 2,346 1,940
Other accrued liabilities (3,255) (78)
Deferred revenue 1,593 2,316
-------- --------
Net cash provided by operating activities 12,261 7,864
-------- --------
Cash flows from investing activities:
Purchases of short-term investments (42,701) (61,744)
Maturities and sales of short-term investments 71,038 38,500
Purchases of equipment, furniture and fixtures (2,410) (1,416)
-------- --------
Net cash provided by (used in) investing activities 25,927 (24,660)
-------- --------
Cash flows from financing activities:
Principal payments under capital lease obligations (21) (29)
Payments on technology acquisition payable (84) (839)
Exercise of stock options 1,708 258
Issuance of common stock under employee stock purchase plan 744 --
-------- --------
Net cash provided (used by) financing activities 2,347 (610)
-------- --------
Net increase (decrease) in cash and cash equivalents 40,535 (17,406)
Cash and cash equivalents, beginning of period 33,067 50,010
-------- --------
Cash and cash equivalents, end of period $ 73,602 $ 32,604
======== ========
<FN>
See accompanying notes to consolidated financial statements.
</FN>
</TABLE>
3
<PAGE>
AVANT! CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION
The unaudited consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated. The consolidated financial statements
have been restated to reflect the effect of the mergers with, Anagram, Inc.
(Anagram), Meta-Software Inc. (Meta) and FrontLine Design Automation, Inc.
(FrontLine) discussed in Note 4. In the opinion of management, all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of financial position and results of operations have been made.
Operating results for interim periods are not necessarily indicative of results
which may be expected for a full year. The information included in this Form
10-Q should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations and the 1996 consolidated
financial statements and notes thereto included in the Company's annual report
on Form 10-K filed with the Securities and Exchange Commission (SEC) and Form
S-3 as declared effective by the SEC on January 31, 1997.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates. Certain financial statement items
have been reclassified to conform to the current period's format.
2. NET INCOME PER SHARE
Net income per share is computed using the weighted average number of common
and common equivalent shares outstanding during each period presented. Fully
diluted and primary income per share are the same for each of the periods
presented. Common stock equivalents consist of stock options and awards (using
the treasury stock method).
3. STATEMENTS OF CASH FLOWS
Net income taxes refund of $851,000 was received and $2,911,000 of income
taxes were paid during the three months ended March 31, 1997 and 1996,
respectively. Interest of $83,000 was paid during the three months ended March
31, 1996. An income tax benefit attributable to employee stock plans of $500,000
and $303,000 was credited to equity during the three months ended March 31, 1997
and 1996, respectively, which is included in the change in accrued income taxes
and change in prepaid income tax and other assets, respectively.
4. MERGERS
On November 27, 1996, the Company issued approximately 1,812,000 shares of
its common stock for all of the outstanding common stock of FrontLine and
assumed approximately 410,000 warrants and stock options under option plans.
On October 29, 1996, the Company issued approximately 4,471,000 shares of
Avant! common stock for all of the outstanding common stock of Meta, and assumed
approximately 608,000 stock options and subscriptions under option and purchase
plans.
On September 27, 1996, the Company issued approximately 2,154,000 shares of
its common stock for all of the outstanding common and preferred stock of
Anagram, and assumed approximately 260,000 stock options under various option
plans.
These FrontLine, Meta and Anagram mergers described above have been
accounted for as pooling of interests and, accordingly, the Company's
consolidated financial statements have been restated for all periods prior to
the mergers to include the results of operations, financial position and cash
flows of Anagram, Meta and FrontLine.
4
<PAGE>
5. LITIGATION
The Company is involved in various litigation matters as discussed in Item 1
of Part 2 of this Form 10-Q. On April 11, 1997, a criminal complaint was filed
against, among others, the Company and six officers and employees. The Company
has charged to expenses approximately $1,711,000 and $756,000 in litigation
expenses during the three months ended March 31, 1997 and 1996, respectively.
6. COMMITMENTS
In February 1997, the Company signed four leases for its new headquarters in
Fremont, California. The leases cover four buildings with an aggregate of
approximately 281,000 square feet of space with an aggregate annual base rent
amount of approximately $4,800,000. The leases for three of the buildings
expires on September 1, 2010 and the fourth building on August 31, 2012. The
Company expects to move into its new headquarters in July 1997.
7. RECENT PRONOUNCEMENTS
The Financial Accounting Standards Board recently issued Statement of
Financial Accounting Standards (SFAS) No. 128, Earnings Per Share. SFAS No. 128
requires the presentation of basic earnings per share ("EPS") and, for companies
with complex capital structures, diluted EPS. SFAS No. 128 is effective for
annual and interim periods ending after December 15, 1997. The Company expects
that basic EPS will be higher than primary earnings per share as presented in
the accompanying consolidated financial statements and the diluted EPS will not
differ materially from primary earnings per share as presented in the
accompanying consolidated financial statements.
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The discussion in this Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 that involve risks and uncertainties. The
Company's actual results could differ materially from those discussed herein.
Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in "Quarterly Results" and "Factors That May Impact
Future Operations" as well as those discussed in this section and elsewhere in
this Form 10-Q, and the risks discussed in the "Risk Factors" section included
in the Company's Registration Statement on Form S-1 as declared effective by the
Securities and Exchange Commission on June 6, 1995 (Reg. No. 33-91128), the
Registration Statements on Form S-4 as declared effective by the Securities and
Exchange Commission on October 23, 1995 (Reg. No. 33-96648) and on September 30,
1996 (Reg. No. 333-11659), the Registration Statement on Form S-3 as declared
effective by the SEC on January 31, 1997, and other risks detailed from time to
time in the Company's Securities and Exchange Commission reports, including the
report on Form 10-K for the year ended December 31, 1996.
Overview
Avant! Corporation, (the Company) develops, markets and supports software
products that assist design engineers in the physical layout, design,
verification, simulation and timing analysis of advanced integrated circuits
(ICs). The Company's strategy is to focus on productivity enhancing software for
the integrated circuit design automation (ICDA) segment of the electronic design
automation (EDA) market.
Effective September 27, 1996, October 29, 1996, and November 27, 1996, the
Company merged with Anagram, Meta, and FrontLine, respectively. The mergers have
been accounted for by the pooling-of-interests method, and accordingly, the
Company's consolidated financial statements give retroactive effect for all
periods presented to include the results of operations, financial position, and
cash flows of Anagram, Meta, and FrontLine.
The Company began shipping Hercules (formerly VeriCheck), its hierarchical
physical verification software, in the third quarter of 1992, and, Aquarius
(formerly ArcCell), its cell-based place and route software product, in 1993.
Anagram was founded in March 1993, and began shipping Star-Sim, its
high-capacity circuit simulation and high-accuracy timing analysis software, in
December 1994. Meta was founded in 1980, when it introduced its simulation and
library software products including Star-Hspice. FrontLine was founded in 1993.
Substantially all of the Company's revenue for the three months ended March 31,
1997 and 1996 was derived from the licensing and support of Aquarius, Hercules,
Star-Sim and Star-Hspice.
6
<PAGE>
Results of Operations
The following table sets forth the percentage of total revenue for certain
items in the Company's Consolidated Financial Statements (after giving effect to
rounding) for the periods indicated:
Three Months Ended
March 31,
-------------------
1997 1996
--- ---
Percentage of total revenue
Software ....................................... 77 79
Services ....................................... 23 21
--- ---
Total revenue .............................. 100% 100%
Costs and expenses:
Costs of software .............................. 2 3
Costs of services .............................. 10 8
Selling and marketing .......................... 26 26
Research and development ....................... 19 22
General and administrative ..................... 12 12
--- ---
Total operating expenses .................... 69 71
--- ---
Income from operations ...................... 31 29
Interest income .................................. 3 4
Other income (expense) ........................... -- --
--- ---
Income before income taxes ................... 34 33
Provision for income taxes ....................... 12 12
--- ---
Net income .................................. 22% 21%
=== ===
Comparison of Three Months Ended March 31, 1997 and 1996
Revenue. Revenue consists primarily of fees for licenses of the
Company's software products, maintenance and customer support. Revenue from the
sale of software licenses is recognized after shipment of the products, delivery
of permanent authorization codes and fulfillment of acceptance terms, if any,
providing that no significant vendor and post-contract support obligations
remain and collection of the related receivable is probable. Any remaining
insignificant vendor or post-contract support obligations are accrued at the
time the revenue is recognized. In instances where there is a contingency
regarding the sale, revenue recognition is delayed until the contingency has
been resolved. When the Company receives advance payment for software products,
such payments are reported as deferred revenue until all conditions for revenue
recognition are met. The Company has entered into certain license agreements
under which software, support and other services are provided to a customer for
a bundled price for a specific period. Generally, revenue under such agreements
is recognized ratably over the contract period. Maintenance revenue is deferred
and recognized ratably over the term of the maintenance agreement, which is
typically twelve months. Revenue from customer training, support and other
services is recognized as the service is performed.
The Company's total revenue increased 32% to $31,193,000 in the first
quarter of 1997 from $23,547,000 in the first quarter of 1996. The percentage of
the Company's total revenue attributable to software licenses decreased to 77%
in the first quarter of 1997 from 79% in the first quarter of 1996. The decrease
is primarily due to the increased user base and resulting increase in
maintenance revenue. Increases in total revenue were due primarily to increased
license revenue from the Company's place and route, physical verification and
analysis software. To date, price increases have not been a material factor in
the Company's revenue growth. Software revenue increased 29% to $23,998,000 in
the first quarter of 1997 from $18,603,000 in the first quarter of 1996. Revenue
from services increased 46% to $7,195,000 in the first quarter of 1997 from
$4,944,000 in the first quarter of 1996, reflecting the growing base of
installed systems.
7
<PAGE>
As discussed in the notes to the consolidated financial statements and Item
1 of Part II, the Company is involved in litigation with Cadence Design Systems,
Inc., and other related actions (collectively "the Cadence litigation"). As a
result of the Cadence litigation, some customers may cancel or postpone orders
of the Company's products. As of March 31, 1997, there had not been a material
financial impact on the Company's revenues as a result of the Cadence
litigation; however significant order delays or cancellations in the future may
impact the Company's business, financial condition and results of operations.
Deferred revenue increased to $15,417,000 as of March 31, 1997 from
$13,824,000 as of December 31, 1996 due to increases in the number of
maintenance agreements and license agreements where software and services are
provided for a specific period and revenue is recognized ratably over the
contract period.
Costs of Software. Costs of software consist primarily of expenses
associated with product documentation and production costs as well as
amortization of capitalized software costs. Costs of software decreased to
$448,000 in the first quarter of 1997 from $615,000 in the first quarter of
1996. Costs of software decreased primarily due to a product launch in the first
quarter of 1996.
Costs of Services. Costs of services consist of costs of maintenance and
customer support, and direct costs associated with providing other services.
Maintenance includes activities undertaken after the product is available for
general release to customers to correct errors, make routine changes and provide
additional features. Customer support includes any installation assistance,
training classes, telephone question and answer services, newsletters, on-site
visits and software or data modifications. Costs of services increased to
$3,018,000 in the first quarter of 1997 from $1,935,000 in the first quarter of
1996. The increase in costs of services was due primarily to an increase in
personnel and expenses necessary to support the Company's growing base of
installed software. The increase in costs of services revenue as a percentage of
services revenue increased to 42% in the first quarter of 1997 from 39% in the
first quarter of 1996.
Selling and Marketing Expenses. Selling and marketing expenses consist
primarily of costs, including sales commissions, of all personnel involved in
the sales process. This includes sales representatives, marketing associates,
benchmarking personnel and field application engineers. Selling and marketing
expenses also include costs of advertising, public relations, conferences and
trade shows. Selling and marketing expenses increased to $8,222,000 in the first
quarter of 1997 from $6,242,000 in the first quarter of 1996. The increase
reflects significant increases in sales personnel. As a percentage of total
revenue, selling and marketing expenses remained constant at 26% in the first
quarter of both 1997 and 1996.
Research and Development Expenses. Research and development expenses
include all costs associated with the development of new products and
significant enhancement of existing products. Research and development expenses
increased to $5,965,000 in the first quarter of 1997 from $5,269,000 in the
first quarter of 1996. The increases in research and development expenses
resulted from increased personnel-related costs associated with the development
of new products and enhancement of existing products. Research and development
expenses represented 19% and 22% of total revenue in the first quarter of 1997
and 1996, respectively. No software development costs were capitalized in the
first quarter of both 1997 or 1996.
General and Administrative Expenses. General and administrative expenses
increased to $3,806,000 in the first quarter of 1997 from $2,735,000 in the
first quarter of 1996. The increases were primarily due to legal and personnel
costs. As a percentage of total revenue, general and administrative expenses
remained constant at 12% for the first quarter of both 1997 and 1996. The
Company expects to incur significant legal expenses in the future in connection
with the Cadence litigation.
Income from Operations. The Company had operating income of $9,734,000 and
$6,751,000 in the first quarter of 1997 and 1996, respectively. The increase in
operating income is attributable to revenue growth net of increased expenses
necessary to support the Company's growth. Operating income represented 31% and
29% of total revenue in the first quarter of 1997 and 1996, respectively.
Interest Income. Interest income was $1,069,000 and $908,000 in the first
quarter of 1997 and 1996, respectively.
8
<PAGE>
Other income (expense). Other expense of $140,000 in the first quarter of
1997 was due to the Company's pro-rata share of losses from the Company's joint
venture distributor in Korea.
Income Taxes. The Company accounts for income taxes in accordance with SFAS
No. 109. The provision for income taxes was $3,839,000 and $2,745,000 in the
first quarter of 1997 and 1996, respectively. The provision for income taxes as
a percentage of pre-tax income was 36% for the first quarter of 1997 and 1996.
Quarterly Results
The Company's quarterly results have varied in the past and may be subject
to fluctuations resulting from a variety of factors, including the outcome of
outstanding litigation, purchasing patterns of customers, the completion of
product evaluations by customers, the timing of product enhancements and product
introductions by the Company and its competitors and the timing of significant
orders. The customer evaluation process for the Company's products is lengthy,
and the timing and outcome of such evaluations have affected the Company's
historical quarterly performance and may impact future quarterly results. A
substantial portion of the Company's revenue in each quarter results from orders
received in the same quarter. The Company's expense levels are based, in part,
on its expectations as to future revenue. The Company continues to expand and
increase its operating expenses in order to generate and support future revenue.
If revenue levels are below expectations, operating results are likely to be
disproportionately affected because only a small portion of the Company's
expenses varies with its revenue. As a result, the Company believes that period
to period comparison of financial results are not necessarily meaningful and
should not be relied upon as an indication of future performance.
Due to the factors noted above, the Company's future earnings and stock
price may be subject to significant volatility, particularly on a quarterly
basis. Any shortfall in revenues or earnings from levels expected by securities
analysts could have an immediate and significant adverse effect on the trading
price of the Company's common stock. Additionally, the Company may not learn of
such shortfalls until late in a fiscal quarter, which could result in an even
more immediate and adverse effect on the trading price of the Company's common
stock.
Liquidity and Capital Resources
Net cash provided by operations was $12,261,000 and $7,864,000 in the first
quarter of 1997 and 1996, respectively. The Company provided $25,927,000 and
used $24,660,000 of net cash in the first quarter of 1997 and 1996,
respectively, for investing activities. Net cash provided in investing
activities relates primarily to net purchases and maturities of short-term
"available-for-sale" securities, which was $28,337,000 in the first quarter of
1997 and net cash used in investing activities of $24,660,000 in the first
quarter of 1996. The securities, which are accounted for in accordance with SFAS
No. 115, consist of short-term debt securities, U.S. Government Agency debt
securities, U.S. Treasury Bills, municipal/corporate auction preferred stock,
municipal bonds, and demand deposit investments in limited maturity fixed income
mutual funds. Cash was also used to acquire equipment, furniture and fixtures,
primarily computer workstations and file servers for use by the Company's
employees. The Company expects that purchases of equipment will likely increase
as the Company's employee base grows.
The Company's stated payment terms generally are net 30 days. However, in
the Company's experience, many customers do not comply with stated payment terms
due to industry practice, slower payment by certain major companies and most
foreign customers, and general economic conditions. The Company periodically
increases its allowance for doubtful accounts to reflect increased sales levels
and collection experience. The Company believes that its allowance for doubtful
accounts is adequate.
As of March 31, 1997, the Company had $129,485,000 of cash and short-term
investments and $124,105,000 of working capital. As of March 31, 1997, the
Company had $31,601,000 in current liabilities, including $15,417,000 of
deferred revenue. As of March 31, 1997, the Company had $6,692,000 in other
accrued liabilities. The decrease from December 31, 1996 of $3,255,000 is
primarily due to the reduction of accrued expenses related to mergers. As of
March 31, 1997, there was no bank indebtedness outstanding and the Company had
no long-term commitments other than the technology acquisition payable and
operating and capital lease obligation.
Based on its operating plan, and absent any adverse judgments in the
pending Cadence litigation, the Company believes that it has available cash and
short-term investments sufficient to fund the Company's operations for at least
the next twelve months.
9
<PAGE>
Factors That May Affect Future Operations
On December 6, 1995, Cadence filed an action against the Company and certain
of its officers in the Northern California United States District Court alleging
copyright infringement, unfair competition, misappropriation of trade secrets,
conspiracy, breach of contract, inducing breach of contract and false
advertising. In addition to actual and punitive damages, which were not
quantified by Cadence, Cadence seeks to enjoin the sale of certain place and
route products. On March 18, 1997, the Northern California United States
District Court denied Cadence's motion to obtain a preliminary injunction that
would have prohibited the production and sale of Avant!'s ArcCell, ArcCell XO,
Aquarius XO and Aquarius XO 2.0 products or any other product that Avant! is
currently selling. The matter is currently awaiting trial, pending further
pretrial matters. A trial date has not been set. Avant! has filed a counterclaim
alleging antitrust violations, racketeering, false advertising, defamation,
trade libel, unfair competition, unfair trade practices, negligent and
intentional interference with prospective economic advantage and intentional
interference with contractual relations.
The Santa Clara County District Attorney's office is also investigating the
allegations of misappropriation of trade secrets set forth in Cadence's lawsuit
and filed a criminal complaint against the Company and six employees on April
11, 1997. The Company and the individuals have pleaded not guilty and are
awaiting further proceedings. The criminal complaint may result in canceled or
postponed customer orders, increased future expenditures, loss of certain key
employees and could have other material adverse effects on the Company.
The Company's products compete with similar products from both larger and
smaller EDA vendors, and with dissimilar EDA products for a share of their
customers' EDA budgets. The EDA industry, and as a result the Company's
business, has benefited from the rapid worldwide growth of the semiconductor
industry. There can be no assurance that this growth will continue. The EDA
industry as a whole may experience pricing and margin pressures from a decrease
in growth in the semiconductor industry, or other changes in the overall
computer industry. In addition, the EDA industry is experiencing consolidation
as the major EDA vendors are seeking to provide a complete range of EDA products
to customers. There can be no assurance that the Company will be able to compete
successfully against current and future competitors, or that market conditions
faced by the Company will not adversely affect its operating results and
financial condition.
The Company's future success depends upon its ability to improve current
products and develop new products that address the increasingly sophisticated
needs of its customers. There can be no assurance that the Company will continue
to successfully develop technologically acceptable products on a timely basis.
The Company's ability to develop and improve products is dependent on key
individuals for their technical and other contributions. There can be no
assurance that the Company can continue to attract and retain these key
personnel. Loss of certain key personnel could result in loss of the Company's
market advantage and could adversely affect its operating results and financial
condition.
The American Institute of Certified Public Accountants approved for exposure
a draft Statement of Position (Exposure Draft) that would supersede SOP 91-1,
Software Revenue Recognition. The adoption of the provisions of the Exposure
Draft is not expected to have a material effect on the Company's consolidated
results of operations.
10
<PAGE>
PART 2. OTHER INFORMATION
Item 1. Legal Proceedings
On December 6, 1995, Cadence filed an action against the Company and certain
of its officers in the Northern California United States District Court alleging
copyright infringement, unfair competition, misappropriation of trade secrets,
conspiracy, breach of contract, inducing breach of contract and false
advertising. The essence of the complaint is that certain Avant! employees who
were formerly Cadence employees allegedly misappropriated and improperly copied
source code for certain important functions of Avant! place and route products
from Cadence, and that the Company has allegedly competed unfairly by making
false statements concerning Cadence and its products. The action also alleges
that the Company induced certain individual defendants to breach their
agreements of employment and confidentiality with Cadence. In addition to actual
and punitive damages, which were not quantified by Cadence, Cadence seeks to
enjoin the sale of certain place and route products.
On March 18, 1997, the Northern California United States District Court
denied Cadence's motion to obtain a preliminary injunction that would have
prohibited the production and sale of Avant!'s ArcCell, ArcCell XO, Aquarius XO
and Aquarius XO 2.0 products or any other product that Avant! is currently
selling. The matter is currently awaiting trial, pending further pretrial
matters. A trial date has not yet been set.
On January 16, 1996, Avant! filed a counterclaim alleging antitrust
violations, racketeering, false advertising, defamation, trade libel, unfair
competition, unfair trade practices, negligent and intentional interference with
prospective economic advantage and intentional interference with contractual
relations. Although Avant!'s counterclaim seeks unquantified damages according
to proof, Avant! specifically alleges that it has suffered losses in excess of
$500 million. The alleged losses are due largely to the decline in Avant!'s
stock market value caused by Cadence's misconduct.
The Santa Clara County District Attorney's office is also investigating the
allegations of misappropriation of trade secrets set forth in Cadence's lawsuit,
described above. On December 5, 1995, a search warrant was executed at the
Company's Sunnyvale, California, facility to determine whether there was
evidence of criminal conduct. On April 11, 1997, a criminal complaint was filed
against, among others, the Company, Gerald C. Hsu, President, Chief Executive
Officer and Chairman of the Board of Directors, Y. Eric Cho, Senior Vice
President of Corporate Operations and a member of the Board of Directors, Y. Z.
Liao, Vice President, and three other employees of the Company for allegedly
violating various California Penal Code Sections relating to the theft of trade
secrets. The Company and the individuals above have pleaded not guilty and are
awaiting further proceedings. The criminal complaint could result in a loss of
these individuals and could have other material adverse effects on the Company.
On December 15, 1995, Paul Margetis and Helen Margetis filed in the United
States District Court for the Northern District of California a securities fraud
class action complaint. In addition, on December 19, 1995, Fred Tarca filed in
the United States District Court for the Northern District of California a class
action complaint for violations of the federal securities laws. These class
action lawsuits allege certain securities law violations, including omissions
and/or misrepresentation of material facts. The alleged omissions and/or
misrepresentations are largely consistent with those outlined in the Cadence
claim. In February 1997, plaintiff Tarca voluntarily dismissed his action and
the Margetis plaintiffs were certified as class representatives in their action.
The Margetis action has been informally stayed pending resolution of Cadence's
preliminary injunction motion.
When the lawsuits were originally filed against the Company, the Company
experienced delays in orders by customers due to the uncertainty of the pending
lawsuits against the Company. If the Company suffers an adverse outcome in
either the civil or criminal proceedings, then the Company would likely
experience future delays in orders from customers and would likely suffer the
loss of customers. If such events were to occur, there would be a material
adverse effect on the Company's business, financial condition and results of
operations.
11
<PAGE>
The Company believes it has sufficient defenses to the claims and intends to
defend itself vigorously. If, however, Avant!'s defenses are unsuccessful, the
Company may be enjoined from selling certain place and route products and may be
required to pay damages to Cadence. In such event, Avant!'s business, operating
results and financial condition would be materially adversely affected. In
addition, it is likely that an adverse judgment against Avant! would result in a
steep decline in the market price of Avant!'s common stock. Although it is
reasonably possible the Company may incur a loss upon conclusion of these
claims, an estimate of any loss or range of loss cannot be made, and the Company
believes, based on information it presently possesses, that the conclusion of
these claims will not have a material adverse effect on the Company's
consolidated financial position; however, there can be no assurance that an
adverse judgment, if granted on any claim would not have a material adverse
effect on the Company's business, consolidated financial position or
consolidated results of operations.
The Company is subject to other claims that have arisen in the ordinary
course of business. In the opinion of management, all such matters are without
merit or involve amounts that would not have a material adverse effect on the
Company's consolidated financial position if unfavorably resolved.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The exhibits filed as part of this Quarterly Report on Form 10-Q are
listed on the Exhibit Index immediately preceding such exhibits and are
incorporated herein by reference.
(b) Reports on Form 8-K
None
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Avant! Corporation
(Registrant)
May 14, 1997 ` /s/ GERALD C. HSU
-----------------------------------
Gerald C. Hsu
President and
Chief Executive Officer
May 14, 1997 /s/ JOHN P. HUYETT
-----------------------------------
John P. Huyett
Chief Financial Officer,
Treasurer, and Principal
Accounting Officer
13
<PAGE>
EXHIBIT INDEX
Sequential
Number Description Page Number
- ------ ----------- -----------
Exhibit 10.1 Property Lease Agreements
Exhibit 11.1 Computations of Income Per Share
Exhibit 27.1 Financial Data Schedules
EXHIBIT A
File No._______________________
INDUSTRIAL SPACE LEASE
(SINGLE TENANT NET)
Renco 48
THIS LEASE, dated February 24, 1997, for reference purposes only, is
made by and between RENCO INVESTMENT COMPANY, a California general partnership
("Landlord"), and AVANT! CORPORATION, a Delaware corporation ("Tenant"), to be
effective and binding upon the parties as of the date the last of the designated
signatories to this Lease shall have executed this Lease (the "Effective Date of
this Lease").
ARTICLE 1
REFERENCES
1.1 REFERENCES: All references in this Lease (subject to any further
clarifications contained in this Lease) to the following terms shall have the
following meaning or refer to the respective address, person, date, time period,
amount, percentage, calendar year or fiscal year as below set forth:
A. Tenant's Address for Notices: AVANT! Corporation.
1208 East Arques Avenue
Sunnyvale, California
94086
B. Tenant's Representative: John Huyett
Phone Number: (408) 738-8881
C. Landlord's Address for Notices: Renco Investment Company
1285 Oakmead Parkway
Sunnyvale, CA 94086
D. Landlord's Representative: William N. Neidig
Phone Number: (408) 730-5500
E. Intended Commencement Date: Eighteen (18) months
following the actual lease
commencement date for the
building identified as
Renco 54
F. Intended Term: Thirteen (13) years and Six
(6) months
G. Lease Expiration Date: Thirteen (13) years and Six
(6) months from the Actual
Commencement Date
H. Tenant's Punchlist Period: 15 days
I. First Month's Prepaid Rent: $102,000.00 which amount
shall be paid to Landlord
when Landlord submits
17
<PAGE>
construction drawings to the
City of Fremont for the
Building shell.
J. Last Month's Prepaid Rent: -0-
K. Tenant's Security Deposit: $102,000.00 which amount
shall be paid to Landlord
when Landlord submits
construction drawings to the
City of Fremont for the
Building shell.
L. Late Charge Amount: 5% of delinquent amount
M. Tenant's Required Liability $3,000,000 combined single
Coverage: limit
N. Brokers: CB/Madison
O. Property or Project: That certain real property, situated in the
City of Fremont, County of Alameda, State of California, as presently improved
with one building, which real property is shown on the Site Plan attached hereto
as Exhibit "A" and is commonly known as or otherwise described as follows:
Renco 48
Parcel Map 6925, Parcel 2 recorded
in the official records of Alameda
County, California
P. Building: That certain Building to be constructed by Landlord within
the Property in which the Leased Premises are located, which Building is shown
outlined in red on Exhibit "A" hereto.
Q. Outside Areas: The "Outside Areas" shall mean all areas within the
Property which are located outside the buildings, such as pedestrian walkways,
parking areas, landscaped areas, open areas and enclosed trash disposal areas.
R. Leased Premises: All the space which is the Building which is to
consist of approximately 85,000 square feet of rentable area and, for purposes
of this Lease, agreed to contain said number of square feet. The Leased Premises
are commonly known as or otherwise described as follows:
Renco 48
Parcel Map 6925, Parcel 2 recorded
in the official records of Alameda
County, California
S. Base Monthly Rent: The term "Base Monthly Rent" shall mean the
following:
Sixty Thousand One Hundred Eighty Dollars ($60,180.00) for
each of the first six (6) months of the Lease Term.
One Hundred Six Thousand Two Hundred Fifty Dollars
($106,250.00) for each of months seven (7) through eighteen
(18) of the Lease Term.
The Base Monthly Rent shall be increased by Four Thousand Two
Hundred Fifty Dollars ($4,250.00) at the start of the
nineteenth (19th) month of the Lease Term and by an additional
Four Thousand Two
18
<PAGE>
Hundred Fifty Dollars ($4,250.00) on each and every subsequent
anniversary of the Lease Commencement date throughout the Term
of the Lease.
