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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
Commission File Number 0-26212
______________________________
PURE ATRIA CORPORATION
(Exact name of registrant specified in its charter)
DELAWARE 94-3141575
______________________________________ ______________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1309 SOUTH MARY AVENUE
SUNNYVALE, CALIFORNIA 94087
(Address of principal executive offices)
TELEPHONE: (408) 720-1600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
40,438,696 shares of Common Stock, $.0001 par value, as of November 4, 1996
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PURE ATRIA CORPORATION
FORM 10-Q
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
<S> <C> <C>
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets September 30, 1996
and December 31, 1995........................................ 2
Condensed Consolidated Statements of Operations
For the three months and nine months ended
September 30, 1996 and 1995.................................. 3
Condensed Consolidated Statements of Cash Flows
For the nine months ended September 30, 1996 and 1995........ 4
Notes to Condensed Consolidated Financial Statements.......... 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings............................................. 13
Item 4. Submission of Matters to a Vote of Security Holders........... 14
Item 6. Exhibits and Reports on Form 8-K.............................. 14
SIGNATURES............................................................. 15
INDEX TO EXHIBITS...................................................... 16
</TABLE>
1
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
PURE ATRIA CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
------------- ------------
1996 1995
------------- ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents....................... $ 38,450 $ 24,294
Short-term investments.......................... 55,340 54,240
Accounts receivable, net........................ 21,706 16,613
Prepaid expenses and other assets............... 3,198 3,391
Deferred tax assets............................. 5,881 705
-------- --------
Total current assets........................... 124,575 99,243
Property and equipment, net..................... 10,566 8,314
Other assets, net............................... 1,751 2,517
-------- --------
Total assets................................... $136,892 $110,074
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of bank borrowings and
capital lease obligations...................... $ -- $ 321
Accounts payable................................ 2,928 1,846
Accrued payroll and related expenses............ 8,338 5,722
Accrued merger and integration expenses......... 18,969 1,887
Other accrued expenses.......................... 11,031 7,139
Deferred revenue................................ 21,081 13,945
Income taxes.................................... 1,665 3,359
-------- --------
Total current liabilities.................... 64,012 34,219
-------- --------
Stockholders' equity:
Common stock................................. 4 4
Additional paid-in capital................... 88,802 78,162
Cumulative translation adjustment............ (519) (146)
Accumulated deficit.......................... (15,407) (2,165)
-------- --------
Total stockholders' equity................... 72,880 75,855
-------- --------
Total liabilities and stockholders' equity....... $136,892 $110,074
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
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PURE ATRIA CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ---------------------
1996 1995 1996 1995
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Product............................................. $ 23,909 $16,722 $66,777 $43,373
Maintenance and other............................... 10,183 6,228 27,937 15,316
-------- ------- ------- -------
Total revenues..................................... 34,092 22,950 94,714 58,689
-------- ------- ------- -------
Cost of revenues:
Product............................................. 503 634 1,762 1,426
Maintenance and other............................... 3,209 1,564 7,957 4,050
-------- ------- ------- -------
Total cost of revenues............................. 3,712 2,198 9,719 5,476
-------- ------- ------- -------
Gross margin....................................... 30,380 20,752 84,995 53,213
-------- ------- ------- -------
Operating expenses:
Sales and marketing................................. 14,952 10,367 42,596 27,133
Research and development............................ 5,698 4,085 16,528 10,826
General and administrative.......................... 2,775 2,355 7,619 5,752
Merger and integration.............................. 35,255 -- 35,255 --
In-process research and development................. -- 1,500 -- 11,600
-------- ------- ------- -------
Total operating expenses........................... 58,680 18,307 101,998 55,311
-------- ------- ------- -------
Income (loss) from operations....................... (28,300) 2,445 (17,003) (2,098)
Other income........................................ 908 633 2,476 1,621
-------- ------- ------- -------
Income (loss) before income taxes.................. (27,392) 3,078 (14,527) (477)
Income taxes (benefit).............................. (5,661) 794 (1,283) 2,539
-------- ------- ------- -------
Net income (loss).................................. $(21,731) $ 2,284 $(13,244) $(3,016)
======== ======= ======= =======
Net loss per share................................... $ (0.54) $ (0.33)
======== =======
Shares used in per share computation................. 40,008 39,706
======== =======
Income (loss) before pro forma income taxes.......... $ 3,078 $ (477)
Pro forma income taxes............................... 1,119 3,263
------- -------
Pro forma net income (loss).......................... $ 1,959 $ (0.10)
======= =======
Pro forma net income (loss) per share................ $ 0.05 $ (0.10)
======= =======
Shares used in per share computation................. 42,346 38,852
======= =======
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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PURE ATRIA CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
1996 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $13,244 $ 3,016
Adjustments to reconcile net loss to
net cash provided by operating activities:
Depreciation and amortization 4,784 2,469
Non cash merger and integration expenses 6,512 --
Tax benefit of stock option exercises 1,540 600
In-process research and development -- 11,600
Changes in operating assets and liabilities:
Accounts receivable (5,664) (6,088)
Prepaid expenses and other current assets (1,370) (349)
Deferred tax assets (3,661) (86)
Accounts payable 1,082 992
Accrued merger and integration 17,082 --
Accrued payroll and related expenses 2,466 2,396
Other accrued expenses 4,163 2,391
Deferred revenue 7,146 3,568
Income taxes (1,694) 292
------- --------
Net cash provided by operating activities 19,142 14,769
------- --------
Cash flows from investing activities:
Purchases of property and equipment, net (7,998) (5,577)
Other assets (94) (415)
Acquisition of QualTrak Corporation, net of cash acquired -- (1,439)
Purchases of short-term investments, net (1,240) (32,249)
------- --------
Net cash used for investing activities (9,332) (39,680)
------- --------
Cash flows from financing activities:
Repayment of bank borrowings, net (321) (67)
Proceeds from issuance of common stock, net 5,089 30,719
S Corporation distributions to stockholders -- (1,297)
------- --------
Net cash provided by financing activities 4,768 29,355
------- --------
Effect of foreign currency exchange rate changes on cash (422) (119)
------- --------
Change in cash and cash equivalents 14,156 4,325
Cash and cash equivalents, beginning of period 24,294 20,525
------- --------
Cash and cash equivalents, end of period $38,450 $ 24,850
======= ========
Non cash investing and financing activities:
Redeemable convertible preferred stock issued
in connection with acquisition of QualTrak Corporation -- $ 9,904
======= ========
Cash paid during the period for:
Taxes $ 3,306 $ 1,716
======= ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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PURE ATRIA CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The unaudited condensed consolidated financial statements included
herein reflect all adjustments, consisting only of normal recurring adjustments,
which in the opinion of management are necessary to fairly state Pure Atria
Corporation's (the "Company" or "Pure Atria") and its subsidiaries' condensed
consolidated financial position, the results of their operations, and their cash
flows for the periods presented. A merger between Atria Software Inc. ("Atria")
and CST Acquisition Corporation, a wholly owned subsidiary of the Pure Software,
Inc., resulting in Atria becoming a wholly owned subsidiary of the Company (the
"Merger"),was approved by the stockholders of both companies and became
effective August 26, 1996 and accounted for as a pooling of interests for
reporting purposes. In connection with the Merger, the Company changed its name
from Pure Software Inc. to Pure Atria Corporation. When used below, the term
"Pure" refers to the Company prior to the Merger.
The terms of the Merger, including certain Risk Factors, are set forth in detail
in the Company's Prospectus/Joint Proxy Statement dated July 26, 1996. These
financial statements should be considered in conjunction with the matters
described in the Prospectus/Joint Proxy Statement dated July 26, 1996.
Additionally, these financial statements should be read in conjunction with the
audited consolidated financial statements included in the Pure and Atria Annual
Reports on Form 10-K for the year ended December 31, 1995. The consolidated
results of operations for the periods ended September 30, 1996 are not
necessarily indicative of the results to be expected for any subsequent quarter
or for the entire fiscal year ending December 31, 1996.
(2) NET LOSS PER SHARE AND PRO FORMA NET INCOME (LOSS) PER SHARE
Net loss per share is computed using the weighted average number of
common shares outstanding (using the treasury stock method).
Pro forma net income (loss) per share is computed using pro forma net
income (loss) and is based on the weighted average number of shares outstanding
of common stock and dilutive common equivalent shares from stock options using
the treasury stock method. In accordance with certain Securities and Exchange
Commission (SEC) Staff Accounting Bulletins, such computations include all
common and common equivalent shares issued within 12 months of the initial
public offering date as if they were outstanding for all prior periods presented
using the treasury stock method and the initial public offering price.
The difference between primary and fully diluted net loss and pro forma
net income (loss) per share is either not significant or anti-dilutive in all
periods presented.
(3) ACQUISITIONS
QualTrak Corporation
- --------------------
On March 17, 1995, the Company acquired QualTrak Corporation
("QualTrak"), a provider of quality assurance software tools. Pursuant to the
acquisition, all of the shares of outstanding common stock of QualTrak and
options therefor were exchanged for (i) 822,363 shares of the Company's Series D
redeemable convertible preferred stock or options therefor; (ii) $2,000,000 in
cash or the right to receive cash and (iii) a contingent right to receive
additional shares of the Company's common stock, which right has subsequently
terminated.
5
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The acquisition was accounted for as a purchase with the results of
QualTrak included from the acquisition date. The total purchase price of
$11,904,000 was assigned to the fair value of the net assets acquired, including
$543,000 to the net tangible assets acquired, $10,100,000 to in-process research
and development, $591,000 to goodwill, $420,000 to purchased software and
$250,000 to a royalty arrangement. The value of the in-process research and
development was charged to operations on the acquisition date. The balance of
goodwill was written-off in connection with the merger with Atria on August 26,
1996 .Purchased software and prepaid royalties are amortized on a straight-line
basis over 18 months, and 3 years, respectively.
Performix, Inc.
- --------------
On November 21, 1995, the Company acquired Performix, Inc.
("Performix"), a provider of client/server load and performance testing tools.
Pursuant to the acquisition, all of the shares of outstanding common stock of
Performix were exchanged for 1,591,475 shares of the Company's common stock. All
options to purchase Performix common stock then outstanding were assumed by the
Company. Each assumed option continues to have, and is subject to, the same
terms and conditions set forth in the respective option agreement applicable to
such option immediately prior to the date of acquisition, subject to adjustment
of the number of shares and exercise price thereof to reflect the exchange ratio
of Performix shares for the Company's shares.
The acquisition was accounted for as a pooling of interests, and
accordingly, the Company's Unaudited Condensed Consolidated Financial Statements
have been restated to include the financial position and results of Performix
for all periods presented.
Atria Software, Inc.
- -------------------
On June 6, 1996 Pure entered into an Agreement and Plan of
Reorganization (the "Agreement") with Atria, a publicly-held company that
develops, markets and supports software that facilitates the management of
complex software development, enhancement and maintenance. Under the terms of
the Agreement, the Company issued 1.544615 shares of common stock for each
outstanding share of Atria common stock. In addition, each outstanding option or
right to purchase Atria common stock under Atria's various stock option and
stock purchase plans were assumed by the Company and became an option or right
to purchase the Company's common stock after giving effect to the 1.544615
exchange ratio.
The Board of Directors of Pure and Atria unanimously approved the Agreement and
transactions contemplated thereby. Special meetings of Pure and Atria
stockholders were held on August 23, 1996 to consider and vote upon the proposed
merger of CST Acquisition Corporation, a wholly owned subsidiary of Pure, and
Atria and other related matters. The Merger was approved by the stockholders of
both Pure and Atria at their respective special meetings. The terms of the
Merger between the Pure and Atria, including conditions required to be satisfied
in order to consummate the transactions and certain Risk Factors to be
considered in evaluating the proposed transaction are set forth in detail in the
Company's Prospectus/Joint Proxy Statement dated July 26, 1996.
The acquisition was accounted for as a pooling of interests, and
accordingly, the Company's Unaudited Condensed Consolidated Financial Statements
have been restated to include the financial position and results of Atria for
all periods presented.
6
<PAGE>
The following details separate results for Pure and Atria for periods prior to
the acquisition:
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED NINE MONTHS ENDED
---------------- ------------------ -----------------
JUNE 30, SEPTEMBER 30, SEPTEMBER 30,
---------------- ------------------ -----------------
1996 1995 1995 1995
------ ------ ------------------ -----------------
<S> <C> <C> <C> <C>
Revenues:
Pure..................................... $31,625 $18,510 $12,337 $30,847
Atria.................................... 28,998 17,229 10,613 27,842
------- ------- ------- -------
Total.................................... $60,623 $35,739 $22,950 $58,689
======= ======= ======= =======
Net income (loss):
Pure..................................... $ 1,945 $ 601 $ 1,740 $(6,228)
Atria.................................... $ 2,432 1,144 544 $ 3,212
------- ------- ------- -------
Total.................................... $ 4,377 $ 1,745 $ 2,284 $(3,016)
======= ======= ======= =======
</TABLE>
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The Company operates in a rapidly changing environment that involves a
number of risks and uncertainties, including those set forth in this discussion
under "Potential Fluctuations in Quarterly Results" and "Certain Factors That
May Affect Future Results", the risk factors associated with the merger and
successful integration of Atria as set forth in the Company's Prospectus/Joint
Proxy Statement dated July 26, 1996, and other risks detailed from time to time
in Atria's and the Company's respective Annual Reports on Form 10-K for the year
ended December 31, 1995 and other SEC Reports. In addition, the discussion of
the Company's results of operations should be read in conjunction with matters
described in detail in the Prospectus/Joint Proxy Statement dated July 26, 1996,
including the risk factors set forth therein.
RESULTS OF OPERATIONS
REVENUES
- --------
The Company's revenues are derived from license fees for its software
products, from software maintenance fees and from other sources. Product
revenues are derived from product licensing fees. Maintenance and other revenues
are derived from software maintenance fees, from training fees, from consulting
fees and from royalties for technology licenses. Fees for maintenance, training
and consulting are generally billed separately from licenses for the Company's
products. The Company recognizes revenue in accordance with the provisions of
American Institute of Certified Public Accountants Statement of Position No. 91-
1, Software Revenue Recognition. Product revenues from software licenses are
recognized upon shipment to an end-user if collection is probable and remaining
vendor obligations are insignificant. Product returns and sales allowances are
estimated and provided for at the time of sale. Maintenance revenues from
ongoing customer support and product upgrades are recognized ratably over the
term of the maintenance agreement. Payments for maintenance fees are generally
received in advance and are nonrefundable. Revenues for training and consulting
are recognized when the services are performed. Revenues from royalties for
technology licenses are recognized when earned and when collection is probable.
Total revenues increased 48% to $34.1 million for the three months
ended September 30, 1996 from $23.0 million for the three months ended September
30, 1995 and increased 61% to $94.7 million for the nine months ended September
30, 1996 from $58.7 million for the prior year's comparable nine months. Total
revenues increased primarily due to increased unit sales of software licenses
and increased maintenance, training and consulting fees resulting from a larger
installed base. The Company distributes the majority of its products through
its direct sales force and continues to expand its international operations,
particularly in Europe.
Product Revenues. Revenues from product licenses increased 43% to
----------------
$23.9 million for the three months ended September 30, 1996 from $16.7 million
for the three months ended September 30, 1995 and increased 54% to $66.8 million
for the nine months ended September 30, 1996 from $43.4 million for the prior
year's comparable nine months. Substantially all of the period-to-period growth
in product revenues for both the three and nine month periods was due to higher
unit sales of software licenses. The higher unit sales resulted from an
increase in the number of direct sales personnel worldwide, a new product
release in the second quarter of 1996, releases of new versions of existing
products, and expansion of the platforms supported for Unix based products.
Maintenance and Other Revenues. Maintenance and other revenues
------------------------------
increased 65% to $10.2 million for the three months ended September 30, 1996
from $6.2 million for the three months ended September 30, 1995 and increased
82% to $27.9 million for the nine months ended September 30, 1996 from $15.3
million for the prior year's comparable nine months. The growth was primarily
attributable to a larger installed base requiring incrementally more
maintenance, training and consulting support.
8
<PAGE>
International Revenues. International revenues as a percentage of
----------------------
total revenues increased to 30% for the three months ended September 30, 1996
from 24% for the three months ended September 30, 1995 and increased to 30% or
$28.3 million for the nine months ended September 30, 1996 from $15.8 million or
27% for the prior year's comparable nine month period. The increase was
primarily due to the increase in the number of direct sales and marketing
personnel and the expansion of operations in the international market.
COST OF REVENUES
- ----------------
Cost of Product Revenues. Cost of product revenues consists primarily
------------------------
of product media and duplication, manuals, packaging materials and shipping
expenses. Cost of product revenues decreased 20% to $503,000 for the three
months ended September 30, 1996 from $634,000 for the three months ended
September 30, 1995, representing 2% and 4% of product revenues for the
respective periods. For the nine month periods ended September 30, 1996 and
1995, the cost of product revenues was $1,762,000 and $1,426,000, respectively,
representing 3% of product revenues for each of the periods. The decrease in
dollar amount of cost of product revenue for the 1996 three month period was
primarily due to economies of scale in production of certain products. The
increase in the dollar amount for the nine month period ended September 30, 1996
was primarily due to the higher volume of products shipped and the amortization
of certain intangible assets capitalized in connection with the QualTrak
acquisition. In connection with the acquisition of QualTrak, purchased software
of $420,000 and prepaid royalties of $250,000 were capitalized and are amortized
as a cost of product revenues over 18 months and three years, respectively.
Cost of product revenues as a percentage of product revenues has varied
primarily as the result of variations in product mix.
Cost of Maintenance and Other Revenues. Cost of maintenance and other
--------------------------------------
revenues consists primarily of costs incurred in providing telephone support,
product upgrades, and training and consulting to customers. Cost of maintenance
and other revenues increased 100% to $3.2 million for the three months ended
September 30, 1996 from $1.6 million for the three months ended September 30,
1995, representing 32% and 25% of related maintenance and other revenue for each
period, respectively. Cost of maintenance and other revenues increased 95% to
$8.0 million for the nine months ended September 30, 1996 from $4.1 million for
the comparable prior year period, representing 29% and 27% of the related
revenues for each nine month period, respectively. The increase in dollar
amount was primarily due to the increase in the number of customer support,
training and consulting personnel and related overhead costs necessary to
support a larger installed product base and expanded product line.