T. Permitted Use: The term "Permitted Use" shall mean the following:
Manufacture, warehousing, repair, and sales and service of
high technology computer hardware/software and all related
support functions including office, research, and development
as such uses are permitted in Bayside Technology Park and any
other lawful uses with Landlord's consent, which shall not be
unreasonably withheld.
U. Exhibits: The term "Exhibits" shall mean the Exhibits to this Lease
which are described as follows:
Exhibit "A"- Site Plan showing the Property and delineating
the Building in which the Leased Premises are located.
Exhibit "B"- [intentionally deleted]
Exhibit "C"- Tenant Improvement Agreement
Exhibit "D"- Acceptance Agreement
V. Addenda: The term "Addenda" shall mean the Addendum (or Addenda) to
this Lease which is (or are) described as follows: First Addendum to Lease.
19
<PAGE>
File No._______________________
INDUSTRIAL SPACE LEASE
(SINGLE TENANT NET)
Renco 53
THIS LEASE, dated February 24, 1997 for reference purposes only, is
made by and between RENCO INVESTMENT COMPANY, a California general partnership
("Landlord"), and AVANT! CORPORATION, a"Delaware corporation ("Tenant"), to be
effective and binding upon the parties as of the date the last of the designated
signatories to this Lease shall have executed this Lease (the "Effective Date of
this Lease").
ARTICLE 1
REFERENCES
1.1 REFERENCES: All references in this Lease (subject to any further
clarifications contained in this Lease) to the following terms shall have the
following meaning or refer to the respective address, person, date, time period,
amount, percentage, calendar year or fiscal year as below set forth:
A. Tenant's Address for Notices: AVANT! Corporation
1208 East Arques Ave
Sunnyvale, CA 94086
B. Tenant's Representative: John Huyett
Phone Number: (408) 738-8881
C. Landlord's Address for Notices:Renco Investment Company
1285 Oakmead Parkway
Sunnyvale, CA 94086
D. Landlord's Representative: William N. Neidig
Phone Number: (408) 730-5500
E. Intended Commencement Date: The earlier of May 1,
2009 or upon the actual expiration
or termination of the lease for
Renco 53 with Cirrus Logic
F. Intended Term: Approximately One (1)
year and four (4) months
G. Lease Expiration Date: The Lease shall expire
on the same date as the expiration
of the leases for Renco 54 and Renco
55
H. Tenant's Punchlist Period: 15 days
I. First Month's Prepaid Rent: $0.00
20
<PAGE>
J. Last Month's Prepaid Rent: -0-
K. Tenant's Security Deposit: $157,500.00 to be paid on the Lease
Commencement Date
L. Late Charge Amount: 5% of delinquent amount
M. Tenant's Required Liability $3,000,000 combined
Coverage: single limit
N. Brokers: CB/ Madison
O. Property or Project: That certain real property, situated in the
City of Fremont, County of Alameda, State of California, as presently improved
with one building, which real property is shown on the Site Plan attached hereto
as Exhibit "A" and is commonly known as or otherwise described as follows:
Renco 53
46875 Bayside Parkway
Fremont, California 94538
P. Building: That certain Building within the Property in which the
Leased Premises are located, which Building is shown outlined in red on Exhibit
"A" hereto.
Q. Outside Areas: The "Outside Areas" shall mean all areas within the
Property which are located outside the buildings, such as pedestrian walkways,
parking areas, landscaped areas, open areas and enclosed trash disposal areas.
R. Leased Premises: All the space which is the Building, consisting of
approximately 90,000 square feet of rentable area and, for purposes of this
Lease, agreed to contain said number of square feet. The Leased Premises are
commonly known as or otherwise described as follows:
Renco 53
46875 Bayside Parkway
Fremont, California 94538
S. Base Monthly Rent: The term "Base Monthly Rent" shall mean the
following:
In the event the Lease Commencement Date is earlier than May
1, 2009, the Base Monthly Rent from the Lease Commencement
Date through April 30, 2009 shall be the greater of the
following: (a) the same Base Monthly Rent as Tenant would have
been required to pay to Cirrus Logic under Tenant's sublease
agreement with Cirrus Logic for the Leased Premises (had such
sublease continued in full force and effect through April 30,
2009) through April 30, 2009 pursuant to the terms of such
sublease as of the date of this lease agreement, or (b) the
same Base Monthly Rent as Cirrus Logic would have been
required to pay to Landlord if the Cirrus Logic lease with
Landlord, as reference above, had continued in full force and
effect through April 30, 2009.
One Hundred Fifty-seven Thousand Five Hundred Dollars
($157,500.00) from May 1, 2009 through April 30, 2010.
The Base Monthly Rent shall be increased by Four Thousand Five
Hundred Dollars ($4,500.00) per month on May 1, 2010 and each
and every May 1 thereafter.
21
<PAGE>
T. Permitted Use: The term "Permitted Use" shall mean the following:
Manufacture, warehousing, repair, and sales and service of
high technology computer hardware/software and all related
support functions including office, research, and development
as such uses are permitted in Bayside Technology Park and any
other lawful uses with Landlord's consent, which shall not be
unreasonably withheld.
U. Exhibits: The term "Exhibits" shall mean the Exhibits to this Lease
which are described as follows:
Exhibit "A"- Site Plan showing the Property and delineating
the Building in which the Leased Premises are located.
Exhibit "B"- [intentionally deleted]
Exhibit "C"- Tenant Improvement Agreement
Exhibit "D"- Acceptance Agreement
V. Addenda: The term "Addenda" shall mean the Addendum (or Addenda) to
this Lease which is (or are) described as follows: First Addendum to Lease.
22
<PAGE>
INDUSTRIAL SPACE LEASE
(SINGLE TENANT NET)
Renco 54
THIS LEASE, dated February 24, 1997 for reference purposes only, is
made by and between RENCO INVESTMENT COMPANY, a California general partnership
("Landlord"), and AVANT! CORPORATION, a Delaware corporation ("Tenant"), to be
effective and binding upon the parties as of the date the last of the designated
signatories to this Lease shall have executed this Lease (the "Effective Date of
this Lease").
ARTICLE 1
REFERENCES
1.1 REFERENCES: All references in this Lease (subject to any further
clarifications contained in this Lease) to the following terms shall have the
following meaning or refer to the respective address, person, date, time period,
amount, percentage, calendar year or fiscal year as below set forth:
A. Tenant's Address for Notices: AVANT! Corporation.
1208 East Arques Avenue
Sunnyvale, CA 94086
B. Tenant's Representative: John Huyett
Phone Number: (408) 738-8881
C. Landlord's Address for Renco Investment Company
Notices: 1285 Oakmead Parkway
Sunnyvale, CA 94086
D. Landlord's Representative: William N. Neidig
Phone Number: (408) 730-5500
E. Intended Commencement Date: October 1, 1997
F. Intended Term: 13 years
G. Lease Expiration Date: 13 years from the Actual
Commencement Date
H. Tenant's Punchlist Period: 15 days
I. First Month's Prepaid Rent: $53,000.00
J. Last Month's Prepaid Rent: -0-
K. Tenant's Security Deposit: $53,000.00
L. Late Charge Amount: 5% of delinquent amount
M. Tenant's Required Liability $3,000,000 combined
Coverage: single limit
N. Brokers: CB/ Madison
23
<PAGE>
O. Property or Project: That certain real property, situated in the
City of Fremont, County of Alameda, State of California, to be improved with one
building, which real property is shown on the Site Plan attached hereto as
Exhibit "A" and is commonly known as or otherwise described as follows:
Renco 54
46859 Bayside Parkway
Fremont, California 94538
P. Building: That certain Building to be constructed by Landlord within
the Property in which the Leased Premises are located, which Building is shown
outlined in red on Exhibit "A" hereto.
Q. Outside Areas: The "Outside Areas" shall mean all areas within the
Property which are located outside the buildings, such as pedestrian walkways,
parking areas, landscaped areas, open areas and enclosed trash disposal areas.
R. Leased Premises: All the space which is the Building which is to
consist of approximately 53,000 square feet of rentable area and, for purposes
of this Lease, agreed to contain said number of square feet. The Leased Premises
are commonly known as or otherwise described as follows:
Renco 54
46859 Bayside Parkway
Fremont, California 94538
S. Base Monthly Rent: The term "Base Monthly Rent" shall mean the
following:
Fifty Three Thousand Dollars ($53,000.00) for months one (1)
through four (4) of the Lease Term.
Sixty-three Thousand Six Hundred Dollars ($63,600.00) for
months five (5) through twenty-four (24) of the Lease Term.
Sixty-six thousand Two Hundred Fifty Dollars ($66,250.00) for
months twenty-five (25) through thirty-six (36) of the Lease
Term.
The Base Monthly Rent shall be increased by Two Thousand Six
Hundred Fifty Dollars ($2,650.00) at the start of the
thirty-seventh (37th) month of the Lease Term and by an
additional Two Thousand Six Hundred Fifty Dollars ($2,650.00)
on each and every subsequent anniversary of the Lease
Commencement date throughout the Term of the Lease.
T. Permitted Use: The term "Permitted Use" shall mean the following:
Manufacture, warehousing, repair, and sales and service of
high technology computer hardware/software and all related
support functions including office, research, and development
as such uses are permitted in Bayside Technology Park and any
other lawful uses with Landlord's consent, which shall not be
unreasonably withheld.
U. Exhibits: The term "Exhibits" shall mean the Exhibits to this Lease
which are described as follows:
Exhibit "A"- Site Plan showing the Property and delineating
the Building in which the Leased Premises are located.
Exhibit "B"- [intentionally deleted]
24
<PAGE>
Exhibit "C"- Tenant Improvement Agreement
Exhibit "D"- Acceptance Agreement
V. Addenda: The term "Addenda" shall mean the Addendum (or Addenda) to
this Lease which is (or are) described as follows: First Addendum to Lease.
25
<PAGE>
File No._______________________
INDUSTRIAL SPACE LEASE
(SINGLE TENANT NET)
Renco 55
THIS LEASE, dated February 27, 1997 for reference purposes only, is
made by and between RENCO INVESTMENT COMPANY, a California general partnership
("Landlord"), and AVANT! CORPORATION, a Delaware corporation ("Tenant"),to be
effective and binding upon the parties as of the date the last of the designated
signatories to this Lease shall have executed this Lease (the "Effective Date of
this Lease").
ARTICLE 1
REFERENCES
1.1 REFERENCES: All references in this Lease (subject to any further
clarifications contained in this Lease) to the following terms shall have the
following meaning or refer to the respective address, person, date, time period,
amount, percentage, calendar year or fiscal year as below set forth:
A. Tenant's Address AVANT! Corporation.
for Notices: 1208 East Arques Avenue
Sunnyvale, CA 94086
B. Tenant's Representative: John Huyett
Phone Number: (408) 738-8881
C. Landlord's Address Renco Investment Company
for Notices: 1285 Oakmead Parkway
Sunnyvale, CA 94086
D. Landlord's Representative: William N. Neidig
Phone Number: (408) 730-5500
E. Intended Commencement Date: Four (4) Months following
the lease commencement date for the
building identified as Renco 54
F. Intended Term: Twelve (12) years and Eight
(8) Months
G. Lease Expiration Date: 12 years and eight (8)
months following the actual
lease commencement date for the
building identified as
Renco 54
H. Tenant's Punchlist Period: 15 days
I. First Month's Prepaid Rent: $63,600.00
J. Last Month's Prepaid Rent: -0-
26
<PAGE>
K. Tenant's Security Deposit: $63,600.00
L. Late Charge Amount: 5% of delinquent amount
M. Tenant's Required Liability $3,000,000 combined
Coverage: single limit
N. Brokers: CB/ Madison
O. Property or Project: That certain real property, situated in the
City of Fremont, County of Alameda, State of California, as presently improved
with one building, which real property is shown on the Site Plan attached hereto
as Exhibit "A" and is commonly known as or otherwise described as follows:
Renco 55
46889 Bayside Parkway
Fremont, California 94538
P. Building: That certain Building to be constructed by Landlord within
the Property in which the Leased Premises are located, which Building is shown
outlined in red on Exhibit "A" hereto.
Q. Outside Areas: The "Outside Areas" shall mean all areas within the
Property which are located outside the buildings, such as pedestrian walkways,
parking areas, landscaped areas, open areas and enclosed trash disposal areas.
R. Leased Premises: All the space which is the Building which is to
consist of approximately 53,000 square feet of rentable area and, for purposes
of this Lease, agreed to contain said number of square feet. The Leased Premises
are commonly known as or otherwise described as follows:
Renco 55
46889 Bayside Parkway
Fremont, California 94538
S. Base Monthly Rent: The term "Base Monthly Rent" shall mean the
following:
Thirty Two Thousand Four Hundred Forty Dollars ($32,440.00)
for each month of the first four (4) months of the Lease Term.
Sixty-three Thousand Six Hundred Dollars ($63,600.00) for
months five (5) through twenty (20) of the Lease Term.
Sixty-six thousand Two Hundred Fifty Dollars ($66,250.00) for
months twenty-one (21) through thirty-two (32) of the Lease
Term.
The Base Monthly Rent shall be increased by Two Thousand Six
Hundred Fifty Dollars ($2,650.00) at the start of the
thirty-third (33rd) month of the Lease Term and by an
additional Two Thousand Six Hundred Fifty Dollars ($2,650.00)
at the start of each subsequent twelve (12) month period
following the thirty-third (33rd) month of the Lease Term
throughout the Term of the Lease.
T. Permitted Use: The term "Permitted Use" shall mean the following:
Manufacture, warehousing, repair, and sales and service of
high technology computer hardware/software and all related support functions
including office, research, and development as such uses are
27
<PAGE>
permitted in Bayside Technology Park and any other lawful uses with Landlord's
consent, which shall not be unreasonably withheld.
U. Exhibits: The term "Exhibits" shall mean the Exhibits to this Lease
which are described as follows:
Exhibit "A"- Site Plan showing the Property and delineating
the Building in which the Leased Premises are located.
Exhibit "B"- [intentionally deleted]
Exhibit "C"- Tenant Improvement Agreement
Exhibit "D"- Acceptance Agreement
V. Addenda: The term "Addenda" shall mean the Addendum (or Addenda) to
this Lease which is (or are) described as follows: First Addendum to Lease.
28
<PAGE>
ARTICLE 2:
LEASED PREMISES, TERM AND POSSESSION
2.1 DEMISE OF LEASED PREMISES: Landlord hereby leases to Tenant and
Tenant hereby leases from Landlord for Tenant's use in the conduct of Tenant's,
and Tenant's permitted sublessee's and assignee's business and not for purposes
of speculating in real estate, for the Lease Term and upon the terms and subject
to the conditions of this Lease, that certain interior space described in
Article I as the Leased Premises, reserving and excepting to Landlord the
exclusive right One-half of all excess rentals and assignment considerations (as
defined in Section 7.5) to all profits to be derived from any assignments or
sublettings by Tenant during the Lease Term by reason of the appreciation in the
fair market rental value of the Leased Premises. Tenant's lease of the Leased
Premises, together with the appurtenant right to use the Outside Areas as
described in Article 2.2 below, shall be conditioned upon and be subject to the
continuing compliance by Tenant with (i) all the terms and conditions of this
Lease, (ii) all Laws governing the use of the Leased Premises and the Property,
(iii) all Private Restrictions, easements and other matters now of public record
respecting the use of the Leased Premises and the Property, and (iv) all
reasonable written rules and regulations from time to time established by
Landlord. Notwithstanding anything to the contrary in Section 2.1 of the Lease
Form, Tenant's compliance with Laws concerning Hazardous Materials, whether
governing the use of the Leased Premises or the Property or not, shall be
governed solely and exclusively by Paragraph 16 of the Addendum entered into
concurrently herewith.
2.2 RIGHT TO USE OUTSIDE AREAS: As an appurtenant right to Tenant's
right to the use and occupancy of the Leased Premises, Tenant shall have the
right to use the Outside Areas in conjunction with its use of the Leased
Premises solely for the purposes for which they were designed and intended and
for no other purposes whatsoever. Tenant's right to so use the Outside Areas
shall be subject to the limitations on such use as set forth in Article 4 and
shall terminate concurrently with any termination of this Lease.
2.3 LEASE COMMENCEMENT DATE AND LEASE TERM: The term of this Lease
shall begin, and the Lease Commencement Date shall be deemed to have occurred,
on the Intended Commencement Date (as set forth in Article 1) unless either (i)
Landlord is unable to deliver possession of the Leased Premises to Tenant on the
Intended Commencement Date, in which case the Lease Commencement Date shall be
as determined pursuant to Article 2.4 below or (ii) Tenant enters into
possession of the Leased Premises prior to the Intended Commencement Date, in
which case the Lease Commencement Date shall be as determined pursuant to
Article 2.7 below (the "Lease Commencement Date") . The term of the Lease shall
end on the Lease Expiration Date (as set forth in Article I), irrespective of
whatever date the Lease Commencement Date is determined to be pursuant to the
foregoing sentence (unless the Lease Expiration Date is expressly determined
based upon the Lease Commencement Date). The Lease Term shall be that period of
time commencing on the Lease Commencement Date and ending on the Lease
Expiration Date (the "Lease Term").
2.4 DELIVERY OF POSSESSION: Landlord shall deliver to Tenant possession
of the Leased Premises on or before the Intended Commencement Date (as set forth
in Article 1) in their presently existing condition, broom clean, unless
Landlord shall have agreed, as a condition to Tenant's obligation to accept
possession of the Leased Premises pursuant to a written Exhibit or Addenda
attached to and made a part of this Lease, to modify existing interior
improvements or to make, construct and/or install additional specified
improvements within the Leased Premises or to the Outside Areas and/or to
construct the Leased Premises, in which case Landlord shall deliver to Tenant
possession of the Leased Premises on or before the Intended Commencement Date as
so modified and/or improved. If Landlord is unable to so deliver possession of
the Leased Premises to Tenant in the agreed condition on or before the Intended
Commencement Date, for whatever reason other than Landlord's failure to commence
construction or diligently pursue it to completion to the extent it is within
Landlord's reasonable control to do so, Landlord shall not be in default under
this Lease, nor shall this Lease be void, voidable or cancelable by Tenant until
the lapse of one hundred twenty days after the Intended Commencement Date (the
"delivery grace period"); however, the Lease Commencement Date shall not be
deemed to have occurred until such date as Landlord notifies Tenant that the
Leased Premises are in the agreed condition and are Ready for Occupancy.
Additionally, the delivery grace period above set forth shall be extended for
such number of days as Landlord may be delayed in making the agreed improvements
and/or delivering possession of the Leased Premises to Tenant by reason of Force
Majeure or the actions of Tenant. If Landlord is unable to deliver possession of
the Leased Premises in the agreed condition to Tenant (a) within the described
delivery grace period (including any extensions thereof by reason of Force
Majeure or the actions of Tenant) or (b) within twelve (12) months from the
29
<PAGE>
Intended Commencement Date, then Tenant's sole remedy shall be to cancel and
terminate this Lease by providing Landlord written notice of such election to
terminate within fifteen (15) days of such event, and in no event shall Landlord
be liable in damages to Tenant for such delay. Tenant may not cancel this Lease
at any time after the date Landlord notifies Tenant that the Leased Premises
have been put into the agreed condition and are Ready for Occupancy unless
Landlord's notice is not given in good faith.
2.5 ACCEPTANCE OF POSSESSION: On the date Tenant commences occupancy of
the Premises Tenant acknowledges that it has inspected the Leased Premises and
is willing to accept them in their existing condition (excepting latent
defects), broom clean, unless Landlord shall have agreed, as a condition to
Tenant's obligation to accept possession of the Leased Premises pursuant to a
written Exhibit or Addenda attached to and made a part of the Lease, to modify
existing interior improvements or to make, construct and/or install specified
improvements within the Leased Premises and/or to construct the Leased Premises,
in which case Tenant agrees to accept possession of the Leased Premises when
Landlord has substantially completed such modifications or improvements and the
Leased Premises are Ready for Occupancy. If Landlord shall have so modified
existing improvements or constructed additional improvements within the Leased
Premises for Tenant and/or to construct the Leased Premises, Tenant shall,
within Tenant's Punchlist Period (as set forth in Article I) which shall
commence on the date that Landlord notifies Tenant that the agreed improvements
have been completed and the Leased Premises are Ready for Occupancy, submit to
Landlord a signed copy of the Acceptance Agreement attached hereto as Exhibit
"D" together with a punchlist of all incomplete and/or improper work performed
by Landlord. Upon the expiration of Tenant's Punchlist Period, Tenant shall be
conclusively deemed to have accepted the Leased Premises in their then-existing
condition as so delivered by Landlord to Tenant, except as to latent defects and
those items reasonably set forth in the punchlist submitted to Landlord prior to
the expiration of said period. Landlord agrees to correct all items reasonably
set forth in Tenant's punchlist, provided that such punchlist was submitted to
Landlord within Tenant's Punchlist Period. Additionally, Landlord agrees to
place in good working order all plumbing, lighting, heating, ventilating and air
conditioning systems within the Leased Premises and all man doors and roll-up
truck doors serving the Leased Premises to the extent that such systems and/or
items are not in good operating condition. Notwithstanding anything to the
contrary in Section 2.5 of the Lease Form, Landlord warrants that the
construction of the Building, Outside Areas and Tenant Improvements will be
performed substantially in accordance with the Construction Drawings (as defined
in Exhibit C) in a good and workmanlike manner, free of defects and the
Building, Outside Areas, and Leased Premises shall be in compliance with all
laws, codes, ordinances, rules and regulations, and that all materials and
equipment furnished will substantially conform to said drawings and will be new
and otherwise of good quality. This warranty does not extend to, and neither
Landlord nor Landlord's general contractor shall be liable for, any defect in
construction or equipment which is discovered more than one year after the
recordation of a notice of completion for the Building. Tenant shall promptly
notify Landlord in writing of any defect in construction or equipment covered
within such one-year period, and promptly thereafter Landlord shall commence the
cure of each such defect and complete such cure with diligence at Landlord's
cost and expense, not to be passed through to Tenant.
With respect to defects discovered after the expiration of such
one-year period, Landlord and Tenant acknowledge that they intend that Tenant
shall have the benefit of any express or implied construction or equipment
warranties existing in favor of Landlord and against all third parties which
would assist Tenant in correcting such defects and in discharging its
obligations regarding the repair and maintenance of the Leased Premises.
Following the expiration of such one-year period, Landlord shall inform Tenant
of all written construction and equipment warranties existing in favor of
Landlord which affect the Building or equipment. Landlord shall cooperate with
Tenant in enforcing such warranties and in bringing any suit that may be
necessary to enforce liability with regard to any defective construction or
equipment which is discovered or of which Landlord receives notice after the
expiration of said one-year warranty period, so long as Tenant pays all costs
reasonably incurred by Landlord in connection therewith. This warranty applies
only to construction performed by Landlord for Tenant after the date of this
Lease.
2.6 SURRENDER OF POSSESSION: Immediately prior to the expiration or
upon the sooner termination of this Lease, Tenant shall remove all of Tenant's
signs from the exterior of the Building and shall remove all of Tenant's
equipment, trade fixtures, furniture, supplies, wall decorations and other
personal property from the Leased Premises ("Tenants Property"), and shall
vacate and surrender the Leased Premises to Landlord in the same condition
(except for reasonable wear and tear, acts of god or alterations which Landlord
had stated in writing may remain upon expiration or earlier termination of this
Lease), broom clean, as existed at the Lease Commencement Date.
30
<PAGE>
Tenant shall repair all damage to the Leased Premises caused by Tenant's removal
of Tenant's property and all damage to the exterior of the Building caused by
Tenant's removal of Tenant's signs. Tenant shall patch and refinish, to
Landlord's reasonable satisfaction, all penetrations made by Tenant or its
employees to the floor, walls or ceiling of the Leased Premises, whether such
penetrations were made with Landlord's approval or not. Tenant shall repair or
replace all stained or damaged ceiling tiles and wall coverings and replace as
may be required floor coverings to the reasonable satisfaction of Landlord.
Subject to paragraph 13.12 B Tenant shall pay the cost of restoring or replacing
all trees, shrubs, plants, lawn and ground cover, and repair (or replace as
required) all paved surfaces of the Property, and otherwise satisfy all
requirements to repair any damage or excessive wear to the Leased Premises,
Building, Outside Areas, and/or Property. Tenant shall repair all damage caused
by Tenant to the exterior surface of the Building and the paved surfaces of the
outside areas adjoining the Leased Premises and, where necessary, replace or
resurface same. Additionally, Tenant shall, prior to the expiration or sooner
termination of this Lease, remove any improvements constructed or installed by
Tenant which Landlord requests be so removed by Tenant and Tenant shall restore
the Leased Premises to the condition existing prior to the installation of such
improvements, ordinary wear and tear and casualty damage for which Tenant is not
responsible excepted. If the Leased Premises are not surrendered to Landlord in
the condition required by this Article at the expiration or sooner termination
of this Lease, Landlord may, at Tenant's expense, so remove Tenant's signs,
property and/or improvements not so removed and make such repairs and
replacements not so made or hire, at Tenant's expense, independent contractors
to perform such work. Tenant shall be liable to Landlord for all costs incurred
by Landlord in returning the Leased Premises to the required condition, plus
interest on all costs incurred from the date paid by Landlord at the Wells Fargo
Bank Prime Rate Plus Two not to exceed the legal rate allowed by Law until paid,
payable by Tenant to Landlord within ten days after receipt of a statement
therefor from Landlord. Tenant shall indemnify Landlord against loss or
liability resulting from delay by Tenant in so surrendering the Leased Premises,
including, without limitation, any claims made by any succeeding tenant or any
losses to Landlord due to lost opportunities to lease to succeeding tenants.
2.7 EARLY OCCUPANCY: So long as such entry does not interfere in any
way with Landlord's obligations under Exhibit C ("Landlord Work") nor otherwise
delay the project, Tenant and its subcontractors, vendors and agents may have
reasonable access to the Leased Premises prior to the Lease Commencement Date
for the sole purpose of the installation of Tenant's Property and inspecting and
monitoring Landlord's Work and not for the operation of Tenant's business. Prior
to any such entry Tenant must comply with all insurance provisions of this Lease
Agreement as if the Lease Commencement Date had occurred. In addition Tenant
agrees to defend, indemnify and hold Landlord harmless from and against any and
all claims and liabilities (including, but not limited to, attorney fees)
relating, in any way, to such entry. If Tenant enters into possession of the
Leased Premises prior to the Intended Commencement Date for any reason other
than that set forth in this paragraph above, unless otherwise agreed in writing
by Landlord, the Lease Commencement Date shall be deemed to have occurred on
such sooner date, and Tenant shall be obligated to perform all its obligations
under this Lease, including the obligation to pay rent, from that sooner date.
ARTICLE 3:
RENT, LATE CHARGES AND SECURITY DEPOSITS
3.1 BASE MONTHLY RENT: Commencing on the Lease Commencement Date (as
determined pursuant to Article 2.3 above) and continuing throughout the Lease
Term, Tenant shall pay to Landlord, without prior demand therefor, in advance on
the first day of each calendar month, as base monthly rent, the amount set forth
as "Base Monthly Rent" in Article 1 (the "Base Monthly Rent").
3.2 ADDITIONAL RENT: Commencing on the Lease Commencement Date (as
determined pursuant to Article 2.3 above) and continuing throughout the Lease
Term, in addition to the Base Monthly Rent, Tenant shall pay to Landlord as
additional rent (the "Additional Rent") the following amounts:
A. An amount equal to all Property Operating Expenses (as
defined in Article 13) incurred by Landlord. Payment shall be made by whichever
of the following methods (or combination of methods) is (are) from time to time
designated by Landlord:
(1) Landlord may bill to Tenant, on a periodic basis
not more frequently than monthly, the amount of such expenses (or group of
expenses) as paid or incurred by Landlord, and Tenant shall pay to Landlord
31
<PAGE>
the amount of such expenses by the 12th day of each calendar month provided such
bill is received by Tenant after the 20th day of the immediately preceding
calendar month, but on or before the 5th day of such calendar month; and by the
27th day of each calendar month provided such bill is received by Tenant after
the 5th day of such calendar month, but on or before the 20th day of such
calendar month; and/or
(2) Landlord may deliver to Tenant Landlord's
reasonable estimate of any given expense (such as Landlord's Insurance Costs or
Real Property Taxes), or group of expenses, which it anticipates will be paid or
incurred for the ensuing calendar or fiscal year, as Landlord may determine, and
Tenant shall pay to Landlord an amount equal to the estimated amount of such
expenses for such year in equal monthly, installments during such year with the
installments of Base Monthly Rent.