OPERATING EXPENSES
- ------------------
Sales and Marketing. Sales and marketing expenses consist primarily
-------------------
of salaries, commissions and bonuses of sales and marketing personnel and
promotional expenses. Sales and marketing expenses increased 44% to $15.0
million for the three months ended September 30, 1996 from $10.4 million for the
three months ended September 30, 1995, representing 44% and 45%, respectively,
of total revenues. For the nine month period ended September 30, 1996 sales and
marketing expense increased 57% to $42.6 million from $27.1 million for the
prior year comparable period, representing 45% and 46% , respectively, of total
revenues for each nine month period. The dollar increase in sales and marketing
expenses for all periods is primarily attributable to the domestic and
international expansion of the Company's sales force and related travel expenses
and increased marketing activities, including trade shows, seminars and
promotional expenses.
Research and Development. Research and development expenses increased
------------------------
39% to $5.7 million for the three months ended September 30, 1996 from $4.1
million for the three months ended September 30, 1995, representing 17% and 18%,
respectively, of total revenues for each period. For the nine month period
ended September 30, 1996, research and development expenses increased 53% to
$16.5 million from $10.8 million for the prior year's comparable period,
representing 17% and 18% of total revenues, respectively. The dollar increase
in research and development expense was primarily due to increased staffing and
associated support for software engineers required to expand and enhance the
Company's product line.
9
<PAGE>
General and Administrative. General and administrative expenses
--------------------------
increased 17% to $2.8 million for the three months ended September 30, 1996 from
$2.4 million for the three months ended September 30, 1995, representing 8% and
10%, respectively, of total revenues. For the nine month period ended September
30, 1996, general and administrative expenses increased 31% to $7.6 million from
$5.8 million for the prior year's comparable period, representing 8% and 10% of
total revenues, respectively. The dollar increase for the 1996 periods was
primarily due to increased staffing and associated expenses necessary to manage
and support the Company's growth. General and administrative expenses as a
percentage of revenues have decreased for the 1996 periods in relation to the
1995 periods as the result of increased revenue growth and economies of scale.
Merger and Integration. In the third quarter 1996, the Company
----------------------
recorded a charge of $35.3 million related to the merger and integration of
Pure and Atria. This charge includes direct transaction costs of $8.3 million
and $27 million associated with integrating the operations of both companies.
Included in integration charges were severance costs and other compensation
expenses, redundant facility costs, computer and other equipment write-offs,
contract termination costs, and other related costs. There can be no assurance
that Pure Atria will not incur additional charges associated with the Merger or
that management will be successful in its efforts to integrate the operations of
the two companies.
In-Process Research and Development. On March 17, 1995, the Company
-----------------------------------
acquired QualTrak for a purchase price of $11.9 million, of which $10.1 million
was allocated to in-process research and development and expensed at the time of
acquisition. Additionally, in the third quarter of 1995, the Company recorded a
$1.5 million dollar charge related to the acquisition of technology that was
incorporated into the release of the Company's ClearTrack product, a
client/server change request management product that tracks defects and
enhancement requests through the software life cycle.
OTHER INCOME
- ------------
Other income consists of the net effect of interest income, interest
expense and miscellaneous income and expense items. Other income was $908,000
for the three months ended September 30, 1996 as compared to $633,000 for the
three months ended September 30, 1995. Other income was $2.5 million for the
nine months ended September 30, 1996 as compared to $1.6 million for the nine
months ended September 30, 1995. The increase in other income for each period
primarily resulted from interest income generated from higher average cash
balances.
INCOME TAXES
- ------------
The income tax benefit for the three and nine months ended September
30, 1996 was $5.7 million and $1.3 million, respectively. The Company incurred
income tax expense of $794,000 and $2.5 million for the three and nine months
ended September 30, 1995, respectively, despite its operating loss for the nine
months ended September 30, 1995 because the in-process research and development
expense incurred in connection with the acquisition of QualTrak was not
deductible for tax purposes. The actual tax rates differ from the statutory
rate primarily due to state income taxes, tax exempt interest, research credits,
and certain nonrecurring charges incurred in connection with acquisitions in
both 1995 and 1996 which are not fully deductible for tax purposes.
POTENTIAL FLUCTUATIONS IN QUARTERLY RESULTS
The Company's quarterly operating results have in the past and may in
the future fluctuate significantly depending on factors such as demand for the
Company's products, the size and timing of orders, the number, timing and
significance of new product announcements by the Company and its competitors,
the ability of the Company to develop, introduce and market new and enhanced
versions of the Company's products on a timely basis, the level of product and
price competition, changes in operating expenses, changes in average selling
prices and product mix, changes in the Company's sales incentive strategy, sales
personnel changes, the mix of direct and indirect sales, product returns and
general economic factors, among others. The Company's products are typically
shipped shortly after orders are received and consequently, order backlog at the
beginning of any quarter typically represents only a small portion of that
quarter's expected revenues. Furthermore, the Company
10
<PAGE>
has often recognized a substantial portion of its revenues in the last month of
a quarter, with these revenues frequently concentrated in the last weeks or days
of a quarter. As a result, product revenues in any quarter are substantially
dependent on orders booked and shipped in that quarter, and revenues for any
future quarter are not predictable with any significant degree of accuracy.
Product revenues are also difficult to forecast because the market for software
quality products is rapidly evolving and the Company's sales cycle, from initial
evaluation to multiple license purchases and the provision of support services,
varies substantially from customer to customer. The Company's expense levels,
however, are based in significant part on the Company's expectations of future
revenues and therefore are relatively fixed in the short run. If revenue levels
are below expectations, operating results are likely to be adversely affected.
Net income may be disproportionately affected by an unanticipated decline in
revenue for a particular quarter because a relatively small amount of the
Company's expenses varies with its revenue in the short run. As a result, the
Company believes that period-to-period comparisons of its results of operations
are not necessarily meaningful and should not be relied upon as any indication
of future performance. Due to all of the foregoing factors, it is likely that in
some future quarter the Company's operating results will be below the
expectations of public market analysts and investors. In such event, the price
of the Company's common stock would likely be materially adversely affected. The
Company's limited operating history makes the prediction of future operating
results difficult or impossible. Although the Company has experienced growth in
revenues in recent years, there can be no assurance that, in the future, the
Company will sustain revenue growth or remain profitable on a quarterly or
annual basis. Additionally, there can be no assurance that the merger of Pure
and Atria will be successful.
The Company's business historically has not experienced significant
seasonality. However, as international sales increase, the Company expects
increased seasonality in customers' buying patterns, particularly as a result of
sales to Europe and Asia.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations primarily
through the sale of stock and cash generated from operations. Cash and cash
equivalents totaled $38.5 million at September 30, 1996 compared to $24.3
million at December 31, 1995. The increase in cash and cash equivalents was
primarily due to operating results, excluding merger and integration charges,
and cash proceeds from the issuance of common stock, offset by capital additions
related to the expansion of operations. As of September 30, 1996, the Company
had short-term investments of $55.3 million with a maturity date of greater than
three months from the date of purchase.
For the nine months ended September 30, 1996 and 1995, the Company
incurred a net loss of $13.2 million and $3.0 million, respectively, which
included non-recurring charges of $35.3 million and $11.6 million for the nine
months ended September 30, 1996 and 1995, respectively, related to merger and
integration and in-process research and development expenses. For the nine
months ended September 30, 1996, net cash was provided by operations primarily
as a result of deferred revenue generated during the period, accruals required
for merger and integration expenses, and other noncash expenses. For the nine
months ended September 30, 1995, net cash was provided by operations primarily
because the net loss of $3.0 million included a non-cash charge of $11.6 million
related to in-process research and development. In each period, the Company
experienced significant growth in receivables, accompanying the Company's
increased sales volumes, which was partially offset by increases in accounts
payables, income taxes and deferred revenue.
In the nine months ended September 30, 1996 and 1995, the Company
utilized $8.0 million and $5.6 million, respectively, of cash to purchase
property and equipment. The purchases of property and equipment were primarily
for computer hardware and software to support the Company's growing employee
base. In the nine months ended September 30, 1995, the Company also used cash
of $1.4 million in connection with the acquisition of QualTrak. The Company
expects that the rate of purchases of property and equipment will remain
constant or increase.
Net cash provided by financing activities in the nine months ended
September 30, 1996 consisted primarily of $5.1 million from the issuance of
common stock through the employee stock purchase plan and exercise of stock
options. In the nine months ended September 30, 1995, net cash was provided by
the common
11
<PAGE>
stock issued in connection with the initial public offering of Pure which was
partially offset by a distribution to stockholders of Performix.
From time to time, the Company evaluates acquisitions of businesses,
products or technologies that complement the Company's business. The Company
has no present understandings, commitments or agreements with respect to any
material acquisitions of other businesses, products or technologies. Any such
transactions, if consummated, may use a portion of the Company's working capital
or require the issuance of additional debt or equity instruments.
The Company believes that its current cash balances, short-term
investments, and anticipated cash flow from operations will be sufficient to
meet its working capital and capital expenditure requirements for at least the
next twelve months.
CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS
The Company's future results are subject to substantial risks and
uncertainties. Broad market acceptance of the Company's products, including
acceptance in markets characterized by greater usage of the Windows and Windows
NT operating systems, is critical to the Company's future success. The Company
believes that factors affecting the ability of the Company's products to achieve
broad market acceptance include: product performance, price, ease of adoption
and the ability to displace existing approaches. The application development
software industry is extremely competitive and is subject to rapid technological
change, frequent new product introductions and evolving domestic and
international industry standards that may render existing products and services
obsolete. To be successful in the future, the Company must respond promptly and
effectively to the challenges of technological change and its competitors'
innovations by continually enhancing its current products and developing new
products on a timely basis. The Company expects to confront new competitors as
it introduces new products and expands into new markets. Certain current and
potential competitors of the Company are more established, benefit from greater
market recognition and have substantially greater financial, development and
marketing resources than the Company. Competitive pressures or other factors,
including entry into new markets, may result in significant price erosion that
could have a material adverse effect on the Company's results of operations.
12
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Litigation has been necessary in the past, and may be necessary in the
past, and may be necessary in the future, to enforce the Company's patents and
other intellectual property rights, protect the Company's trade secrets,
determine the validity and scope of the proprietary rights of others or defend
against claims of infringement or invalidity. In March of 1995, the Company
brought suit against AIB Software Inc. ("AIB") in the U.S. District Court for
the Northern District of California, asserting that AIB's Sentinel II product
infringes one of the Company's patents and seeking injunctive relief and
damages; the complaint has since been amended to also assert that AIB's Sentinel
II product infringes another of the Company's patents. AIB responded by filing
suit against the Company in the U.S. District Court for the Eastern District of
Virginia for Declaratory Judgement of noninfringement, invalidity, and
unenforceability of the Company's U.S. Pat. Nos. 5,193,180 and 5,335,344 and
seeking $1,000,000 in compensatory and $10,000,000 in punitive damages under
U.S. copyright law and various Virginia trade secret and computer laws; these
claims were later transferred to the Northern District of California. The
Company is vigorously defending these claims, as well as continuing to pursue
the Company's claims against AIB. On September 29, 1995, a motion by the
Company for summary judgement, or dismissal in the alternative, on AIB's
copyright law and various Virginia trade secret and computer law claims was
granted in the Company's favor.
On September 25, 1996, the Company also brought suit against Platinum
Technology, Inc., the parent company of AIB, ("Platinum") in the U.S. District
Court for the Northern District of California, asserting that Platinum's selling
of Memory Advisor (another name for AIB's Sentinel II product), and Platinum's
use of the Memory Advisor product to make other products, infringes two of the
Company's patents, and seeking damages and an injunction against further sales
of the Memory Advisor product and other products Platinum has made through the
use of the Memory Advisor Product.
Although patent and intellectual property disputes in the software area
have often been settled through licensing, cross-licensing or similar
arrangements, costs associated with such arrangements may be substantial. The
pending litigation against AIB and Platinum and any future litigation involving
the Company, whether as plaintiff or defendant, regardless of the outcome, may
result in substantial costs and expenses to the Company and significant
diversion of effort by the Company's technical and management personnel. Any
such litigation could have a material adverse effect upon the Company's
business, operating results and financial condition. The Company has incurred
and may continue to incur significant costs with respect to the prosecution and
defense of these claims, which costs if material or not offset by payments
received from adverse parties could have a material adverse effect on the
Company's business, operating results and financial condition.
13
<PAGE>
Item 4 Submission of Matters to a Vote of Security Holders
The following proposals were approved at a Special Meeting of Stockholders
pursuant to proxies solicited pursuant to Regulation 14A:
<TABLE>
<CAPTION>
Affirmative Negative Broker
Votes Votes Abstained Non-Votes
-------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
1. Approval of the issuance of Common Stock
pursuant to the plan of reorganization and
merger of Pure and Atria. 14,751,691 34,135 651 69,163
2. Amend the Certificate of Incorporation to
change the corporate name of Pure to Pure
Atria Corporation. 14,627,030 228,390 220 0
3. An increase of 2,200,00 to shares reserved
for issuance under the Stock Option Plan. 12,921,429 1,830,147 34,901 69,163
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits.
10.18 Office Lease dated October 2, 1996 between Registrant and
Computers Tandem Incorporated.
10.19 Office Lease dated September 23, 1996, between Atria Advent
Realty Software, Inc. and Limited Partnership.
10.20 Letter Agreement dated August 26, 1996 between the Fukamura.
Registrant and Aki
10.21 Amendment to Office Lease dated September 23, 1996, Software,
Inc. and between Atria Advent Realty Limited Partnership.
11.1 Statement Regarding Computation of Net Income and Pro
Forma Net Income (Loss) Per Share.
27 Financial Data Schedule.
b) Reports on Form 8-K.
The Company filed a report September 9, report: on Form 10-K
to record the 1996. The merger of Pure and Atria on following
financial statements were filed as part of that
Pro forma financial statements as of June 30, 1996.
14
<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.
Date: November 8, 1996 PURE ATRIA CORPORATION
By:/s/ Chuck Bay
-------------
Chuck Bay
Vice President, Finance, Chief
Financial Officer, General Counsel
and Secretary (Duly Authorized
Officer and Principal Financial Officer)
15
<PAGE>
INDEX TO EXHIBITS
Exhibit
No.
- -------
10.18 Office Lease dated October 2, 1996 between Registrant and Tandem
Computers Incorporated.
10.19 Office Lease dated September 23, 1996, between Atria Software, Inc. and
Advent Realty Limited Partnership.
10.20 Letter Agreement dated August 26, 1996 between the Registrant and Aki
Fukamura.
10.21 Amendment to Office Lease dated September 23, 1996, between Atria
Software, Inc. and Advent Realty Limited Partnership.
11.1 Statement Regarding Computation of Net Income and Pro Forma Net Income
(Loss) Per Share.
27 Financial Data Schedule.
16
<PAGE>
EXHIBIT 10.18
BASIC LEASE INFORMATION
LEASE DATE: October 2, 1996
TENANT: Pure Atria Corporation, a Delaware corporation
ADDRESS OF TENANT: 1309 S. Mary Ave., Sunnyvale, CA 94087
(Section 23.1)
LANDLORD: Tandem Computers Incorporated, a Delaware corporation
ADDRESS OF LANDLORD: 19333 Vallco Parkway, Cupertino, CA 95014
(Section 23.1) ATTN: Corporate Real Estate
PREMISES: A parcel of land containing approximately 5.772 net
(Section 1.1) acres +-, excluding Homestead Road public road
dedication and including the area of portions of Swallow
Way and Forge Drive, private streets, improved with a
two-story office building of approximately 101,373
square feet, commonly known as 18880 Homestead Road,
Cupertino, CA 95014, (the "Building") and a two story
parking structure containing approximately 139,340
square feet (the "Parking Structure"). (See Exhibit A,
Legal Description, Exhibit B, Site Plan)
USE: General office, training, research and development,
sales,
Lease.19.
October 2, 1996
Page 1
<PAGE>
(but not sales requiring retail zoning)
and related storage, shipping & receiving, all to the
extent allowed by the applicable zoning statutes
(Section 6.1)
SHELL DELIVERY DATE: September 19, 1996
LEASE COMMENCEMENT
DATE: January 1, 1997
RENT COMMENCEMENT
DATE: January 5, 1997
EXPIRATION DATE: Ten (10) years after the Lease Commencement Date
TERM: One Hundred and Twenty (120) months
(Section 2.1)
OPTIONS TO EXTEND: Two Options to Extend for 5 years each
OPTION RENT: Fair Market Value, not less than prior month's
Base Rent, except as modified by Article 10
INITIAL BASE RENT: $177,400 per month
ANNUAL RENT
ADJUSTMENT: 4% over previous Lease year's Base Rent
LIABILITY INSURANCE: Five Million Dollars ($5,000,000)
SECURITY DEPOSIT:
Letter of Credit for Three Million Dollars ($3,000,000.00)
Lease.19.
October 2, 1996
Page 2
<PAGE>
LEASE
-----
THIS LEASE is made as of the date specified in the Basic Lease Information, by
and between the landlord specified in the Basic Lease Information ("Landlord"),
and the tenant specified in the Basic Lease Information ("Tenant").
W I T N E S S E T H:
ARTICLE 1
------- -
Premises
1.1 Landlord hereby leases to Tenant, and Tenant hereby leases from Landlord,
for the term and subject to the covenants hereinafter set forth, to all of which
Landlord and Tenant hereby agree, the land, Building and Parking Structure
specified in the Basic Lease Information, and as shown on Exhibits A and B, (the
"Premises").
ARTICLE 2
------- -
Term
2.1 The term of this Lease shall be the term specified in the Basic Lease
Information, which shall commence on the commencement date specified in the
Basic Lease Information (the "Lease Commencement Date") and, unless sooner
terminated as hereinafter provided, shall end on the expiration date specified
in the Basic Lease Information (the "Expiration Date").
2.2 Landlord and Tenant agree that Landlord has substantially completed
("Substantially Completed") Landlord's Work, in accordance with the requirements
set forth in (S)1 of the Addendum to Lease (attached hereto and made a part
hereof by this reference) subject only to "punch-list" items (determined
pursuant to the procedure set forth in (S)1 of the Lease Addendum). Tenant's
possession of the Premises constitutes Tenant's acknowledgment that (except for
"punch-list" items) the Premises are in all respects in the condition in which
Landlord is required to deliver the Premises to Tenant under this Lease and that
Tenant has examined the plans
Lease.19.
October 2, 1996
Page 3
<PAGE>
and specifications and the Premises and is fully informed to Tenant's
satisfaction of the physical and environmental condition and the utility of the
Premises. Tenant acknowledges that Landlord, its agents and employees and other
persons acting on behalf of Landlord have made no representation or warranty of
any kind in connection with any matter relating to the physical or environmental
condition, value, fitness, use or zoning of the Premises upon which Tenant has
relied directly or indirectly for any purpose.
Notwithstanding the above, with regard to the land, the Building and Parking
Structure, and except as caused by Tenant's Work or Tenant's use of the
Premises, Landlord agrees to correct, or cause to be corrected, at Landlord's
cost, i) any defect in the design of the Building and the Parking Structure with
Landlord's Work completed (which Building and Parking Structure as so completed
by Landlord's Work is referred herein as the "Completed Shell") that causes a
foreseeable unreasonable risk to the life and safety of the occupants of the
Building, any defect in construction resulting from Landlord's Work, and any
defect in the installation of equipment in the Completed Shell resulting from
Landlord's Work, and ii) any failures of the Completed Shell to comply with the
applicable building codes, Title 24 and the Americans with Disabilities Act of
1990, but only to the extent that any such defect or failure to comply existed
as of the Shell Delivery Date. Except as otherwise provided by law, in any
action under this section against Landlord or Landlord's People (defined below),
Tenant shall have the burden of proof as to each fact essential to the claim or
defense being asserted by Tenant. Except as otherwise provided by law, in any
action under this section against Tenant or Tenant's People (defined below),
Landlord shall have the burden of proof as to each fact essential to the claim
or defense being asserted by Landlord. Tenant shall insure that its use complies
with applicable zoning regulations. Landlord agrees to obtain any necessary
Cupertino City final approvals with respect to Landlord's Work within thirty
(30) days of the Shell Delivery Date.
2.3 Provided that at the time of exercising the applicable option to renew
described below or at the time such renewal term commences, there is no Event of
Default (as defined in (S)14.1) that remains uncured, Tenant shall have the
option to renew this Lease for two (2) additional terms of five (5) years each.
Tenant shall exercise each option to renew by delivering to
Lease.19.
October 2, 1996
Page 4
<PAGE>
Landlord written notice of Tenant's election to renew the term of this Lease at
least eight (8) months before the expiration of the then existing term of this
Lease. Landlord's failure to receive Tenant's written notice duly electing to
renew the term of this Lease shall be conclusively deemed Tenant's election not
to exercise its option to renew, in which event the term shall expire on the
last day of the then-existing term. If Tenant duly exercises an option to renew,
then Tenant shall continue to occupy the Premises on all of the terms and
conditions of this Lease, except that: (a) the Base Rent payable by Tenant
during the applicable renewal term shall be increased as set forth in Lease
Addendum (S)3; and (b) after the second renewal term, Tenant shall have no
further renewal options under this Lease. Tenant's rights to extend the term of
this Lease may not be exercised by or be assigned to any person or entity not
approved by Landlord according to the same standards applicable to proposed
subtenants or assignees contained elsewhere herein. Notwithstanding the
foregoing, Tenant shall have the right to assign the options to extend (or to
make the options part of a sublease with) i) to an "Affiliated Entity" (meaning
any entity that controls, is controlled by, or is under common control with the
entity that is then the Tenant, with control consisting of ownership of fifty-
one percent (51%) or more of the beneficial ownership of the entity in question,
which in the case of a corporation shall be deemed to be those shares of common
stock issued, outstanding, and entitled to vote for the election of directors)
to whom this Lease has been assigned or otherwise transferred pursuant to
(S)12.1 hereof, ii) in connection with a corporate reorganization or merger
where the surviving or resulting entity has a net worth determined in accordance
with generally accepted accounting principles of not less than Fifty Million
Dollars ($50,000,000.00), and iii) in connection with a sale of substantially
all of the assets of Tenant to an entity with a net worth determined in
accordance with generally accepted accounting principles of not less than Fifty
Million Dollars ($50,000,000.00).
2.4 [Omitted]
2.5 Landlord acknowledges that Tenant will attempt to gain early access to the
Premises to begin its tenant improvements, and each party agrees to make all
reasonable efforts to insure that the various contractors and subcontractors do
not interfere with each other during the period prior to the withdrawal of
Landlord's contractors and subcontractors. In the event of
Lease.19.
October 2, 1996
Page 5
<PAGE>
early access to the Premises, Tenant shall not be obligated to pay rent, and the
term of the Lease shall not begin, but Tenant shall be and remain responsible
for injury, damage or costs caused by the intentional acts or negligence of
Tenant, or those under Tenant's control, including without limitation, Tenant's
employees, agents, contractors, subcontractors, assignees, invitees and
appointees. Tenant ("Tenant's People")
ARTICLE 3
------- -
Rent
3.1 Tenant shall pay to Landlord the following amounts as rent for the
Premises:
(a) During the period between the Rent Commencement Date and the last day of the
twelfth (12th) full calendar month thereafter, Tenant shall pay to Landlord, as
base monthly rent, the amount of monthly rent specified in the Basic Lease
Information (the "Base Rent"). Commencing on the first day of the thirteenth
(13th) full calendar month after the Commencement Date, and on each anniversary
of that date thereafter (including during all renewal terms), the Base Rent
shall be increased as provided in Lease Addendum (S)2.
(b) Throughout the term of this Lease, Tenant shall pay, as additional rent, all
other amounts of money and charges required to be paid by Tenant under this
Lease, whether or not such amounts of money or charges are designated additional
rent as used in this Lease, rent shall mean and include all Base Rent and
additional rent payable by Tenant in accordance with this Lease.
3.2 It is the intention of Landlord and Tenant that the Base Rent payable by
Tenant to Landlord during the term of this Lease shall be net of all costs and
expenses incurred in connection with the management, operation, maintenance,
repair and replacement of the Premises in accordance with this Lease, except as
specifically set forth otherwise herein. Tenant will be charged no management
fee by Landlord.
Except as provided in Section 8.2, Landlord shall have no obligations or
liabilities whatsoever with respect to the management, operation, maintenance,
repair or replacement of the Premises during the term of this
Lease.19.
October 2, 1996
Page 6
<PAGE>
Lease, and Tenant shall manage, operate, maintain, repair and replace the
Premises in accordance with this Lease and shall pay all costs and expenses
incurred in connection therewith before such costs or expenses become
delinquent.
Without limiting the generality of the foregoing, throughout the entire term of
this Lease, Tenant shall pay, as additional rent, all premiums for all property
and liability insurance required under this Lease, all Property Taxes (as
defined in section 4.1) and all Other Taxes (as defined in section 5.1) that
accrue during or are allocable to the term of this Lease. Notwithstanding any
provision herein to the contrary, Tenant shall only have liability, obligation
or responsibility for or in connection with Hazardous Material (defined below)
introduced in, on, under or about the Premises on or after the Shell Delivery
Date, by Tenant or Tenant's People. Except as otherwise provided by law, in any
action under this section against Landlord or Landlord's People (defined below),
Tenant shall have the burden of proof as to each fact essential to the claim or
defense being asserted by Tenant. Except as otherwise provided by law, in any
action under this section against Tenant or Tenant's People, Landlord shall have
the burden of proof as to each fact essential to the claim or defense being
asserted by Landlord.
3.3 Tenant shall pay all Base Rent to Landlord, in advance, on or before the
first day of each and every calendar month during the term of this Lease. Tenant
shall pay all additional rent upon demand. Tenant shall pay all rent to Landlord
without notice, demand, deduction or offset, in lawful money of the United
States of America, at the address of Landlord specified in the Basic Lease
Information, or to such other person or at such other place as Landlord may from
time to time designate in writing.
3.4 Tenant acknowledges that the late payment by Tenant of any Base Rent or
additional rent (including the items described in section 3.2) will cause
Landlord to incur costs and expenses, the exact amount of which is extremely
difficult and impractical to fix. Such costs and expenses will include
administration and collection costs and processing and accounting expenses.
Therefore, if any Base Rent or additional rent is not received by Landlord
within five (5) days after it is due, Tenant shall immediately pay to Landlord a
late charge equal to six percent (6%) of such delinquent amount.
Lease.19.
October 2, 1996
Page 7
<PAGE>
Landlord and Tenant agree that such late charge represents a reasonable estimate
of such costs and expenses and is fair compensation to Landlord for the loss
suffered by Tenant's failure to make timely payment. In no event shall such late
charge be deemed to grant to Tenant a grace period or extension of time within
which to pay any rent or prevent Landlord from exercising any right or enforcing
any remedy available to Landlord upon Tenant's failure to pay all rent due under
this Lease in a timely fashion, including the right to terminate this Lease All
amounts of money payable by Tenant to Landlord hereunder, if not paid when due,
shall bear interest from the due date until paid at the maximum annual interest
rate allowed by law for business loans (not primarily for personal, family or
household purposes) not exempt from the usury law at such due date or, if there
is no such maximum annual interest rate, at the rate of eighteen percent (18%)
per anum.
ARTICLE 4
------- -
Property Taxes
-----
4.1 "Property Taxes" shall mean all taxes, assessments, excises, levies, fees
and charges (and any tax, assessment, excise, levy, fee or charge levied wholly
or partly in lieu thereof or as a substitute therefor or as an addition thereto)
of every kind and description, general or special, ordinary or extraordinary,
foreseen or unforeseen, secured or unsecured, whether or not now customary or
within the contemplation of Landlord and Tenant, that are levied, assessed,
charged, confirmed or imposed by any public or government authority on or
against, or otherwise with respect to, the Premises or any part thereof or any
personal property used in connection with the Premises. Property Taxes shall not
include net income (measured by the income of Landlord from all sources or from
sources other than solely rent), franchise, inheritance or capital stock taxes
of Landlord, unless levied or assessed against Landlord in whole or in part in
lieu of, as a substitute for, or as an addition to any Property Taxes. Property
Taxes shall not mean i) any city, local or county transfer taxes imposed as a
result of the sale or other transfer of the Premises, or ii) any investigation
and/or remediation costs related to Hazardous Materials unless caused to be
present in, on, under or about the Premises on or after the Shell Delivery Date
by Tenant or Tenant's People.
Lease.19.
October 2, 1996
Page 8
<PAGE>
ARTICLE 5
------- -
Other Taxes
5.1 "Other Taxes" shall mean all taxes, assessments, excises, levies, owner's
association dues or similar charges, fees and charges, including all payments
related to the cost of providing facilities or services, whether or not now
customary or within the contemplation of Landlord and Tenant, that are levied,
assessed, charged, confirmed or imposed by any public or government authority
upon, or measured by, or reasonably attributable to (a) the Premises, (b) the
cost or value of Tenant's equipment, furniture, fixtures and other personal
property located in the Premises or the cost or value of any leasehold
improvements made in or to the Premises by or for Tenant, regardless of whether
title to such improvements is vested in Tenant or Landlord, (c) any rent payable
under this Lease, including any gross income tax or excise tax levied by any
public or government authority with respect to the receipt of any such rent, (d)
the possession, leasing, operation, management, maintenance, alteration, repair,
replacement, use or occupancy by Tenant of the Premises, or (e) this transaction
or any document to which Tenant is a party creating or transferring an interest
or an estate in the Premises. Other Taxes shall not include net income (measured
by the income of Landlord from all sources or from sources other than solely
rent), franchise, inheritance or capital stock taxes of Landlord, unless levied
or assessed against Landlord in whole or in part in lieu of, as a substitute
for, or as an addition to any Other Taxes. Other Taxes shall not include i) any
city, local or county transfer taxes imposed as a result of the sale or other
transfer of the Premises, or ii) any investigation and/or remediation costs
related to Hazardous Materials unless caused to be present in, on, under or
about the Premises on or after the Shell Delivery Date by Tenant or Tenant's
People.
ARTICLE 6
------- -
Use
6.1 The Premises shall be used only for the purpose specified in the Basic
Lease Information and no other purpose without Landlord's prior written consent,
which consent shall not be unreasonably withheld or delayed; provided, however,
Landlord's withholding of consent shall be conclusively
Lease.19.
October 2, 1996
Page 9
<PAGE>
presumed reasonable if the proposed use would materially increase the wear and
tear on or the risk of damage to the Premises above levels or risks resulting
from Tenant's use as of the date of this Lease or the proposed use is for an
illegal, immoral or disreputable purpose. Tenant shall not do or permit to be
done in, on or about the Premises, nor bring or keep or permit to be brought or
kept therein, anything which is prohibited by or will in any way conflict with
any law, ordinance, rule, regulation or order now in force or which may
hereafter be enacted, or which is prohibited by any insurance policy for the
Premises, or will in any way cause a cancellation of any insurance for the
Premises. Tenant shall not do or permit anything to be done in, on or about the
Premises which will in any way obstruct or interfere with the rights of
Landlord. Tenant shall not maintain or permit any nuisance in, on or about the
Premises or commit or suffer to be committed any waste in, on or about the
Premises.
ARTICLE 7
------- -
Services
7.1 Tenant shall, at Tenant's sole cost and expense, supply the Premises with
electricity, heating, ventilating and air conditioning, water, natural gas,
lighting replacement for all lights, restroom supplies, telephone service,
window washing, security service, janitor, scavenger and disposal services, and
such other services as Tenant determines to furnish to the Premises. Landlord
shall not be in default hereunder or be liable for any damage or loss directly
or indirectly resulting from, nor shall the rent be abated or a constructive or
other eviction be deemed to have occurred by reason of, the installation, use or
interruption of use of any equipment in connection with the furnishing of any of
the foregoing services, any failure to furnish or delay in furnishing any such
services, whether such failure or delay is caused by accident or any condition
beyond the control of Landlord or Tenant or by the making of repairs or
improvements to the Premises, or any limitation, curtailment, rationing or
restriction on use of water, electricity, gas or any form of energy serving the
Premises, whether such results from mandatory governmental restriction or
voluntary compliance with governmental guidelines. Tenant shall pay the full
cost of all of the foregoing services as additional rent.
Lease.19.
October 2, 1996
Page 10
<PAGE>
ARTICLE 8
------- -
Maintenance and Repairs; Capital Improvements
8.1 Except as otherwise provided herein, Tenant shall, at all times during the
term of this Lease and at Tenant's sole cost and expense, maintain, repair and
replace the Premises and every part thereof and all grounds, landscaping,
parking areas, lighting, roof, interior walls, floors, signs, heating,
ventilating and air conditioning, mechanical, electrical, plumbing, sprinkler
and life safety systems, equipment, fixtures, alterations, additions and
improvements therein or thereon and keep all of the foregoing clean and in good
order and operating condition (including painting the exterior of the Premises
as often as reasonably needed to keep such exterior in a good, well painted
condition, cleaning interior and exterior doors, windows and glass, and
repairing and replacing any exterior windows and glass that is broken, cracked
or damaged). Tenant shall engage a duly licensed independent contractor to
perform all maintenance and repair services on all heating, ventilating and air
conditioning, mechanical, electrical, plumbing, sprinkler and life safety
systems and equipment in the Premises that is to be performed by Tenant in
accordance with this section 8.1. Landlord and its consultants or contractors
shall have the right to inspect the Premises to determine Tenant's compliance
with this section 8.1, and Tenant shall promptly complete any work recommended
by Landlord or its consultants or contractors as a result of any such
inspection. Tenant hereby waives all rights to make repairs at the expense of
Landlord or in lieu thereof to vacate the Premises. Subject to section 9.2,
Tenant shall, at the end of the term of this Lease, surrender to Landlord the
Premises and all alterations, additions, fixtures and improvements therein or
thereto in the same condition as when received, ordinary wear and tear and
damage thereto by fire or other casualty, condemnation and Hazardous Materials
unless caused to be present in, on, under or about the Premises on or after the
Shell Delivery Date by Tenant or Tenant's People, excepted. Except as otherwise
provided by law, in any action under this section against Landlord or Landlord's
People (defined below), Tenant shall have the burden of proof as to each fact
essential to the claim or defense being asserted by Tenant. Except as otherwise
provided by law, in any action under this section against Tenant or Tenant's
People Landlord shall have the burden of proof as to each fact essential to the
claim or defense being asserted by Landlord.
Lease.19.
October 2, 1996
Page 11
<PAGE>
8.2 Landlord shall be and remain responsible for maintenance and repair of the
Premises' foundation, and structural roof members, for structural aspects of the
Completed Shell, except (subject to the waiver of subrogation set forth
elsewhere herein) for damages caused by the intentional act or negligence of
Tenant or Tenant's People. Landlord shall be and remain responsible for i) any
defect in the design of the Completed Shell that causes a foreseeable
unreasonable risk to the life and safety of the occupants of the Building, any
defect in construction resulting from Landlord's Work, and any defect in the
installation of equipment in the Completed Shell resulting from Landlord's Work,
and ii) any failures of the Completed Shell to comply with the appropriate
building codes, Title 24 and the Americans with Disabilities Act of 1990, but
only to the extent that any such defect or failure to comply existed as of the
Shell Delivery Date. Except as otherwise provided by law, in any action under
this section against Landlord or Landlord's People (defined below), Tenant shall
have the burden of proof as to each fact essential to the claim or defense being
asserted by Tenant.
8.3 Notwithstanding the provisions of sections 8.1 above, if at any time after
the first ten (10) year term of this Lease it becomes necessary to make a
capital improvement or replacement costing in excess of Five Thousand Dollars
($5,000.00), (including replacement of the roof structure [but not the membrane]
or any major building system) then such capital improvement or replacement shall
be made by Landlord at its cost, and upon completion thereof, Tenant shall pay
on a monthly basis for the remainder of the term of this Lease an amount
sufficient to amortize the cost of such improvement over its anticipated useful
life. The obligation to pay amortization shall cease upon the termination of the
Lease or at any time that an option to extend is exercised and the rent is
adjusted based upon the fair market rental value of the Premises. The provisions
of this Section 8.3 shall not apply to any improvements required to be made
pursuant to Section 8.2, or to the restoration of damage caused by fire or other
peril, which subject is governed by Article 15.
ARTICLE 9
------- -
Alterations
Lease.19.
October 2, 1996
Page 12
<PAGE>
9.1 Tenant shall not make any alterations, additions or improvements in or to
the Premises or any part thereof, or attach any fixtures or equipment thereto,
without Landlord's prior written consent.