(3) Landlord reserves the right to change from time
to time the methods of billing Tenant for any given expense or group of expenses
or the periodic basis (but in no event more frequently than monthly) on which
such expenses are billed.
B. Landlord's share of the consideration received by Tenant
upon certain assignments and sublettings as required by Article 7;
C. Any legal fees and costs that Tenant is obligated to pay or
reimburse to Landlord pursuant to Article 13; and
D. Any other charges or reimbursements due Landlord from
Tenant pursuant to the terms of this Lease other than late charges and interest
on defaulted rent. Notwithstanding anything to the contrary in this Section 3.2
of the Lease Form, and provided while Tenant's net worth (using generally
accepted accounting principles) is $60,000,000.00 or greater, Tenant shall pay
Real Property Taxes (as defined in Article 13 of the Lease Form) no later than
ten (10) days before Real Property Taxes become delinquent and Tenant shall not
be required to pay Real Property Taxes prior to such date. In the event Tenant's
aforesaid net worth is less than $60,000,000.00, Landlord may require Tenant to
pay Real Property Taxes pursuant to the provisions of Paragraph 3.2A above.
Tenant shall pay its prorata share of any Real Property Taxes due as a result of
the recordation of a tract or parcel map required as a result of the
construction and/or financing of the Building, and such payment shall be due and
payable at the time of recording the map.
3.3 YEAR-END ADJUSTMENTS: If Landlord shall have elected to bill Tenant
for the Property Operating Expenses (or any group of such expenses) on an
estimated basis in accordance with the provisions of Article 3.2A(2) above,
Landlord shall furnish to Tenant within six months following the end of the
applicable calendar or fiscal year, as the case may be, a statement setting
forth (i) the amount of such expenses paid or incurred during the just ended
calendar or fiscal year, as appropriate, and (ii) the amount that Tenant has
paid to Landlord for credit against such expenses for such period. If Tenant
shall have paid more than its obligation for such expenses for the stated
period, Landlord shall, at its election, either (i) credit the amount of such
overpayment toward the next ensuing payment or payments of Additional Rent that
would otherwise be due or (ii) refund in cash to Tenant the amount of such
overpayment within thirty (30) days of the date of such determination. If such
year-end statement shall show that Tenant did not pay its obligation for such
expenses in full, then Tenant shall pay to Landlord the amount of such
underpayment within thirty (30) days from Landlord's billing of same to Tenant.
The provisions of this Article shall survive the expiration or sooner
termination of this Lease. Notwithstanding anything to the contrary in Section
3.3 of the Lease Form:
1. Not more than once per year, Tenant shall have the right, at its
expense, exercisable upon reasonable prior written notice to Landlord, to audit
Landlord's books and records for Property Operating Expenses provided such audit
is conducted during normal business hours and within twelve (12) months
following the Lease year subject to audit.
2. Landlord shall pay the cost of such audit if it is determined that
Tenant has been overcharged for Property Operating Expenses by more than five
percent (5%) and shall promptly refund the amount of such overpayment to Tenant.
32
<PAGE>
3.4 LATE CHARGE AND INTEREST ON RENT IN DEFAULT: Tenant acknowledges
that the late payment by Tenant of any monthly installment of Base Monthly Rent
or any Additional Rent will cause Landlord to incur certain costs and expense
not contemplated under this Lease, the exact amounts of which are extremely
difficult or impractical to fix. Such costs and expenses will include, without
limitation, administration and collection costs and processing and accounting
expenses. Therefore, if any installment of Base Monthly Rent is not received by
Landlord from Tenant within six calendar days after the same becomes due, Tenant
shall immediately pay to Landlord a late charge in an amount equal to the amount
set forth in Article 1 as the "Late Charge Amount", and if any Additional Rent
is not received by Landlord within six calendar days after same becomes due,
Tenant shall immediately pay to Landlord a late charge in an amount equal to
five percent of the Additional Rent not so paid. Landlord and Tenant agree that
this late charge represents a reasonable estimate of such costs and expenses and
is fair compensation to Landlord for the anticipated loss Landlord would suffer
by reason of Tenant's failure to make timely payment. In no event shall this
provision for a late charge be deemed to grant to Tenant a grace period or
extension of time within to pay any rental installment or prevent Landlord from
exercising any right or remedy available to Landlord upon Tenant's failure to
pay each rental installment due under this Lease when due, including the right
to terminate this Lease. If any rent remains delinquent for a period in excess
of ten calendar days, then, in addition to such late charge, Tenant shall pay to
Landlord interest on any rent that is not so paid from said tenth day at the
then maximum rate of interest not prohibited or made usurious by Law until paid.
Late Charge and Interest on Rent in Default: Notwithstanding
anything to the contrary in Section 3.4 of the Lease Form:
A. No late charge for Base Monthly Rent or Additional Rent shall become
due and payable until Tenant has received written notice that a payment of
either Base Monthly Rent or Additional Rent is delinquent and Tenant fails to
pay such delinquent amount within six (6) days after receipt of Landlord's
written notice, provided that, after Landlord provides Tenant with such a
delinquency notice (as to either Base Monthly Rent or Additional Rent) then, for
the twelve (12) month period from and after such notice, late charges shall be
due and payable after the applicable six (6)-day grace period described in
Section 3.4 of the Lease Form without the requirement that Landlord first
deliver a delinquency notice to Tenant (as to either Base Monthly Rent or
Additional Rent).
B. Interest on delinquent rent payments shall not commence until six
(6) days after Tenant's receipt of Landlord's written notice that rent has not
been paid.
3.5 PAYMENT OF RENT: Except as specifically provided otherwise in this
Lease, all rent shall be paid in lawful money of the United States, without any
abatement, reduction or offset for any reason whatsoever, to Landlord at such
address as Landlord may designate from time to time. Tenant's obligation to pay
Base Monthly Rent and all Additional Rent shall be appropriately prorated at the
commencement and expiration of the Lease Term. The failure by Tenant to pay any
Additional Rent as required pursuant to this Lease when due shall be treated the
same as a failure by Tenant to pay Base Monthly Rent when due, and Landlord
shall have the same rights and remedies against Tenant as Landlord would have if
Tenant failed to pay the Base Monthly Rent when due.
3.6 PREPAID RENT: Tenant shall pay to Landlord the amount set forth in
Article I as "First Month's Prepaid Rent" as prepayment of rent for credit
against the first installment(s) of Base Monthly Rent due hereunder.
3.7 SECURITY DEPOSIT: Tenant shall deposit with Landlord the amount set
forth in Article 1 as the "Security Deposit" as security for the performance by
Tenant of the terms of this Lease to be performed by Tenant, and not as
prepayment of rent. Landlord may apply such portion or portions of the Security
Deposit as are reasonably necessary for the following purposes: (i) to remedy
any default by Tenant in the payment of Base Monthly Rent or Additional Rent or
a late charge or interest on defaulted rent; (ii) to repair damage to the Leased
Premises, the Building or the Outside Areas caused by Tenant; (iii) to clean and
repair the Leased Premises, the Building or the Outside Areas following their
surrender to Landlord if not surrendered in the condition required pursuant to
the provisions of Article 2; and (iv) to remedy any other default of Tenant to
the extent permitted by Law including, without limitation, paying in full on
Tenant's behalf any sums claimed by materialmen or contractors of Tenant to be
owing to them by Tenant for work done or improvements made at Tenant's request
to the Leased Premises. In this regard, Tenant hereby waives any
33
<PAGE>
restriction on the uses to which the Security Deposit may be applied as
contained in Section 1950.7(c) of the California Civil Code and/or any successor
statute. In the event the Security Deposit or any portion thereof is so used,
Tenant shall pay to Landlord, promptly upon demand, an amount in cash sufficient
to restore the Security Deposit to the full original sum. If Tenant fails to
promptly restore the Security Deposit and if Tenant shall have paid to Landlord
any sums as "Last Month's Prepaid Rent", Landlord may, in addition to any other
remedy Landlord may have under this Lease, reduce the amount of Tenant's Last
Month's Prepaid Rent by transferring all or portions of such Last Month's
Prepaid Rent to Tenant's Security Deposit until such Security Deposit is
restored to the amount set forth in Article 1. Landlord shall not be deemed a
trustee of the Security Deposit. Landlord may use the Security Deposit in
Landlord's ordinary business and shall not be required to segregate it from its
general accounts. Tenant shall not be entitled to any interest on the Security
Deposit. If Landlord transfers the Building or the Property during the Lease
Term, Landlord may pay the Security Deposit to any subsequent owner in
conformity with the provisions of Section 1950.7 of the California Civil Code
and/or any successor statute, in which event the transferring landlord shall be
released from all liability for the return of the Security Deposit. Tenant
specifically grants to Landlord (and Tenant hereby waives the provisions of
California Civil Code Section 1950.7 to the contrary) a period of sixty days
following a surrender of the Leased Premises by Tenant to Landlord within which
to return the Security Deposit (less permitted deductions) to Tenant, it being
agreed between Landlord and Tenant that sixty days is a reasonable period of
time within which to inspect the Leased Premises, make required repairs, receive
and verify workmen's billings therefor, and prepare a final accounting with
respect to such deposit. In no event shall the Security Deposit, or any portion
thereof, be considered prepaid rent.
ARTICLE 4:
USE OF LEASED PREMISES AND OUTSIDE AREAS
4.1 PERMITTED USE: Tenant shall be entitled to use the Leased Premises
solely for the "Permitted Use" as set forth in Article 1 and for no other
purpose whatsoever. Tenant shall continuously and without interruption use the
Leased Premises for such purpose for the entire Lease Term. Any discontinuance
of such use for a period of thirty consecutive calendar days shall be, at
Landlord's election, a default by, Tenant under the terms of this Lease. Tenant
shall have the right to use the Outside Areas in conjunction with its Permitted
Use of the Leased Premises solely for the purposes for which they were designed
and intended and for no other purposes whatsoever. Notwithstanding anything to
the contrary in this Section 4.1, Tenant shall not be required to continuously
and without interruption occupy or use the Leased Premises, and Tenant may
vacate the Leased Premises so long as it continues to comply with all other
provisions of this Lease Agreement, provides notice to Landlord of its intended
vacation and safeguards the Leased Premises in a manner reasonably satisfactory
to Landlord and Landlord's insurance carrier, in which event such failure to
occupy or vacate shall not be a default hereunder.
4.2 GENERAL LIMITATIONS ON USE: Tenant shall not do or permit anything
to be done in or about the Leased Premises, the Building, the Outside Areas or
the Property which does or could (i) jeopardize the structural integrity of the
Building or (ii) cause damage to any part of the Leased Premises, the Building,
the Outside Areas or the Property. Tenant shall not operate any equipment within
the Leased Premises which does or could (i) injure, vibrate or shake the Leased
Premises or the Building, (ii) damage, overload, or impair the efficient
operation of any electrical, plumbing, sewer, heating, ventilating or air
conditioning systems within or servicing the Leased Premises or the Building or
(iii) damage or impair the efficient operation of the sprinkler system (if any)
within or servicing the Leased Premises or the Building. Tenant shall not
install any equipment or antennas on or make any penetrations of the exterior
walls or roof of the Building nor shall Tenant affix any equipment to or make
any penetrations or cuts in the floor, ceiling or walls of the Leased Premises
absent Landlord's consent not to be unreasonably withheld. Landlord's consent
may be conditioned upon, without limitation, (a) assurance (including the
posting of bonds or additional security deposits) that such work shall not
damage nor create the risk of damage to the Property or Building and/or (b)
Landlord approving, in Landlord's sole discretion, Tenant's contractor who shall
perform such work with such contractor guaranteeing (in favor of Landlord) the
proper performance of such work. Tenant shall not place any loads upon the
floors, walls, ceiling or roof systems which could endanger the structural
integrity of the Building or damage its floors, foundations or supporting
structural components. Tenant shall not place any explosive, flammable or
harmful fluids or other waste materials in the drainage systems of the Leased
Premises, the Building, the Outside Areas or the Property. Tenant shall not
drain or discharge any fluids in the landscaped areas or across the paved areas
of the Property. Tenant shall not use any of the Outside Areas for the storage
of its materials, supplies, inventory or equipment, and all such materials,
supplies, inventory or equipment shall at all times be stored within the Leased
Premises. Tenant shall not
34
<PAGE>
commit nor permit to be committed any waste in or about the Leased Premises, the
Building, the Outside Areas or the Property. Without limiting anything to the
contrary in this Section 4.2 and regardless of anything set forth in Section 6.1
of the Lease Form expressly to the contrary:
A. Tenant shall have the right to make interior alterations which cost, in the
aggregate, less that $25,000 per Lease year and $200,000.00 cumulative over the
Lease Term and any extensions, if exercised, without Landlord's prior consent
provided that such alterations do not affect the structural parts of the
Building or involve the demolition of Landlord's property. Tenant shall,
however, deliver to Landlord a copy of any plans and specifications for any
leasehold improvement made by Tenant to the Leased Premises.
B. Tenant shall have the right to make modifications, alterations or
improvements to the Outside Areas, the exterior of the Building and structural
components of the Building only with Landlord's prior written consent, which
shall not be unreasonably withheld.
4.3 NOISE AND EMISSIONS: All noise generated by Tenant in its use of
the Leased Premises shall be confined or muffled so that it does not interfere
with the businesses of or annoy the occupants and/or users of adjacent
properties. All dust, fumes, odors and other emissions generated by Tenant's use
of the Leased Premises shall be sufficiently dissipated in accordance with sound
environmental practices and exhausted from the Leased Premises in such a manner
so as not to interfere with the businesses of or annoy the occupants and/or
users of adjacent properties, or cause any damage to the Leased Premises, the
Building, the Outside Areas or the Property or any component part thereof or the
property of adjacent property owners.
4.4 TRASH DISPOSAL: Tenant shall provide trash bins (or other adequate
garbage disposal facilities) within the trash enclosure areas provided or
permitted by Landlord outside the Leased Premises sufficient for the interim
disposal of all of its trash, garbage and waste. All such trash, garbage and
waste temporarily stored in such areas shall be stored in such a manner so that
it is not visible from outside of such areas, and Tenant shall cause such trash,
garbage and waste to be regularly removed from the Property at Tenant's sole
cost. Tenant shall at all times keep the Leased Premises, the Building, the
Outside Areas and the Property in a clean, safe and neat condition free and
clear of all trash, garbage, waste and/or boxes, pallets and containers
containing same at all times.
4.5 PARKING: Tenant shall not, at any time, park or permit to be parked
any recreational vehicles, inoperative vehicles or equipment in the Outside
Areas or on any portion of the Property. Tenant agrees to assume responsibility
for compliance by its employees and invitees with the parking provisions
contained herein. If Tenant or its employees park any vehicle within the
Property in violation of these provisions, then Landlord may, in addition to any
other remedies Landlord may have under this Lease, charge Tenant, as Additional
Rent, and Tenant agrees to pay, as Additional Rent, Fifty Dollars per day for
each day or partial day that each such vehicle is so parked within the Property.
4.6 SIGNS: Other than one business identification sign (which may be
illuminated if allowed by City and/or other applicable ordinances) which is
first approved by Landlord in accordance with this Article, Tenant shall not
place or install on or within any portion of the Leased Premises, the exterior
of the Building, the Outside Areas or the Property any sign, advertisement,
banner, placard, or picture which is visible from the exterior of the Leased
Premises. Tenant shall not place or install on or within any portion of the
Leased Premises, the exterior of the Building, the Outside Areas or the Property
any business identification sign which is visible from the exterior of the
Leased Premises until Landlord shall have first approved in writing the
location, size, content, design, method of attachment and material to be used in
the making of such sign. Any sign, once approved by Landlord, shall be installed
only in strict compliance with Landlord's approval, at Tenant's expense, using a
person first approved by Landlord to install same. Landlord may remove any signs
(which have not been first approved in writing by Landlord), advertisements,
banners, placards or pictures so placed by Tenant on or within the Leased
Premises, the exterior of the Building, the Outside Areas or the Property and
charge to Tenant the cost of such removal, together with any costs incurred by
Landlord to repair any damage caused thereby, including any cost incurred to
restore the surface upon which such sign was so affixed to its original
condition. Tenant shall remove all of Tenant's signs, repair any damage caused
thereby, and restore the surface upon which the sign was affixed to its original
condition, all to Landlord's reasonable satisfaction, upon the termination of
this Lease. Landlord's approval of Tenant's business name signage shall not be
unreasonably withheld.
35
<PAGE>
4.7 COMPLIANCE WITH LAWS AND PRIVATE RESTRICTIONS: Tenant shall abide
by and shall promptly observe and comply with, at its sole cost and expense, all
Laws (now or hereafter in effect) and Private Restrictions of record as of the
date of this Lease or amendments to Private Restrictions approved by Tenant
respecting the use and occupancy of the Leased Premises, the Building, the
Outside Areas or the Property including, without limitation, all Laws governing
the use and/or disposal of hazardous materials, and shall defend with competent
counsel, indemnify and hold Landlord harmless from any claims, damages or
liability resulting from Tenant's failure to do so. The indemnity provision of
this Article shall survive the expiration or sooner termination of this Lease,
with respect to any activities of Tenant occurring on or about the Property
while Tenant was in possession of the Leased Premises. Notwithstanding anything
to the contrary in Section 4.7 of the Lease Form:
A. Landlord, at its sole cost and expense, shall remain liable for the
correction of any violations of Law or Private Restrictions for Landlord's Work
which existed as of the Lease Commencement Date.
B. Tenant's compliance with Laws governing the use and/or disposal of hazardous
materials and Tenant's obligation to defend Landlord with competent counsel,
indemnify and hold Landlord harmless from any claims, damages or liabilities
resulting from Tenant's failure to do so shall be governed solely and
exclusively pursuant to Paragraph 16 of the Addendum to this Lease Agreement
executed concurrently herewith.
4.8 COMPLIANCE WITH INSURANCE REQUIREMENTS: With respect to any
insurance policies required or permitted to be carried by Landlord in accordance
with the provisions of this Lease, Tenant shall not conduct (or permit any other
person to conduct) any activities nor keep, store or use (or allow any other
person to keep, store or use) any item or thing within the Leased Premises, the
Building, the Outside Areas or the Property which (i) is prohibited under the
terms of any of such policies, (ii) could result in the termination of the
coverage afforded under any of such policies, (iii) could give to the insurance
carrier the right to cancel any of such policies, or (iv) could cause an
increase in the rates (over standard rates) charged for the coverage afforded
under any of such policies. Tenant shall comply with all requirements of any
insurance company, insurance underwriter, or Board of Fire Underwriters which
are necessary to maintain, at standard rates, the insurance coverages carried by
either Landlord or Tenant pursuant to this Lease. Notwithstanding anything to
the contrary in Section 4.8 of the Lease Form, Tenant shall be permitted to
conduct any activities or keep, store or use any item or thing within the Leased
Premises, the Building, the Outside Areas or the Property which is reasonably
necessary to Tenant's business even if it causes an increase in the rates
charged for coverage afforded under any insurance policies required or permitted
to be carried by Landlord, so long as Tenant is willing to pay any increase in
insurance rates so caused, and such activities do not constitute an unreasonable
danger to the Leased Premises or any part thereof or otherwise materially
interfere with Landlord's ability to obtain insurance for the Leased Premises
and Landlord's other buildings. If Tenant's activities cause an increase in
insurance rates for Landlord's other buildings, Tenant shall pay the entire
amount of such increase to the extent caused solely by Tenant's activities.
4.9 LANDLORD'S RIGHT TO ENTER: Landlord and its agents shall have the
right to enter the Leased Premises during normal business hours after giving
Tenant at least twenty four (24) hours notice except in cases of emergency and
subject to Tenant's reasonable security measures for the purpose of (i)
inspecting the same; (ii) showing the Leased Premises to prospective purchasers
or mortgagees of the Leased Premises; (iii) showing the Premises to prospective
tenants of the Premises except that the same shall not be allowed access absent
being accompanied by a representative of Tenant to assure that confidential
information is not disclosed to such prospective Tenant; (iv) making necessary
alterations, additions or repairs; and/or (v) performing any of Tenant's
obligations when Tenant has failed to do so. Landlord shall have the right to
enter the Leased Premises during normal business hours (or as otherwise agreed),
subject to Tenant's reasonable security measures, for purposes of supplying any
maintenance or services agreed to be supplied by Landlord. Landlord shall have
the right to enter the Outside Areas during normal business hours for purposes
of (i) inspecting the exterior of the Building and the Outside Areas, (ii)
posting notices of non-responsibility, and (iii) supplying any services to be
provided by Landlord. Any entry into the Leased Premises or the Outside Areas
obtained by Landlord in accordance with this Article shall not under any
circumstances be construed or deemed to be a forcible or unlawful entry into, or
a detainer of, the Leased Premises, or an eviction, actual or constructive, of
Tenant from the Leased Premises or any portion thereof. Notwithstanding anything
to the contrary in Section 4.9 of the Lease Form, Landlord shall enter the
Leased Premises only in a manner which will not unreasonably interfere with
Tenant's use of the Leased Premises.
36
<PAGE>
4.10 USE OF OUTSIDE AREAS: Tenant, in its use of the Outside Areas,
shall at all times keep the Outside Areas in a safe condition free and clear of
all materials, equipment, debris, trash (except within existing enclosed trash
areas), inoperable vehicles, and other items which are not specifically
permitted by Landlord to be stored or located thereon by Tenant. If, in the
opinion of Landlord, unauthorized persons are using any of the Outside Areas by
reason of, or under claim of, the express or implied authority or consent of
Tenant, then Tenant, upon demand of Landlord, shall restrain, to the fullest
extent then allowed by Law, such unauthorized use, and shall initiate such
appropriate proceedings as may be required to so restrain such use. Landlord
acknowledges that so long as Tenant has complied with all laws applicable
thereto, a portion of the Outside Areas may be used by Tenant in connection with
the operation of a day care facility for the children of Tenant's employees. In
such event, such Area shall be deemed a portion of the Leased Premises hereunder
and not a portion of the Outside Areas. Landlord may reasonably approve the
location of Tenant's day care facility.
4.11 [Intentionally deleted.]
4.12 ENVIRONMENTAL PROTECTION: Landlord may voluntarily cooperate in a
reasonable manner with the efforts of all governmental agencies in reducing
actual or potential environmental damage. Tenant shall not be entitled to
terminate this Lease or to any reduction in or abatement of rent by reason of
such compliance or cooperation. Tenant agrees at all times to cooperate fully
with Landlord and to abide by all rules and regulations and requirements which
Landlord may reasonably prescribe in order to comply with the requirements and
recommendations of governmental agencies regulating, or otherwise involved in,
the protection of the environment. Notwithstanding anything to the contrary in
Section 4.12 of the Lease Form, Landlord may voluntarily cooperate in reducing
actual or potential environmental damage so long as such cooperation is required
by law or does not unreasonably interfere with Tenant's use of the Leased
Premises or increase Tenant's costs.
4.13 OUTSIDE AREAS: No materials, pallets, supplies, tanks or
containers whether above or below ground level, equipment, finished products or
semifinished products, raw materials, inoperable vehicles or articles of any
nature shall be stored upon or permitted to remain outside of the Leased
Premises except in fully fenced and screened areas outside the Building which
have been designed for such purpose and have been approved in writing by
Landlord for such use by Tenant.
ARTICLE 5
REPAIRS, MAINTENANCE, SERVICES AND UTILITIES
5.1 REPAIR AND MAINTENANCE: Except in the case of damage to or
destruction of the Leased Premises, the Building, the Outside Areas or the
Property caused by an Act of God or other peril, in which case the provisions of
Article 10 shall control, the parties shall have the following obligations and
responsibilities with respect to the repair and maintenance of the Leased
Premises, the Building and the Outside Areas. Notwithstanding anything to the
contrary in Section B of Section 5.1 of the Lease Form, with respect to all
repairs or maintenance undertaken by Landlord, the cost of which is a Property
Operating Expense which is to be charged back to Tenant, Landlord shall use
reasonable efforts to obtain services and materials at fair market value.
A. Tenant's Obligation: Except for Landlord's responsibility
under Section 2.5, Tenant shall, at all times during the Lease Term and at its
sole cost and expense, regularly clean and continuously keep and maintain in
good order, condition and repair the Leased Premises and every part thereof
including, without limiting the generality of the foregoing, (i) all interior
walls, floors and ceilings, (ii) all windows, doors and skylights, (iii) all
electrical wiring, conduits, connectors and fixtures, (iv) all plumbing, pipes,
sinks, toilets, faucets and drains, (v) all lighting fixtures, bulbs and lamps,
(vi) all heating, ventilating and air conditioning equipment, and (vii) all
entranceways to the Leased Premises. Tenant, if requested to do so by Landlord
shall hire, at Tenant's sole cost and expense, a licensed heating, ventilating
and air conditioning contractor to regularly and periodically (not less
frequently than every three months) inspect and perform required maintenance on
the heating, ventilating and air conditioning equipment and systems serving the
Leased Premises, or alternatively, Landlord may, at its election, and at
reasonable cost with a reputable contractor, contract in its own name for such
regular and periodic inspections of and maintenance on such heating,
37
<PAGE>
ventilating and air conditioning equipment and systems and charge to Tenant, as
Additional Rent, the cost thereof. Tenant shall, at all times during the Lease
Term, keep in a clean and safe condition the Outside Areas. Tenant shall
regularly and periodically sweep and clean the driveways and parking areas.
Subject to Section 9.2 of this Lease, Tenant shall, at its sole cost and
expense, repair all damage to the Leased Premises, the Building, the Outside
Areas or the Property caused by the activities of Tenant, its employees,
invitees or contractors promptly following written notice from Landlord to so
repair such damage. If Tenant shall fail to perform the required maintenance or
fail to make repairs required of it pursuant to this Article within a reasonable
period of time following notice from Landlord to do so, then Landlord may, at
its election and without waiving any other remedy it may otherwise have under
this Lease or at Law, perform such maintenance or make such repairs and charge
to Tenant, as Additional Rent, the costs so incurred by, Landlord for same. All
glass within or a part of the Leased Premises, both interior and exterior, is at
the sole risk of Tenant and any broken glass shall promptly be replaced by
Tenant at Tenant's expense with glass of the same kind, size and quality.
B. Landlord's Obligation: Landlord shall, at all times during
the Lease Term, maintain in good condition and repair: (i) the exterior and
structural parts of the Building (including the foundation, subflooring,
load-bearing and exterior walls, and roof); and (ii) the landscaped areas
located outside the Building. The provisions of this Subarticle B shall in no
way limit the right of Landlord to charge to Tenant, as Additional Rent pursuant
to Article 3 (to the extent permitted pursuant to Article 3 or Article 13.12),
the costs incurred by Landlord in performing such maintenance and/or making such
repairs.
5.2 UTILITIES: Tenant shall arrange, at its sole cost and expense and
in its own name, for the supply of gas and electricity to the Leased Premises.
In the event that such services are not separately metered, Tenant shall, at its
sole expense, cause such meters to be installed. Landlord shall maintain the
water meter(s) in its own name; provided, however, that if at any time during
the Lease Term Landlord shall require Tenant to put the water service in
Tenant's name, Tenant shall do so at Tenant's sole cost. Tenant shall be
responsible for determining if the local supplier of water, gas and electricity
can supply the needs of Tenant and whether or not the existing water, gas and
electrical distribution systems within the Building and the Leased Premises are
adequate for Tenant's needs. Tenant shall be responsible for determining if the
existing sanitary and storm sewer systems now servicing the Leased Premises and
the Property are adequate for Tenant's needs. Tenant shall pay all charges for
water, gas, electricity, and storm and sanitary sewer services as so supplied to
the Leased Premises, irrespective of whether or not the services are maintained
in Landlord's or Tenant's name.
5.3 SECURITY: Tenant acknowledges that Landlord has not undertaken any
duty whatsoever to provide security for the Leased Premises, the Building, the
Outside Areas or the Property and, accordingly, Landlord is not responsible for
the security of same or the protection of Tenant's property or Tenant's
employees, invitees or contractors. To the extent Tenant determines that such
security or protection services are advisable or necessary, Tenant shall arrange
for and pay the costs of providing same.
5.4 ENERGY AND RESOURCE CONSUMPTION: Landlord may voluntarily cooperate
in a reasonable manner with the efforts of governmental agencies and/or utility
suppliers in reducing energy or other resource consumption within the Property.