Notwithstanding the preceding sentence, Tenant may make such alterations,
additions or improvements without Landlord's consent only if the total cost of
any such integrated work of improvement constituting an alteration or addition
or other improvement is fifteen percent (15%) of the then monthly Base Rent or
less and such alterations, additions or improvements will not affect in any way
the structural, exterior or roof elements of the Premises or mechanical,
electrical, plumbing, utility or life safety systems of the Premises, but Tenant
shall give prior written notice of any such alterations, additions or
improvements to Landlord.
As a part of any consent to alterations, additions or improvements, Landlord
shall inform Tenant as to whether the proposed alterations, additions or
improvements are to be removed at the termination of the Lease.
In no event shall Tenant be permitted to install underground storage tanks or
fuel systems on the Premises Landlord's refusal to consent to the installation
of an underground tank or fuel system shall be conclusively presumed to be
reasonable. All alterations, additions and improvements in or to the Premises to
which Landlord consents, or which do not require Landlord's consent, shall be
made by Tenant, at Tenant's sole cost and expense, as follows:
(a) Tenant shall submit to Landlord, complete plans and specifications for all
work to be done by Tenant (which plans must be approved by Landlord if
Landlord's approval is required for the alterations, additions or improvements
described by such plans); provided, however, that plans need not be submitted
for any work not requiring a building permit from the city of Cupertino. Such
plans and specifications shall be prepared by the licensed architect(s) and
engineer(s), shall comply with all applicable codes, laws, ordinances, rules and
regulations, shall not adversely affect the structural elements of the Premises,
shall be in a form sufficient to secure the approval of all government
authorities with jurisdiction over the
Lease.19.
October 2, 1996
Page 13
<PAGE>
Premises, and shall be otherwise satisfactory to Landlord in Landlord's
reasonable discretion.
(b) In those cases wherein Landlord's approval is required, Landlord shall
notify Tenant promptly in writing whether Landlord approves or disapproves such
plans and specifications and, if Landlord disapproves such plans and
specifications, Landlord shall describe the reasons for disapproval. Landlord's
consent shall not be unreasonably withheld. Notwithstanding the previous
sentence, however any objection to any proposed change in the use of the
Premises shall be conclusively deemed to be reasonable. Tenant may submit to
Landlord revised plans and specifications for Landlord's prior written approval.
Tenant shall pay all costs, including the fees and expenses of the licensed
architect(s) and engineer(s), in preparing such plans and specifications.
(c) All changes in the plans and specifications requiring Landlord's approval
shall be subject to Landlord's prior written approval. If Tenant wishes to make
any such change in such approved plans and specifications, Tenant shall have
such architect(s) and engineer(s) prepare plans and specifications for such
change and submit them to Landlord for Landlord's written approval. Landlord
shall notify Tenant in writing promptly whether Landlord approves or disapproves
such change and, if Landlord disapproves such change, Landlord shall describe
the reasons for disapproval. Tenant may submit to Landlord revised plans and
specifications for such change for Landlord's written approval. After Landlord's
written approval of such change, such change shall become part of the plans and
specifications approved by Landlord.
(d) Tenant shall obtain and comply with all building permits and other
governmental permits and approvals required in connection with the work. Tenant
shall, through Tenant's licensed contractor, perform the work substantially in
accordance with (i) the plans and specifications submitted to Landlord (and
where Landlord's approval is required, in accordance with the plans and
specifications so approved by Landlord), (ii) the permits obtained by Tenant,
and (iii) all applicable codes, laws, ordinances, rules and regulations. Tenant
shall pay, as additional rent, the entire cost of all work (including the cost
of all utilities, permits, fees, taxes, and property and liability insurance
premiums in connection therewith) required to make
Lease.19.
October 2, 1996
Page 14
<PAGE>
the alterations, additions and improvements. Under no circumstances shall
Landlord be liable to Tenant for any damage, loss, cost or expense incurred by
Tenant on account of any plans and specifications, contractors or
subcontractors, design of any work, construction of any work, or delay in
completion of any work.
(e) Tenant shall give written notice to Landlord of the date on which
construction of any work will be commenced at least ten (10) days prior to such
date. Tenant shall keep the Premises free from mechanics', materialmen's and all
other liens arising out of any work performed, labor supplied, materials
furnished or other obligations incurred by Tenant. Tenant shall promptly and
fully pay and discharge all claims on which any such lien could be based.
Landlord shall have the right to post and keep posted on the Premises any
notices that may be provided by law or which Landlord may deem to be proper for
the protection of Landlord and the Premises from such liens, and to take any
other action Landlord deems necessary to remove or discharge liens or
encumbrances at the expense of Tenant. Tenant shall have the right, upon
notification by Landlord of Landlord's intent to take action to remove or
discharge liens or encumbrances pursuant to this section, to take actions deemed
necessary by Tenant to protest or contest any such liens or encumbrances and
Landlord shall allow Tenant to take such actions if Tenant first deposits,
either in cash or by means of a bond reasonably acceptable by Landlord, with
Landlord sufficient funds with which Landlord may satisfy the lien or
encumbrance in the event Tenant's attempts are unsuccessful or untimely.
9.2 All alterations, additions, fixtures and improvements, whether temporary
or permanent in character, made in or to the Premises by Landlord or Tenant
shall become part of the Premises and Landlord's property.
Upon termination of this Lease, Landlord shall have the right, at Landlord's
option, by giving written notice to Tenant at any time before or within ten (10)
days after such termination, to retain all such alterations, additions, fixtures
and improvements in the Premises, without compensation to Tenant, or to remove
all such alterations, additions, fixtures and improvements from the Premises,
repair all damage caused by any such removal, and restore the Premises to the
condition in which the Premises existed before such alterations, additions,
fixtures and improvements were
Lease.19.
October 2, 1996
Page 15
<PAGE>
made, and in the latter case Tenant shall pay to Landlord, upon billing by
Landlord, the cost of such removal, repair and restoration (including a
reasonable charge for Landlord's overhead and profit).
Notwithstanding the above, Tenant's original tenant improvements need not be
removed, and any reconfiguration of the interior of the Premises that does not
result in any configuration that is more "special use" than the original
configurations shall be treated as if they were original tenant improvements for
purposes of this section.
All movable furniture, equipment, trade fixtures and other personal property
shall remain the property of Tenant. Upon termination of this Lease, Tenant
shall, at Tenant's expense, remove all such movable furniture, equipment, trade
fixtures other personal property from the Premises and repair all damage caused
by any such removal. Termination of this Lease shall not affect the obligations
of Tenant pursuant to this section 9.2 to be performed after such termination.
ARTICLE 10
------- --
Insurance
10.1 Landlord shall not be liable to Tenant for any damage to or loss or theft
of any property or for any bodily or personal injury, illness or death of any
person in, on or about the Premises arising at any time and from any cause
whatsoever, except to the extent caused by the active negligence or willful
misconduct of Landlord, or those under Landlord's control, including without
limitation, Landlord's employees, agents, contractors, subcontractors,
assignees, invitees and appointees, ("Landlord's People").
Tenant waives all claims against Landlord arising from any liability described
in this section 10.1, except to the extent caused by the active negligence or
willful misconduct of Landlord or Landlord's People.
10.2 Except to the extent caused by the breach of this Lease by Landlord or by
the active negligence or willful misconduct of Landlord or Landlord's People,
Tenant shall indemnify and defend Landlord against and hold
Lease.19.
October 2, 1996
Page 16
<PAGE>
Landlord harmless from all claims, demands, liabilities, damages, losses, costs
and expenses, including reasonable attorneys' fees and disbursements, arising
from or related to any use or occupancy of the Premises, or any condition of the
Premises, or any default in the performance of Tenant's obligations, or any
damage to any property (including property of employees and invitees of Tenant)
or any bodily or personal injury, illness or death of any person (including
employees and invitees of Tenant) occurring in, on or about the Premises or any
part thereof or any part of the building or the land containing the Premises
arising at any time and from any cause whatsoever or occurring outside the
Premises when such damage, bodily or personal injury, illness or death is caused
by any act or omission of Tenant or Tenant's People. The foregoing
indemnification i) is subject to the waiver of subrogation contained in (S)10.7,
ii) shall not apply to the performance of Landlord's obligations under the
Lease, or iii) shall not apply to Hazardous Materials [see Article 21]). This
section 10.2 shall survive the termination of this Lease with respect to any
damage, bodily or personal injury, illness or death occurring prior to such
termination.
10.3. Tenant shall, at all times during the term of this Lease and at Tenant's
sole cost and expense, obtain and keep in force commercial general liability
insurance, including contractual liability (specifically covering this Lease),
cross liability, fire legal liability, and premises operations, all on an
occurrence policy form, with a minimum combined single limit in the amount
specified in the Basic Lease Information per occurrence for bodily or personal
injury to, illness of, or death of persons and damage to property occurring in,
on or about the Premises. Such insurance shall name the Landlord and any other
parties designated by Landlord as additional insureds, to the extent of their
interests under this Lease. Tenant shall, at Tenant's sole cost and expense, be
responsible for insuring Tenant's furniture, equipment, fixtures, computers,
office machines and personal property.
10.4 Tenant shall, to the extent required by law, at all times during the term
of this Lease and at Tenant's sole cost and expense, obtain and keep in force
Worker's Compensation and employer's liability insurance in all states in which
the Premises and any other operations of the Tenant are located and any other
state in which the Tenant or its contractors or subcontractors may be subject to
any statutory or other liability arising in any manner
Lease.19.
October 2, 1996
Page 17
<PAGE>
whatsoever out of the actual or alleged employment of others. The total limits
of the employer's liability coverage required hereunder shall not be less than
the amounts specified in section 10.3.
10.5 Tenant shall, at all times during the term of this Lease, at Tenant's
sole cost and expense, obtain and keep in force (a) insurance against loss or
damage to the Premises by fire and all other risks of physical loss covered by
insurance of the type now known as "all risk," (including earthquake, flood and
increased code cost endorsements; the increased code cost endorsement
certificate must be delivered not later than two (2) weeks after the Lease Date
shown on the Basic Lease Information) in an amount not less than the full
replacement cost of the Premises (without deduction for depreciation), including
the cost of debris removal and such endorsements as Landlord may reasonably
require, and containing the "Replacement Cost Endorsement;" (b) boiler and
machinery insurance covering pressure vessels, air tanks, boilers, machinery,
pressure piping, heating, ventilation and air conditioning equipment, and
elevator and escalator equipment, provided the Premises contain equipment of
such nature and insurance against loss of occupancy or use arising from any
breakdown of any such items, in such amounts as Landlord may reasonably
determine; (c) plate glass insurance in such amounts as Landlord may reasonably
determine if the Premises contain plate glass, and (d) rental loss insurance
(see section 15.1). Insurance required hereunder may be obtained through
multiple layered policies.
Notwithstanding the foregoing, in the event that Tenant is unable to acquire
earthquake insurance from a domestic (continental USA) insurer with a Best's
rating of at least A-,V with a deductible amount no greater than ten percent
(10%) of the face amount of the policy, ("Qualifying Insurance") then Landlord
will attempt to provide Qualifying Insurance, at Tenant's cost. If Landlord is
unable to acquire Qualifying Insurance, Landlord or Tenant may obtain earthquake
insurance from an insurer which would not qualify as Qualifying Insurance, but
the other party shall not be obligated to pay any part of the cost thereof.
Tenant shall remain liable for payment of any deductible amount, not to exceed
ten percent (10%) of the face amount of the policy.
Lease.19.
October 2, 1996
Page 18
<PAGE>
10.6 All insurance (except that insuring against earthquakes) required to be
maintained by Tenant under this Article 10 and all renewals thereof shall be
issued by good and responsible domestic companies qualified to do and doing
business in the state where the Premises are located and having a rating in
Best's Insurance Guide of at least A-,XII, with deductible amounts not to exceed
10% of the face amount. Tenant agrees that it shall be solely responsible for
payment of those deductibles, subject to the exceptions and conditions set forth
elsewhere herein.
All earthquake insurance required to be maintained by Tenant under this Article
10 and all renewals thereof shall be issued by good and responsible domestic
companies qualified to do and doing business in the state where the Premises are
located and having a rating in Best's Insurance Guide of at least A-,V, with
deductible amounts not to exceed 10% of the face amount. Tenant agrees that it
shall be solely responsible for payment of those deductibles, subject to the
exceptions and conditions set forth elsewhere herein.
Each policy to be maintained by Tenant shall expressly provide that the policy
shall not be canceled or altered without sixty (60) days' prior written notice
to Landlord and shall remain in effect notwithstanding any such cancellation or
alteration until such notice shall have been given to Landlord and such period
of sixty (60) days shall have expired. All insurance under this Article 10 to be
maintained by Tenant shall name Landlord and any other parties designated by
Landlord as an additional insured to the extent of its interest under the Lease
or in the Premises, shall be primary and noncontributing with any insurance
which may be carried by Landlord, shall afford coverage for all claims based on
any act, omission, event or condition that occurred or arose (or the onset of
which occurred or arose) during the policy period, and shall expressly provide
that Landlord and other additional insureds, although named as an additional
insured, shall nevertheless be entitled to recover under the policy for any
loss, injury or damage to Landlord or such other additional insureds. Upon the
issuance and renewal of each such policy to be maintained by Tenant, Tenant
shall deliver a certificate of insurance to Landlord for retention by Landlord.
If Tenant fails to insure or fails to furnish to Landlord upon notice to do so
any certificate of insurance as required, Landlord shall have the right from
time to time to effect such insurance for the benefit of Tenant or Landlord or
Lease.19.
October 2, 1996
Page 19
<PAGE>
both of them and all premiums paid by Landlord shall be payable by Tenant as
additional rent on demand. Tenant shall pay to Landlord, immediately upon demand
all costs incurred by Landlord as a result of Tenant's failure to obtain and
maintain in effect the policies of insurance required under this Article 10. The
waivers here contemplated shall be given only the extent not prohibited by the
respective insurance carriers involved.
10.7 The parties hereto release each other and their respective agents,
employees, successor, assignees and subtenants from all liability for injury to
any person or damage to any property that is caused by or results from a risk
which is actually insured against or which is required to be insured against
under the Lease, without regard to the negligence or willful misconduct of the
entity so released. Each party shall use its best efforts to cause each property
casualty 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. If a party cannot
obtain such insurance policy with such waiver of subrogation, such party shall
promptly notify the other party. The provisions of this section 10.7 shall
supersede any and all inconsistent provisions of this Lease, except Article 21.
ARTICLE 11
------- --
Compliance With Legal Requirements
11.1 Tenant shall, at Tenant's sole cost and expense, promptly comply with all
laws, ordinances, rules, regulations, orders and other requirements of any
government or public authority now in force or which may hereafter be in force,
with all requirements of any board of fire underwriters or other similar body
now or hereafter constituted, and with all directions and certificates of
occupancy issued pursuant to any law by any governmental agency or officer,
insofar as any thereof relate to or are required by the condition, use or
occupancy of the Premises or the operation, use or maintenance of any personal
property, fixtures, machinery, equipment or improvements in the Premises.
Notwithstanding any provision to the contrary herein, Landlord shall be and
remain responsible for i) any defect in the design of the Completed Shell that
causes a foreseeable unreasonable risk to the life and safety of the
Lease.19.
October 2, 1996
Page 20
<PAGE>
occupants of the Building, any defect in construction resulting from Landlord's
Work, and any defect in the installation of equipment in the Completed Shell
resulting from Landlord's Work, and ii) any failures of the Completed Shell to
comply with the applicable building codes, Title 24 and the Americans with
Disabilities Act of 1990, but only to the extent that any such defect or failure
to comply existed as of the Shell Delivery Date. Except as otherwise provided by
law, in any action under this section against Landlord or Landlord's People,
Tenant shall have the burden of proof as to each fact essential to the claim or
defense being asserted by Tenant. Except as otherwise provided by law, in any
action under this section against Tenant or Tenant's People Landlord shall have
the burden of proof as to each fact essential to the claim or defense being
asserted by Landlord.
ARTICLE 12
------- --
Assignment or Sublease
12.1 Tenant shall not, directly or indirectly, without the prior written
consent of Landlord (which consent shall not be unreasonably withheld), assign
this Lease or any interest herein or sublease the Premises or any part thereof,
or permit the use or occupancy of the Premises by any person or entity other
than Tenant; provided, however, that Landlord's withholding of consent shall be
conclusively presumed reasonable if: a) the financial condition of the proposed
transferee is not suitable to perform the obligations being assumed by it
hereunder; or b) the proposed use of the Premises is not permitted hereunder or
under any legal and other requirements described in Article 11, or c) would
materially increase the wear and tear on or the risk of damage to the Premises
above levels or risks resulting from Tenant's use as of the date of this Lease,
or d) is for any illegal purpose. This Lease shall not, nor shall any interest
herein, be assignable as to the interest of Tenant involuntarily or by operation
of law without the prior written consent of Landlord.
Any of the foregoing acts without such prior written consent of Landlord shall
be void and shall, at the option of Landlord, constitute a default that entitles
Landlord to terminate this Lease. Tenant agrees that the instrument by which any
assignment or sublease to which Landlord consents is
Lease.19.
October 2, 1996
Page 21
<PAGE>
accomplished shall expressly provide that the assignee or subtenant will perform
all of the covenants to be performed by Tenant under this Lease (in the case of
a sublease, only insofar as such covenants relate to the portion of the Premises
subject to such sublease) as and when performance is due after the effective
date of the assignment or sublease and that Landlord will have the right to
enforce such covenants directly against such assignee or subtenant. Any
purported assignment or sublease without an instrument containing the foregoing
provisions shall be void. Tenant shall in all cases remain liable for the
performance by any assignee or subtenant of all such covenants.
Notwithstanding any provision to the contrary herein, Landlord's consent shall
not be required for the following transfers, and Tenant shall nevertheless
remain primarily responsible for compliance with the terms of this Lease: i) to
an Affiliated Entity to whom this Lease has been assigned or otherwise
transferred pursuant to (S)12.1 hereof, ii) in connection with a corporate
reorganization or merger where the surviving or resulting entity has a net worth
determined in accordance with generally accepted accounting principles of not
less than Fifty Million Dollars ($50,000,000.00), and iii) in connection with a
sale of substantially all of the assets of Tenant to an entity with a net worth
determined in accordance with generally accepted accounting principles of not
less than Fifty Million Dollars ($50,000,000.00).