Tenant shall not be entitled to terminate this Lease or to any reduction in or
abatement of rent by reason of such compliance or cooperation. Tenant agrees at
all times to cooperate fully with Landlord and to abide by all reasonable rules
established by Landlord (i) in order to maximize the efficient operation of the
electrical, heating, ventilating and air conditioning systems and all other
energy or other resource consumption systems within the Property and/or (ii) in
order to comply with the requirements and recommendations of utility suppliers
and governmental agencies regulating the consumption of energy and/or other
resources. Notwithstanding anything to the contrary in Section 5.4 of the Lease
Form, Landlord shall not reduce energy or other resource consumption in a manner
which unreasonably interferes with Tenant's use of the Leased Premises, and
Tenant shall not be required to cooperate in any reduction of energy which
unreasonably interferes with Tenant's use of the Leased Premises or increases
Tenant's costs unless such cooperation is required by law.
38
<PAGE>
ARTICLE 6:
ALTERATIONS AND IMPROVEMENTS
6.1 BY TENANT: Tenant shall not make any alterations to or
modifications of the Leased Premises or construct any improvements within the
Leased Premises until Landlord shall have first approved, in writing, the plans
and specifications therefor, which approval shall not be unreasonably withheld.
All such modifications, alterations or improvements, once so approved, shall be
made, constructed or installed by Tenant at Tenant's expense (including all
permit fees and governmental charges related thereto), using a licensed
contractor first approved by Landlord, in substantial compliance with the
Landlord approved plans and specifications therefor. All work undertaken by
Tenant shall be done in accordance with all Laws and in a good and workmanlike
manner using new materials of good quality. Tenant shall not commence the making
of any such modifications or alterations or the construction of any such
improvements until (i) all required governmental approvals and permits shall
have been obtained, (ii) all requirements regarding insurance imposed by this
Lease have been satisfied, (iii) Tenant shall have given Landlord at least five
business days' prior written notice of its intention to commence such work so
that Landlord may post and file notices of non-responsibility, and (iv) if
requested by Landlord, Tenant shall have obtained contingent liability and broad
form builder's risk insurance in an amount satisfactory to Landlord to cover any
perils relating to the proposed work not covered by insurance carried by Tenant
pursuant to Article 9. In no event shall Tenant make any modifications,
alterations or improvements whatsoever to the Outside Areas or the exterior or
structural components of the Building including, without limitation, any cuts or
penetrations in the floor, roof or exterior walls of the Leased Premises. As
used in this Article, the term "modifications, alterations and/or improvements"
shall include, without limitation, the installation of additional electrical
outlets, overhead lighting fixtures, drains, sinks, partitions, doorways, or the
like. Notwithstanding anything to the contrary in Section 4.2 or Section 6.1 of
the Lease Form:
A. Tenant shall have the right to make interior alterations which cost, in the
aggregate, less that $25,000 per Lease year and $200,000.00 cumulative over the
Lease Term and any extensions, if exercised, without Landlord's prior consent
provided that such alterations do not affect the structural parts of the
Building or involve the demolition of Landlord's property. Tenant shall,
however, deliver to Landlord a copy of any plans and specifications for any
leasehold improvement made by Tenant to the Leased Premises.
B. Tenant shall have the right to make modifications, alterations or
improvements to the Outside Areas, the exterior of the Building and structural
components of the Building only with Landlord's prior written consent, which
shall not be unreasonably withheld.
6.2 OWNERSHIP OF IMPROVEMENTS: Tenant may remove its trade fixtures
constructed by Tenant at its expense, HVAC units installed by Tenant at its
expense which are not reasonably necessary for the comfortable use and enjoyment
of the Premises, computer flooring installed by Tenant at its expense, and
demountable partitions installed by Tenant at Tenant's expense, after
commencement of the Lease Term, so long as it repairs all damage caused by the
installation and removal thereof and returns the Leased Premises to
substantially the condition existing prior to the installation of such Property.
All modifications, alterations or improvements made or added to the Leased
Premises by Tenant (other than Tenant's inventory, equipment, movable furniture,
wall decorations and trade fixtures) shall be deemed real property and a part of
the Leased Premises, but shall remain the property of Tenant during the Lease
Term. Any such modifications, alterations or improvements, once completed, shall
not be altered or removed from the Leased Premises during the Lease Term without
Landlord's written approval first obtained in accordance with the provisions of
Article 6.1 above. At the expiration or sooner termination of this Lease, all
such modifications, alterations and improvements (other than Tenant's inventory,
equipment, movable furniture, wall decorations and trade fixtures) if not
removed by Tenant shall automatically become the property of Landlord and shall
be surrendered to Landlord as a part of the Leased Premises as required pursuant
to Article 2, unless Landlord shall require Tenant to remove any of such
modifications, alterations or improvements in accordance with the provisions of
Article 2, in which case Tenant shall so remove same. Landlord shall have no
obligation to reimburse to Tenant all or any portion of the cost or value of any
such modifications, alterations or improvements so surrendered to Landlord. All
modifications, alterations or improvements which are installed or constructed on
or attached to the Leased Premises by Landlord at Landlord's expense shall be
deemed real property and a part of the Leased Premises and shall be the property
of Landlord. All lighting, plumbing, electrical, heating, ventilating and air
conditioning fixtures, partitioning, window coverings, wall coverings and floor
coverings installed by Tenant shall be deemed improvements to the Leased
Premises and real
39
<PAGE>
property as set forth above and not trade fixtures of Tenant. Notwithstanding
anything to the contrary in Section 6.2 of the Lease Form, with respect to
Tenant's Property (as defined in Paragraph 2.6 above), Landlord shall, upon
Tenant's request, execute a lien waiver in a form reasonably acceptable to
Tenant's lender or equipment lessor, so long as such waiver does not alter the
terms of the Lease.
6.3 ALTERATIONS REQUIRED BY LAW: Tenant shall, at its sole cost, make
all modifications, alterations and improvements to the Leased Premises after the
Lease Commencement Date that are required by any Law because of (i) Tenant's use
or occupancy of the Leased Premises, the Building, the Outside Areas, or the
Property, (ii) Tenant's application for any permit or governmental approval, or
(iii) Tenant's making of any modifications, alterations or improvements to or
within the Leased Premises. If Landlord shall, at any time during the Lease
Term, be required by any governmental authority to make any modifications,
alterations or improvements to the Building or the Project, the actual
out-of-pocket cost incurred by Landlord in making such modifications,
alterations or improvements, including interest at a rate equal to sum of that
rate quoted by Wells Fargo Bank, NT. & SA. from time to time as its "prime" rate
or "reference" rate and two percent (2%) ("Wells Prime Plus Two"), shall be
amortized by Landlord over the useful life of such modifications, alterations or
improvements, as determined in accordance with generally accepted accounting
standards, and the monthly amortized cost of such modifications, alterations and
improvements as so amortized shall be considered a Property Maintenance Cost.
Notwithstanding anything contained herein to the contrary, except as caused by
or resulting from the acts or omissions of Tenant or Tenant's architect, Tenant
shall not be responsible for correcting any Building code violations or
violations of other laws existing at the Commencement Date with respect to
improvements constructed by Landlord and existing as of the Lease Commencement
Date but, rather, Landlord shall be responsible for such correction.
6.4 LIENS: Tenant shall keep the Property and every part thereof free
from any liens and shall pay when due all bills arising out of any work
performed, materials furnished, or obligations incurred by Tenant, its agents,
employees or contractors relating to the Property. If any such claim of lien is
recorded against Tenant's interest in this Lease, the Property or any part
thereof, Tenant shall bond against, discharge or otherwise cause such lien to be
entirely released within ten days after receipt of written notice from Landlord.
Tenant's failure to do so shall be conclusively deemed a material default under
the terms of this Lease.
ARTICLE 7:
ASSIGNMENT AND SUBLETTING BY TENANT
7.1 BY TENANT: Tenant shall not sublet the Leased Premises (or any
portion thereof) or assign or encumber its interest in this Lease, whether
voluntarily or by operation of Law, without Landlord's prior written consent,
which shall not be unreasonably withheld, first obtained in accordance with the
provisions of this Article 7. Any attempted subletting, assignment or
encumbrance without Landlord's prior written consent, at Landlord's election,
shall constitute a default by Tenant under the terms of the Lease. The
acceptance of rent by Landlord from any person or entity other than Tenant, or
the acceptance of rent by Landlord from Tenant with knowledge of a violation of
the provisions of this Article, shall not be deemed to be a waiver by Landlord
of any provision of this Article or this Lease or to be a consent to any
subletting by Tenant or any assignment or encumbrance of Tenant's interest in
this Lease. Notwithstanding anything to the contrary in Section 7.1 of the Lease
Form, Landlord shall not unreasonably withhold its consent to any assignment or
sublease.
7.2 MERGER OR REORGANIZATION: If Tenant is a corporation, any
dissolution, merger, consolidation or other reorganization of Tenant, or the
sale or other transfer in the aggregate over the Lease Term of a controlling
percentage of the capital stock of Tenant, shall be deemed a voluntary
assignment of Tenant's interest in this Lease. The phrase "controlling
percentage" means the ownership of and the right to vote stock possessing more
than fifty percent of the total combined voting power of all classes of Tenant's
capital stock issued, outstanding and entitled to vote for the election of
directors. If Tenant is a partnership, a withdrawal or change, whether
voluntary, involuntary or by operation of Law, of any general partner, or the
dissolution of the partnership, shall be deemed a voluntary assignment of
Tenant's interest in this Lease. Notwithstanding anything to the contrary in
Sections 7.1 or 7.5 or this Section 7.2 of the Lease Form:
40
<PAGE>
A. If Tenant is a publicly traded corporation, or Tenant is not a publicly
traded corporation but the Lease does not represent substantially all of the
assets of Tenant, then Landlord's consent shall not be required for any
assignment or sublease (i) made in connection with a merger, consolidation, or
other reorganization of Tenant, (ii) made in connection with a sale of
substantially all of the assets of Tenant, or (iii) involving any corporation
which controls, is controlled by, or is under common control with Tenant. For
the purpose of the Lease if Tenant is a corporation, the sale, or other transfer
of Tenant's capital stock shall not be deemed an assignment, subletting, or any
other transfer of the Lease or the Leased Premises. Notwithstanding any
provision to the contrary in Article 7 of the Lease Form, in the case of any of
the above described transfers, Tenant shall not be obligated to pay any
assignment consideration or excess rentals to Landlord.
B. If Tenant or Landlord assigns the Lease as security for a loan, Landlord and
Tenant agree to execute such documents as are reasonably requested by the lender
and to provide reasonable provisions in the Lease protecting such lender's
security interest which are customarily required by institutional lenders making
loans secured by a deed of trust or a leasehold mortgage, so long as such
provisions do not alter the benefits of Landlord or Tenant or the obligations of
Tenant or Landlord under the Lease.
7.3 LANDLORD'S ELECTION: If Tenant shall desire to assign its interest
under this Lease or to sublet the Leased Premises, Tenant must first notify
Landlord, in writing, of its intent to so assign or sublet, at least fifteen
days in advance of the date it intends to so assign its interest in this Lease
or sublet the Leased Premises but not sooner than one hundred eighty days in
advance of such date, specifying in detail the terms of such proposed assignment
or subletting, including the name of the proposed assignee or sublessee, the
proposed assignee's or sublessee's intended use of the Leased Premises, a
current financial statement of such proposed assignee or sublessee and the form
of documents to be used in effectuating such assignment or subletting. Landlord
shall have a period of ten business days following receipt of such notice within
which to do one of the following: (i) consent to such requested assignment or
subletting subject to Tenant's compliance with the conditions set forth in
Article 7.4 below or (ii) refuse to so consent to such requested assignment or
subletting, provided that such consent shall not be unreasonably refused. If
Landlord refuses Landlord shall provide Tenant the reasons therefor. During said
ten business day period, Tenant covenants and agrees to supply to Landlord, upon
request, all necessary or relevant information which Landlord may reasonably
request respecting such proposed assignment or subletting and/or the proposed
assignee or sublessee.
7.4 CONDITIONS TO LANDLORD'S CONSENT: If Landlord elects to consent, or
shall have been ordered to so consent by a court of competent jurisdiction, to
such requested assignment, subletting or encumbrance, such consent shall be
expressly conditioned upon the occurrence of each of the conditions below set
forth, and any purported assignment, subletting or encumbrance made or ordered
prior to the full and complete satisfaction of each of the following conditions
shall be void and, at the election of Landlord, which election may be exercised
at any time following such a purported assignment, subletting or encumbrance but
prior to the satisfaction of each of the stated conditions, shall constitute a
material default by Tenant under this Lease until cured by satisfying in full
each such condition by the assignee, subleases or encumbrances. The conditions
are as follows:
A. Landlord having approved in form and substance the assignment or
sublease agreement (or the encumbrance agreement), which approval shall not be
unreasonably withheld by Landlord if the requirements of this Article 7 are
otherwise complied with.
B. Each such subleases or assignee having agreed, in writing
satisfactory to Landlord and its counsel and for the benefit of Landlord, to
assume, to be bound by, and to perform the obligations of this Lease to be
performed by Tenant which relate to space being subleased (or, in the case of an
encumbrance, each such encumbrance having similarly agreed to assume, be bound
by and to perform Tenant's obligations upon a foreclosure or transfer in lieu
thereof).
C. Landlord shall not have exercised any remedy for a Default by
Tenant.
D. Tenant having reimbursed to Landlord all reasonable costs and
reasonable attorneys' fees (at actual time incurred and at hourly rates then
customary) incurred by Landlord in conjunction with the processing and
documentation of any such requested subletting, assignment or encumbrance.
41
<PAGE>
E. Tenant having delivered to Landlord a complete and fully-executed
duplicate original of such sublease agreement, assignment agreement or
encumbrance (as applicable) and all related agreements.
F. Tenant having paid, or having agreed in writing to pay as to future
payments, to Landlord fifty percent of all assignment consideration or excess
rentals to be paid to Tenant or to any other on Tenant's behalf or for Tenant's
benefit for such assignment or subletting as follows:
(1) If Tenant assigns its interest under this Lease and if all
or a portion of the consideration for such assignment is to be paid by the
assignee at the time of the assignment, that Tenant shall have paid to Landlord
and Landlord shall have received an amount equal to fifty percent of the
assignment consideration so paid or to be paid (whichever is the greater) at the
time of the assignment by the assignee; or
(2) If Tenant assigns its interest under this Lease and if
Tenant is to receive all or a portion of the consideration for such assignment
in future installments, that Tenant and Tenant's assignee shall have entered
into a written agreement with and for the benefit of Landlord satisfactory to
Landlord and its counsel whereby Tenant and Tenant's assignee jointly agree to
pay to Landlord an amount equal to fifty percent of all such future assignment
consideration installments to be paid by such assignee as and when such
assignment consideration is so paid.
(3) If Tenant subleases the Leased Premises, that Tenant and
Tenant's sublessee shall have entered into a written agreement with and for the
benefit of Landlord satisfactory to Landlord and its counsel whereby Tenant and
Tenant's sublessee jointly agree to pay to Landlord fifty percent of all excess
rentals to be paid by such sublessees as and when such excess rentals are so
paid.
7.5 ASSIGNMENT CONSIDERATION AND EXCESS RENTALS DEFINED: For purposes
of this Article, including any amendment to this Article by way of addendum or
other writing, the term "assignment consideration" shall mean all consideration
to be paid by the assignee to Tenant or to any other on Tenant's behalf or for
Tenant's benefit as consideration for such assignment, less any commissions paid
by Tenant to a licensed real estate broker for arranging such assignment (not to
exceed then standard rates), and the term "excess rentals" shall mean all
consideration to be paid by the sublessees to Tenant or to any other on Tenant's
behalf or for Tenant's benefit for the sublease of the Leased Premises in excess
of the rent due to Landlord under the terms of this Lease for the same period,
less any commissions paid by Tenant to a licensed real estate broker for
arranging such sublease (not to exceed then standard rates). Tenant agrees that
the portion of any assignment consideration and/or excess rentals arising from
any assignment or subletting by Tenant which is to be paid to Landlord pursuant
to this Article now is and shall then be the property of Landlord and not the
property of Tenant. Notwithstanding anything to the contrary, the following
costs shall be deducted from (a) all consideration received by Tenant with
respect to an assignment and (b) all consideration in excess of rent due to
Landlord under the Lease for the same period with respect to subletting, to
determine the meaning of the terms "assignment consideration" or "excess
rentals": (i) any commissions paid by Tenant to a licensed real estate broker
for arranging such sublease or assignment (not to exceed then standard rates);
and (ii) any costs of retrofit, tenant improvements, or restoration necessary
for a subtenant or assignee and paid for by Tenant.
7.6 PAYMENTS: All payments required by this Article to be made to
Landlord shall be made in cash in full as and when they become due. At the time
Tenant, Tenant's assignee or subleases makes each such payment to Landlord,
Tenant or Tenant's assignee or subleases, as the case may be, shall deliver to
Landlord an itemized statement in reasonable detail showing the method by which
the amount due Landlord was calculated and certified by the party making such
payment as true and correct.
7.7 GOOD FAITH: The rights granted to Tenant by this Article are
granted in consideration of Tenant's express covenant that all pertinent
allocations which are made by Tenant between the rental value of the Leased
Premises and the value of any of Tenant's personal property which may be
conveyed or leased generally concurrently with and which may reasonably be
considered a part of the same transaction as the permitted assignment or
subletting shall be made fairly, honestly and in good faith. If Tenant shall
breach this Covenant of Good Faith, Landlord may immediately declare Tenant to
be in default under the terms of this Lease and terminate this Lease and/or
exercise any
42
<PAGE>
other rights and remedies Landlord would have under the terms of this Lease in
the case of a material default by Tenant under this Lease.
7.8 EFFECT OF LANDLORD'S CONSENT: No subletting, assignment or
encumbrance, even with the consent of Landlord, shall relieve Tenant of its
personal and primary obligation to pay rent and to perform all of the
obligations to be performed by Tenant hereunder. Consent by Landlord to one or
more assignments or encumbrances of Tenant's interest in this Lease or to one or
more sublettings of the Leased Premises shall not be deemed to be a consent to
any subsequent assignment, encumbrance or subletting. If Landlord shall have
been ordered by a court of competent jurisdiction to consent to a requested
assignment or subletting, or such an assignment or subletting shall have been
ordered over the objection of Landlord, such assignment or subletting shall not
be binding between the assignee (or subleases) and Landlord until such time as
all conditions set forth in Article 7.4 above have been fully satisfied (to the
extent not then satisfied) by the assignee or subleases, including, without
limitation, the payment to Landlord of all agreed assignment considerations
and/or excess rentals then due Landlord.
ARTICLE 8:
LIMITATION ON LANDLORD'S LIABILITY AND INDEMNITY
8.1 LIMITATION ON LANDLORD'S LIABILITY AND RELEASE: Landlord shall not
be liable to Tenant for, and Tenant hereby releases Landlord and its partners,
principals, officers, agents and employees from, any and all liability, whether
in contract, tort or on any other basis, for any injury to or any damage
sustained by Tenant, Tenant's agents, employees, contractors or invitees, any
damage to Tenant's property; or any loss to Tenant's business, loss of Tenant's
profits or other financial loss of Tenant resulting from or attributable to the
condition of, the management of, the repair or maintenance of, the protection
of, the supply of services or utilities to, the damage to or destruction of the
Leased Premises, the Building, the Project or the Common Areas, including
without limitation (i) the failure, interruption, rationing or other curtailment
or cessation in the supply of electricity, water, gas or other utility service
to the Project, the Building or the Leased Premises; (ii) the vandalism or
forcible entry into the Building or the Leased Premises; (iii) the penetration
of water into or onto any portion of the Leased Premises through roof leaks or
otherwise; (iv) the failure to provide security and/or adequate lighting in or
about the Project, the Building or the Leased Premises; (v) the existence of any
design or construction defects within the Project, the Building or the Leased
Premises; (vi) the failure of any mechanical systems to function properly (such
as the HVAC systems); or (vii) the blockage of access to any portion of the
Project, the Building or the Leased Premises, except that Tenant does not so
release Landlord from such liability to the extent such damage was proximately
caused by Landlord's gross negligence, willful misconduct, or Landlord's failure
to perform an obligation expressly undertaken pursuant to this Lease after a
reasonable period of time shall have lapsed following receipt of written notice
from Tenant to so perform such obligation. In this regard, Tenant acknowledges
that it is fully apprised of the provisions of Law relating to releases, and
particularly to those provisions contained in Section 1542 of the California
Civil Code which reads as follows:
A general release does not extend to claims which the creditor does not know or
suspect to exist in his favor at the time of executing the release, which if
known by him must have materially affected his settlement with the debtor.
Notwithstanding such statutory provision, and for the purpose of implementing a
full and complete release and discharge, Tenant hereby (i) waives the benefit of
such statutory provision and (ii) acknowledges that, subject to the exceptions
specifically set forth herein, the release and discharge set forth in this
Article is a full and complete settlement and release and discharge of all
claims and is intended to include in its effect, without limitation, all claims
which Tenant, as of the date hereof, does not know of or suspect to exist in its
favor. Except as to Landlord's successors acquiring the building by way of
foreclosure or deed in lieu of foreclosure, notwithstanding anything to the
contrary in Section 8.1 of the Lease form, Tenant shall not release Landlord,
and Landlord shall remain liable to Tenant for the following:
(i) Landlord's liability to repair violations of Law in Landlord's Work existing
as of the Lease Commencement Date; and
43
<PAGE>
(ii) Liability for hazardous materials other than liability assumed by Tenant
pursuant to Paragraph 16 of this Addendum.
8.2 TENANT'S INDEMNIFICATION OF LANDLORD: Except to the extent that the
waivers of subrogation set forth in Paragraph 9.3 are applicable, Tenant shall
defend with competent counsel satisfactory to Landlord any claims made or legal
actions filed or threatened against Landlord with respect to the violation of
any law, or the death, bodily injury, personal injury, property damage, or
interference with contractual or property rights suffered by any third party
(including other tenants within the Project) occurring within the Leased
Premises or resulting from Tenant's use or occupancy of the Leased Premises, the
Building or the Outside Areas, or resulting from Tenant's activities in or about
the Leased Premises, the Building, the Outside Areas or the Property, and Tenant
shall indemnify and hold Landlord, Landlord's principals, employees, agents and
contractors harmless from any loss, liability, penalties, or expense whatsoever
(including any loss attributable to vacant space which otherwise would have been
leased, but for such activities) resulting therefrom, except to the extent
proximately caused by the active and gross negligence or willful misconduct of
Landlord. This indemnity agreement shall survive the expiration or sooner
termination of this Lease, provided that Tenant shall not be required to
indemnify Landlord under this section 8.2 with respect to events that first
occur after the later of (a) the date of the expiration, or sooner termination,
of this Lease, or (b) the date Tenant actually vacates the Premises, provided
that Landlord has actual notice of such vacation. Tenant shall not be obligated
to indemnify Landlord against loss resulting from and to the extent of the
active and gross negligence or willful misconduct of Landlord or its agents,
employees or contractors.
ARTICLE 9:
INSURANCE
9.1 TENANT'S INSURANCE: Tenant shall maintain insurance complying with
all of the following:
A. Tenant shall procure, pay for and keep in full force and effect, at
all times during the Lease Term, the following:
(1) Commercial General Liability insurance insuring Tenant
against liability for bodily injury, death, property damage and personal injury
resulting from Tenant's use or occupancy of the Leased Premises or the Building,
Outside Areas, Property, or Common Areas or resulting from Tenant's activities
in or about the Leased Premises. Such insurance shall be on an occurrence basis
with a combined single limit of liability of not less than the amount of
Tenant's Required Liability Coverage (as set forth in Article 1). The policy or
policies shall be endorsed to name Landlord and such others as are designated by
Landlord as additional insureds in the form equivalent to CG20111185 or
successor and shall contain the following additional endorsement: "The insurance
afforded to the additional insureds is primary insurance. If the additional
insureds have other insurance which is applicable to the loss on a contributing,
excess or contingent basis, the amount of this insurance company's liability
under this policy shall not be reduced by the existence of such other insurance.
Any insurance carried by the additional insureds shall be excess and
noncontributing with the insurance provided by the tenant." The policy shall not
be canceled or reduced without at least 30 days written notice to additional
insureds. If the policy insures more than one location, it shall be endorsed to
show that the limits and aggregate apply per location using endorsement
CG25041185 or successor. Tenant's policy shall also contain the severability of
interest and cross-liability endorsement or clauses.
(2) Fire and property damage insurance in so-called Special
Form plus flood insuring Tenant against loss from physical damage to Tenant's
personal property, inventory, trade fixtures and improvements within the Leased
Premises with coverage in amounts that a reasonable and prudent tenant would
procure, but in no event less than $5,000,000.00 in coverage;
(3) [intentionally omitted];
(4) Boiler and machinery insurance, if applicable;
(5) Liability insurance to cover sale or distribution of food
and beverages within the Leased Premises, to the extent obtainable, coverage for
liability arising out of the distribution, sale, or consumption of food and/or
beverages, including alcoholic beverages if applicable, at the Leased Premises
for not less than Tenant's Required Liability Coverage as set forth in Article
1;
44
<PAGE>
(6) To the extent required by Law, workers' compensation
insurance and any other employee benefit insurance sufficient to comply with all
Laws which policy shall be endorsed to provide thirty (30) days written notice
of cancellation to Landlord;
(7) With respect to making of alterations or the construction
of improvements or the like undertaken by Tenant, contingent liability and
builder's risk insurance, in an amount and with coverage satisfactory to
Landlord;
(8) [intentionally omitted]; and
(9) Comprehensive Auto Liability insurance with a combined
single limit coverage of not less than the amount of Tenant's Required Liability
Coverage (as set forth in Article I) for bodily injury and/or property damage
liability for: a) Owned autos b) Hired or borrowed autos c) Non-owned autos d)
Auto blanket contractual form CA0029. The policy shall be endorsed to provide 30
days written notice of cancellation to Landlord.
B. Each policy of insurance required to be carried by Tenant pursuant
to this Article or actually carried by Tenant with respect to the Leased
Premises or the Property (i) shall be in a form reasonably satisfactory to
Landlord, and (ii) shall be provided by carriers admitted to do business in the
state of California reasonably acceptable to Landlord.
C. Prior to the time Tenant or any of its contractors enters the Leased
Premises, Tenant shall deliver to the Landlord with respect to each policy of
insurance required to be carried by Tenant pursuant to this Article, a
certificate of the insurer certifying, in a form satisfactory to the Landlord,
that the policy has been issued and premium paid providing the coverage required
by this Article and containing the provisions specified herein. With respect to
each renewal or replacement of any such insurance, the requirements of this
Article must be complied with not less than 30 days prior to the expiration or
cancellation of the policy being renewed or replaced. Landlord may at any time
and from time-to-time inspect and/or copy any and all insurance policies
required to be carried by Tenant pursuant to this Article. If Landlord's lender,
insurance broker or advisor or counsel reasonably determines at any time that
the form or amount of coverage set forth in Article 9.1A for any policy of
insurance Tenant is required to carry pursuant to this Article is not adequate,
then Tenant shall increase the amount of coverage for such insurance to such
greater amount or change the form as Landlord's lender, insurance broker or
advisor or counsel reasonably deems adequate (provided however such increase
level of coverage may not exceed the level of coverage for such insurance
commonly carried by comparable businesses similarly situated and operating under
similar circumstances).
D. The Commercial General Liability insurance carried by Tenant shall
specifically insure the performance by Tenant of the Indemnification provisions
set forth in Article 8.2 of this Lease Form provided, however, nothing contained
in this Article 9 shall be construed to limit the liability of Tenant under the
Indemnification provisions set forth in said Article 8.2.
9.2 LANDLORD'S INSURANCE: With respect to insurance maintained by
Landlord:
A. Landlord shall maintain, as the minimum coverage required of it by
this Lease, property insurance in so-called "Special" form insuring Landlord
(and such others as Landlord may designate) against loss from physical damage to
the Building with coverage of not less than one hundred percent of the full
actual replacement cost thereof (with an endorsement for replacement in
compliance with all building codes and other laws). Such property damage
insurance, at Landlord's election but without any requirement on Landlord's
behalf to do so, (i) may be endorsed to include or separate policies may be
carried to cover loss or damage caused by any additional perils against which
Landlord may elect to insure, including earthquake and/or flood; (ii) may
provide coverage for loss of rents for a period of up to twelve months; and/or
(iii) may contain "deductibles" not exceeding Ten Thousand Dollars per
occurrence or such other amount as is reasonably acceptable to both Landlord and
Tenant. Landlord shall not be required to cause such insurance to cover any of
Tenant's personal property, inventory and trade fixtures, or any modifications,
alterations or improvements made or constructed by Tenant to or within the
Leased Premises.
B. Landlord shall maintain Commercial General Liability insurance
insuring Landlord (and such others as are designated by Landlord) against
liability for personal injury, bodily injury, death, and damage to property
occurring in, on or about, or resulting from the use or occupancy of the
Property, or any portion thereof, with combined single limit coverage of at
least Two Million Dollars. Landlord may carry such greater coverage as Landlord
or Landlord's
45
<PAGE>
Lender, insurance broker or advisor or counsel may from time to time determine
is reasonably necessary for the adequate protection of Landlord and the
Property.
C. Landlord may maintain any other insurance which in the opinion of
its insurance broker or advisor or legal counsel is prudent to carry under the
given circumstances provided such insurance is commonly carried by owners of
property similarly situated and operating under similar circumstances, and the
cost thereof is customarily paid by tenants pursuant to industrial triple net
leases. Notwithstanding anything to the contrary in Section 9.2 of the Lease
Form:
1. Tenant's obligation to pay for the cost of any earthquake and/or
flood insurance premiums is limited to an amount which is equal to or less than
competitive premiums charged by reputable carriers, with coverage acceptable to
Landlord.
2. Uninsured losses and earthquake and/or flood insurance deductibles
shall be handled in the following manner:
(i) Tenant shall pay for the uninsured loss or earthquake or
flood insurance deductible up to an amount equal to ten percent (10%) of the
replacement cost of the building;
(ii) If Tenant's contribution of ten percent (10%) of the
replacement cost of the building is not sufficient to cover an uninsured loss or
earthquake and/or flood insurance deductible, Landlord may pay the difference or
Landlord may terminate the Lease unless Tenant agrees to pay the entire amount
which is in excess of ten percent (10%) of the Building replacement cost;
(iii) If Landlord contributes to payment for an uninsured loss
or earthquake and/or flood insurance deductible, such amount shall be repaid and
amortized by Tenant over the remaining term of the Lease together with interest
at Wells Prime Plus Two, and Tenant shall pay same as Additional Rent. However,
Tenant shall in no event be required to pay an amount in excess of the product
of six and one-half cents ($0.065) times the Rentable Area of the Building in
square feet per month (the "Ceiling Amount"). All amortization will terminate on
the expiration of Tenant's occupancy of the Building.
(iv) If the Ceiling Amount is not adequate to amortize
Landlord's contribution to an uninsured loss or earthquake and/or flood
insurance deductible over the initial Lease Term, and Tenant exercises an option
to renew the Lease or otherwise remains in possession of the Premises, Tenant's
payment shall continue at the Ceiling Amount during any period of Tenant's
occupancy of the Premises until Landlord's contribution is amortized with
interest as provided above.
9.3 MUTUAL WAIVER OF SUBROGATION: Landlord hereby releases Tenant, and
Tenant hereby releases Landlord and its respective principals, officers, agents,
employees and servants, from any and all liability for loss, damage or injury to
any person or property in or about the Leased Premises or the Property which is
caused by or results from a peril or event or happening which would be covered
by insurance required to be carried by the party sustaining such loss under the
terms of this Lease, or is covered by insurance actually carried and in force at
the time of the loss, by the party sustaining such loss; provided, however, that
such waiver shall be effective only to the extent permitted by the insurance
covering such loss and to the extent such insurance is not prejudiced thereby.
Each party shall cause each insurance policy it obtains to provide that the
insurer thereunder waives all right of recovery by way of subrogation as
required herein in connection with any injury or damage covered by the policy to
the extent such endorsement is available at commercially reasonable rates, and
should endorsement not be available at commercially reasonable rates, then such
party shall notify the other party of that fact.
46
<PAGE>
ARTICLE 10:
DAMAGE TO LEASED PREMISES
10 LANDLORD'S DUTY TO RESTORE: If the Leased Premises, the Building or
the Outside Areas are damaged by any peril after the Effective Date of this
Lease, Landlord shall restore the same, as and when required by this Article,
unless this Lease is terminated by Landlord pursuant to Article 10.3 or by
Tenant pursuant to Article 10.4. If this Lease is not so terminated, then upon
the issuance of all necessary governmental permits, Landlord shall commence and
diligently prosecute to completion the restoration of the Leased Premises, the
Building or the Outside Areas, as the case may be, to the extent then allowed by
Law, to substantially the same condition in which it existed as of the Lease
Commencement Date, but in compliance with all then existing Laws. Landlord's
obligation to restore shall be limited to the improvements constructed by
Landlord, including but not limited to Landlord's Work. Landlord shall have no
obligation to restore any improvements made by Tenant to the Leased Premises or
any of Tenant's personal property, inventory or trade fixtures. Upon completion
of the restoration by Landlord, Tenant shall forthwith replace or fully repair
all of Tenant's personal property, inventory, trade fixtures and other
improvements constructed by Tenant to like or similar condition as existed at
the time of such damage or destruction.
ARTICLE 11
CONDEMNATION
11.1 TENANT'S RIGHT TO TERMINATE: Except as otherwise provided in
Article 11.4 below regarding temporary takings, Tenant shall have the option to
terminate this Lease if, as a result of any taking, (i) all of the Leased
Premises is taken, (ii) twenty percent or more of the Leased Premises is taken
and the part of the Leased Premises that remains cannot, within a reasonable
period of time, be made reasonably suitable for the continued operation of
Tenant's business, (iii) there is a taking of a portion of the Outside Areas
and, as a result of such taking, Landlord cannot provide parking spaces within
the Property (or within a reasonable distance therefrom) equal in number to at
least eighty-five percent of the number of parking spaces existing within the
Outside Areas immediately prior to such taking, whether by rearrangement of the
remaining parking areas in the Outside Areas (including, if Landlord elects,
construction of multi-deck parking structures or restriping for compact cars
where permitted by Law), or (iv) because of the Laws then in force, the Leased
Premises may not be used for the same use being made thereof before such taking,
whether or not restored as required by Article 11.3 below. Tenant must exercise
such option within a reasonable period of time, to be effective on the later to
occur of (i) the date that possession of that portion of the Leased Premises or
the Outside Areas that is condemned is taken by the condemnor or (ii) the date
Tenant vacates the Leased Premises.
11.2 LANDLORD'S RIGHT TO TERMINATE: Except as otherwise provided in
Article 11.4 below regarding temporary takings, Landlord shall have the option
to terminate this Lease if, as a result of any taking, (i) all or substantially
all of the Leased Premises is taken, (ii) more than thirty-three and one-third
percent of the Outside Areas is taken, or (iii) because of the Laws then in
force, the Leased Premises may not be used for the same use being made thereof
before such taking, whether or not restored as required by Article 11.3 below.
Any, such option to terminate by Landlord must be exercisable within a
reasonable period of time, to be effective as of the date possession is taken by
the condemnor.
11.3 RESTORATION: If any part of the Leased Premises, the Building or
the Outside Areas is taken and this Lease is not terminated, then Landlord shall
repair any damage occasioned thereby to the remainder thereof to a condition
reasonably suitable for Tenant's continued operations and otherwise, to the
extent practicable, in the manner and to the extent provided in Article 10.1.
11.4 TEMPORARY TAKING: If any portion of the Leased Premises is
temporarily taken, this Lease shall remain in effect except that if any portion
of the Leased Premises is temporarily taken for a period which either exceeds
nine months or which extends beyond the Lease Expiration Date, then Tenant shall
have the option to terminate this Lease, effective on the date possession is
taken by the condemnor.
47
<PAGE>
11.5 DIVISION OF CONDEMNATION AWARD: Any award made for any taking of
the Property, the Building, the Outside Areas or the Leased Premises, or any
portion thereof, shall belong to and be paid to Landlord, and Tenant hereby
assigns to Landlord all of its right, title and interest in any such award;
provided, however, that Tenant shall be entitled to receive any portion of the
award that is made specifically (i) for the taking of personal property,
inventory or trade fixtures belong to Tenant, (ii) for the interruption of
Tenant's business or its moving costs, or (iii) for loss of Tenant's goodwill,
or (iv) for any temporary taking where this Lease is not terminated as a result
of such taking, or (v) for the value of any leasehold improvements installed by
Tenant at its cost that Tenant could remove pursuant to Paragraph 6.2. The
rights of Landlord and Tenant regarding any condemnation shall be determined as
provided in this Article, and each party hereby waives the provisions of Section
1265.130 of the California Code of Civil Procedure, and the provisions of any
similar law hereinafter enacted, allowing either party to petition the Superior
Court to terminate this Lease and/or otherwise allocate condemnation awards
between Landlord and Tenant in the event of a taking of the Leased Premises.
11.6 ABATEMENT OF RENT: In the event of a taking of the Leased Premises
which does not result in a termination of this Lease (other than a temporary
taking), then, as of the date possession is taken by the condemning authority,
the Base Monthly Rent shall be reduced in the same proportion that the area of
that part of the Leased Premises so taken (less any addition to the area of the
Leased Premises by reason of any reconstruction) bears to the area of the Leased
Premises immediately prior to such taking. Notwithstanding anything to the
contrary in Section 11.6 of the Lease Form:
In the event of a taking of any parking area of, or any driveway access to, the
Leased Premises which has a material adverse effect on Tenant's access or
parking rights, Landlord or Tenant shall have the right, at either's option, to
require Landlord, at the sole cost and expense of the party who exercises such
right, to convert Outside Area which is located on the Property then being used
for recreational facilities or landscaped areas to parking area use to the
extent necessary to cure the material adverse effect of Tenant's access or
parking rights. To the extent Landlord receives a condemnation award as a result
of such taking for such area, the proceeds thereof shall be used to pay for such
cost.
11.7 TAKING DEFINED: The term "taking" or "taken" as used in this
Article 11 shall mean any transfer or conveyance of all or any portion of the
Property to a public or quasi-public agency or other entity having the power of
eminent domain pursuant to or as a result of the exercise of such power by such
an agency, including any inverse condemnation and/or any sale or transfer by
Landlord of all or any portion of the Property to such an agency under threat of
condemnation or the exercise of such power.
ARTICLE 12:
DEFAULT AND REMEDIES
12.1 EVENTS OF TENANT'S DEFAULT: Tenant shall be in default ("Default")
of its obligations under this Lease if any of the following events occur:
A. Tenant shall have failed to pay Base Monthly Rent or any Additional
Rent when due within six days after receiving written notice from Landlord. A
statutory notice under CCP 1161, and served pursuant to CCP 1162, providing for
6 days to cure shall satisfy such notice requirement and is expressly
authorized; or
B. Except as set forth elsewhere in this Article 12.1, Tenant shall
have failed to perform any term, covenant or condition of this Lease, except
those requiring the payment of Base Monthly Rent or Additional Rent, within
thirty days after written notice from Landlord to Tenant specifying the nature
of such failure and requesting Tenant to perform same (or such longer period of
time if reasonably necessary to cure the default so long as Tenant begins the
cure within such thirty (30)-day period and prosecutes it with due diligence and
best faith efforts to completion); or
C. Tenant shall have sublet the Leased Premises or assigned or
encumbered its interest in this Lease in violation of the provisions contained
in Article 7, whether voluntarily or by operation of Law; or
48
<PAGE>
D. Tenant shall have failed to continuously occupy the Leased Premises
for a period of ten (10) consecutive days without maintaining reasonable
security with respect to the Leased Premises after written notice. A statutory
notice under CCP 1161, and served pursuant to CCP 1162, providing for 10 days to
cure shall satisfy such notice requirement and is expressly authorized; or
E. Tenant or any Guarantor of this Lease shall have permitted or
suffered the sequestration or attachment of, or execution on, or the appointment
of a custodian or receiver with respect to, all or any substantial part of the
property or assets of Tenant (or such Guarantor) or any property or asset
essential to the conduct of Tenant's (or such Guarantor's) business, and Tenant
(or such Guarantor) shall have failed to obtain a return or release of the same
within thirty days thereafter, or prior to sale pursuant to such sequestration,
attachment or levy, whichever is earlier; or
F. Tenant or any Guarantor of this Lease shall have made a general
assignment of all or a substantial part of its assets for the benefit of its
creditors; or
G. Tenant or any Guarantor of this Lease shall have allowed (or sought)
to have entered against it a decree or order which: (i) grants or constitutes an
order for relief, appointment of a trustee, or confirmation or a reorganization
plan under the bankruptcy laws of the United States; (ii) approves as properly
filed a petition seeking liquidation or reorganization under said bankruptcy
laws or any other debtor's relief law or similar statute of the United States or
any state thereof; or (iii) otherwise directs the winding up or liquidation of
Tenant; provided, however, if any decree or order was entered without Tenant's
consent or over Tenant's objection, Landlord may not terminate this Lease
pursuant to this Subarticle if such decree or order is rescinded or reversed
within sixty days after its original entry; or
H. Tenant or any Guarantor of this Lease shall have availed itself of
the protection of any debtor's relief law, moratorium law or other similar Law
which does not require the prior entry of a decree or order.
12.2 LANDLORD'S REMEDIES: In the event of any default by Tenant, and
without limiting Landlord's right to indemnification as provided in Article 8.2,
Landlord shall have the following remedies, in addition to all other rights and
remedies provided by Law or otherwise provided in this Lease, to which Landlord
may resort cumulatively, or in the alternative:
A. Landlord may, at Landlord's election, keep this Lease in effect and
enforce, by an action at law or in equity, all of its rights and remedies under
this Lease including, without limitation, (i) the right to recover the rent and
other sums as they become due by appropriate legal action, (ii) the right to
make payments required by Tenant, or perform Tenant's obligations and be
reimbursed by Tenant for the cost thereof with interest at the then maximum rate
of interest not prohibited by Law from the date the sum is paid by Landlord
until Landlord is reimbursed by Tenant, and (iii) the remedies of injunctive
relief and specific performance to prevent Tenant from violating the terms of
this Lease and/or to compel Tenant to perform its obligations under this Lease,
as the case may be.
B. Landlord may, at Landlord's election, terminate this Lease by giving
Tenant written notice of termination, in which event this Lease shall terminate
on the date set forth for termination in such notice. Any termination under this
Subarticle shall not relieve Tenant from its obligation to pay to Landlord all
Base Monthly Rent and Additional Rent then or thereafter due, or any other sums
due or thereafter accruing to Landlord, or from any claim against Tenant for
damages previously accrued or then or thereafter accruing. In no event shall any
one or more of the following actions by Landlord, in the absence of a written
election by Landlord to terminate the Lease, constitute a termination of the
Lease:
(1) Appointment of a receiver or keeper in order to protect
Landlord's interest hereunder;
(2) Consent to any subletting of the Leased Premises or
assignment of this Lease by Tenant, whether pursuant to the provisions hereof or
otherwise; or
(3) Any other action by Landlord or Landlord's agents intended
to mitigate the adverse effects of any breach of this Lease by Tenant,
including, without limitation, any action taken to maintain and preserve the
Leased
49
<PAGE>
Premises or any action taken to relet the Leased Premises, or any portion
thereof, for the account of Tenant and in the name of Tenant provided that any
reletting of the Premises by Landlord shall terminate the Lease.
C. In the event Tenant breaches this Lease and abandons the Leased
Premises, Landlord may terminate this Lease, but this Lease shall not terminate
unless Landlord gives Tenant written notice of termination or terminates
Tenant's right to possession of the Leased Premises. If Landlord does not
terminate this Lease by giving written notice of termination or by terminating
Tenant's right to possession of the Leased Premises, Landlord may enforce all
its rights and remedies under this Lease, including the right to recover rent as
it becomes due under this Lease as provided in California Civil Code Section
1951.4, as in effect on the Effective Date of this Lease.
D. In the event Landlord terminates this Lease, Landlord shall be
entitled, at Landlord's election, to damages in an amount as set forth in
California Civil Code Section 1951.2, as in effect on the Effective Date of this
Lease. For purposes of computing damages pursuant to Section 1951.2, an interest
rate equal to the maximum rate of interest then not prohibited by Law shall be
used where permitted. Such damages shall include, without limitation:
(1) 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,
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; and
(2) Any other amount necessary to compensate Landlord for all
detriment proximately caused by Tenant's failure to perform Tenant's obligations
under this Lease, or which in the ordinary course of things would be likely to
result therefrom, including without limitation, the following: (i) expenses for
cleaning, repairing or restoring the Leased Premises; (ii) expenses for
altering, remodeling or otherwise improving the Leased Premises for the purpose
of reletting, including removal of existing leasehold improvements but excluding
installation of additional leasehold improvements (regardless of how the same is
funded, including reduction of rent, a direct payment or allowance to a new
tenant, or otherwise); (iii) broker's fees allocable to the remainder of the
term of this Lease, advertising costs and other expenses of reletting the Leased
Premises; (iv) costs of carrying and maintaining the Leased Premises which costs
would have been billed to Tenant as Additional Rent had Tenant not defaulted and
which include but are not limited to taxes, insurance premiums, utility charges,
landscape maintenance costs, costs of maintaining electrical, plumbing and HVAC
equipment and costs for providing security for the Leased Premises; (v) expenses
incurred in removing, disposing of and/or storing any of Tenant's personal
property, inventory or trade fixtures remaining therein; (vi) attorneys' fees,
expert witness fees, court costs and other reasonable expenses incurred by
Landlord (but not limited to taxable costs) in retaking possession of the Leased
Premises, establishing damages hereunder, and re-leasing the Leased Premises;
and (vii) any other expenses, costs or damages otherwise incurred or suffered as
a result of Tenant's default.
12.3 LANDLORD'S DEFAULT AND TENANT'S REMEDIES: In the event Landlord
fails to perform any of its obligations under this Lease, Landlord shall
nevertheless not be in default under the terms of this Lease until such time as
Tenant shall have first given Landlord written notice specifying the nature of
such failure to perform its obligations, and then only after Landlord shall have
had a reasonable period of time following its receipt of such notice within
which to perform such obligations. In the event of Landlord's default as above
set forth, then, and only then, Tenant shall have the following remedies only:
A. Tenant may then proceed in equity or at law to compel Landlord to
perform its obligations and/or to recover damages proximately caused by such
failure to perform (except as and to the extent Tenant has waived its right to
damages as provided in this Lease).
B. Tenant, at its option, may then cure any default of Landlord at
Landlord's cost. If, pursuant to this Subarticle, Tenant reasonably pays any sum
to any third party or does any act that requires the payment of any sum to any
third part at any time by reason of Landlord's default, the sum paid by Tenant
shall be immediately due from Landlord to Tenant at the time Tenant supplies
Landlord with an invoice therefor (provided such invoice sets forth and is
accompanied by a written statement of Tenant setting forth in reasonable detail
the amount paid, the party to whom it was paid, the date it was paid, and the
reasons giving rise to such payment), together with interest at the maximum rate
permitted by Law from the date of such invoice until Tenant is reimbursed by
Landlord. Tenant may not offset
50
<PAGE>
such sums against any installment of rent due Landlord under the terms of this
Lease. The remedies afforded Tenant in this Section 12.3 are granted in
additional to any and all remedies afforded Tenant at law or in equity.
12.4 LIMITATION ON TENANT'S RECOURSE: If Landlord is a corporation,
trust, partnership, joint venture, unincorporated association, or other form of
business entity, Tenant agrees that (i) the obligations of Landlord under this
Lease shall not constitute personal obligations of the officers, directors,
trustees, partners, joint venturers, members, owners, stockholders, or other
principals of such business entity and (ii) Tenant shall have recourse only to
the assets of such business entity for the satisfaction of such obligations and
not against the assets of such officers, directors, trustees, partners, joint
venturers, members, owners, stockholders or principals (other than to the extent
of their interest in the assets owned by such business entity). Additionally, if
Landlord is a partnership, then Tenant covenants and agrees:
A. No partner of Landlord shall be sued or named as a party in any suit
or action brought by Tenant with result to any alleged breach of this Lease
(except to the extent necessary to secure jurisdiction over the partnership and
then only for that sole purpose);
B. No service of process shall be made against any partner of Landlord
except for the sole purpose of securing jurisdiction over the partnership; and
C. No writ of execution will ever be levied against the assets of any
partner of Landlord other than to the extent of his interest in the assets of
the partnership.
Tenant further agrees that each of the foregoing covenants and agreements shall
be enforceable by Landlord and by any partner of Landlord and shall be
applicable to any actual or alleged misrepresentation or nondisclosure made
respecting this Lease or the Leased Premises or any factual or alleged failure,
default or breach of any covenant or agreement either expressly or implicitly
contained in this Lease or imposed by statue or at common law.
Landlord shall have no obligation, nor incur any liability beyond Landlord's
then equity interest if any, in the Property, and Tenant shall look exclusively
to such equity interest of Landlord, if any, in the Property for payment and
discharge of any obligations imposed upon Landlord hereunder, and Landlord is
hereby released and relieved of any other obligations hereunder provided,
however, that with respect to the prosecution and completion of Landlord's Work
Landlord's liability shall extend to Landlord's assets but not the assets of
Landlord's partners.
12.5 TENANT'S WAIVER: Landlord and Tenant agree that the provisions of
Article 12.3 above are intended to supersede and replace the provisions of
California Civil Code Sections 1932(l), 1941 and 1942, and accordingly, Tenant
hereby waives the provisions of California Civil Code Sections 1932(l), 1941 and
1942 and/or any similar or successor Law regarding Tenant's right to terminate
this Lease or to make repairs and deduct the expenses of such repairs from the
rent due under this Lease.
ARTICLE 13
GENERAL PROVISIONS
13.1 TAXES ON TENANT'S PROPERTY: Tenant shall pay before delinquency
any and all taxes, assessments, license fees, use fees, permit fees and public
charges of whatever nature or description levied, assessed or imposed against
Tenant or Landlord by a governmental agency arising out of, caused by reason of
or based upon Tenant's estate in this Lease, Tenant's ownership of property,
improvements made by Tenant to the Leased Premises or the Outside Areas,
improvements made by Landlord for Tenant's use within the Leased Premises or the
Outside Areas, Tenant's use (or estimated use) of public facilities or services
or Tenant's consumption (or estimated consumption) of public utilities, energy,
water or other resources. Upon demand by Landlord, Tenant shall furnish Landlord
with satisfactory evidence of these payments. If any such taxes, assessments,
fees or public charges are levied against Landlord, Landlord's property, the
Building or the Property, or if the assessed value of the Building or the
Property is increased by the inclusion therein of a value placed upon same, then
Landlord, after giving written notice to Tenant, shall have the right,
regardless of the validity thereof, to pay such taxes, assessment, fee or public
charge and bill Tenant, as Additional Rent, the amount of such taxes,
assessment, fee or public charge so paid on Tenant's behalf. Tenant shall,
51
<PAGE>
within ten days from the date it receives an invoice from Landlord setting forth
the amount of such taxes, assessment, fee or public charge so levied, pay to
Landlord, as Additional Rent, the amount set forth in said invoice. Failure by
Tenant to pay the amount so invoiced within said ten day period shall be
conclusively deemed a default by Tenant under this Lease following notice and
expiration of the cure period without cure as provided in Section 12.1A of this
Lease. Tenant shall have the right, and the Landlord's full cooperation if
Tenant is not then in default under the terms of this Lease, to bring suit in
any court of competent jurisdiction to recover from the taxing authority the
amount of any such taxes, assessment, fee or public charge so paid.
13.2 HOLDING OVER: This Lease shall terminate without further notice on
the Lease Expiration Date (as set forth in Article 1). Any holding over by
Tenant after expiration of the Lease Term shall neither constitute a renewal nor
extension of this Lease nor give Tenant any rights in or to the Leased Premises
except as expressly provided in this Article. Any such holding over shall be
deemed an unlawful detainer of the Leased Premises unless Landlord has consented
to same. Any such holding over to which Landlord has consented shall be
construed to be a tenancy from month to month, on the same terms and conditions
herein specified insofar as applicable, except that the Base Monthly Rent shall
be increased to an amount equal to one hundred fifty percent of the Base Monthly
Rent payable during the last full month immediately preceding such holding over.
13.3 SUBORDINATION TO MORTGAGES: Landlord represents and warrants to
Tenant that as of the Effective Date of this Lease, this Lease is not
subordinate or subject to any underlying ground leases, mortgages and deeds of
trust. If the lessor under any such ground lease or any lender holding any such
mortgage or deed of trust shall advise Landlord that it desires or requires this
Lease to be made prior and superior thereto, then, upon written request of
Landlord to Tenant, Tenant shall promptly execute, acknowledge and deliver any
and all documents or instruments which Landlord and such lessor or lender deem
necessary or desirable to make this Lease prior thereto. Tenant hereby consents
to Landlord's ground leasing the land underlying the Building or the Property
and/or encumbering the Building or the Property as security for future loans on
such terms as Landlord shall desire, all of which future ground leases,
mortgages or deeds of trust shall be subject to and subordinate to this Lease.
However, if any lessor under any such future ground lease or any lender holding
such future mortgage or deed of trust shall desire or require that this Lease be
made subject to and subordinate to such future ground lease, mortgage or deed of
trust, then Tenant agrees, within ten days after Landlord's written request
therefor, to execute, acknowledge and deliver to Landlord any and all documents
or instruments requested by Landlord or by such lessor or lender as may be
necessary or proper to assure the subordination of this Lease to such future
ground lease, mortgage or deed of trust, but only if such lessor or lender
agrees to recognize Tenant's rights under this Lease and agrees not to disturb
Tenant's quiet possession of the Leased Premises so long as Tenant is not in
default under this Lease.
13.4 TENANT'S ATTORNMENT UPON FORECLOSURE: Tenant shall, upon request,
attorn (i) to any purchaser of the Building or the Property at any foreclosure
sale or private sale conducted pursuant to any security instrument encumbering
the Building or the Property, (ii) to any grantee or transferee designated in
any deed given in lieu of foreclosure of any security interest encumbering the
Building or the Property, or (iii) to the lessor under any underlying ground
lease of the land underlying the Building or the Property, should such ground
lease be terminated; provided that such purchaser, grantee or lessor recognizes
Tenant's rights under this Lease.
13.5 MORTGAGEE PROTECTION: In the event of any default on the part of
Landlord, Tenant will give notice by the methods provided for in the Notice
provision of this Lease to any Lender or lessor under any underlying ground
lease who shall have requested, in writing, to Tenant that it be provided with
such notice, and Tenant shall offer such Lender or lessor a reasonable
opportunity to cure the default, including time to obtain possession of the
Leased Premises by power of sale or judicial foreclosure or other appropriate
legal proceedings if reasonably necessary to effect a cure.
13.6 ESTOPPEL CERTIFICATES: Tenant will, following any request by
Landlord, promptly execute and deliver to Landlord an estoppel certificate (i)
certifying that this Lease is unmodified and in full force and effect, or, if
modified, stating the nature of such modification and certifying that this
Lease, as so modified, is in full force and effect, (ii) stating the date to
which the rent and other charges are paid in advance, if any, (iii)
acknowledging that there are not, to Tenant's knowledge, any uncured defaults on
the part of Landlord hereunder, or specifying such defaults if any are claimed,
and (iv) certifying such other information about this Lease as may be reasonably
requested by
52
<PAGE>
Landlord, its Lender or prospective lenders, investor or purchaser of the
Building or the Property. Tenant's failure to execute and deliver such estoppel
certificate within ten days after Landlord's request therefor shall be a
material default by Tenant under this Lease, and Landlord shall have all of the
rights and remedies available to Landlord as Landlord would otherwise have in
the case of any other material default by Tenant, including the right to
terminate this Lease and sue for damages proximately caused thereby, it being
agreed and understood by Tenant that Tenant's failure to so deliver such
estoppel certificate in a timely manner could result in Landlord being unable to
perform committed obligations to other third parties which were made by Landlord
in reliance upon this covenant of Tenant. Landlord and Tenant intend that any
statement delivered pursuant to this Article may be relied upon by any Lender or
purchaser or prospective Lender or purchaser of the Building, the Property, or
any interest herein. Notwithstanding anything to the contrary in Section 13.6 of
the Lease Form, Landlord shall, upon the same terms and conditions applicable to
Tenant, give an estoppel certificate to Tenant for the benefit of any lender
taking a security interest in the Lease or for the benefit of a purchaser of
Tenant's assets.
13.7 TENANT'S FINANCIAL INFORMATION: Tenant shall, within ten business
days after Landlord's request therefor deliver to Landlord a copy of a current
financial statement and any such other information reasonably requested by
Landlord regarding Tenant's financial condition. Landlord shall be entitled to
disclose such financial statements or other information to its Lender, to any
present or prospective principal of or investor in Landlord, or to any
prospective Lender or purchaser of the Building, the Property or any portion
thereof or interest therein. Any such financial statement or other information
which is marked "confidential" or "company secrets" (or is otherwise similarly
marked by Tenant) shall be confidential and shall not be disclosed by Landlord
to any third party except as specifically provided in this Article, unless the
same becomes a part of the public domain without the fault of Landlord.