12.2 Landlord must respond with a consent or denial of the proposed transfer
within twenty-one (21) days after receipt of a written request, accompanied by
all reasonably necessary information concerning the proposed transaction and the
proposed transferee. Landlord shall notify Tenant within five (5) days after
receipt of the request if Landlord determines that all reasonably necessary
information has not been provided, and in such notification Landlord shall
identify with specificity the types of information that are missing and which
must be provided by Tenant in order to make the request complete, and if
Landlord fails to do so within such five (5) day period, then Tenant shall be
deemed to have submitted all reasonably necessary information concerning the
proposed transaction and the proposed transferee. If Landlord consents in
writing, Tenant may complete the intended assignment or sublease subject to the
following covenants: (a) no assignment or sublease shall be valid and no
assignee or
Lease.19.
October 2, 1996
Page 22
<PAGE>
subtenant shall take possession of the Premises or any part thereof until an
executed duplicate original of such assignment or sublease, in compliance with
section 12.1, has been delivered to Landlord, (b) Tenant remains primarily
liable for compliance with the terms of the Lease.
12.3 No assignment or sublease whatsoever shall release Tenant from Tenant's
obligations and liabilities under this Lease or alter the primary liability of
Tenant to pay all rent and to perform all obligations to be paid and performed
by Tenant. The acceptance of rent by Landlord from any other person or entity
shall not be deemed to be a waiver by Landlord of any provision of this Lease.
Consent to one assignment or sublease shall not be deemed consent to any
subsequent assignment or sublease. If any assignee, subtenant or successor of
Tenant defaults in the performance of any obligation to be performed by Tenant
under this Lease, Landlord may proceed directly against Tenant without the
necessity of exhausting remedies against such assignee, subtenant or successor.
Landlord may consent to subsequent assignments or subleases or amendments or
modifications to this Lease with assignees, subtenants or successors of Tenant,
without notifying Tenant or any successor of Tenant and without obtaining any
consent thereto from Tenant or any successor of Tenant, and such action shall
not release Tenant from liability under this Lease.
ARTICLE 13
------- --
Entry by Landlord
13.1 Landlord shall have the right to enter the Premises at any time to (a)
inspect the Premises, (b) exhibit the Premises to prospective purchasers,
lenders or tenants (with respect to tenants, only during the last nine (9)
months of the Lease term), (c) determine whether Tenant is performing all of
Tenant's obligations, (d) perform any obligations of Tenant in accordance with
section 14.5, (e) post notices of non-responsibility, "For sale" and "For lease"
signs (only during the last six (6) months of the Lease term) in and about the
Premises, (f) make any repairs to the Premises and (g) investigate and perform
tests to determine Tenant's compliance with Article 21. Tenant waives all claims
for damages for any injury or inconvenience to or interference with Tenant's
business, any loss of occupancy or quiet enjoyment of the Premises or any other
loss occasioned by such entry.
Lease.19.
October 2, 1996
Page 23
<PAGE>
Landlord shall have the right to use any and all means which Landlord may deem
proper in an emergency to obtain entry to the Premises. Any entry to the
Premises obtained by Landlord by any of such means shall not under any
circumstances be construed or deemed to be a forcible or unlawful entry into or
a detainer of the Premises or an eviction, actual or constructive, of Tenant
from the Premises or any portion thereof.
Notwithstanding any provision herein to the contrary, "For Lease" signs may only
be posted during the last nine (9) months of the term of the Lease, "For Sale"
signs may be posted only with the prior written consent of Tenant (which consent
may be given, withdrawn or withheld in Tenant's sole discretion) , and any entry
by Landlord or its agents must be undertaken in such a way (barring emergencies)
that Tenant's occupation and utilization of the Premises is infringed to the
slightest extent reasonably possible. Landlord shall be responsible for damage
or injury caused by the active negligence or willful misconduct of Landlord or
Landlord's People during any such entry.
ARTICLE 14
------- --
Events of Default and Remedies
14.1 The occurrence of any one or more of the following events ("Event of
Default") shall constitute a breach of this Lease by Tenant:
(a) Tenant fails to pay any Base Rent, additional rent or other amount of money
or charge payable by Tenant hereunder as and when such additional rent or amount
or charge becomes due and payable and such failure continues for more than ten
(10) days after Landlord gives written notice thereof to Tenant; provided,
however, that after the second (2nd) such failure for which Landlord has given
Tenant notice and the opportunity to cure as described above in a calendar year,
then, with respect to the third (3rd) and any subsequent failures during each
calendar year, only the passage of time, but no further notice, shall be
required to establish an Event of Default in the same calendar year; or
(b) Tenant fails to perform or breaches any other agreement or covenant of this
Lease to be performed or observed by Tenant as and when performance
Lease.19.
October 2, 1996
Page 24
<PAGE>
or observance is due and such failure or breach continues for more than thirty
(30) days after Landlord gives written notice thereof to Tenant; provided,
however, that if, by the nature of such agreement or covenant, such failure or
breach cannot reasonably be cured within such period of thirty (30) days, an
Event of Default shall not exist as long as Tenant commences with due diligence
and dispatch the curing of such failure or breach within such period of thirty
(30) days and, having so commenced, thereafter prosecutes with diligence and
dispatch and completes the curing of such failure or breach within a reasonable
time; or
(c) If (i) Tenant files, or consents by answer or otherwise to the filing
against it of, a petition for relief or reorganization or arrangement or any
other petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy, insolvency or other debtors' relief law of any jurisdiction, (ii)
Tenant makes an assignment for the benefit of its creditors, (iii) Tenant
consents to the appointment of a custodian, receiver, trustee or other officer
with similar powers of Tenant or of any substantial part of Tenant's property,
(iv) Tenant takes action for the purpose of any of the foregoing, (v) without
consent by Tenant, a court or government authority enters an order appointing a
custodian, receiver, trustee or other officer with similar powers with respect
to Tenant or with respect to any substantial part of Tenant's property and such
order is not dissolved or rescinded within forty-five (45) days, or (vi) a court
or governmental authority enters an order constituting an order for relief or
approving a petition for relief or reorganization or arrangement or any other
petition in bankruptcy or for liquidation or to take advantage of any
bankruptcy, insolvency or other debtors' relief law of any jurisdiction and such
order is not dissolved or rescinded within forty-five (45) days, or (vii) a
court or other governmental authority orders the dissolution, winding up or
liquidation of Tenant; or
(d) This Lease or any estate of Tenant hereunder is levied upon under any
attachment or execution and such attachment or execution is not vacated within
forty-five (45) days; or
(e) Tenant abandons the Premises. (The parties acknowledge that the mere
vacation of the Premises does not constitute abandonment.)
Lease.19.
October 2, 1996
Page 25
<PAGE>
14.2 If an Event of Default occurs, Landlord shall have the right at any time
to give a written termination notice to Tenant and, on the date specified in
such notice, Tenant's right to possession shall terminate and this Lease shall
terminate. Upon such termination, Landlord shall have the right to recover from
Tenant:
(a) The worth at the time of award of all unpaid rent which had been earned at
the time of termination;
(b) The worth at the time of award of the amount by which all unpaid rent which
would have been earned after termination until the time of award exceeds the
amount of such rental loss that Tenant proves could have been reasonably
avoided;
(c) The worth at the time of award of the amount by which all unpaid rent for
the balance of the term of this Lease after the time of award exceeds the amount
of such rental loss that Tenant proves could be reasonably avoided; and
(d) All other amounts necessary to compensate Landlord for all the detriment
proximately caused by Tenant's failure to perform all of Tenant's obligations
under this Lease or which in the ordinary course of things would be likely to
result therefrom The worth at the time of awards of the amounts referred to in
clauses (a) and (b) above shall be computed by allowing interest at the maximum
annual interest rate allowed by law for business loans (not primarily for
personal, family or household purposes) not exempt from the usury law at the
time of termination or, if there is no such maximum annual interest rate, at the
rate of eighteen percent (18%) per annum. The worth at the time of award of the
amount referred to in clause (c) above shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank located nearest the
Premises at the time of award plus one percent (1%). For the purpose of
determining unpaid rent under clauses (a), (b) and (c) above, the rent reserved
in this Lease shall be deemed to be the total rent payable by Tenant under
Articles 3, 4 and 5 hereof.
14.3 Even though Tenant has breached this Lease, this Lease shall continue in
effect for so long as Landlord does not terminate Tenant's right to
Lease.19.
October 2, 1996
Page 26
<PAGE>
possession, and Landlord shall have the right to enforce all its rights and
remedies under this Lease, including the right to recover all rent as it becomes
due under this Lease. Acts of maintenance or preservation or efforts to relet
the Premises or the appointment of a receiver upon initiative of Landlord to
protect Landlord's interest under this Lease shall not constitute a termination
of Tenant's right to possession unless written notice of termination is given by
Landlord to Tenant.
14.4 The remedies provided for in this Lease are in addition to all other
remedies available to Landlord at law or in equity by statute or otherwise.
14.5 All agreements and covenants to be performed or observed by Tenant under
this Lease shall be at Tenant's sole cost and expense and without any abatement
of rent. If Tenant fails to pay any sum of money to be paid by Tenant or to
perform any other act to be performed by Tenant under this Lease, Landlord shall
have the right, but shall not be obligated, and without waiving or releasing
Tenant from any obligations of Tenant, to make any such payment or to perform
any such other act on behalf of Tenant in accordance with this Lease. All sums
so paid by Landlord and all necessary incidental costs shall be deemed
additional rent hereunder and shall be payable by Tenant to Landlord on demand,
together with interest on all such sums from the date of expenditure by Landlord
to the date of repayment by Tenant at the maximum annual interest rate allowed
by law for business loans (not primarily for personal, family or household
purposes) not exempt from the usury law at the date of expenditure or, if there
is no such maximum annual interest rate, at the rate of eighteen percent (18%)
per annum. Landlord shall have, in addition to all other rights and remedies of
Landlord, the same rights and remedies in the event of the nonpayment of such
sums plus interest by Tenant as in the case of default by Tenant in the payment
of rent.
14.6 If Tenant abandons or surrenders the Premises, or is dispossessed by
process of law or otherwise, any movable furniture, equipment, trade fixtures or
personal property belonging to Tenant and left in the Premises shall be deemed
to be abandoned, at the option of Landlord, and Landlord shall have the right to
sell or otherwise dispose of such personal property in any commercially
reasonable manner.
ARTICLE 15
----------
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October 2, 1996
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<PAGE>
Damage or Destruction
15.1 If the Premises, or any part thereof, is damaged by fire or other
casualty before the Commencement Date or during the term of this Lease, then, in
accordance with the applicable provisions of this Article 15, Tenant shall
repair such damage and restore the Premises to substantially the same or better
condition as existed before the occurrence of such fire or other casualty,
Tenant shall repair and replace all such movable furniture, equipment, trade
fixtures and personal property, and this Lease shall remain in full force and
effect. Such repair and replacement by Tenant shall be done in accordance with
Article 9. In no event shall rent abate, except to the extent that proceeds from
rental loss insurance are received by Landlord. (see section 10.5(d)). If Tenant
is required to rebuild hereunder, then Tenant shall (i) deliver to Landlord
plans and specifications and a budget for such repair and restoration for
Landlord's approval in its reasonable judgement and (ii) deposit with a third
party escrow holder reasonably acceptable to both parties, cash in the sum equal
to the excess, if any, of the total cost set forth in such approved budget over
the amount of insurance proceeds received by both parties on account of such
casualty, and each party shall also deposit into such escrow all insurance
proceeds actually received by the parties, respectively, on account of such
casualty, for application to the costs of such approved repair and restoration,
as follows:
No more frequently than once per calendar month, Tenant may request that such
third party escrow holder pay invoices then payable in connection with the
repair and restoration of the Premises during the immediately preceding calendar
month. Each such request shall be accompanied to the extent applicable, by
standard architect's certifications required under AIA construction contracts
and by conditional mechanics' lien releases with respect to the payment then
invoiced and unconditional mechanics' lien releases with respect to work for
which funds were released at the time of the immediately preceding draw from all
contractors and subcontractors and major materials suppliers in form and
substance required by law.
15.2. If the Premises, or any part thereof, is damaged by fire or other
casualty and (a) such fire or other casualty occurs during the last twelve (12)
months of the term of this Lease and the repair and restoration work to be
Lease.19.
October 2, 1996
Page 28
<PAGE>
performed by Tenant in accordance with section 15.1 cannot, as reasonably
estimated by Landlord and Tenant, be completed within two (2) months after the
occurrence of such fire or other casualty, Tenant may, by giving written notice
to Landlord within sixty (60) days after the occurrence of such fire or other
casualty, to terminate this Lease as of the date of such notice or if (b) the
insurance proceeds received by Landlord and Tenant in respect of such damage are
not adequate to pay the entire cost, as reasonably estimated by Landlord and
Tenant, of the repair and restoration work to be performed by Tenant in
accordance with section 15.1 and Tenant does not deposit such shortfall with the
escrow holder, then, in any such event, Landlord shall have the right, by giving
written notice to Tenant within sixty (60) days after the occurrence of such
fire or other casualty, to terminate this Lease as of the date of such notice,
in which case all insurance proceeds on account of such casualty shall be paid
to Landlord. If Tenant or Landlord does not exercise the right to terminate this
Lease in accordance with this section 15.2 when it has the right to do so,
Tenant shall repair such damage and restore the Premises in accordance with
section 15.1 and this Lease shall remain in full force and effect. However, if
the Lease is terminated pursuant to this section 15.2, Tenant shall not be
obligated to repair or restore such damage.
15.3 If there is an uninsured loss, and the failure of insurance to cover the
loss is caused not by the actions or inactions of Tenant, but solely by the
insolvency of a properly qualified insurance carrier (see Article 10), or solely
by the insolvency of an insurer providing earthquake insurance at the request of
Tenant pursuant to the last sentence of section 10.5 insuring the Building and
the Premises, Tenant shall be relieved of its obligations under this Lease to
rebuild the Building, Premises and Parking Structure and Tenant may terminate
this Lease by written notice to Landlord.
15.4 In the event of an uninsured loss greater than ten percent (10%) and less
than twenty-five percent (25%) of the replacement cost of the Building, other
than an uninsured loss described in section 15.3 hereof, Tenant shall rebuild
and restore any damage to the Building, Premises and Parking Structure
(including damage to the outside areas adjacent to the Building and the Parking
Structure) as otherwise required by this Article 15, and, in that event, Tenant
shall have one (1) additional five (5) year option to extend the term of this
Lease. Annual adjustments to the Rent during the
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October 2, 1996
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<PAGE>
one (1) additional option period shall continue to be calculated based upon a
four percent (4%) annual increase, without an adjustment in the fair market
value of the Premises or the Completed Shell. This additional option shall
become effective at the end of the then-current term of this Lease.
15.5 In the event of an uninsured loss equal to or greater than twenty-five
percent (25%) of the replacement cost of the Building, other than an uninsured
loss described in section 15.3 hereof, Tenant shall rebuild and restore any
damage to the Building, Premises and Parking Structure (including damage to the
outside areas adjacent to the Building and the Parking Structure) as otherwise
required by this Article 15, and, in that event, at Tenant's discretion, either
i) the remaining term of this Lease and the options available to Tenant under
this Lease shall remain unchanged, or ii) the remaining term this Lease shall,
beginning upon substantial completion of the repair and restoration, be extended
for one-hundred and twenty (120) months. In that event, Tenant shall have only
two (2) five (5) year options to extend the term of this Lease. Annual
adjustments to the Rent during the initial extended period and also during each
of the two (2) option periods shall continue to be calculated based upon a four
percent (4%) annual increase, without adjustment to fair market value.
ARTICLE 16
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Eminent Domain
16.1 If a substantial portion of the Premises is taken and the remaining
portion of the Premises is not reasonably suitable for Tenant's purposes, or if
a portion of the Premises is taken resulting in loss of access to and from the
Premises without reasonable substitute access being available, Landlord and
Tenant each shall have the right, by giving written notice to the other within
thirty (30) days after the date of such taking, to terminate this Lease If
either Landlord or Tenant exercises such right to terminate this Lease ln
accordance with this section 16.1, this Lease shall terminate as of the date of
such taking.
If neither Landlord nor Tenant exercises such right to terminate this Lease in
accordance with this section 16.1, this Lease shall terminate as to the portion
of the Premises so taken as of the date of such taking and shall
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October 2, 1996
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<PAGE>
remain in full force and effect as to the portion of the Premises not so taken,
Tenant shall restore the portion of the Premises not so taken to an integrated
architectural unit in accordance with Article 9 and the Base Rent then being
paid under the terms of this Lease shall be reduced as of the date of such
taking in the proportion that Tenant's use and occupancy of the Premises as
contemplated hereunder has been impaired. In the event of a failure by the
parties to agree on the nature and scope of any such reductions, the matter
shall be submitted to binding arbitration as described in (S)3 of the Addendum.
If all of the Premises is taken by exercise of the power of eminent domain
before the Commencement Date or during the term of this Lease, this Lease shall
terminate as of the date of such taking.
16.2 If all or any part of the Premises is taken by exercise of the power of
eminent domain, all awards, compensation, damages, income, rent and interest
payable in connection with such taking ("Condemnation Compensation") shall,
except as expressly set forth in this section 16.2, be paid to and become the
property of Landlord, and Tenant hereby assigns to Landlord all of the
foregoing. Without limiting the generality of the foregoing, Tenant shall have
no claim against Landlord or the entity exercising the power of eminent domain
for the value of the leasehold estate created by this Lease or any unexpired
term of this Lease. Notwithstanding the foregoing, Landlord shall make
Condemnation Compensation available to pay for Tenant's restoration of the
Premises as described in (S)16.1 pursuant to the procedure set forth in (S)16.3
below.
Tenant shall have the right to claim and receive directly from the entity
exercising the power of eminent domain only the share of any award determined to
be owing to Tenant for the taking of improvements installed in the portion of
the Premises so taken by Tenant at Tenant's sole Cost and expense based on the
unamortized cost actually paid by Tenant for such improvements, for the taking
of Tenant's movable furniture, equipment, trade fixtures and personal property,
for loss of goodwill, for interference with or interruption of Tenant's
business, or for removal and relocation expenses.