13.8 TRANSFER BY LANDLORD: Landlord and its successors in interest
shall have the right to transfer their interest in the Building, the Property,
or any portion thereof at any time and to any person or entity. In the event of
any such transfer, the Landlord originally named herein (and in the case of any
subsequent transfer, the transferor), from the date of such transfer, (i) shall
be automatically relieved, without any further act by any person or entity, of
all liability for the performance of the obligations of the Landlord hereunder
which may accrue after the date of such transfer and (ii) shall be relieved of
all liability for the performance of the obligations of the Landlord hereunder
which have accrued before the date of transfer if its transferee agrees to
assume and perform all such prior obligations of the Landlord hereunder. Tenant
shall attorn to any such transferee. After the date of any such transfer, the
term "Landlord" as used herein shall mean the transferee of such interest in the
Building or the Property.
13.9 FORCE MAJEURE: The obligations of each of the parties under this
Lease (other than the obligations to pay money) shall be temporarily excused if
such party is prevented or delayed in performing such obligation by reason of
any strikes, lockouts or labor disputes; inability to obtain labor, materials,
fuels or reasonable substitutes therefor; governmental restrictions,
regulations, controls, action or inaction; civil commotion; inclement weather,
fire or other acts of God; or other causes (except financial inability) beyond
the reasonable control of the party obligated to perform (including acts or
omissions of the other party) for a period equal to the period of any such
prevention, delay or stoppage. In the event of a Force Majeure condition the
party exercising Force Majeure rights shall endeavor to provide notice of the
same to the other party, provided however, the failure to do so shall not limit
or waive the parties rights to assert the Force Majeure event.
13.10 NOTICES: Any notice required or desired to be given by a party
regarding this Lease shall be in writing and shall be personally served, or in
lieu of personal service may be given by (i) delivery by Federal Express, United
Parcel Service or similar commercial carrier, (ii) electronic fax transmission
(except for Notices of Default), or (iii) depositing such notice in the United
States mail, postage prepaid, addressed to the other party as follows:
A. If addressed to Landlord, to Landlord at its Address for Notices (as
set forth in Article 1).
B. If addressed to Tenant, to Tenant at its Address for Notices (as set
forth in Article 1). In addition, any Notice of Default to Tenant shall be
copied to Mr. Robert Gunderson, Gunderson, Dettmer & Stough, 155 Constitution
Avenue, Menlo Park, California 94025. It is agreed, however, that service upon
Mr. Gunderson need only be performed by one of the methods set forth in this
paragraph 13.10 and need not be by any statutorially prescribed methods that
might apply to Tenant.
53
<PAGE>
Any notice given by mail shall be deemed given on completion
of the second business day after deposit in the U.S. Mail. Any notice delivered
by commercial carrier or by fax shall be deemed given on the date of
confirmation of delivery by the carrier or by electronic confirmation. Each
party may, by written notice to the other in the manner aforesaid, change the
address to which notices addressed to it shall thereafter be mailed.
13.11 ATTORNEYS FEES: In the event any party shall bring any action,
arbitration proceeding or legal proceeding alleging a breach of any provision of
this Lease, to recover rent, to terminate this Lease, or to enforce, protect,
determine or establish any term or covenant of this Lease or rights or duties
hereunder of either party, the prevailing party shall be entitled to recover
from the non-prevailing party as a part of such action or proceeding, or in a
separate action for that purpose brought within one year from the determination
of such proceeding, reasonable attorneys' fees, expert witness fees, court costs
and other reasonable expenses incurred by the prevailing party. In the event
that Landlord shall be required to retain counsel to enforce any provision of
this Lease, and if Tenant shall thereafter cure (or desire to cure) such
default, Landlord shall be conclusively deemed the prevailing party and Tenant
shall pay to Landlord all attorneys' fees, expert witness fees, court costs and
other reasonable expenses so incurred by Landlord promptly upon demand provided
that Landlord has first notified Tenant in writing that Landlord was retaining
counsel in connection with such matter prior to Landlord's retention of counsel.
Landlord may enforce this provision by either (i) requiring Tenant to pay such
fees and costs as a condition to curing its default or (ii) bringing a separate
action to enforce such payment, it being agreed by and between Landlord and
Tenant that Tenant's failure to pay such fees and costs upon demand shall
constitute a breach of this Lease in the same manner as a failure by Tenant to
pay the Base Monthly Rent, giving Landlord the same rights and remedies as if
Tenant failed to pay the Base Monthly Rent.
13.12 DEFINITIONS: Any term that is given a special meaning by any
provision in this Lease shall, unless otherwise specifically stated, have such
meaning whenever used in this Lease or in any Addenda or amendment hereto. In
addition to the terms defined in Article 1, the following terms shall have the
following meanings: Notwithstanding anything to the contrary in Subsection E of
Section 13.12 of the Lease Form:
A. The term "Property Maintenance Costs" shall not include any of the following:
(i) The cost to correct code violations in work constructed by Landlord
existing as of the Lease Commencement Date;
(ii) The cost to correct defects in design or construction of
structural components of the Building;
(iii) The cost to correct defects in design or construction of
nonstructural components of the Building or structural and nonstructural
components of other improvements located on the Property, if such defect is (i)
discovered within two (2) years after the Lease Commencement Date or (ii)
discovered more than two (2) years after the Lease Commencement Date if such
defect is material and could not reasonably have been discovered by Tenant
within two (2) years after the Lease Commencement Date;
(iv) The cost of repairs necessitated by the active negligence or
misconduct of Landlord, its agents, employees or contractors;
(v) The cost of repairs which are covered by insurance or required to
be covered by insurance under the Lease; and
(vi) Any cost or expense related to or incurred in connection with
hazardous materials unless Landlord incurs such cost or expense as a result of
Tenant's failure to comply with its obligations under Paragraph 16 of this
Addendum.
B. With respect to any single item or component of Property Maintenance Cost
under Subparagraph (E) which exceeds $50,000 and is incurred with respect to an
item with a useful life not less than five (5) years and would be defined as a
capital expenditure under generally accepted accounting principles, the amount
in excess of $50,000.00
54
<PAGE>
shall be amortized in equal monthly installments over the useful life of the
improvement with interest at Wells Fargo Bank Prime Plus Two, and Tenant shall
pay such amortized amount on a monthly basis. The amount up to the $50,000.00
sum shall be paid by Tenant without amortization.
C. REAL PROPERTY TAXES: The term "Real Property Tax" or "Real Property
Taxes" shall each mean (i) all taxes, assessments, levies and other charges of
any kind or nature whatsoever, general and special, foreseen and unforeseen
(including all installments of principal and interest required to pay any
general or special assessments for public improvements and any increases
resulting from reassessments caused by any change in ownership or new
construction), now or hereafter imposed by any governmental or
quasi-governmental authority or special district having the direct or indirect
power to tax or levy assessments, which are levied or assessed for whatever
reason against the Project or any portion thereof, or Landlord's interest
herein, or the fixtures, equipment and other property of Landlord that is an
integral part of the Project and located thereon, or Landlord's business of
owning, leasing or managing the Project or the gross receipts, income or rentals
from the Project; (ii) all charges, levies or fees imposed by any governmental
authority against Landlord by reason of or based upon the use of or number of
parking spaces within the Project, the amount of public services or public
utilities used or consumed (e.g. water, gas, electricity, sewage or surface
water disposal) at the Project, the number of persons employed by tenants of the
Project, the size (whether measured in area, volume, number of tenants or
whatever) or the value of the Project, or the type of use or uses conducted
within the Project; and (iii) all costs and fees (including attorneys' fees)
incurred by Landlord in contesting any Real Property Tax and in negotiating with
public authorities as to any Real Property Tax. If, at any time during the Lease
Term, the taxation or assessment of the Project prevailing as of the Effective
Date of this Lease shall be altered so that in lieu of or in addition to any
Real Property Tax described above there shall be levied, or imposed (whether by
reason of a change in the method of taxation or assessment, creation of a new
tax or charge, or any other cause) an alternate, substitute, or additional tax
or charge (i) on the value, size, use or occupancy of the Project or Landlord's
interest therein or (ii) on or measured by the gross receipts, income or rentals
from the Project, or on Landlord's business of owning, leasing or managing the
Project or (iii) computed in any manner with respect to the operation of the
Project, then any such tax or charge, however designated, shall be included
within the meaning of the terms "Real Property Tax" or "Real Property Taxes" for
purposes of this Lease. If any Real Property Tax is partly based upon property
or rents unrelated to the Project, then only that part of such Real Property Tax
that is fairly allocable to the Project shall be included within the meaning of
the terms "Real Property Tax" or "Real Property Taxes." Notwithstanding the
foregoing, the terms "Real Property Tax" or "Real Property Taxes" shall not
include estate, inheritance, transfer, gift or franchise taxes of Landlord or
the federal or state income tax imposed on Landlord's income from all sources.
Notwithstanding the above, Tenant shall only be liable for Real Property taxes
which relate to the Lease Term.
D. LANDLORD'S INSURANCE COSTS: The term "Landlord's Insurance Costs"
shall mean the costs to Landlord to carry and maintain the policies of fire and
property damage insurance including for the Building and the Property and
Commercial General Liability insurance required, or permitted, to be carried by
Landlord pursuant to Article 9, together with any deductible amounts paid by
Landlord upon the occurrence of any insured casualty or loss and which are
recoverable by Landlord from Tenant pursuant to one or more other provisions of
this Lease.
E. PROPERTY MAINTENANCE COSTS: The term "Property Maintenance Costs"
shall mean all costs and expenses (except Landlord's Insurance Costs and Real
Property Taxes) paid or incurred by Landlord in protecting, operating,
maintaining, repairing and preserving the Property and all parts thereof,
including without limitation, (i) professional management fees equal to two (2)
percent of the annualized Base Monthly Rent, (ii) the amortizing portion of any
costs incurred by Landlord in the making of any modifications, alterations or
improvements required by any governmental authority as set forth in Article 6,
which are so amortized during the Lease Term, (iii) such other costs as may be
paid or incurred with respect to operating, maintaining and preserving the
Property, such as repairing and resurfacing the exterior surfaces of the
buildings (including roofs), repairing and resurfacing paved areas, repairing
structural parts of the buildings, cleaning, maintaining, or replacing, when
necessary electrical, plumbing, heating, ventilating and air conditioning
systems serving the buildings or major components thereto and (iv) subject to
Paragraph 13.12 B above, replacement of any portion of the Property that can no
longer reasonably be repaired or maintained.
F. READY FOR OCCUPANCY: The term "Ready for Occupancy" shall mean the
date upon which (i) the Leased Premises are available for Tenant's occupancy in
a broom clean condition and (ii) the improvements, if any,
55
<PAGE>
to be made to the Leased Premises by Landlord as a condition to Tenant's
obligation to accept possession of the Leased Premises have been substantially
completed in accordance with approved plans and specifications, if applicable,
and the appropriate governmental building department (i.e. the City building
department, if the Property is located within a City, or otherwise the County
building department) shall have approved the construction of improvements as
complete or is willing to so approve the construction of the improvements as
complete subject only to compliance with specified conditions which are the
responsibility of Tenant to satisfy or is willing to allow Tenant to occupy
subject to its receiving assurances that specified work will be completed.
G. PROPERTY OPERATING EXPENSES: The term "Property Operating Expenses"
shall mean and include all Real Property Taxes, plus all Landlord's Insurance
Costs, plus all Property Maintenance Costs.
H. LAW: The term "Law" shall mean any judicial decision and any
statute, constitution, ordinance, resolution, regulation, rule, administrative
order, or other requirement of any municipal, county, state, federal, or other
governmental agency or authority having jurisdiction over the parties to this
Lease, the Leased Premises, the Building or the Property, or any of them in
effect either at the Effective Date of this Lease or at any time during the
Lease Term, including, without limitation, any regulation, order, or policy of
any quasi-official entity or body (e.g. a board of fire examiners or a public
utility or special district).
I. LENDER: The term "Lender" shall mean the holder of any Note or other
evidence of indebtedness secured by the Property or any portion thereof.
J. PRIVATE RESTRICTIONS: The term "Private Restrictions" shall mean all
recorded covenants, conditions and restrictions, private agreements, easements,
and any other recorded instruments affecting the use of the Property, as they
may exist from time to time.
K. RENT: The term "rent" shall mean collectively Base Monthly Rent and
all Additional Rent.
13.13 GENERAL WAIVERS: One party's consent to or approval of any act by
the other party requiring the first party's consent or approval shall not be
deemed to waive or render unnecessary the first party's consent to or approval
of any subsequent similar act by the other party. No waiver of any provision
hereof or any breach of any provision hereof shall be effective unless in
writing and signed by the waiving party. The receipt by Landlord of any rent or
payment with or without knowledge of the breach of any other provision hereof
shall not be deemed a waiver of any such breach. No waiver of any provision of
this Lease shall be deemed a continuing waiver unless such waiver specifically
states so in writing and is signed by both Landlord and Tenant. No delay or
omission in the exercise of any right or remedy accruing to either party upon
any breach by the other party under this Lease shall impair such right or remedy
or be construed as a waiver of any such breach theretofore or thereafter
occurring. The waiver by either party of any breach of any provision of this
Lease shall not be deemed to be a waiver of any subsequent breach of the same or
any other provisions herein contained.
13.14 MISCELLANEOUS: Should any provision of this Lease prove to be
invalid or illegal, such invalidity or illegality shall in no way affect, impair
or invalidate any other provision hereof, and such remaining provisions shall
remain in full force and effect. Time is of the essence with respect to the
performance of every provision of this Lease in which time of performance is a
factor. Any copy of this Lease which is executed by the parties shall be deemed
an original for all purposes. This Lease shall, subject to the provisions
regarding assignment, apply to and bind the respective heirs, successors,
executors, administrators and assigns of Landlord and Tenant. The term "party"
shall mean Landlord or Tenant as the context implies. If Tenant consists of more
than one person or entity, then all members of Tenant shall be jointly and
severally liable hereunder. This Lease shall be construed and enforced in
accordance with the Laws of the State in which the Leased Premises are located.
The language in all parts of this Lease shall in all cases be construed as a
whole according to its fair meaning, and not strictly for or against either
Landlord or Tenant. The captions used in this Lease are for convenience only and
shall not be considered in the construction or interpretation of any provision
hereof. When the context of this Lease requires, the neuter gender includes the
masculine, the feminine, a partnership or corporation or joint venture, and the
singular includes the plural. The terms "must", shall", will", and "agree" are
mandatory. The term "may" is permissive. When a party is required to do
something by this Lease, it shall do so at its sole cost and expense without
right of reimbursement from the other party unless specific provision is made
56
<PAGE>
therefor. Where Tenant is obligated not to perform any act or is not permitted
to perform any act, Tenant is also obligated to restrain any others reasonably
within its control, including agents, invitees, contractors, subcontractors and
employees, from performing said act. Landlord shall not become or be deemed a
partner or a join venture with Tenant by reason of any of the provisions of this
Lease.
ARTICLE 14
CORPORATE AUTHORITY,
BROKERS AND ENTIRE AGREEMENT
14.1 CORPORATE AUTHORITY: If Tenant is a corporation. each individual
executing this Lease on behalf of said corporation represents and warrants that
Tenant is validly formed and duly authorized and existing, that Tenant is
qualified to do business in the State in which the Leased Premises are located,
that Tenant has the full right and legal authority to enter into this Lease,
that he or she is duly authorized to execute and deliver this Lease on behalf of
Tenant in accordance with the bylaws and/or a board of directors' resolution of
Tenant. Tenant shall, within thirty days after execution of this Lease, deliver
to Landlord a certified copy of the resolution of its board of directors
authorizing or ratifying the execution of this Lease, and if Tenant fails to do
so, Landlord at its sole election may elect to (i) extend the Intended
Commencement Date by such number of days that Tenant shall have delayed in so
delivering such corporate resolution to Landlord or (ii) terminate this Lease.
14.2 BROKERAGE COMMISSIONS: Tenant warrants that it has not had any
dealings with any real estate broker(s), leasing agent(s), finder(s) or
salesmen, other than the Brokers (as named in Article I) with respect to the
lease by it of the Leased Premises pursuant to this Lease, and that it will
indemnify, defend with competent counsel, and hold Landlord harmless from any
liability for the payment of any real estate brokerage commissions, leasing
commissions or finder's fees claimed by any other real estate broker(s), leasing
agent(s), finder(s), or salesmen to be earned or due and payable by reason of
Tenant's agreement or promise implied or otherwise) to pay (or to have Landlord
pay) such a commission or finder's fee by reason of its leasing the Leased
Premises pursuant to this Lease.
14.3 ENTIRE AGREEMENT: This Lease, the Exhibits (as described in
Article 1) and the Addenda (as described in Article 1), which Exhibits and
Addenda are by this reference incorporated herein, constitute the entire
agreement between the parties, and there are no other agreements, understandings
or representations between the parties relating to the lease by Landlord of the
Leased Premises to Tenant, except as expressed herein. No subsequent changes,
modifications or additions to this Lease shall be binding upon the parties
unless in writing and signed by both Landlord and Tenant.
14.4 LANDLORD'S REPRESENTATIONS: Tenant acknowledges that neither
Landlord nor any of its agents made any representation or warranties respecting
the Project, the Building or the Leased Premises, upon which Tenant relied in
entering into this Lease, which are not expressly set forth in this Lease.
Tenant further acknowledges that neither Landlord nor any of its agents made any
representations as to (i) whether the Leased Premises may be used for Tenant's
intended use under existing Law, or (ii) the suitability of the Leased Premises
for the conduct of Tenant's business, or (iii) the exact square footage of the
Leased Premises, and that Tenant relied solely upon its own investigations
respecting said matters. Tenant expressly waives any and all claims for damage
by reason of any statement, representation, warranty, promise or other agreement
of Landlord or Landlord's agent(s), if any, not contained in this Lease or in
any Addenda hereto.
57
<PAGE>
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the respective dates below set forth with the intent to be legally bound thereby
as of the Effective Date of this Lease first above set forth.
AS LANDLORD: AS TENANT:
RENCO INVESTMENT COMPANY, a AVANT! CORPORATION., a
California general partnership Delaware corporation
By: _____________________ By: _____________________
Title: __________________ Title: __________________
By: _____________________ By: _____________________
Title: __________________ Title: __________________
Dated: __________________ Date: ___________________
If Tenant is a CORPORATION, the authorized officers must sign on behalf of the
corporation and indicate the capacity in which they are signing. This Lease must
be executed by the chairman of the board, president or vice-president, and the
secretary, assistant secretary, the chief financial officer or assistant
treasurer, unless the bylaws or a resolution of the board of directors shall
otherwise provide, in which event a certified copy, of the bylaws or a certified
copy of the resolution, as the case may be, must be attached to this Lease.
Single Tenant Lease
58
<PAGE>
FIRST ADDENDUM TO LEASE
Avant! Corporation
THIS FIRST ADDENDUM TO LEASE ("The Addendum") is dated for reference purposes as
of February 24, 1997, and is made between RENCO INVESTMENT COMPANY, a California
general partnership ("Landlord") and AVANT! CORPORATION., a Delaware corporation
("Tenant") to be a part of that certain Industrial Space Lease of even date
herewith between Landlord and Tenant (herein the "Lease"), with respect to the
building commonly known as Renco ____ (the "Building"). Terms defined in the
Lease Form shall have the same meaning when used herein unless specifically
defined otherwise herein. Landlord and Tenant agree that the Lease is hereby
modified and supplemented as follows:
The following provisions are hereby added to the text of the Lease Form.
13.12 Definitions:
J. Buildings Occupied By Tenant: Tenant has entered into a sublease with Cirrus
Logic, Inc. to occupy a building identified as Renco 53. Tenant has also entered
into leases with Landlord to occupy buildings identified as Renco 48, Renco 54,
and Renco 55, and Tenant has entered into a lease with Landlord to occupy Renco
53 following the expiration of the Cirrus Logic sublease. All four buildings
(one of which is currently in existence and three or which shall be constructed
pursuant to the terms of the respective leases therefor) are/shall be located in
Fremont, California and are/shall be adjacent to each other. For purposes of
this Lease the buildings are identified as follows: Renco 53, 46875 Bayside
Parkway, parcel map 6925, parcel 5; Renco 54, 46859 Bayside Parkway, parcel map
6925, parcel 4; Renco 55, 46889 Bayside Parkway, parcel map 6925, parcel 3,
Renco 48, parcel map 6925, parcel 2.
15. Cross Default: Landlord and Tenant have entered into leases for buildings
identified as Renco 53, Renco 54, Renco 55, and Renco 48. The leases provide for
Tenant's occupancy of said buildings. A default by Tenant (as defined in the
Article entitled "Default and Remedies") under either or any of such leases or
under this Lease shall be considered to be a default under all of the leases as
well as this Lease. In the event of a default by Tenant under any of the leases,
or this Lease, Landlord may pursue the remedies permitted by law or pursuant to
the terms of any, either or all of such leases, as if Tenant had defaulted under
any one or all of such leases. If Tenant and Landlord enter into any other
Leases, the immediately preceding cross default provisions shall apply to all
such leases.
16. Hazardous Materials: Notwithstanding anything to the contrary in the Lease:
Landlord represents that, to the best of its knowledge, any handling,
transportation, storage, treatment or use of Hazardous Materials (as defined
below) that has occurred on the Property prior to the Lease Commencement Date
has been done in compliance with all laws and that the Property is, to the best
of Landlord's knowledge, presently in compliance with all laws which relate to
Hazardous Materials.
Tenant, at its sole cost, shall comply with all Laws relating to the
storage, use and disposal of hazardous, toxic or radioactive matter including,
but not limited to, those materials identified in Section 66680 through 66685 of
Title 22 of the California Administrative Code, Division 4, Chapter 30 ("Title
22") as they may be amended from time to time (collectively "Hazardous
Materials"); provided, however, that Tenant shall not be responsible for
contamination of the Leased Premises by Hazardous Materials existing as of the
Lease Commencement Date (unless caused by Tenant) or by any release of Hazardous
Materials occurring off-site on adjacent or neighboring property (but not caused
by Tenant) which migrates onto the Leased Premises. If Tenant does store, use or
dispose of any Hazardous Materials other than small amounts of cleaning and
janitorial items used in the ordinary course of Tenant's business, Tenant shall
(a) notify Landlord in writing at least ten (10) days prior to their first
appearance on the Leased Premises and (b) provide periodically (at least each 6
months) a written description of such materials together with a statement of the
quantities that shall be so stored or used upon the Premises and shall provide
to Landlord copies of all material safety data sheets that Tenant is required to
provide to applicable agencies. Tenant shall be solely responsible for and shall
defend, indemnify, and hold Landlord and its agents harmless from and against
all claims, costs and liabilities, including attorneys' fees and costs, arising
out of or in connection with Tenant's storage, use and/or disposal of Hazardous
59
<PAGE>
Materials. If the presence of Hazardous Materials on the Leased Premises caused
or permitted by Tenant results in contamination or deterioration of water or
soil then Tenant shall promptly take any and all action necessary to clean up
such contamination. At any time prior to the expiration of the Lease Term,
Tenant shall have the right to conduct appropriate tests of water and soil and
to deliver to Landlord the results of such tests to demonstrate that no
contamination has occurred as a result of Tenant's use of the Leased Premises.
Tenant shall further be solely responsible for, and shall defend, indemnify, and
hold Landlord and its agents harmless from and against all claims, costs and
liabilities, including attorneys' fees and costs, arising out of or in
connection with any removal, cleanup and restoration work and materials required
hereunder to return the Leased Premises and any other property of whatever
nature to their condition existing prior to the appearance of the Hazardous
Materials. Tenant's obligation hereunder shall survive the termination of the
Lease.
17. Limitations on Liability: Intentionally Omitted.
18. Option To Renew: Landlord hereby grants to Tenant an option to renew the
Lease for two (2) additional terms of five (5) years each (the "Renewal Terms")
with the first Renewal Term commencing on the Lease Expiration Date (the
"Renewal Commencement Date") and ending five (5) years thereafter (the "Renewal
Expiration Date") and the second Renewal Term commencing on the expiration of
the first Renewal Term ( the "Second Renewal Commencement Date") and ending five
(5) years thereafter (the "Second Renewal Expiration Date"). Tenant shall not be
eligible to exercise the option for the second Renewal Term if it did not timely
exercise the option for the first Renewal Term. Each lease extension shall be on
the same terms and conditions as set forth in the Lease, except:
A. That the rental for the Leased Premises during the Renewal
Term shall be as set forth below, and
B. That the Security Deposit shall be increased to the Base
Monthly Rent determined below (the "Increased Security Deposit Amount").
18.1 Method of Exercise: Provided that Tenant shall not be in default
under the Lease as of the exercise of the applicable option to extend the term
of the Lease, Tenant shall notify Landlord of Tenant's exercise of its right to
renew the Lease for the applicable Renewal Term only by giving to Landlord
written notice not sooner than twelve (12) months prior to the Renewal
Commencement Date (or the Second Renewal Commencement Date as appropriate) and
not later than seven (7) months prior to the Renewal Commencement Date (or the
Second Renewal Commencement Date as appropriate) (time is expressly of the
essence to Landlord). Any attempted exercise of this Option made other than
within the time period stated or in the manner stated shall be void and of no
force or effect.
18.2 Terms of Renewal: If Tenant shall have properly and timely
exercised its right to extend the term of the Lease and provided that Tenant
shall not have been in default under the terms of the Lease as of the each
Renewal Commencement Date, the term of the Lease shall be so extended for such
Renewal Term on the same terms and conditions contained in the Lease; provided,
however, the Base Monthly Rent for each month of the first thirty (30) months of
each Renewal Term shall be calculated as follows: The new Base Monthly Rent
shall be the greater of: (i) the Base Monthly Rent being paid by Tenant to
Landlord during the final full month of the final year of the initial Lease
Term, or (ii) the Then Monthly Market Rental Rate for the Leased Premises as of
the date seven (7) months prior to the commencement of such renewal term. The
Base Monthly Rent for the Second Renewal Term shall be the greater of: (i) the
Base Monthly Rent being paid by Tenant to Landlord for the full month
immediately prior to the commencement of such renewal term, or (ii) the Then
Monthly Market Rental Rate for the Leased Premises as of the date seven (7)
months prior to the commencement of such renewal term.
18.3 Monthly Market Rental Rate: For purposes of this Option to Renew
Lease, the term "Then Monthly Market Rental Rate" shall be determined by mutual
agreement between Landlord and Tenant or, in the event such agreement cannot be
made within ten (10) days from the date Tenant shall have exercised the
applicable Option, Landlord and Tenant shall each appoint a real estate
appraiser with at least five (5) years full-time commercial/industrial appraisal
experience in Santa Clara County to appraise and determine the fair market
monthly rental rate the Leased Premises, in their then existing condition for
the highest and best use the Premises could be leased for, on the same terms and
conditions set forth in the Lease, to a qualified renewal tenant ready, willing
and able to lease the Leased Premises for a term equal to the Renewal Term. If
either party does not appoint an appraiser within ten (10) days after the other
60
<PAGE>
party has given notice of the name of its appraiser, the other party can then
apply to the President of the Santa Clara County Real Estate Board or the
presiding Judge of the Superior Court of that County for the selection of a
second appraiser who meets the qualifications stated above. The failing party
shall bear the cost of appointing the second appraiser and of paying the second
appraiser's fee. The two appraisers shall attempt to establish the Then Monthly
Market Rental Rate for the Leased Premises. If the two appraisers are unable to
agree on the Then Monthly Market Rental Rate for the Leased Premises within ten
(10) days after the second appraiser has been selected or appointed, then the
two appraisers shall attempt to select a third appraiser meeting the
qualifications stated above. If they fail to agree on a third appraiser, either
party can follow the above procedure for having an appraiser appointed by the
Real Estate Board or a judiciary. Each of the parties shall bear one-half (1/2)
of the cost of appointing the third appraiser and of paying the third
appraiser's fee. Unless the three appraisers are able to agree on the Then
Monthly Market Rental Rate for the Leased Premises within ten (10) days after
the selection or appointment of the third appraiser, the two appraisal amounts
being calculated most closely together, after having discarded the appraisal
amount which most greatly varies from the other two appraisal amounts, shall be
added together then divided by two (2). The resulting rental amount shall be
defined as the Then Monthly Market Rental Rate for the Leased Premises. The Base
Monthly Rent for each Renewal Term shall include rental increases each year of
the term if such increases are appropriate under market conditions. In no event,
however, shall the resulting Then Monthly Market Rental Rate be less than the
Base Monthly Rent paid during the final full month of the initial Lease Term. In
no event, however, shall the resulting Then Market Rental Rate for the second
Renewal Term be less than the Base Monthly Rent paid during the final full month
of the first Renewal Term.
18.4 CPI Rental Increase: The Base Monthly Rent shall be adjusted at
the end of the thirtieth (30th) month of each Renewal Term by multiplying the
Base Monthly Rent for the thirtieth (30th) month of such renewal term times a
fraction the numerator of which shall be the Consumer Price Index published
immediately prior to the thirtieth (30th) month of such Renewal Term and the
denominator of which shall be the Consumer Price Index published immediately
prior to the first (1st) month of such Renewal Term. In no event, however, shall
the Base Monthly Rent for the last thirty (30) months of each Renewal Term be
less than the Base Monthly Rent for the first thirty (30) months of such Renewal
Term.
A. For purposes of this Option, the term "Consumer Price
Index" shall mean the Consumer Price Index, All Urban Consumers, Subgroup "All
Items", for the San Francisco-Oakland-San Jose Area (1982-1984=100), now being
published by the United States Department of Labor, Bureau of Labor Statistics.
If the Consumer Price Index is changed so that the base year is altered from
that used as of the Lease Commencement Date, then the Consumer Price Index shall
be converted in accordance with the conversion factor published by the United
States Department of Labor, Bureau of Labor Statistics, to obtain the same
result that would have been obtained had the base year not been changed. If no
conversion factor is available, or if the Consumer Price Index is otherwise
changed, revised or discontinued for any reason, there shall be substituted in
lieu thereof and the term "Consumer Price Index" shall thereafter refer to the
most nearly comparable official price index of the United States Government
reasonably designated by Landlord in order to obtain substantially the same
result for any adjustment required by this Option as would have been obtained
had the original Consumer Price Index not been changed, revised or discontinued.
18.5 One Tenant: It is landlord's intention that the buildings
identified as Renco 53, Renco 54, and Renco 55 be occupied by one tenant.
Notwithstanding anything to the contrary contained above, Tenant shall not be
entitled to exercise any option to extend the leases for either Renco 53, Renco
54, and/or Renco 55 unless Tenant simultaneously and validly (according to the
terms of each Lease) exercises it's options to extend the term of all three
buildings.
19. Additional Shell Construction Costs: Intentionally Omitted
20. General: In the event of any inconsistency between this First Addendum and
the Lease Form, the terms of this First Addendum shall prevail. As used herein,
the term "Lease" shall mean the Lease Form, this Addendum and all riders,
exhibits, rules, regulations, covenants, conditions and restrictions referred to
in the Lease Form or this Addendum.
61
<PAGE>
21. Allocation of Property Operating Expenses. Without limiting any restrictions
set forth in the Lease or this Addendum relating to Tenant occupying all four
buildings, referenced above, in the event that one or more of the four
Buildings, reference above, is leased by a tenant, other than Tenant or a
subleasee of Tenant, Landlord shall reasonably allocate the Property Operating
Expenses among the different Tenants. Without limiting the methods by which
Landlord may so reasonably allocate the Property Operating Expenses, it shall be
conclusively presumed reasonable for Landlord to allocate the total Property
Operating Expenses among the different tenants based upon the percentage ratio
of gross rentable square footages of each Building as is being paid for by each
such tenant such that Landlord recovers 100% of the Property Operating Expenses.
LANDLORD: TENANT:
RENCO INVESTMENT COMPANY AVANT! CORPORATION
a California General a Delaware Corporation
Partnership
By:____________________________ By:_______________________
General Partner
Title: ___________________
By:____________________________ By:_______________________
General Partner
Title: ___________________
By:_____________________________
General Partner
Dated:__________________________ Dated:___________________
62
<PAGE>
SECOND ADDENDUM TO LEASE
Avant! Corporation
Renco 53
THIS SECOND ADDENDUM TO LEASE ("The Addendum") is dated for reference purposes
as of February 24, 1997, and is made between RENCO INVESTMENT COMPANY, a
California general partnership ("Landlord") and AVANT! CORPORATION., a Delaware
corporation ("Tenant") to be a part of that certain Industrial Space Lease of
even date herewith between Landlord and Tenant (herein the "Lease"), with
respect to the building commonly known as Renco 53 (the "Building"). Terms
defined in the Lease Form shall have the same meaning when used herein unless
specifically defined otherwise herein. Landlord and Tenant agree that the Lease
is hereby modified and supplemented as follows:
1.1 E. It is acknowledged that the Intended Commencement Date of the Lease is to
occur in the future when the Lease between Landlord and Cirrus Logic for the
Leased Premises expires or terminates. It is specifically agreed that Landlord
has the option to declare the Lease terminated and the Lease Commencement Date
shall not occur in the event of a default by Tenant under any of the leases
between Landlord and Tenant for Renco 54, 55 and/or 48 prior to the Lease
Commencement Date under the Lease. It is agreed that this remedy is in addition
to all other remedies set forth in the Lease including, but not limited to, the
cross default remedies set forth in the First Addendum to Lease.
LANDLORD: TENANT:
RENCO INVESTMENT COMPANY AVANT! CORPORATION
a California General a Delaware Corporation
Partnership
By:____________________________ By:_______________________
General Partner
Title: ___________________
By:____________________________ By:_______________________
General Partner
Title: ___________________
By:_____________________________
General Partner
Dated:__________________________ Dated:___________________
File No._______________
63
<PAGE>
THIRD AMENDMENT TO LEASE
(Renco 53)
THIS THIRD AMENDMENT TO LEASE ("Amendment") dated for reference
purposes as of February 24, 1997, is made to that Industrial Space Lease dated
as of June 14, 1995 (the "Lease") by and between CIRRUS LOGIC, INC., a
California Corporation as Tenant ("Tenant") and RENCO INVESTMENT COMPANY, a
California partnership as Landlord ("Landlord"), for the lease of space located
at 46875 Bayside Parkway, Fremont, California (the "Leased Premises"). The Lease
was amended by the terms of the First Amendment to Lease dated for reference
purposes as of May 1, 1996, and the Second Amendment to Lease dated as of June
11, 1996. The parties hereto agree that the Lease is amended, changed and
modified by the following provisions, which are hereby added to the Lease:
Unless otherwise expressly provided herein, all terms which are given a
special definition by the Lease that are used herein are intended to be used
with the definition given to them by the Lease. The provisions of the Lease
shall remain in full force and effect except as specifically amended hereby. In
the event of any inconsistency between the Lease and this Amendment, the terms
of this Amendment shall prevail.
1.1 S. Base Monthly Rent: The Base Monthly rent is as follows:
May 1, 1996, through November 30, 1996, the amount of Eighty
Three Thousand Six Hundred Eighty Dollars ($83,680.00).
December 1, 1996, through May 31, 1997, the amount of One
Hundred One Thousand Six Hundred Eighty Dollars ($101,680.00).
June 1, 1997, through April 30, 2003, the amount of Ninety Two
Thousand Six Hundred Eighty Dollars ($92,680.00).
On May 1, 2003, the Base Monthly Rent shall be adjusted
pursuant to section 1.1 S of the Lease.
On May 1, 2006, the Base Monthly Rent shall be adjusted
pursuant to section 1.1 S of the Lease.
1.1 G Lease Termination Date: April 30, 2009
18. Option to Renew: Section 18 of the First Addendum to Lease which provides
for an option to renew the term of the Lease is amended as follows: By Sublease
Agreement dated as of the date hereof (the "Avant! Sublease"), Tenant has
subleased the Leased Premises to Avant! Corporation, a Delaware corporation
("Avant!") for the remainder of the term of the Lease. Landlord has
simultaneously entered into direct leases with Avant! for (a) two (2) adjacent
buildings (the "Avant! Leases") and (b) the Leased Premises for a term
commencing upon the expiration of the term of the Lease. Tenant's option to
renew is exercisable only if Tenant has terminated the Avant! Sublease as a
result of a default under said sublease by Avant! and Avant! has vacated the
Leased Premises.
19. Additional Shell Costs: Tenant has paid to Landlord a total of Three Hundred
Twenty Two Thousand Six Hundred Forty Eight Dollars ($322,648.00) for work
pursuant to Section 19 of the First Addendum to Lease. The Lease provides that
Landlord shall reimburse to Tenant seventy five percent (75%) of the usable
costs. Landlord shall reimburse to Tenant Two Hundred Forty Two Thousand Dollars
($242,000.00), one half when the first building (Renco 54) is occupied by a
third party tenant, and the balance when the second building (Renco 55) is so
occupied. Tenant has paid to Landlord One Hundred Nineteen Thousand One Hundred
Dollars ($119,100.00) for architectural plans for two buildings identified as
Renco 54 and Renco 55. Tenant has elected not to lease those two buildings.
Landlord shall
64
<PAGE>
reimburse to Tenant the entire amount of One Hundred Nineteen Thousand One
Hundred Dollars ($119,100.00) when Landlord receives a building permit from the
City of Fremont for the buildings and starts construction of the buildings.
First Addendum to Lease, 15. Cross Default: The provisions of Section 15 of the
First Addendum to Lease shall not apply so long as Avant!, or a permitted
assignee or sublettee of Avant!, remains in possession as a subtenant of Tenant
(or as a permitted assignee or sublettee of Avant! as applicable) in the Leased
Premises and the Avant! sublease remains in effect.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Third
Amendment to Lease with the intent to be legally bound thereby, to be effective
as of the date the second party signs this Third Amendment to Lease.
AS LANDLORD: AS TENANT:
RENCO INVESTMENT COMPANY, CIRRUS LOGIC, INC.,
a California partnership a California corporation
By: _____________________ By: ______________________
Title: General Partner
Title: ____________________
By: _____________________ By: ______________________
Title: General Partner
Title: ____________________
By: _____________________ By: ______________________
Title: General Partner
Dated: February __, 1997 Dated: February __, 1997
65
<PAGE>
FOURTH AMENDMENT TO LEASE
(Renco 53)
THIS FOURTH AMENDMENT TO LEASE ("Amendment") dated for reference
purposes as of February 24, 1997, is made to that Industrial Space Lease dated
as of June 14, 1995 (the "Lease") by and between CIRRUS LOGIC, INC., a
California Corporation as Tenant ("Tenant") and RENCO INVESTMENT COMPANY, a
California partnership as Landlord ("Landlord"), for the lease of space located
at 46875 Bayside Parkway, Fremont, California (the "Leased Premises"). The Lease
was amended by the terms of the First Amendment to Lease dated for reference
purposes as of May 1, 1996, the Second Amendment to Lease dated as of June 11,
1996 and the Third Amendment to Lease dated as of February 24, 1997. The parties
hereto agree that the Lease is amended, changed and modified by the following
provisions, which are hereby added to the Lease:
Unless otherwise expressly provided herein, all terms which are given a
special definition by the Lease that are used herein are intended to be used
with the definition given to them by the Lease. The provisions of the Lease
shall remain in full force and effect except as specifically amended hereby. In
the event of any inconsistency between the Lease and this Amendment, the terms
of this Amendment shall prevail.
1. Consent to Sublease/Exhibit B to Consent to Sublease: The parties hereto are
concurrently herewith entering into a Consent to Sublease dated February 24,
1997 ("Consent to Sublease") with respect to a Sublease Agreement ("Sublease")
between Tenant and Avant! Corporation ("Subtenant") for the Leased Premises.
Without limiting the rights, privileges and/or obligations as currently set
forth in the Consent to Sublease, or the Exhibits thereto, in the event of a
default by Subtenant under the Sublease, or a termination of the Sublease,
Tenant shall have all of the rights, privileges and obligations of "Subtenant"
under the Tenant Improvement Agreement attached as Exhibit B to the Consent to
Sublease.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Fourth
Amendment to Lease with the intent to be legally bound thereby, to be effective
as of the date the second party signs this Fourth Amendment to Lease.
AS LANDLORD: AS TENANT:
RENCO INVESTMENT COMPANY, CIRRUS LOGIC, INC.,
a California partnership a California corporation
By:____________________________ By:_______________________
Title:General Partner
Title: ___________________
By:____________________________ By:_______________________
Title:General Partner
Title: ___________________
By:_____________________________
Title:General Partner
Dated: February __, 1997 Dated: February __, 1997
66
<PAGE>
EXHIBIT "B"
TENANT IMPROVEMENT AGREEMENT
INTERIOR ALLOWANCE
[RENCO 53]
1. Building Shell and Common Areas: The Building Shell and Common Areas have
been completed and Tenant and Subtenant accept such improvements in their "As
Is" condition, subject to any warranty provisions that may exist in the Master
Lease.
2. Design and Construction of Improvements in and about the Leased Premises
("Tenant Improvements"): Landlord, Renco Investment Company, a California
partnership ("Landlord") agrees to construct within, under, and above the
Building housing the Leased Premises certain "Tenant Improvements" (or "Interior
Improvements") as set forth in this Exhibit "B" in accordance with the
Construction Work Schedule described herein. The Tenant Improvements shall be
similar in type and quality to the general purpose interior improvements
installed by Landlord in its buildings in Bayside Technology Park, Fremont,
California. Subject to Landlord's reasonable approval Subtenant, Avant!
Corporation ("Subtenant"), with the consent of Tenant, Cirrus Logic, Inc., a
California corporation ("Tenant") shall have the flexibility to design a floor
plan that suits Subtenant's needs so long as such plan preserves the general
purpose nature of the Building.
Landlord shall pay for the cost of Tenant Improvements (which shall
include the cost of alterations to the Building and/or Outside Areas requested
by Subtenant) up to a maximum amount of $1,790,721.00. Subtenant agrees to pay
the entire cost of construction approved by Subtenant and Tenant of Tenant
Improvements in excess of the above amount. Landlord shall provide such
information as is reasonably requested by Subtenant to assist Subtenant in
evaluating or approving construction costs or any change order within a
reasonable period of time based upon the information requested.
In the event the cost of any Tenant Improvements approved by Subtenant
and Tenant in accordance with this Agreement exceeds the total amount which
Landlord has agreed to spend, Subtenant shall pay such excess amount within five
(5) days of receipt of a written statement from Landlord therefor however not
earlier than thirty (30) days following delivery to Subtenant of an initial
estimated budget for such costs. Upon tender of such sum to Landlord,
Subtenant's obligation to pay any such amount in regard to approved Tenant
Improvements, the cost of which was covered by such payment, shall be completely
satisfied notwithstanding that the final cost of the same is in excess of such
payment made by Subtenant, provided however, that such shall not apply with
respect to cost increases arising as a result of a delay caused by Tenant,
Subtenant or Subtenant's Architect, or caused by an error of Subtenant's
Architect or incomplete drawings, plans and/or specifications of Subtenant's
Architect. Landlord or Tenant may require Subtenant to pay such excess amount
prior to, and as a condition of, the commencement of construction of such Tenant
Improvements. If at any time during the design or construction of Tenant
Improvements, Subtenant or Subtenant's Architect requests changes in the scope
of Tenant Improvements (and such changes are approved by Landlord and Tenant),
which changes increase the cost of the work above what Landlord has agreed to
spend, then Subtenant shall pay to Landlord the cost of improvements above the
amount that Landlord has agreed to spend, and Subtenant shall pay the amount due
within five (5) days from receipt of a written statement from Landlord. Upon
tender of such sum to Landlord, Subtenant's obligation to pay any such amount in
regard to approved Tenant Improvements, the cost of which was covered by such
payment, shall be completely satisfied notwithstanding that the final cost of
the same is in excess of such payment made by Subtenant, provided however, that
such shall not apply with respect to cost increases arising as a result of a
delay caused by Tenant, Subtenant or Subtenant's Architect, or caused by an
error of Subtenant's Architect or incomplete drawings, plans and/or
specifications of Subtenant's Architect. All amounts due from Subtenant as
provided herein shall be considered as "rent" under the Master Lease and
Sublease and all amounts due shall be subject to the terms of the Master Lease
and Sublease. In the event that Subtenant fails to make any payment within the
required time period, Subtenant shall pay interest and late charges on the
delinquent amount directly to Landlord in accordance with Section 3 of the
Master Lease. In addition, should any amounts not be paid when due, Landlord may
suspend the construction of Interior Improvements until said amounts have been
paid and in such event Landlord shall provide written notice to Tenant and
Subtenant of such event. Following Subtenant's acceptance of the cost of any
item, as referenced above, Landlord shall be entitled to any cost/price savings
that thereafter occur with respect to such item.
67
<PAGE>
Subtenant shall have the right to contract with vendors of its
selection for the installation of Subtenant's furnishings and fixtures, provided
however, that Subtenant's vendors shall not unreasonably interfere with the
construction of Interior Improvements by Landlord and Landlord's contractors.
Landlord shall not charge Subtenant a fee pursuant to section 2 (g) (2) for any
work performed by Subtenant's vendors. Landlord's contractor shall assist (so
long as such assistance does not increase Landlord's cost) in the coordination
of work performed by Subtenant's subcontractors and vendors.
(a) Subtenant's Conceptual Plan ("Conceptual Plan") and Landlord's
Schematic Plan, ("Schematic Plan"): No later than March 20, 1997, Subtenant
shall provide to Landlord and Tenant a Conceptual Plan for the Interior
Improvements to be constructed in the building. The Conceptual Plan shall show
Subtenant's preference for the location of: doors, partitions, ceilings, air
conditioned areas, restrooms, offices, conference areas, entries, assembly or
manufacturing areas, storage and distribution areas, and any proposed
alterations to existing improvements in such Building.
Subtenant has selected Robinson Mills + Williams to represent Subtenant
and prepare design and construction drawings ("Subtenant's Architect").
Subtenant shall pay all fees charged by Subtenant's architect. Within ten (10)
days from the date the Conceptual Plan was required to be completed, Subtenant's
Architect shall prepare a Schematic Plan from Subtenant's Conceptual Plan, which
Schematic Plan shall be drawn to scale and shall show proposed dimensions and
general performance specifications for areas to be heated, cooled and/or
lighted. Landlord and Tenant shall have five (5) business days from receipt of
the Schematic Plan from Subtenant within which to review and approve or propose
specific changes to the Schematic Plan. If Landlord or Tenant require any
changes to the Schematic Plan, Subtenant's Architect shall make the changes
which are acceptable to Landlord, Tenant and Subtenant within five (5) business
days of Landlord's or Tenant's requested changes and said Schematic Plan shall
be signed by Landlord, Tenant and Subtenant within five (5) days from each
party's receipt of the revised plan, and said Schematic Plan shall become the
Approved Schematic Plan. Landlord and Tenant shall not be required to approve
the Schematic Plan if such Plan calls for improvements that would, in Landlord's
or Tenant's reasonable opinion damage the Building or reduce its value. Landlord
acknowledges, and agrees with, (subject to approval of the Schematic Plan and
Construction Drawings) Subtenant's concept of the stair and water feature and
pendant lights as set forth in Subtenant's current space plan.
(b) Construction Drawings for the Tenant Improvements ("Construction
Drawings"): Within thirty (30) days from the date the Schematic Plan was
required to be completed, Subtenant's Architect shall prepare Construction
Drawings based on the Approved Schematic Plan and deliver to Landlord and Tenant
the Construction Drawings which reflect the requirements of the Approved
Schematic Plan. The Construction Drawings must be documents that provide a full
and complete description of the Interior Improvements and must be suitable for
construction and comply with all building code requirements including the
requirement for completeness and suitability for construction. Within five (5)
business days from receipt of the Construction Drawings, Landlord and Tenant
shall review the Construction Drawings and deliver any proposed changes to
Subtenant. Landlord's and Tenant's review shall be for design purposes only.
Subtenant and Subtenant's Architect shall remain solely responsible and liable
for any design deficiencies including the responsibility to comply with all
applicable building codes and regulations including requirements of utility
service providers. If Landlord and/or Tenant does not deliver to Subtenant any
proposed changes to the Construction Drawings within such five (5) business day
period, such party shall be deemed to have approved the Construction Drawings as
submitted to them. If Landlord and/or Tenant does deliver to Subtenant any
proposed changes to the Construction Drawings within such five (5) business day
period, the parties shall agree upon the changes to be made to the Construction
Drawings within a period of five (5) business days thereafter. When Landlord,
Tenant and Subtenant agree upon the Construction Drawings, a representative of
each party shall sign the same and when signed by both parties, any changes in
the Construction Drawings shall only be made as authorized pursuant to the
provisions of this Exhibit "B". Notwithstanding anything above to the contrary,
each party agrees not to unreasonably withhold consent to the Construction
Drawings to the extent that they are prepared in accordance with the Approved
Schematic Plan.
(c) Time for Construction of Tenant Improvements: Promptly following
approval of the Construction Drawings by Landlord, Tenant and Subtenant,
Landlord shall apply for and use reasonable efforts to obtain the necessary
building permits to allow the construction of the Tenant Improvements. Promptly
following the issuance of the necessary building permits, Landlord shall
commence construction of the Tenant Improvements and shall use
68
<PAGE>
reasonable efforts to complete the improvements within a reasonable period of
time using reasonable efforts to maintain the Construction Work Schedule;
provided, however, that Landlord shall be excused for a delay in the completion
of construction of the Tenant Improvements for such period of time as
construction is delayed because of any fault or neglect of Tenant or Subtenant,
because of changes requested by Tenant or Subtenant, because of any law,
regulation, ordinance, or order of any public agency (provided Landlord shall
not be excused for public agency delays as the result of Landlord deviating from
the Construction Drawings without Subtenant or Subtenant's Architect's consent),
or because of acts of God, labor disputes, strikes, inability to obtain
materials or labor, fires, floods, inclement weather, earthquakes, epidemics,
quarantine, restrictions, freight embargoes, or other causes or contingencies
beyond the reasonable control of Landlord. Landlord shall take any and all
reasonable actions, remedial or otherwise, to maintain the Construction Work
Schedule. Subtenant shall remain solely responsible for the conduct of
Subtenant's vendors, contractors, and subcontractors. Subtenant's vendors,
contractors, and subcontractors shall not interfere with the construction of
Landlord's Work or Landlord's contractors, or subcontractors.
Subtenant (with Tenant's prior written consent) may authorize Landlord
and Landlord's Contractor to commence work prior to obtaining a building permit
provided that Subtenant in so doing shall accept any cost, delay, or expense of
commencing construction prior to obtaining a building permit.
(d) [Intentionally omitted]
(e) Hazardous Materials Facilities: Subtenant shall be solely
responsible for the design, approval, and payment of the costs of design and
construction of any and all work, fixtures, or materials required for
Subtenant's transportation, storage, use, and disposal of Hazardous Materials,
which Hazardous Materials shall only enter the Property or any portion thereof
pursuant to the terms of the Sublease and the Master Lease. Subtenant shall also
be solely responsible for the design, approval, and payment of the costs of
design and construction for any and all work, fixtures, or materials required
for the handling, service, or provision of food on the Leased Premises.
Landlord's Work is limited to the construction of the Tenant Improvements as
shown on Construction Drawings approved by Landlord, Tenant and Subtenant.
Landlord shall promptly notify Subtenant of any items of the Tenant Improvements
which would be Subtenant's obligation pursuant to this paragraph. In addition,
Landlord's Work (and the funds that Landlord has agreed to spend) specifically
excludes any and all fees charged by governmental agencies for Subtenant's use
of Hazardous Materials or Subtenant's service of food which fees include but are
not limited to: sewer or sanitary district fees, health department fees, air
quality fees, excess water usage fees, and the like. Any and all such fees shall
be paid by Subtenant to the appropriate governmental agency. In the event that
the design, approval, construction, or completion of any work to be performed by
Landlord is delayed directly or indirectly for any reason as a result of (i)
Subtenant's use of Hazardous Materials, or (ii) Subtenant's handling or
intention to handle food or provide food service, then Subtenant shall be
delaying the Landlord's Work. Landlord shall promptly notify Tenant and
Subtenant whenever Landlord becomes aware of any action of Tenant or Subtenant
which will cause a delay in any work to be performed by Landlord.
(e) [Intentionally omitted]
(f) [Intentionally omitted]
(f-1) [Intentionally omitted]
(g) Cost of Tenant Improvements: As used herein, the "Cost of Tenant
Improvements" or words of similar import shall include all costs paid or
incurred by Landlord in connection with the design, approval, and/or
construction of the Tenant Improvements (or any improvements) as shown on the
Construction Drawings (as they may be amended), including but not limited to:
(1) The fees of architects, engineers, consultants, utility
companies, or governmental agencies for the design, supervision, construction or
approval of improvements or alterations to the basic Building, which
improvements or alterations are requested by Subtenant or required by
Subtenant's use;
(2) The costs and charges by Landlord's general contractor,
subcontractors, material suppliers, laborers, and employees who provide goods
and services for the actual construction of Tenant's Improvements or
69
<PAGE>
Building alterations requested or required by Subtenant for its use of the
Leased Premises. Landlord (or an affiliate of Landlord) may act as a general
contractor or subcontractor, and such general contractor may charge all of its
reasonable direct costs as well as a construction management fee, profit, and/or
overhead, which charge shall equal seven percent (7.0%) times the total cost of
the work excluding costs for architectural fees, governmental fees (including
building department fees), and utility company fees;
(3) Direct costs of procuring and installing the improvements
or items required for Subtenant's use of the Leased Premises including, but not
limited to: building permits (but excluding the cost of the "shell" building
permit), inspections, filings, taxes, governmental fees; any installation,
connection or service fees required to provide utility service to the Building
or into the Leased Premises, the cost of utility service or security service, or
any service or material provided to the Building for purpose of the construction
of Tenant Improvements. As a direct cost Landlord's contractor shall include
costs of labor, materials, equipment, tools, construction equipment and
machinery, water, heat, and utilities, transportation and other facilities and
services necessary for proper execution and completion of work, whether
temporary or permanent and whether or not incorporated or to be incorporated in
the work;
(4) General contractor's costs of maintaining any and all
property damage and/or liability insurance pertaining and reasonably allocable
to the construction of the Tenant Improvements;
(5) Omitted;
(6) Costs of performance or payment bond premiums if approved
by Subtenant;
(7) Omitted; and
(8) The following items shall be included in the cost of
construction of Interior Improvements whether the improvements are constructed
at the time of shell construction or at time of construction of interior
improvements: the additional cost of high performance glass in lieu of standard
gray lite glass, glass in the rear of the Building where there otherwise would
be roll up truck doors, data conduit between buildings, special door closures
and electronic locks, false mullions in the window wall, the elevator (except
that Landlord shall pay for the cost of the concrete elevator pit and framing
for the hole in the second floor both as shell items), underground plumbing runs
to restrooms, the lobby stair, employee patio areas, all improvements required
for recreational use and/or child care, and all restrooms.
(h) Selection of Subcontractors: Subtenant, with the consent of Tenant,
shall have reasonable rights of approval of the subcontractors to perform the
work of construction of Tenant Improvements prior to the engagement thereof, and
Subtenant, with the consent of Tenant, shall have reasonable rights of approval
of the cost charged by each subcontractor prior to the incurrence of any cost or
charge by each such subcontractor. Following Subtenant's acceptance of the cost
of any item, as referenced above, Landlord shall be entitled to any cost/price
savings that thereafter occur with respect to such item.
(i) Miscellaneous: Landlord's general contractor shall provide
supervision during normal business hours when required. Landlord's General
Contractor shall assist Subtenant's Architect in verifying existing building
conditions, but Subtenant's Architect shall remain primarily responsible for the
accuracy of its drawings. Landlord's General Contractor shall provide a detailed
cost schedule and a construction work schedule ("Construction Work Schedule")
within fourteen (14) days of receipt from Subtenant's Architect of complete
Construction Drawings. Landlord's General Contractor shall supervise and direct
Landlord's Work using the General Contractor's best skills and attention.
Landlord's General Contractor shall be fully responsible for and have control
over construction means, methods, techniques, sequences, and procedures for
coordinating portions of the work under the contract. Landlord's contractor
shall review, approve, and submit to Subtenant's Architect shop drawings,
product data, samples, and submittals required by the contract documents with
promptness and in sequence where possible as to cause no delay in the work and
the project schedule. Landlord's General Contractor shall take reasonable
precautions for safety and shall provide reasonable protection to prevent
damage, injury, or loss.
(j) Punch List and Correction of Defects: Not later than fifteen (15)
days after substantial completion of the Tenant Improvements (which shall not be
sooner than the issuance of a Certificate of Occupancy) Landlord, Tenant and
70
<PAGE>
Subtenant shall conduct a walkthrough of the Leased Premises and mutually
prepare a written PUNCH LIST setting forth any defective item of construction.
Landlord shall cause all defects, errors or omissions listed in the PUNCH LIST
to be corrected within a reasonable time after receipt thereof.
3. Conflict: In the event of a conflict between the language of this Exhibit and
either the Master Lease or the Sublease, the language of this Exhibit shall
control.
4. Time of Essence: Time is of the essence of each and every provision of this
Work Letter.
5. Approvals: Except as expressly provided otherwise, whenever the approval of a
party is required hereunder, such approval shall not be unreasonably withheld or
delayed.