16.3 In the event of any taking other than a taking referred to in section
16.1, this Lease shall continue in full force and effect, Tenant shall continue
to pay all of the rent and to perform all of the covenants of Tenant in
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October 2, 1996
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<PAGE>
accordance with this Lease and Tenant shall restore the Premises to an
integrated architectural unit in accordance with Article 9. If Tenant is
required to restore hereunder, then Tenant shall (i) deliver to Landlord plans
and specifications and a budget for such repair and restoration for Landlord's
approval in its reasonable judgement and (ii) deposit with a third party escrow
holder reasonably acceptable to both parties, cash in the sum equal to the
excess, if any, of the total cost set forth in such approved budget over the
amount of Condemnation Compensation received by both parties on account of such
taking, and each party shall also deposit into such escrow all Condemnation
Compensation actually received by the parties, respectively, on account of such
taking, for application to the costs of such approved restoration, as follows:
No more frequently than once per calendar month, Tenant may request that such
third party escrow holder pay invoices then payable in connection with the work
being done to the Premises during the immediately preceding calendar month. Each
such request shall be accompanied to the extent applicable, by standard
architect's certifications required under AIA construction contracts and by
conditional lien releases with respect to the payment then invoiced and
unconditional mechanics' lien releases with respect to work for which funds were
released at the time of the immediately preceding draw from all contractors and
subcontractors and major materials suppliers in form and substance required by
law.
16.4 As used in this Article 16, a "taking" means the acquisition of all or
part of the Premises for a public use by exercise of the power of eminent domain
(or a sale of any or all of the Premises in lieu, or under threat, thereof) and
the taking shall be considered to occur as of the earlier of the date on which
possession of the Premises (or part so taken) by the entity exercising the power
of eminent domain is authorized as stated in an order for possession or the date
on which title to the Premises (or part so taken) vests in the entity exercising
the power of eminent domain.
ARTICLE 17
------- --
Subordination, Merger and Sale
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October 2, 1996
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17.1 This Lease shall be subject and subordinate at all times to the lien of
all mortgages and deeds of trust securing any amount or amounts whatsoever, and
any ground lease or master lease of the Premises, which may now exist or
hereafter be placed on or against the Premises or on or against Landlord's
interest or estate therein, all without the necessity of having further
instruments executed by Tenant to effect such subordination. Landlord represents
that as of the execution of this Lease, the Premises is not encumbered by any
mortgage, deed of trust, ground lease, or master lease to which this Lease would
be subordinate. Notwithstanding Tenant's agreement to subordinate this Lease to
any future mortgage, deed of trust, ground lease or master lease, any such
instrument shall provide that condemnation proceeds and insurance proceeds shall
be held, disbursed, and applied as provided in this Lease. Notwithstanding the
foregoing, in the event of a foreclosure of any such mortgage or deed of trust
or of any other action or proceeding for the enforcement thereof, or of any sale
thereunder, if no Default then exists under this Lease, this Lease shall not be
terminated or extinguished, nor shall the rights and possession of Tenant
hereunder be disturbed, and the person or entity succeeding to the position of
Landlord under this Lease shall assume the obligations of Landlord arising after
such person's succession under the Lease, including the obligations to make
insurance proceeds available for restoration of the Premises if the Lease is not
terminated as a result of casualty damages, to cure any continuing defaults of
Landlord under the Lease which relate to maintenance, and to recognize any
offset or reduction in rent that results from any draw on the $3,000,000.00
Letter of Credit (defined in (S)6 of the Lease Addendum) that has been
improperly applied or is in excess of the amount needed to cure defaults by
Tenant) and Tenant shall attorn to the person who acquires Landlord's interest
hereunder through any such mortgage or deed of trust. Landlord agrees to provide
Tenant evidence of any such successor's agreement to make insurance proceeds
available prior to granting any such potential successor an interest in the
Completed Shell. Tenant agrees to execute, acknowledge and deliver upon demand
such further instruments evidencing such subordination of this Lease to the lien
of all such mortgages and deeds of trust or to all such ground leases or master
leases of the Premises as may reasonably be required by Landlord, but Tenant's
covenant to subordinate this Lease to mortgages or deeds of trust, or ground
leases or master leases, hereafter executed is conditioned upon each holder of
such senior mortgage or deed of trust, or ground lease or master lease,
Lease.19.
October 2, 1996
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<PAGE>
executing and acknowledging a separate subordination agreement, containing the
commitments specified in this section 17.1. Without limiting the generality or
applicability of the foregoing, Tenant agrees to enter into a subordination,
nondisturbance and attornment agreement in the form reasonably required by the
holder of any such mortgage or deed of trust or by any party to any such ground
lease or master lease, so long as the provisions of such agreement do not
increase Tenant's obligations and liabilities hereunder or reduce Tenant's
rights and benefits hereunder.
17.2 The voluntary or other surrender of this Lease by Tenant, or a mutual
cancellation thereof, shall not work a merger and shall, at the option of
Landlord, terminate all or any existing subleases or subtenancies or operate as
an assignment to Landlord of any or all such subleases or subtenancies.
17.3 If the original Landlord hereunder, or any successor owner of the
Premises, sells or conveys the Premises, all liabilities and obligations on the
part of the original Landlord, or such successor owner, under this Lease
accruing after such sale or conveyance shall terminate and the original
Landlord, or such successor owner, shall automatically be released therefrom,
and thereupon all such liabilities and obligations shall be binding upon the new
owner. Tenant agrees to attorn to such new owner.
Notwithstanding the foregoing, Landlord shall not be released from liability for
(i) Hazardous Materials as set forth in Article 21, (ii) correction of any
defect in design, construction, materials and equipment of the "shell" of the
Building or the Parking Structure (to the extent such design defect is
Landlord's responsibility under Section 8.2), or (iii) any amounts drawn down
under the Letter of Credit in excess of amounts required to cure the monetary
default(s) of Tenant under this Lease as permitted by (S)6 of the Lease
Addendum, or (iv) from the proper application of amounts drawn down under the
Letter of Credit in accordance with the requirements of (S)6 of the Addendum.
Landlord shall not sell, transfer or convey the Premises prior to the completion
of its obligations with respect to the "shell" of the Building and the Parking
Structure as set forth in (S)1 of the Lease Addendum. Landlord further agrees
that in the event of such a sale or transfer prior to disbursal of the entire
Landlord's portion of the tenant improvement allowance,
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October 2, 1996
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Landlord shall transfer the remainder to an escrow account at Lawyer's Title for
the benefit of Tenant and the new owner, to be disbursed and administered by any
new owner according to the terms agreed to by Landlord and Tenant, which terms
shall be substantially duplicative of other terms on which Landlord would have
been required to disburse and administer such allowance to fulfill its
obligations with respect to such allowance under this Lease.
ARTICLE 18
------- --
Estoppel Certificate
18.1 At any time and from time to time, Tenant shall, within ten (10) days
after written request by Landlord, execute, acknowledge and deliver to Landlord
a certificate, in the form attached as Exhibit G or such other form as Landlord
may reasonably require, certifying: (a) that this Lease is unmodified and in
full force and effect (or, if there have been modifications, that this Lease is
in full force and effect as modified, and stating the date and nature of each
modification); (b) the Commencement Date and the Expiration Date determined in
accordance with Article 2 and the date, if any, to which all rent and other sums
payable hereunder have been paid; (c) that to the best of Tenant's knowledge,
there is no default by Tenant hereunder which has not been cured, except as to
defaults specified in such certificate; (d) that Landlord is not in default
under this Lease, except as to defaults specified in such certificate; and (e)
certifying as to the existence of such other facts as may be reasonably
requested by Landlord or any actual or prospective purchaser or mortgage lender.
Any such certificate may be relied upon by Landlord and any actual or
prospective purchaser or mortgage lender of the Premises or any part thereof.
ARTICLE 19
------- --
Holding Over
19.1 If, without objection by Landlord, Tenant holds possession of the
Premises after expiration of the term of this Lease, Tenant shall become a
tenant from month to month upon the terms herein specified but at a Base Rent
equal to one hundred and fifty percent (150%) of the Base Rent in
Lease.19.
October 2, 1996
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<PAGE>
effect at the expiration of the term of this Lease pursuant to Article 3,
payable in advance on or before the first day of each month. Such month to month
tenancy may be terminated by either Landlord or Tenant by giving thirty (30)
days' written notice of termination to the other at any time.
ARTICLE 20
------- --
Financial Statements
20.1 On or before April 1 of each year, Tenant shall deliver to Landlord
Tenant's audited financial statements ("Financial Statements") for the fiscal
year of Tenant ended on the previous December 31, which Financial Statements
shall include an audited consolidated balance sheet of Tenant and its
consolidated subsidiaries as at the end of such fiscal year. a consolidated
statement of operations of Tenant and its consolidated subsidiaries for such
fiscal year, and a certificate of Tenant's auditor (which shall be a recognized
national or regional independent accounting firm) to the effect that such
Financial Statements were prepared in accordance with generally accepted
accounting principals consistently applied and fairly present the financial
condition and operations of Tenant and its consolidated subsidiaries for and as
at the end of such fiscal year.
ARTICLE 21
------- --
Hazardous Materials
21.1 As used herein, the term "Hazardous Material" means any hazardous or
toxic substance, material or waste, or any pollutant or contaminant, or words of
similar import, which is or becomes regulated by any local governmental
authority, the state in which the Premises are located, or the United States
Government. The term "Hazardous Material" includes, but is not limited to, any
material or substance which is, designated as a "hazardous substance" pursuant
to section 311 of the Federal Water Pollution Control Act (33 U.S.C. section
1317), (ii) defined as a hazardous waste" pursuant to section 1004 of the
Federal Resource Conservation and Recovery Act, 42 U.S.C. section 6901, et seq.
(42 U.S.C. section 6903), (iii) defined as a "hazardous substance" pursuant to
section 101 of the Comprehensive Environmental Response Compensation and
Liability Act (42 U.S.C. section 9601, et seq.),
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October 2, 1996
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(iv) asbestos, (v) petroleum (including crude oil or any fraction thereof,
natural gas, natural gas liquids, liquefied natural gas, or synthetic gas usable
for fuel, or any mixture thereof), (vi) petroleum products, (vii)
polychlorinated biphenyls, (viii) urea formaldehyde, (ix) radon gas, (x)
radioactive matter, (xi) medical waste, and (xii) chemicals which may cause
cancer or reproductive toxicity.
21.2 As used herein, the term "Environmental Requirements" means all laws,
ordinances, rules, regulations, orders and other requirements of any government
or public authority now in force or which may hereafter be in force relating to
protection of human health or the environment, including all requirements
pertaining to reporting, licensing, permitting, investigation and remediation of
emissions, discharges, storage, disposal or releases of Hazardous Materials and
all requirements pertaining to the protection of the health and safety of
employees or the public.
21.3 Neither Tenant nor its agents, employees, contractors or invitees shall
conduct the handling, use, generation, treatment, storage or disposal on, in or
about the Premises of any Hazardous Material without prior written notice to
Landlord. Any such notice by Tenant to Landlord shall be in writing and shall
demonstrate to the reasonable satisfaction of Landlord that such Hazardous
Material is necessary to the business of Tenant, and that the uses of such
Hazardous Materials that are proposed to be made by Tenant are not in violation
of the ""Use" section of the Basic Lease Information, and will be handled,
used, generated, treated, stored or disposed of in a manner that complies with
all Environmental Requirements. Any such handling, use, generation, treatment,
storage or disposal of any Hazardous Material permitted by Landlord hereunder
shall be in compliance with all Environmental Requirements, and such use shall
be limited to reasonably small quantities of Hazardous Materials that may
legally be stored within the Building, except that Tenant may use and store fuel
in reasonably necessary quantities on site in above ground tanks located within
or outside the Building.
21.4 Tenant shall, within five (5) days after the receipt thereof, give
written notice to Landlord of any notice or other communication regarding any
(a) actual or alleged violation of Environmental Requirements by Tenant or with
respect to the Premises, (b) actual or threatened migration of
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October 2, 1996
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Hazardous Material from the Premises, or (c) the existence of Hazardous Material
in or on the Premises or regarding any actual or threatened investigation,
inquiry, lawsuit, claim, citation, directive, summons, proceeding, complaint,
notice, order, writ or injunction relating to any of the foregoing.
21.5 Tenant shall indemnify and defend Landlord against and hold Landlord
harmless from all claims, demands, liabilities, damages, fines, encumbrances,
liens, losses, costs and expenses, including reasonable attorneys' fees and
disbursements, and costs and expenses of investigation, arising from or related
to Tenant's or Tenant's People causing i) the existence on or after the
Commencement Date of Hazardous Material in or on the Premises or ii) the actual
or threatened migration on or after the Commencement Date of Hazardous Material
from the Premises or iii) the existence on or after the Commencement Date of a
violation of Environmental Requirements by Tenant or Tenant's People with
respect to the Premises.
The obligations of Tenant under this section 21.5 shall not be affected by any
investigation by or on behalf of Landlord or by any information which Landlord
may have or obtain with respect thereto. Tenant shall, to the reasonable
satisfaction of Landlord, perform all remedial actions necessary to remove any
Hazardous Material in, on or under the Premises on or after the Commencement
Date or to remedy actual or threatened migration from the Premises of any
Hazardous Material or to remedy any actual or threatened violation of
Environmental Requirements, provided such remedial action is required under
Environmental Requirements and provided that Tenant or Tenant's People caused
the Hazardous Material requiring removal to be present in or on the Premises or
caused the threatened migration from the Premises of the Hazardous Material in
question or caused the actual or threatened violation of Environmental
Requirements in question This section 21.5 shall survive termination of this
Lease. Except as otherwise provided by law, in any action under this section
against Landlord or Landlord's People (defined below), Tenant shall have the
burden of proof as to each fact essential to the claim or defense being asserted
by Tenant. Except as otherwise provided by law, in any action under this section
against Tenant or Tenant's People (defined below),
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October 2, 1996
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Landlord shall have the burden of proof as to each fact essential to the claim
or defense being asserted by Landlord.
21.6 Landlord represents and warrants to Tenant that, to the best of its
knowledge (without imputation of knowledge except by Landlord's Hazardous
Materials personnel, its facilities department heads and the personnel in
Landlord's Corporate Real Estate Department) i) it is unaware of any Hazardous
Material contamination of the Premises except as disclosed to Tenant in the
environmental reports described in Exhibit F attached hereto, ii) Landlord has
disclosed all reports and studies concerning the environmental status of the
Premises in its possession or control to Tenant. Landlord shall indemnify,
defend, protect and hold Tenant harmless from all claims, demands, fines,
encumbrances, liens, losses, costs, damages, expenses and liabilities (including
investigation costs and attorney's fees) paid, incurred or suffered as a result
of Hazardous Materials contamination of the Premises unless such Hazardous
Materials contamination was caused by Tenant or Tenant's People on or after the
Shell Delivery Date. Landlord releases Tenant from and waives all claims against
Tenant for, any and all liability for Hazardous Materials in, on under or about
the Premises except to the extent caused to be present by Tenant or Tenant's
People after the Shell Delivery Date. Except as otherwise provided by law, in
any action under this section against Landlord or Landlord's People, Tenant
shall have the burden of proof as to each fact essential to the claim or defense
being asserted by Tenant. Except as otherwise provided by law, in any action
under this section against Tenant or Tenant's People, Landlord shall have the
burden of proof as to each fact essential to the claim or defense being asserted
by Landlord.
ARTICLE 22
------- --
Waiver
22.1 The waiver by Landlord or Tenant of any breach of any covenant in this
Lease shall not be deemed to be a waiver of any subsequent breach of the same or
any other covenant in this Lease, nor shall any custom or practice which may
grow up between Landlord and Tenant in the administration of this Lease be
construed to waive or to lessen the right of Landlord or Tenant to insist upon
the performance by Landlord or Tenant in
Lease.19.
October 2, 1996
Page 39
<PAGE>
strict accordance with this Lease. The subsequent acceptance of rent hereunder
by Landlord or the payment of rent by Tenant shall not waive any preceding
breach by Tenant of any covenant in this Lease, nor cure any Event of Default,
nor waive any forfeiture of this Lease or unlawful detainer action, other than
the failure of Tenant to pay the particular rent so accepted, regardless of
Landlord's or Tenant's knowledge of such preceding breach at the time of
acceptance or payment of such rent.
ARTICLE 23
------- --
Notices
23.1 All requests, approvals, consents, notices and other communications given
by Landlord or Tenant under this Lease shall be properly given only if made in
writing and either deposited in the United States mail, postage prepaid,
certified with return receipt requested, or delivered by hand (which may be
through a messenger or recognized delivery or courier service) and addressed as
follows: To Landlord at the address of Landlord specified in the Basic Lease
Information, or at such other place as Landlord may from time to time designate
in a written notice to Tenant; and to Tenant, before the Commencement Date, at
the address of Tenant specified in the Basic Lease Information, and after the
Commencement Date, at the Premises, or at such other place as Tenant may from
time to time designate in a written notice to Landlord. Such requests,
approvals, consents, notices and other communications shall be effective on the
date of receipt (evidenced by the certified mail receipt) if mailed or on the
date of delivery if hand delivered.
ARTICLE 24
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Miscellaneous
24.1 The words "Landlord" and "Tenant" as used herein shall include the plural
as well as the singular. The words "include," "includes" and "including" shall
be deemed to be followed by the phrase "without limitation." If there is more
than one Tenant, the obligations hereunder imposed upon Tenant shall be joint
and several. Time is of the essence of this Lease and each and all of its
provisions. Submission of this instrument for examination or signature by Tenant
does not constitute a reservation of
Lease.19.
October 2, 1996
Page 40
<PAGE>
or option for lease, and it is not effective as a lease or otherwise until
execution and delivery by both Landlord and Tenant. Subject to Article 12, this
Lease shall benefit and bind Landlord and Tenant and the personal
representatives, heirs, successors and assigns of Landlord and Tenant. If any
provision of this Lease is determined to be illegal or unenforceable, such
determination shall not affect any other provision of this Lease and all such
other provisions shall remain in full force and effect. This Lease shall be
governed by and construed in accordance with the laws of the state where the
Premises are located. Except as specifically provided otherwise in the
Workletter, in any case hereunder requiring the consent of one party to an
action of another, that consent may not be unreasonably withheld or delayed.
Except as otherwise specifically provided otherwise in the Workletter, any
consent not given by the last day due shall be deemed given within 14 days of
the last day due, and if no time period is specified, within 14 days of the
receipt of a request for such a consent.