71
<PAGE>
CONSENT TO SUBLEASE
Renco 53
[Cirrus Logic/Renco Master Lease]
The undersigned Landlord ("Landlord") as Landlord under that certain
Lease by and between Landlord and the undersigned Tenant ("Tenant"), dated June
14, 1995, as amended by three amendments (May 1996, June 1996 and February 1997)
(collectively "Master Lease"), hereby consents to the Sublease attached hereto,
as Exhibit "A", subject to the following terms and conditions:
1. Nothing herein shall be deemed to be a waiver of any term or
condition contained in the above-referenced Master Lease. Landlord shall
continue to have all rights and remedies as set forth in the Master Lease,
notwithstanding the terms or conditions of the Sublease.
2. Nothing contained herein nor in the Sublease Agreement shall be
deemed to release the Tenant from any term or condition contained in the Master
Lease and Tenant shall remain fully liable for each and every term and condition
contained in the Master Lease.
3. Nothing contained herein shall be deemed to be the Consent of the
Landlord to any further Sublease or Assignment of the premises leased pursuant
to the Master Lease by either Tenant or Subtenant.
4. It is agreed that the Sublease is being entered into for the express
benefit of Landlord, as well as Tenant, and Landlord is a third party
beneficiary of such Sublease and Landlord has the right, but not the duty, to
enforce such obligations directly against Subtenant (as well as Tenant).
Subtenant has the right, but not the duty, to enforce the obligations owed to
Tenant by Landlord under the Master Lease, which Subtenant is a direct
beneficiary thereof.
Notwithstanding the foregoing, the parties hereto acknowledge
and agree that (a) any sums collected by Landlord with respect to the Sublease
shall be credited to Tenant's corresponding obligations under the Master Lease,
(b) Landlord shall not have the right to terminate the Sublease or otherwise
limit or interfere with Tenant's rights with respect to Subtenant under the
Sublease, except in conjunction with exercising such rights against Tenant under
the Master Lease as well, and (c) Tenant shall have the right (in accordance
with the Sublease) to amend, modify or terminate the Sublease without Landlord's
consent and without any liability to Landlord.
5. It is expressly acknowledged by the parties hereto that Landlord has
not analyzed the Sublease, referred to herein, and is not hereby agreeing to any
term or condition contained therein to the extent any provisions are
inconsistent with the Master Lease or otherwise create different obligations
upon Landlord or create additional rights to Tenant or Subtenant thereunder.
Landlord is merely consenting to such subletting pursuant to the terms and
conditions contained herein and contained in the Master Lease.
6. This Consent must be executed by Landlord, Tenant, and Subtenant to
be effective.
7. Landlord hereby consents to the following additional uses of the
premises demised under the Master Lease: production, warehousing, repair, and
sales and service of high technology computer hardware/software and all related
support functions including office, research and development as such uses are
permitted in Bayside Technology Park.
8. In the event of a default under the Master Lease Landlord shall
deliver to Subtenant at the address set forth in the Sublease any required
notice of default under the Master Lease before Landlord may enforce any remedy
against Subtenant for such default, including, but not limited to, the remedy of
eviction. Such notices need not necessarily be delivered to Subtenant at the
same time as delivered to Tenant, however, Subtenant (but not Tenant) shall have
the following time periods to cure such default (Tenant shall continue to have
only the time periods to cure as set forth in the Master Lease): (a) with
respect to defaults in the payment of monetary sums, two (2) calendar days
beyond the notice period Tenant is entitled to under the Master Lease for such
default and (b) with respect to all other defaults ten (10) calendar days beyond
the notice period Tenant is entitled to under the Master
72
<PAGE>
Lease for such default. It is expressly acknowledged that such additional cure
periods granted to Subtenant apply only to the required notices under the Master
Lease for a default to exist and such cure periods do not also apply to
statutory notices Landlord may be required to serve under California's unlawful
detainer statutes. Any cure by Subtenant is without prejudice to either the
Landlord's rights against the Tenant under the Master Lease (as may be
diminished by any cure by Subtenant) or to the Subtenant's rights against Tenant
under the Sublease. Landlord further agrees to accept performance of Tenant's
obligations under the Master Lease by Subtenant as if such were performed by
Tenant.
9. Landlord shall credit any payments made by Subtenant to Landlord to
Tenant's corresponding obligation under the Master Lease.
10. The construction of the improvements and all corresponding
obligations relating thereto as referenced in Exhibit C to the Master Lease, as
amended, shall now be performed in accordance with the Tenant Improvement
Agreement attached hereto as Exhibit B. Exhibit C to the Master Lease, as
amended, is hereby deleted and replaced with the terms and provisions of Exhibit
B attached hereto. So long as the Sublease and the Master Lease are in full
force and effect, the parties hereto agree to perform their respective
obligations set forth in the Tenant Improvement Agreement attached as Exhibit B.
Renco Investment Company,
a California Partnership
Dated: _________________ By: _______________________
Title: General Partner
By: _______________________
Title: General Partner
By: _______________________
Title: General Partner
LANDLORD
Cirrus Logic, a
California Corporation
Dated: _________________ By: _______________________
Title: _____________________
By: _______________________
Title: _____________________
TENANT
Avant! Corporation, a
Delaware Corporation
Dated: _________________ By: _______________________
Title: _____________________
By: _______________________
Title: _____________________
SUBTENANT
73
<PAGE>
BASIC SUBLEASE TERMS
Base Monthly
Rent: Months Base Monthly Rent
1-12 $90,000 ($1.00 per square foot)
Base Monthly Rent for each one (1)- year period following the first such period
shall be increased by an amount equal to four percent (4%) of the Base Monthly
Rent in the immediately preceding one (1)-year period. See Paragraphs 4 and 5.
Brokers: Sublandlord's
Broker: BT Commercial - Ron Himes
Subtenant's
Broker: CB Madison Advisory Group - Jay Phillips
Commencement
Date: See Paragraph 2
Rent Commencement
Date: July 1, 1997 (subject to Paragraph 4.A)
Free Rent Period: The period between the Commencement Date and the Rent
Commencement Date. See Paragraph 4.A
Expiration
Date: April 30, 2009
Landlord: Renco Investment Company
Master Lease: That certain Lease dated June 14, 1995 between Landlord, as
landlord, and Sublandlord, as tenant, as amended.
Permitted
Uses: The term "Permitted Use" shall mean the following:
Manufacture, warehousing, repair, and sales and service of electronic equipment
and all related support functions including office, research, and development as
such uses are permitted in Bayside Technology Park and any other lawful uses
with the consent of Sublandlord and Landlord. Subject to the consent of
Landlord, Sublandlord hereby consents to Subtenant's use of the Subleased
Premises for the following purposes: production, warehousing, repair, and sales
and service of high technology computer hardware/software and all related
support functions including office, research, and development as such uses are
permitted in Bayside Technology Park and any other lawful uses with
Sublandlord's consent, which shall not be unreasonably withheld, conditioned or
delayed.
Subleased Premises: That certain building consisting of approximately
90,000 square feet located at 46871 Bayside Parkway,
Fremont, California. See Recitals A and B and
Paragraph 1.
Security Deposit: Ninety Thousand Dollars ($90,000)
Subtenant: Avant! Corp., a Delaware corporation
Subtenant's Address for
Notices: Prior to the Rent Commencement Date:
1208 East Arques
74
<PAGE>
Sunnyvale, CA 94086
Attn: Vice President and Chief Financial Officer
as of the Rent Commencement Date:
46871 Bayside Parkway
Fremont, CA 94538
Attn: Vice President and Chief Financial Officer
with copies (of default notices only) to:
Robert Gunderson, Esq.
Gunderson, Dettmer & Stough
155 Constitution Avenue
Menlo Park, California 94025
or to such other address as Subtenant shall designate.
Sublandlord: Cirrus Logic, Inc., a California corporation
Sublandlord's
Address for
Notices: 3100 West Warren Avenue
Fremont, CA 94538
Attn: Controller
Exhibits: Exhibit A - Master Lease
75
<PAGE>
SUBLEASE
This Sublease ("Sublease") is made on __________, 1997, between Cirrus Logic,
Inc., a California corporation ("Sublandlord"), whose address is 3100 West
Warren Avenue, Fremont, California 94538 and Avant! Corp., a Delaware
corporation ("Subtenant"), whose address is 1208 East Arques, Sunnyvale, CA
94086, as a Sublease under that certain master lease (the "Master Lease") dated
June 14, 1995, entered into by Renco Investment Company, a California general
partnership, as landlord ("Landlord"), and Sublandlord, as tenant, as amended by
the First Amendment to Lease dated for reference purposes as of May 1, 1996, the
Second Amendment to Lease dated as of June 11, 1996, and the Third Amendment to
Lease dated for reference purposes as of February 24, 1997 (collectively the
"Master Lease"), a copy of which Master Lease is attached hereto as Exhibit A.
R E C I T A L S
A. Pursuant to the Master Lease, Sublandlord leases from Landlord that certain
building located at 46871 Bayside Parkway, City of Fremont, State of California,
comprised of approximately 90,000 rentable square feet (the "Master Premises").
B. Subtenant desires to lease from Sublandlord, and Sublandlord desires to
sublease to Subtenant, the entire Master Premises, together with certain
appurtenances thereto, consisting of approximately ninety thousand (90,000)
rentable square feet as outlined in red on Exhibit A to the Master Lease (the
"Subleased Premises"), it being agreed for purposes of this Sublease that the
Subleased Premises contain such number of rentable square feet.
A G R E E M E N T
NOW, THEREFORE, the parties hereto, in consideration of the foregoing and of the
mutual promises contained herein and for other good and valuable consideration,
agree as follows:
1. Subleased Premises. Sublandlord hereby leases to Subtenant and Subtenant
hereby hires from Sublandlord the Subleased Premises as set forth in more detail
in Section 2.1 of the Master Lease, which Section 2.1 is incorporated into this
Sublease. Any defined terms used herein shall have the meaning ascribed to them
in the Master Lease unless specifically defined herein.
2. Term. The term ("Term") of this Sublease shall commence on the date of mutual
execution and delivery of this Sublease (the "Commencement Date"). Sublandlord
shall deliver possession of the Subleased Premises to Subtenant on the
Commencement Date, subject to obtaining Landlord's consent as set forth in
Paragraph 18 below, and this Sublease shall terminate on the earliest to occur
of (a) April 30, 2009 (the "Expiration Date"), (b) the date this Sublease is
sooner terminated pursuant to its terms, or (c) the date the Master Lease is
sooner terminated pursuant to its terms.
3. Delivery and Acceptance. If Sublandlord is unable to deliver possession of
the Subleased Premises to Subtenant to commence (or cause Landlord to commence)
its construction of the Tenant Improvements (defined below) on or before April
1, 1997, for any reason whatsoever, then as Subtenant's sole and exclusive
remedy, Subtenant may terminate this Sublease by written notice to Sublandlord
at any time thereafter until such possession is delivered, whereupon any monies
previously paid by Subtenant to Sublandlord shall be reimbursed to Subtenant and
the parties shall have no further obligation to each other. By taking possession
of the Subleased Premises, Subtenant conclusively
76
<PAGE>
shall be deemed to have accepted the Subleased Premises in their "as-is",
then-existing condition, without any warranty whatsoever of Sublandlord with
respect thereto.
4. Rent.
A. Rent Commencement Date. The rent commencement date ("Rent Commencement Date")
shall be July 1, 1997, provided that if Sublandlord causes a delay in the
completion of the Tenant Improvements by failing to respond within the permitted
time frames set forth in the Tenant Improvement Agreement or by failing to
exercise reasonable good faith efforts to cause Landlord to perform its
obligations for construction of the Tenant Improvements, there shall be one day
of delay in the Rent Commencement Date for each day of such delay. Subtenant
shall have no obligation to pay Rent (defined below) for the period between the
Commencement Date and the Rent Commencement Date, although all other terms and
conditions of this Sublease shall be in full force and effect.
B. Base Monthly Rent. Commencing on the Rent Commencement Date, Subtenant shall
pay to Sublandlord as base monthly rent ("Base Monthly Rent") for the Subleased
Premises, in monthly installments in advance on or before the first day of each
full calendar month of the Term the amounts specified in Paragraph 5.A below.
Base Monthly Rent for any partial month shall be payable in advance and shall be
prorated based on the actual number of days during the Sublease Term occurring
in such month divided by the total number of days in such month.
C. First Month's Rent. Notwithstanding Paragraphs 4.A and 4.B hereof, on the
date on which Subtenant executes this Sublease, Subtenant shall pay to
Sublandlord the amount of $90,000, which amount shall be applied against the
Base Monthly Rent for the first full calendar month for which Base Monthly Rent
is due hereunder.
D. Additional Rent. In addition to the above Base Monthly Rent, commencing on
the Rent Commencement Date, Subtenant shall pay to Sublandlord as additional
rent ("Additional Rent"), in monthly installments in advance on or before the
first day of each full calendar month of the Term all amounts payable by
Sublandlord pursuant to Section 3.2 of the Master Lease, payable with respect to
the time period commencing with the Rent Commencement Date. Additional Rent for
any partial month shall be payable in advance and shall be prorated based on the
actual number of days during the Sublease Term occurring in such month divided
by the total number of days in such month. The provisions of Sections 3.2 and
3.3 of the Master Lease shall apply to the payment of Additional Rent, except
that the timing of such payments and the periods for which such payments are due
shall be as set forth above in this Paragraph 4.D. Notwithstanding the
foregoing, in the event that Landlord elects to bill Sublandlord for Additional
Rent monthly, as provided in Section 3.2(A)(1) of the Master Lease, Subtenant
shall pay Sublandlord the amount set forth in such bill within seven (7) days
after Subtenant's receipt thereof.
E. Manner and Place of Payment. Base Monthly Rent and Additional Rent
(collectively, "Rent") shall be payable without notice or demand and without any
deduction, offset, or abatement, in lawful money of the United States of
America. Subtenant shall pay Rent directly to Sublandlord at the address set
forth in the first paragraph of this Sublease, or such other address as
Sublandlord may designate in writing from time to time.
5. Schedule of Base Monthly Rent Payments.
A. The Base Monthly Rent provided for in Paragraph 4.B shall be adjusted
periodically and the Base Monthly Rent for each period shall be as set forth
below:
Lease Months 1-12
$90,000 per month
77
<PAGE>
Lease Months 13 through Expiration Date:
During the Term, the Base Monthly Rent shall be adjusted on each annual
anniversary of the Rent Commencement Date (individually, a "Rent Adjustment
Date" and collectively, "Rent Adjustment Dates") by making the Rent Adjustment
as defined in Paragraph 5.B below, and Subtenant shall thereafter pay the
increased amount of Base Monthly Rent as adjusted until the date next specified
as a Rent Adjustment Date.
B. Rent Adjustment. The "Rent Adjustment" as used in this Sublease shall mean to
increase the amount of Base Monthly Rent as of the applicable Rent Adjustment
Date to the amount determined by multiplying the amount of the Base Monthly Rent
for the Sublease month immediately preceding the Rent Adjustment Date in
question by One Hundred Four Percent (104%).
6. Security Deposit. Upon execution hereof, Subtenant shall deposit with
Sublandlord the sum of Ninety Thousand Dollars ($90,000) (the "Security
Deposit"), in cash, as security for the performance by Subtenant of the terms
and conditions of this Sublease. The terms and conditions of Section 3.7 of the
Master Lease shall apply to the Security Deposit except that the amount is that
specified in this Paragraph 6.
7. Other Sublease Terms.
A. Incorporation By Reference. Except as otherwise provided in this Sublease,
the terms, provisions and conditions contained in the Master Lease are
incorporated herein by reference, and are made a part hereof as if set forth at
length; provided, however, that: (i) each reference in such incorporated
sections to "Lease" shall be deemed a reference to "Sublease"; (ii) each
reference to the "Premises" shall be deemed a reference to the "Subleased
Premises" as defined herein; (iii) each reference to "Landlord" and "Tenant"
shall be deemed a reference to "Sublandlord" and "Subtenant", respectively; (iv)
with respect to work, services, repairs, restoration, insurance or the
performance of any other obligation of Landlord under the Master Lease, the sole
obligation of Sublandlord shall be to request the same in writing from Landlord
as and when requested to do so by Subtenant, and to use Sublandlord's reasonable
good faith efforts (provided Subtenant pays all reasonable third party
out-of-pocket costs incurred by Sublandlord in connection therewith, provided
that Sublandlord has notified Subtenant in advance that Sublandlord anticipates
incurring such costs and Subtenant has given its approval and further providing
that Sublandlord shall be relieved of its obligation if Subtenant refuses to
approve reasonable third party out-of-pocket expenses) to obtain Landlord's
performance; (v) with respect to any obligation of Subtenant to be performed
under this Sublease, wherever the Master Lease grants to Sublandlord a specified
number of days to perform its obligations under the Master Lease, except as
otherwise provided herein, Subtenant shall have two (2) fewer days than
Subtenant would otherwise have to perform the obligation, including, without
limitation, curing any defaults; (vi) except as set forth in Paragraph 7(A)(iv)
above, Sublandlord shall have no liability to Subtenant with respect to (a)
representations and warranties made by Landlord under the Master Lease, (b) any
indemnification obligations of Landlord under the Master Lease or other
obligations or liabilities of Landlord with respect to compliance with laws,
condition of the Subleased Premises or Hazardous Materials, and (c) Landlord's
repair, maintenance, restoration, upkeep, insurance and similar obligations
under the Master Lease, regardless of whether the incorporation of one or more
provisions of the Master Lease into this Sublease might otherwise operate to
make Sublandlord liable therefor; (vii) with respect to any approval or consent
required to be obtained from the "Landlord" under the Master Lease, such
approval or consent must be obtained from both Landlord and Sublandlord, and the
approval of Sublandlord may be withheld if Landlord's approval or consent is not
obtained; and (viii) the following provisions of the Master Lease are expressly
not incorporated herein by reference: Section 1.1 (except for L, M, O, P, Q, R
and T), Sections 2.3, 2.4, 2.7, 13.12.D, 15, 18, 19, Exhibit "C", Exhibit "D",
all of the First Amendment to Lease except Paragraph 1.1R, the Second Amendment
to Lease, the Third Amendment to Lease, the Option to Expand Agreement, and the
First Amendment to Option to Expand Agreement.
78
<PAGE>
The following provisions of the Master Lease (as well as certain other
provisions specifically identified elsewhere herein), while incorporated herein,
are modified as expressly noted: All obligations of "Landlord" in Article 5,
Section 9.2, Article 10 and Article 11 shall remain the obligations of Landlord
and shall not be deemed to have become the obligations of Sublandlord,
notwithstanding the incorporation of such provisions into this Sublease. The
references to Article 1 in Sections 13.10 and 14.2 shall be deemed to be to
Paragraph 1 of this Sublease. References to "Landlord" in the definitions of
"Real Property Taxes", "Landlord's Insurance Costs", "Property Maintenance
Costs", and "Property Operating Expenses" shall be deemed to refer to Landlord
only and not to Sublandlord.
B. Assumption of Obligations. This Sublease is and at all times shall be subject
and subordinate to the Master Lease and the rights of Landlord thereunder.
Subtenant and Sublandlord shall not commit or permit to be committed on the
Subleased Premises any act or omission which shall violate any term or condition
of the Master Lease. Subtenant hereby expressly assumes and agrees: (i) to
comply with all provisions of the Master Lease which are assumed by Subtenant
hereunder; and (ii) to perform all the obligations on the part of the "Tenant"
to be performed under the terms of the Master Lease during the term of this
Sublease which are assumed by Subtenant hereunder. Subtenant shall not commit or
permit to be committed on the Subleased Premises any act or omission which shall
violate any term or condition of the Master Lease. In the event of termination
of Sublandlord's interest as "Tenant" under the Master Lease for any reason
other than Sublandlord's default under the Master Lease which is not
attributable to Subtenant's default under this Sublease, this Sublease shall
terminate simultaneously with such termination of Sublandlord's interest without
any liability of Sublandlord to Subtenant. In the event of a conflict between
the provisions of this Sublease and the Master Lease, as between Sublandlord and
Subtenant, the provisions of this Sublease shall control.
8. Condition of the Subleased Premises. Subtenant is subleasing the Subleased
Premises on an "as-is" basis, and Sublandlord has made no representations or
warranties, express or implied, with respect to the condition of the Subleased
Premises as of the Commencement Date. Sublandlord shall have no obligation
whatsoever to make or pay the cost of any alterations, improvements or repairs
to the Subleased Premises, including, without limitation, any improvement or
repair required to comply with any law, regulation, building code or ordinance
(including the Americans with Disabilities Act of 1990). Sublandlord shall have
no obligation to perform any of the repairs required to be performed by Landlord
under the terms of the Master Lease.
9. Tenant Improvements. Subtenant and Sublandlord acknowledge that Landlord and
Subtenant shall have the right and obligation to construct tenant improvements
("Tenant Improvements") in accordance with the terms and conditions of the
Tenant Improvement Agreement attached as Exhibit A to the Consent to Sublease
(Renco 53 [Cirrus Logic/Renco Master Lease]) executed by Sublandlord, Subtenant
and Landlord (the "Tenant Improvement Agreement"). So long as this Sublease is
in full force and effect, Sublandlord and Subtenant shall perform their
respective obligations under the Tenant Improvement Agreement.
10. Effect of Conveyance. As used in this Sublease, the term "Sublandlord" means
the holder of the "Tenant's" interest under the Master Lease. In the event of
any assignment or transfer of the "Tenant's" interest under the Master Lease,
which assignment or transfer may occur at any time during the Term hereof, as
between Sublandlord and Subtenant, Sublandlord shall be and hereby is entirely
relieved of all covenants and obligations of Sublandlord hereunder accruing
after the date of such assignment or transfer, provided such transferee has
assumed all covenants and obligations thereafter to be performed by Sublandlord
hereunder. Sublandlord may transfer and deliver any security of Subtenant to the
transferee of the "Tenant's" interest under the Master Lease, and thereupon
Sublandlord shall be discharged from any further liability with respect thereto.
11. Signage. Notwithstanding anything to the contrary set forth in this
Sublease, subject to the approval of Landlord, Subtenant shall have the right to
display its corporate logo in one or more places on the exterior of the
Subleased Premises. Subtenant shall own such signage (and all rights incidental
to such ownership) and shall have the right to remove such signage at the
expiration or sooner termination of this Sublease.
79
<PAGE>
12. Broker. Sublandlord and Subtenant each represent to the other that they have
dealt with no real estate brokers, finders, agents or salesmen other than those
identified in Paragraph 1 hereof. Each party agrees to hold the other party
harmless from and against all claims for brokerage commissions, finder's fees or
other compensation made by any other agent, broker, salesman or finder as a
consequence of said party's actions or dealings with such agent, broker,
salesman, or finder. Sublandlord shall pay any brokerage commission due and
payable under the written agreement concerning this Sublease between BT
Commercial/New America Network and Cirrus Logic, Inc.
13. Sublandlord's Option. Sublandlord and Subtenant acknowledge that, pursuant
to the Third Amendment to Lease, Sublandlord's option to extend the Master Lease
is exercisable only if Sublandlord has terminated this Sublease as a result of a
default by Subtenant hereunder and Subtenant has vacated the Subleased Premises.
14. Representations. Sublandlord represents and warrants to Subtenant that, (i)
to the best of Sublandlord's knowledge, no default (or condition which will
become a default following the passage of time with or without the giving of
notice) under the Master Lease on the part of Sublandlord or Subtenant currently
exists, (ii) the copy of the Master Lease attached hereto as Exhibit A is a true
and correct copy of the entire Master Lease, and (iii) Sublandlord will not
enter into an amendment of the Master Lease which will adversely affect
Subtenant or Subtenant's use and occupancy of the Subleased Premises without the
prior written consent of Subtenant.
15. Direct Enforcement. Consistent with that certain Consent to Sublease (Renco
53 [Cirrus Logic/Renco Master Lease]) executed by Landlord, Subtenant and
Sublandlord, Subtenant shall have the right to seek performance of Landlord's
obligations under the Master Lease directly from Landlord, so long as such
obligations are obligations with respect to which Sublandlord would be required
under this Sublease to seek Landlord's performance for the benefit of Subtenant.
16. Direct Payment of Rent. Subtenant, at Subtenant's option, shall have the
right to make payments of Rent due under this Sublease to Landlord under the
Master Lease or to perform any other financial or monetary obligation of
Subtenant to Landlord under the Master Lease on the following terms and
conditions: (a) Subtenant shall provide Sublandlord with five (5) days prior
written notice of its intention to make such direct payments or to perform such
financial or monetary obligation; (b) Subtenant shall only pay to Landlord that
portion of the Rent that is due under the Master Lease and shall continue to pay
any overage to Sublandlord under this Sublease; (c) Subtenant shall make such
payments of Rent or perform such financial or monetary obligations by the date
such amounts are due under this Sublease; (d) Subtenant shall deliver to
Sublandlord, at the same time Subtenant makes a payment of Rent or performs such
other financial or monetary obligation to Landlord, evidence that such payment
of Rent has been made or performance of such other financial or monetary
obligation has occurred; and (e) Subtenant's failure to make a payment of Rent
to Landlord or to perform such other financial or monetary obligation, if
Subtenant has so elected, or Subtenant's failure to deliver evidence of same as
set forth in subsection (d) above shall be deemed a failure to pay Rent under
this Sublease and Sublandlord shall have all of the rights and remedies
hereunder with respect to the failure to pay Rent.
17. Delivery of Default Notices. Sublandlord shall deliver to Subtenant, within
two (2) business days of receipt by Sublandlord, copies of any notices of
default received by Sublandlord from Landlord under the Master Lease.
18. Conditions Precedent. Notwithstanding anything to the contrary set forth in
this Sublease, it shall be an express condition precedent to Sublandlord's
obligations hereunder that, and this Sublease shall not be effective unless and
until Landlord has consented in writing to this Sublease. If Landlord does not
consent in writing to this Sublease within thirty (30) days after Sublandlord's
execution of this Sublease, then Sublandlord may, at any time thereafter until
such approval is obtained, terminate this Sublease upon written notice to
Subtenant, whereupon any monies previously paid by Subtenant to Sublandlord
shall be reimbursed to Subtenant.
19. Successors. This Sublease shall be binding on and inure to the benefit of
the parties hereto and their respective successors and permitted assigns.
80
<PAGE>
20. Entire Agreement. This Sublease and the provisions of the Master Lease
incorporated herein by the express terms of this Sublease constitute the
complete and exclusive agreement among the parties with respect to the matters
contained herein and supersede all prior written or oral agreements or
statements by and among the parties hereto, provided that this Sublease shall be
at all times subject to all of the terms and conditions of the Master Lease.
IN WITNESS WHEREOF, the parties have executed this Sublease as of the day and
year first above written.
SUBTENANT: SUBLANDLORD:
AVANT! CORP., CIRRUS LOGIC, INC.,
a Delaware corporation a California corporation
By: ___________________________ By: __________________________
Printed Printed
Name: ________________________ Name: ________________________
Its: ___________________________ Its: __________________________
Date: _________________________ Date: _________________________
EXHIBIT A
MASTER LEASE
[to be attached]
81
Exhibit 11.1 Computations of Income Per Share
AVANT! CORPORATION
STATEMENTS RE: COMPUTATIONS OF INCOME PER SHARE
(in thousands, except per share data)
Three months ended
March 31,
------------------------
1997 1996
------- -------
Net income $ 6,824 $ 4,914
======= =======
Common shares outstanding 24,939 23,871
Common stock equivalents:
Stock Options and Awards 2,359 2,249
------- -------
Total 27,298 26,120
======= =======
Net income per common share $ 0.25 $ 0.19
======= =======
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THIS CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF INCOME FILED AS PART OF
THIS FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMETNS ON THIS FORM 10-Q
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 73,602
<SECURITIES> 55,883
<RECEIVABLES> 12,954
<ALLOWANCES> 1,138
<INVENTORY> 0
<CURRENT-ASSETS> 155,706
<PP&E> 19,138
<DEPRECIATION> 8,772
<TOTAL-ASSETS> 167,093
<CURRENT-LIABILITIES> 31,606
<BONDS> 0
0
0
<COMMON> 3
<OTHER-SE> 134,887
<TOTAL-LIABILITY-AND-EQUITY> 167,093
<SALES> 23,998
<TOTAL-REVENUES> 31,193
<CGS> 448
<TOTAL-COSTS> 3,466
<OTHER-EXPENSES> 17,993
<LOSS-PROVISION> 374
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 10,663
<INCOME-TAX> 3,839
<INCOME-CONTINUING> 6,824
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,824
<EPS-PRIMARY> 0.25
<EPS-DILUTED> 0.25
</TABLE>