24.2 If there is any legal action or proceeding between Landlord and Tenant to
enforce this Lease or to protect or establish any right or remedy under this
Lease, the unsuccessful party to such action or proceeding shall pay to the
prevailing party all costs and expenses, including reasonable attorneys' fees
and disbursements, incurred by such prevailing party in such action or
proceeding and in any appeal in connection therewith. If such prevailing party
recovers a judgment in any such action, proceeding or appeal, such costs,
expenses and attorneys' fees and disbursements shall be included in and as a
part of such judgment.
24.3 The exhibits and addenda, if any, specified in the Basic Lease
Information are attached to and made a part of this Lease.
24.4 Tenant warrants and represents to Landlord that Tenant and has not
authorized or employed, or acted by implication to authorize or to employ, any
real estate broker or salesman to act for Tenant in connection with this Lease,
other than Ernst & Young. Tenant acknowledges that Landlord has, at Tenant's
request, added the amount of the commission that would otherwise have been paid
to Ernst & Young to the Tenant's Work allowance.
Lease.19.
October 2, 1996
Page 41
<PAGE>
24.5 Tenant and each person executing this Lease on behalf of Tenant
represents and warrants to Landlord that (a) Tenant is a corporation duly
organized and validly existing under the laws of the State of Delaware,(b)
Tenant is qualified to do business in the state where the Premises is located,
(c) Tenant has full right, power and authority to enter into this Lease and to
perform all of Tenant's obligations hereunder, and (d) each person signing this
Lease on behalf of Tenant is duly and validly authorized to do so.
24.6 There are no oral agreements between Landlord and Tenant affecting this
Lease, and this Lease supersedes and cancels any and all previous negotiations,
arrangements, brochures, offers, agreements and understandings, oral or written,
if any, between Landlord and Tenant or displayed by Landlord to Tenant with
respect to the subject matter of this Lease or the Premises. There are no
representations between Landlord and Tenant or between any real estate broker
and Tenant other than those expressly set forth in this Lease and all reliance
with respect to any representations is solely upon representations expressly set
forth in this Lease. This Lease may not be amended or modified in any respect
whatsoever except by an instrument in writing signed by Landlord and Tenant.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the date
first hereinabove written.
Landlord: Tenant:
Tandem Computers Incorporated, Pure Atria Corporation,
a Delaware Corporation a Delaware Corporation
by __________________________ by _____________________
Lease.19.
October 2, 1996
Page 42
<PAGE>
ADDENDUM TO LEASE
1. CONDITION OF PREMISES (See Lease (S)2.2)
Tenant has been provided with copies of Tandem Loc 240 - Building Reconstruction
specifications Sheet dated 8-29-96; of As-built drawings of the "American
Microsystem project" done by Cebak Associates, dated 8-20-74, as follows:
Drawings cover sheet, A1, A2, A4-A14, C1, C2, S1-S11, H1-H8, P1-P5, and E1-E8;
and Project drawings for Tandem Computers by Greg Bunton & Associates, including
drawing sheets A0-A20, S1-S16, and L1-L4. The foregoing (together with
Landlord's architect's "scope of work" description and any additional plans,
specifications, drawings or documents necessary to result in a full set of
design, construction and installation documents for the preparation and
construction of the "shell" of the Building and the Parking Structure following
the review and approval of Tenant, shall constitute the plans and specifications
(the "Plans and Specifications") for the construction and other work which
Landlord is required to perform with respect to the "shell" of the Building and
the Parking Structure. The work and compliance with the law obligations of
Landlord described above are referred to herein as "Landlord's Work". Landlord
shall not make or cause to be made any changes to the approved Plans and
Specifications without the prior written consent of Tenant.
Landlord shall perform Landlord's Work, including any done in outside areas
(such as parking areas and sidewalks) substantially in compliance with the Plans
and Specifications (any modifications thereto approved by both parties) and all
applicable laws (including compliance with ADA, Title 24, and current seismic
requirements) free from i) any defect in the design of the Completed Shell that
causes a foreseeable unreasonable risk to the life and safety of the occupants
of the Building, any defect in construction resulting from Landlord's Work, and
any defect in the installation of equipment in the Completed Shell resulting
from Landlord's Work, and ii) any failures of the Completed Shell to comply with
the applicable building codes, Title 24 and the Americans with Disabilities Act
of 1990, but only to the extent that any such defect or failure to comply
existed as of the Shell Delivery Date. Landlord's obligation to comply with ADA
shall be limited to the Parking Structure, sidewalks, ramps, and other outside
areas, exterior doors and the Building elevator. Tenant shall have
responsibility to cause the restroom cores, interior doors, and other interior
<PAGE>
areas to comply with ADA. Landlord has completed Landlord's Work and Tenant has
accepted it as conforming, subject to "punch-list" items. Landlord shall cause
its general contractor to complete and/or repair all "punch list" items within
thirty (30) days after the date on which the completed "punch list:" is signed
by Landlord and Tenant. Landlord and Tenant shall review and agree to the
satisfactory completion of the "punch-list" items. The provisions of this
section related to acceptance by Tenant shall not serve to waive any claim
Tenant may have related to defects in design or construction as described in
this Lease.
2. ANNUAL INCREASES IN BASE RENT (See Lease (S)3.1(a))
Base rent shall be increased annually per lease Section 3.1(a) by 4% over the
previous lease year's base rent.
3. OPTION RENEWAL TERM BASE RENT (See lease (S)2.3)
Base Rent. Base rent at the commencement of the applicable renewal term of this
- ---------
lease shall be at the fair market rental rate for the premises determined as of
the date of commencement of the renewal period in question. During each renewal
period, Base Rent shall be increased by four percent (4%) over the previous
year's base rent, and in determining the fair market rental rate for the
Premises for such option period, such increase shall be taken into account. The
fair market rental rate for the Premises shall be established by written
agreement of Landlord and Tenant on or before the one hundred and fiftieth
(150th) day preceding the Expiration Date of the then-current Lease term. Absent
such agreement, such fair market rental rate shall be determined by arbitration
as follows: Either party may commence the process by appointing an arbitrator
who shall be a member of the Appraisers' Institute and shall not have been
employed or engaged by either Landlord or Tenant during the three (3) year
period preceding the date for which the fair market rental rate is to be
determined and shall have had at least ten (10) year's experience in leasing
buildings similar to the Building in the geographic area of the Premises. Such
commencing party shall promptly notify the other party of the identity of the
arbitrator selected and shall instruct the other party to appoint an arbitrator
and to notify the commencing party of the identity of such arbitrator within the
ten (10) day period following the date of such other party's receipt of the
commencing party's notice. Such arbitrator shall have the qualifications
described above.
<PAGE>
The two arbitrators shall, within thirty (30) days after both have been
appointed, select a third similarly qualified arbitrator. The decision of any
two of the three arbitrators in writing shall be binding on both Landlord and
Tenant. Should no two arbitrators be able to agree within 30 days after the
appointment of the third arbitrator, the report of the arbitrators most
favorable to Landlord and the report of the arbitrators most favorable to Tenant
shall both be disregarded and the report of the remaining arbitrator shall be
binding on both landlord and Tenant. Fair market value must be determined to
reflect the fact that rent is adjusted at the rate of four percent (4%) per
year. Should either Landlord or Tenant fail to appoint an arbitrator within ten
(10) days after receiving written notice from the other to do so, the arbitrator
selected by the other party shall act for both and his decision in writing shall
be binding upon both Landlord and Tenant. The fair market rental value so
established shall continue in effect during such renewal period. In no event
will the rent for the renewal period be less than rent prior to the renewal.
Each party shall bear the cost of the arbitrator it selects, and the two parties
shall share equally the cost of the third arbitrator.
4. TENANT ALLOWANCE
Landlord will contribute $2,504,860.00 toward the cost of Tenant's Work in
accordance with the Work Letter Agreement attached as Exhibit E (the "Tenant
Improvement Allowance"). Notwithstanding the fact that it is not newly
manufactured, Landlord consents to Tenant's installation of the air conditioning
equipment described on Exhibit D attached hereto.
5. SIGNAGE.
Subject to City approval, Tenant shall be permitted to install a sign in a
location of its choice on the building, and an additional monument sign at a
mutually agreeable location. The signs are to be installed at Tenant's expense.
Landlord shall cooperate with Tenant in making application to the City of
Cupertino.
6. LETTER OF CREDIT.
No later than November 1, 1996, Tenant will provide Landlord with an
unconditional irrevocable standby letter of credit made payable to Landlord and
available for drawing in San Francisco, California on a sight draft and
<PAGE>
Landlord's certificate stating that Landlord is entitled to draw on the letter
of credit, in a form substantially similar to the form attached to this Lease as
Exhibit C. The letter of credit shall be in the initial amount of $3,000,000 as
security for payment of all amounts payable by Tenant under the Lease and the
Workletter (the "Letter of Credit"). Except as otherwise provided herein, the
Letter of Credit, (as it may be renewed or replaced), must stay in effect
beginning on November 1, 1996 and continuing throughout the Term of this Lease,
including renewal terms. The Letter of Credit shall be renewed annually, and
must be issued by a bank reasonably acceptable to Landlord. The bank issuing the
letter of credit must be required to give Landlord at least thirty (30) days
prior written notice of intent not to renew the letter of credit each year. In
the event of the receipt of such notice, Tenant must either provide a
replacement letter of credit one (1) week prior to the commencement of the last
full week (7 day period) prior to the expiration of the then current letter of
credit, or Landlord shall be authorized to draw on the letter of credit in full
and to hold the funds in Landlord's name, in a separate interest bearing
account, as a security deposit, subject to the provisions below concerning the
use and return of funds held as a security deposit. All interest earned on such
funds shall be maintained in such interest bearing account and shall be paid to
Tenant at the expiration or sooner termination of this Lease. At Tenant's
option, Tenant may instruct Landlord to invest such funds in an conservative
manner selected by Tenant which will allow Landlord reasonable access to such
funds, but will provide a higher rate of return than an interest bearing
account. All of the provisions herein concerning relief from the obligation to
maintain the Letter of Credit and to reduce the amount of the Letter of Credit
shall apply to such funds held by Landlord. If the requirement of the Letter of
Credit would be waived, Landlord shall return such funds and all interest earned
thereon to Tenant. If the requirement for the amount of the Letter of Credit
would be reduced, Landlord shall return that portion of the funds to Tenant
which is equal to the amount of such reduction each time such reduction would
occur.
Tenant shall execute and deliver, or cause to be executed and delivered, any
documents reasonably required in connection with the acquisition of this letter
of credit.
Landlord shall be entitled to draw on the Letter of credit i) only in the amount
necessary to cure an Event of Default with respect to the payment of
<PAGE>
an amount payable to Landlord by Tenant (including late charges and interest as
provided herein) under the Lease, or ii) to fund the completion of Tenant's
Work, including any excess costs and damages suffered as a result of Tenant's
failure to complete Tenant's Work. Any amount drawn down by Landlord not
utilized to cure the Event of Default in question shall be held by Landlord as a
security deposit (and returned to Tenant at the expiration or sooner termination
of the Lease, less any amount required to cure a then-existing Event of Default
with respect to the payment of any amount payable to Landlord by Tenant under
the Lease, including any amounts properly applicable to repair of the Premises
at the end or early termination of the Lease) or, at Tenant's option, shall be
deemed credited to Tenant's obligation to pay rent (which credit shall be
binding upon any lender or transferee of Landlord's interest). Tenant shall
replenish the Letter of Credit to its initial amount following any draw on the
Letter of Credit by Landlord in accordance with this Paragraph and the terms and
conditions of the Letter of Credit.
In the event of any partial draw under the letter of credit, Tenant shall,
within thirty (30) days thereafter, either cause the amount available for draw
thereunder to be returned to the full amount, and if Tenant fails to so, such
failure shall be an Event of Default and Landlord may terminate this Lease and
draw on the letter of credit and/or exercise its other Remedies. Tenant shall be
responsible for Landlord's damages caused by such default.
In the event that Tenant achieves a Standard and Poor's investment grade rating
of BBB or better during the term, as it may be extended, of the Lease, this
Letter of Credit requirement shall be deemed waived.
In the event that Tenant exercises its option to extend the term of the Lease,
and the amount of the Letter of Credit has been reduced in accordance with the
last paragraph of this section 6, then the Letter of Credit shall be adjusted
(or replaced with a new Letter of Credit) to provide for recourse in the
original amount of Three Million Dollars ($3,000,000,00).
During the last eighteen (18) months of the then-current term of the Lease
(including any extension term), if Tenant has not exercised an option to extend
the then current term. Tenant shall have the right to reduce the amount of the
Letter of Credit from time to time so long as the amount of the Letter of Credit
is not reduced below an amount necessary to pay the
<PAGE>
greater of i) any rent due under this Lease for the term remaining at the time
of any such reduction, or ii) three (3) months' rent.
7. EASEMENT.
Tenant has reviewed the text of certain reciprocal easement agreements that
provide for maintenance and repair of those easements and roads by Landlord.
This section is intended to clarify that, as this is a NNN lease, Tenant will
bear responsibility for any maintenance and repair obligations connected with
these easements, but that Landlord retains the responsibility to replace any
such easements that may be destroyed or otherwise become unusable, except as
such use is impaired by failure to repair or maintain.
<PAGE>
EXHIBIT A
------- -
LEGAL DESCRIPTION
<PAGE>
EXHIBIT B
---------
SITE PLAN
<PAGE>
EXHIBIT C
---------
LETTER OF CREDIT
<PAGE>
EXHIBIT D
---------
AIR CONDITIONING EQUIPMENT
<PAGE>
EXHIBIT E
---------
WORK LETTER AGREEMENT
<PAGE>
EXHIBIT F
---------
ENVIRONMENTAL REPORTS
<PAGE>
EXHIBIT G
---------
ESTOPPEL CERTIFICATE
<PAGE>
EXHIBIT A-l
WORK LETTER AGREEMENT
---- ------ ---------
October 2, 1996
To: Pure Atria Corporation
1309 S. Mary Avenue
Sunnyvale, California 94087
Re: Premises Located at:
18880 Homestead Road
Cupertino, California
Gentlemen:
Simultaneously with the execution of this Workletter Agreement
("Workletter), you ("Tenant") and the undersigned ("Landlord") are entering into
a lease agreement (the "Lease" ) pertaining to the space referred to above (the
"Premises"). Capitalized terms used herein shall have the meanings ascribed to
them in the Lease, unless otherwise defined herein.
In consideration of the covenants contained in this Workletter and in
the Lease, Landlord and Tenant agree as follows:
1. Work. Tenant, at its sole cost and expense (but subject to
-----
Landlord's Contribution under Paragraph 8(b) below), shall perform or cause to
be performed the work (the "Work") in the Premises provided for in the Plans and
Specifications (as defined in Paragraph 2 hereof) submitted to and approved by
Landlord. Tenant's Work shall be constructed in the highest and workmanlike
standards, in accordance with the requirements set forth herein and in
compliance with all applicable laws, ordinances, codes, and other governmental
requirements. Tenant's Work shall include well defined description of T.I.'s.
Tenant shall commence the construction of the Work promptly following (i)
Landlord's delivery of the Completed Shell (as defined in the Lease) to Tenant
and (ii) completion of the preconstruction activities provided for in Paragraph
2 below and shall diligently proceed without delay with all such construction.
Both Tenant and Landlord shall
<PAGE>
coordinate their Work so as to avoid interference with any other work being
performed by or on behalf of Landlord or Tenant at the Building.
2. Preconstruction Activities.
--------------- -----------
(a) Prior to commencement of any Work, Tenant shall submit the following
information and items to Landlord for Landlord's review and written approval, as
specified below, which approval shall not be unreasonably withheld or delayed:
(i) an itemized statement of the estimated construction cost, including
permits and architectural and engineering fees and consultant costs;
(ii) the names and addresses of all of Tenant's consultants, contractors
(and the contractors' subcontractors) to be engaged by Tenant for the
Work ("Tenant's Contractors). Landlord has the right of approval of
Tenant's General Contractor, and has given its approval for J.M.
O'Neill, Inc. J.M. O'Neill shall employ persons or entities as
subcontractors or consultants in its discretion, and
(iii) Certificates of Insurance as hereinafter described. Tenant shall
not permit Tenant's Contractors to commence work until the required
insurance has been obtained and certificates reasonably satisfactory
to Landlord have been delivered to Landlord.
Tenant will update such information and items by written notice to
Landlord of any intended changes, and said changes shall not take place without
prior written Landlord approval, which approval shall not be unreasonably
withheld or delayed.
(b) As used herein the term "Plans" shall mean full and detailed architectural
and engineering plans and specifications covering the Work (including, without
limitation, architectural, structural, mechanical, electrical, life safety, fire
protection and plumbing working drawings for the
Tandem Workletter
Workltr.5
October 2, 1996
<PAGE>
Work). The Plans shall be subject to Landlord's approval and the approval of all
local governmental authorities requiring approval if any. The Plans shall be
submitted to Landlord for review and comment at the 50%, 75% and 100% completion
stages. If Landlord notifies Tenant that changes are required to the final Plans
submitted by Tenant, Tenant shall, within five (5) business days thereafter,
submit to Landlord, for its approval, the Plans amended in accordance with the
changes so required. Such submission of revised Plans shall be accompanied by a
written response from Tenant specifically responding to any disapprovals or
other responses delivered by Landlord to Tenant. The Plans shall also be
revised, and the Work shall be changed, to incorporate any work required in the
Premises by any local governmental field inspector. Landlord's approval of the
Plans shall in no way be deemed to be acceptance or approval of any element
therein contained which is violation of any applicable statutes, laws,
ordinances, orders, codes, rules, regulations, building or fire codes or other
governmental requirements. Tenant's ADA and Title 24 requirements are those set
forth in the second grammatical paragraph of Paragraph 1 of the Addendum to
Lease: Tenant shall have the responsibility to cause the restroom cores,
interior doors, and other interior areas to comply with ADA. For purposes of
this provisions, the elevator, exterior doors and any other parts of the
Building which are not a part of the interior of the Building shall not be
deemed to be areas for which Tenant has responsibility for ADA.
(c) No Work shall be undertaken or commenced by Tenant in the
Premises until:
(i) all necessary building permits have been obtained by Tenant;
(ii) all required insurance coverages have been obtained by Tenant
and certificates received and approved by Landlord (failure of
Landlord to receive evidence of such coverage upon commencement
of the Work shall not waive Tenant' s obligations to obtain such
coverages);
Tandem Workletter
Workltr.5
October 2, 1996
<PAGE>
(iii) items required to be submitted to Landlord prior to
commencement of construction of the Work have been so submitted
and have been approved in writing, where required;
(iv) Landlord has given written notice that the Work may proceed, and
subject to the contractor regulations for the building
identified on Attachment A attached hereto and incorporated
herein.
3. Delays. In the event Tenant, for any reason other than Landlord caused
-------
delays, and force majeure is unable to complete the Work on or before the
scheduled commencement date of the term of the Lease, Tenant shall be
responsible for rent and all other obligations as set forth in the Lease from
the scheduled date for the commencement date under the Lease, regardless of the
degree of completion of the Work on such date, and no such delay in completion
of the Work shall relieve Tenant of any of its obligations under said Lease.
4. Landlord's Overhead. Subject to Paragraph 8 below, Tenant shall be
----------- ---------
responsible for all reasonable costs and expenses attributable to the Work.
Landlord shall make no charges to Tenant in connection with its review,
administration and approval of Tenant's Plans.
5.Change Orders. All changes to the final Plans must be effected by
--------------
written change orders ("Change Orders") in accordance with the following
procedure. Tenant must notify Landlord of all Change Orders. Tenant need not
obtain the prior consent of Landlord for Change Orders which do not increase or
decrease the cost of the Work by more than five thousand dollars ($5,000).
Tenant must obtain Landlord's consent to Change Orders which increase or
decrease the cost of the Work by more than $5,000 and less than $20,000 prior to
issuance of such Change Orders. Landlord will approve or disapprove any such
Change Order (i) within 48 hours after request for approval, provided that with
respect to Change Orders involving additional work by consultants, preparation
of additional drawings or the like ("Extraordinary Measures"), Tenant notifies
Landlord of the cause for the Change Order and the action Tenant is
contemplating promptly after Tenant realized that Extraordinary Measures will be
required and (ii) within a reasonable period of time if a Change Order involves
Extraordinary
Tandem Workletter
Workltr.5
October 2, 1996
<PAGE>
Measures and Tenant fails to give Landlord the notice referred to in clause (i)
immediately above. Landlord must in any event, give its approval or disapproval
within five (5) days after receipt of a request for approval. Landlord must
notify Tenant in writing within eight (8) business hours after receipt of a
request for approval whether Landlord will require additional time for approval
or disapproval (up to a maximum of three (3) days beyond the initial two (2)
days). Landlord shall have the right to the additional up-to-three (3) days only
if, at the time Landlord notifies Tenant in writing this it will require
additional time beyond the initial forty-eight (48) hours, Landlord has already
delivered to its consultants all material necessary for such consultants to
assist Landlord in rendering its approval or disapproval of the proposed change
order. If Landlord has not satisfied the conditions for such extended review
period within the initial forty-eight (48) hour period identified above and has
not given its approval or disapproval within such initial forty-eight (48) hour
period, Landlord shall be deemed to have approved the proposed change order.
Tenant must obtain Landlord's consent to Change Orders which increase or
decrease the cost of the Work by more than $20,000 prior to issuance of such
Change Orders. Landlord will notify Tenant of its approval or disapproval
within a reasonable period of time, which time period will be shortened if
Tenant gives Landlord the notice described in clause (i) above. Landlord must in
any event, give its approval or disapproval within five (5) days after receipt
of a request for approval. Landlord must notify Tenant in writing within eight
(8) business hours after receipt of a request for approval whether Landlord will
require additional time for approval or disapproval (up to a maximum of three
(3) days beyond the initial two (2) days). Landlord shall have the right to the
additional up-to-three (3) days only if, at the time Landlord notifies Tenant in
writing this it will require additional time beyond the initial forty-eight (48)
hours, Landlord has already delivered to its consultants all material necessary
for such consultants to assist Landlord in rendering its approval or disapproval
of the proposed change order. If Landlord has not satisfied the conditions for
such extended review period within the initial forty-eight (48) hour period
identified above and has not given its approval or disapproval within such
initial forty-eight (48) hour period, Landlord shall be deemed to have approved
the proposed change order.
Tandem Workletter
Workltr.5
October 2, 1996
<PAGE>
Tenant is liable for all work begun on a change order without Landlord's written
approval, for which Landlord does not grant approval. Subject to Paragraph 8
below, Tenant shall be responsible for all cost and expenses attributable to any
changes. All delays caused by Tenant initiated change orders, including, without
limitation, any stoppage of work during the change order review process, are
solely the responsibility of Tenant and shall cause no delay in the commencement
date, or payment of rent and performance of other obligations set forth in the
Lease. Landlord shall have a reasonable time to review any such changes and
shall not be coerced into approval due to the lateness of Tenant's delivery of
the change order or pending commencement of rent. Landlord shall make every
attempt to review and/or approve Tenant's change request, so as not to delay
construction. In no event shall Landlord's approval, or deemed approval relieve
Tenant of its obligations to conform to all applicable rules, regulations and
laws.
6. Standards of Design and Construction and Conditions of Tenant's
--------- -- ------ --- ------------ --- ---------- -- --------
Performance. All work done in or upon the Premises by Tenant shall be done
- ------------
according to the standards set forth in this Paragraph 6, except as the same may
be modified in the Plans approved by or on behalf of Landlord in writing.
(a) Tenant's Plans and all design and construction of the Work shall comply
with all applicable statutes, ordinances, laws, building and fire codes as well
as other governmental requirements. Approval by Landlord of the Plans shall not
constitute a waiver of this requirement or assumption by Landlord of
responsibility for compliance.
(b) Tenant shall obtain, at its sole cost and expense, all required plan
check fees and building permits and, when construction has been completed, shall
obtain an occupancy permit for the Premise. A copy of said permit shall be
delivered to Landlord. Tenant's failure to obtain such permits shall not cause a
delay in the commencement of the Lease or the rental and other obligations
therein set forth.
(c) Tenant's Contractors shall be licensed by the State of California,
possessing good labor relations, capable of performing quality workmanship and
working in harmony with Landlord's contractors and
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subcontractors and with other contractors and subcontractors hired by Tenant.
Any scheduling conflict between Tenant's contractors and the contractors of the
Landlord shall be resolved by Landlord, with the understanding that Landlord
shall diligently strive to avoid delaying Tenant from meeting its Lease
commencement date.
(d) If Tenant doesn't do so in a timely manner, Landlord shall have the
right (but not the obligation) to perform on behalf of and at Tenant's cost, any
work necessary to remedy or mitigate any emergency situation related to
structural components, building systems, general utility systems or patching of
the Work or of any other work in the Building.
(e) Tenant shall use only new materials that are of good quality in every
particular in the Work, except where explicitly shown otherwise in the Plans and
approved in writing by Landlord. Tenant warrants to Landlord that all materials,
supplies and equipment furnished by Tenant for the Work shall be new,
merchantable, of the most suitable grade, and fit for their intended purposes.
Notwithstanding the foregoing, Tenant may install the two (2) used Pace air
handlers described on Exhibit "A" attached hereto, but the following repairs
must be made: i) fan motors must be replaced with Premium Efficiency motors if
required by local zoning regulations and ii) replace fan drives (belts due to
age, and pulleys if they appear rusted, and replace fan bearings, install new
Variable frequency drives for static pressure control.
Tenant shall obtain warranties of at least one (l) year's duration from the
completion of the Work against defects in workmanship and materials on all work
performed and equipment installed in the Premises as part of the Work, which
shall enure to Landlord should Tenant default on or abandon the lease.
(f) deleted
(g) After written notice to Tenant and failure of Tenant to promptly cure
any violation, Landlord shall have the right to order Tenant or any of Tenant's
Contractors who violate material requirements imposed on Tenant or Tenant's
Contractors in performing work and consequently endanger person or property or
otherwise materially disturb the adjoining neighbors,
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to cease work and remove its equipment and employees from the Building. No such
action by Landlord shall delay the commencement of the Lease or the rental and
other obligations therein set forth.
(h) Utility costs or charges for any service to accommodate the Work to the
Premises shall be the responsibility of Tenant from the date Tenant is obligated
to commence or commences the Work and shall be paid for by Tenant. Tenant shall
arrange and pay for removal of construction debris and shall not place debris in
any of Landlord's waste containers, and shall reimburse Landlord for costs
incurred by Landlord in cleaning the Premises or adjoining area caused by
Tenant's work.
(i) Tenant shall permit access to the Premises, and the Work shall be
subject to inspection, by Landlord and Landlord's architects, engineers,
contractors and other representatives at all times during the period in which
the Work is being constructed and installed and following completion of the
Work. Such inspections by Landlord shall not delay Tenant's construction work,
except where safety or threat to life causes Landlord to order work to cease.
(j) Tenant shall proceed with its work with due diligence. Tenant shall
notify Landlord upon completion of the Work and shall furnish Landlord with such
further documentation as may be necessary under Paragraph 8 below.
(k) Except as provided in Paragraph 5 above, Tenant shall have no authority
to deviate from the Plans in performance of the Work, except as authorized by
Landlord and its designated representative in writing. Tenant shall furnish to
Landlord "as-built" drawings of the Work within thirty (30) days after
completion of the Work.
(l) deleted
(m) Tenant shall impose on and enforce all applicable terms of this
Workletter against Tenant's consultants and Tenant's Contractors.
7. Insurance and Indemnification.
--------- --- ---------------
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(a) In addition to any insurance which may be required under the Lease,
Tenant shall secure, pay for and maintain or cause Tenant's Contractors to
secure, pay for and maintain during the continuance of construction and
fixturing work within the Building or Premises, insurance in the following
minimum coverages and limits of liability:
(i) Workers' compensation and employer's liability insurance, with limits
---------------------------------------------------------
of not less than $1,000,000, or such higher amounts as may be
required from time to time by employee benefit acts or other statutes
applicable in the Sate of California.
(ii) Commercial General Liability Insurance: (including owner's
---------- ------- --------- ----------
contractors' protective liability) in an amount not less than
$2,000,000.00 per occurrence, whether involving bodily injury
liability (or death resulting therefrom) or property damage liability
or a combination thereof with a minimum aggregate limit of
$2,000,000.00. Such insurance shall provide for explosion and
collapse, completed operations coverage and contractual liability
coverage and shall insure Tenant's Contractors against any and all
claims for bodily injury, including death resulting therefrom, and
damage to the property of others and arising from its operations
under the contracts whether such operations are performed by Tenant's
Contractors or by anyone directly or indirectly employed by any of
them;
(iii) Comprehensive Automobile Liability Insurance: including the
------------- ---------- --------- ----------
ownership, maintenance and operation of any automotive equipment,
owned, hired or non-owned, in an amount not less than $500,000.00 for
each person in one accident and $1,000,000.00 for injuries sustained
by two or more persons in any one accident, and property damage
liability in an amount not less than $1,000,000.00 for each accident.
Such insurance shall insure Tenant's Contractors against any and all
claims for bodily injury, including death resulting therefrom, and
damage to the property of others arising from its operations under
the contracts, whether such operations are performed by Tenant's
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<PAGE>
Contractors or by anyone directly or indirectly employed by any of
them;
(iv) "all risk" builder's risk insurance upon the entire Work to the full
---- ---- --------- ---- ---------
insurable value thereof. This insurance shall include the interests
of Landlord and Tenant (and their respective contractors and
subcontractors of any tier to the extent of any insurable interest
therein) in the Work and shall insure against the perils of fire and
extended coverage and shall include "all risk" builder' s risk
insurance for physical loss or damage including, without duplication
of coverage, theft, vandalism and malicious mischief. If portions of
the Work are stored off the site of the Building or in transit to
said site are not covered under said "all risk" builder's risk
insurance, then Tenant shall effect and maintain similar property
insurance on such portions of the Work. Any loss insured under said
"all risk" builder's risk insurance is to be adjusted with Landlord
and Tenant and made payable to Landlord as trustee for the insureds,
as their interests may appear.
All polices (except the workers' compensation policy) and any certificate
evidencing the existence of such policy shall be endorsed to include as
--
additional insured parties Landlord ("Tandem Computers Incorporated, its
directors, officers, employees and agents) with respect to (ii) and (iii) above.
The waiver of subrogation provisions contained in the Lease shall apply to all
insurance policies (except the workers' compensation policy) to be obtained by
Tenant pursuant to this Paragraph. The insurance policy endorsements shall also
provide that all additional insured parties shall be given thirty (30) days'
prior written notice of any reduction, any material change, cancellation or
nonrenewal of coverage (except that ten (10) days' notice shall be sufficient in
the case of cancellation for nonpayment of premium) and shall provide that the
insurance coverage afforded to the additional insured parties thereunder shall
be primary to any insurance carried independently by said additional insured
parties. Each of the insurance policies shall be issued by insurance companies
reasonably acceptable to Landlord. At least five (5) days prior to commencement
of services under this Agreement, Tenant shall furnish Landlord with a
certificate of insurance evidencing each of the above-mentioned policies.
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<PAGE>
Neither the issuance of any insurance policy required under this Agreement, nor
the minimum limits specified herein with respect to Tenant's insurance coverage,
shall be deemed to limit or restrict in any way Tenant's liability arising under
or in connection with the goods or services provided pursuant to, or the
performance or nonperformance of, this Agreement.
(b) Without limitation of the indemnification provisions contained in the
Lease, but except as hereinafter waived, to the fullest extent permitted by law,
except to the extent caused by the active negligence or misconduct of Landlord
or its employees, agents, contractors or invitees, Tenant agrees to indemnify,
protect, defend and hold harmless Landlord, Landlord's agent, Landlord's
contractors and Landlord's architects and their partners, directors, officers,
employees and agents, from and against all claims, liabilities, losses, damages
and expenses of whatever nature arising out of or in connection with performance
of the Work or the entry of Tenant or Tenant's Contractors into the Building and
the Premises, including, without limitation, mechanics' liens or the cost of any
repairs to the Premises or Building necessitated by activities of Tenant or
Tenant's Contractors and bodily injury to persons or damage to the property of
Tenant, its employees, agents, invitees or licensees or others. It is understood
and agreed that the foregoing indemnity shall be in addition to the insurance
requirements set forth above and shall not be in discharge of or in substitution
for same or any other indemnity or insurance provision of the Lease. The
indemnification provisions of this section are nevertheless subject to the
waiver of subrogation provisions of the Lease.
(c) Landlord shall maintain, at Landlord's cost, an "all risk" builder's
risk policy of insurance covering the building's shell as it is being
constructed, up through and including the Commencement Date, as that term is
used in the Lease.
8. Landlord's Contribution: Excess Amounts.
---------- ------------- ------ --------
(a) Landlord shall make a dollar contribution ("Landlord's Contribution")
in an amount of $2,504,860 for application to the extent thereof to the cost of
the Work (including, without limitation, payment of architectural and
engineering building and permit fees and construction costs). Landlord's
Contribution shall be applied as the Work progresses. If
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the cost of the Work exceeds Landlord's Contribution, Tenant shall have sole
responsibility for the payment of such excess cost. Should Tenant fail to
complete the Work, Landlord shall have the right to draw down the Letter of
Credit in a sufficient amount to complete the Work and to reimburse Landlord for
any excess costs and damages suffered as a result of Tenant's failure to
complete the Work. If the cost of the Work is less than Landlord's Contribution,
Tenant shall be entitled to a credit against Base Rent next due and payable
under the Lease in an amount equal to 50% of any such unused portion of
Landlord's Contribution. Landlord's and Tenant's payments for the Work shall be
made prorata as costs of the Work are incurred based on the then most current
estimate of the cost of the Work submitted to and approved by Landlord under
Paragraph 2(a) above.
(b) Periodically, but no more frequently than once per month, Tenant may
submit to Landlord a payment request for costs of the Work incurred and not
previously paid. Requests for payment of Tenant Improvement Costs (less a ten
percent (10%) retention) received by Landlord by the twenty-fifth (25th) day of
a calendar month, accompanied by all documentation required hereunder, shall be
paid by the tenth (10th) day of the next succeeding calendar month. Each monthly
payment request shall be paid by a single check made payable to Tenant, except
that Landlord shall have the right to issue joint checks to Tenant and the Prime
Contractor.
Each monthly progress request for payment of Tenant Improvement Costs shall be
accompanied by the following:
(i) an itemized application for payment in the form of an application
and certification for payment (AIA Document G702) confirming the
character and amount of the cost for which payment is requested;
(ii) Certification from the Project Architect that the construction
which is the subject of any payment request has been completed or
properly stored and substantially conforms to the Approved Plans; and
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(iii) Original conditional waivers of lien form each of Tenant's
contractors and all materialmen and vendors requesting payment
covering the requested payment.
Payment of the ten percent (10%) retention shall be made by Landlord to Tenant
upon certification of the Project Architect that the Tenant's Work (including
all "punch-list items) has been completed.
(c) Within thirty (30) days after final completion and installation
of the Work, Tenant shall submit to Landlord a detailed breakdown of the total
amount of costs of the Work, together with final waivers of liens, contractors'
affidavits, and architects' certificates in such form as may be reasonably
required by Landlord, Landlord's title insurance company and Landlord's lender,
if any, from all parties performing labor or supplying materials or services in
connection with the Work, showing that all of said parties have been compensated
in full and waiving all liens in connection with the Premises and Building.
(d) Any and all tenant improvements shown on Tenant's space plan, as
provided to and approved by Landlord, need not be removed at the end of the
Lease Term.
9. Miscellaneous.
-------------
(a) Except as expressly set forth herein or in the Lease, Landlord
has no agreement with Tenant and has no obligation to do any work with respect
to the Premises.
(b) deleted
(c) Time is of the essence under this Workletter.
(d) Any person signing this Workletter on behalf of Landlord and/or
Tenant warrants and represents he has authority to do so.
(e) If Tenant fails to make any payment relating to the Work as
required hereunder, and such failure is not caused by Landlord's failure to
disburse Landlord's Contribution as required hereunder and neither makes
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<PAGE>
such payment or "bonds over" such payment within the ten (10) day period
following Tenant's receipt of written notice from Landlord that such payment is
past due Landlord, at its option, may complete the Work pursuant to the approved
Plans and continue to hold Tenant liable for the costs thereof. Both Tenant's
and Landlord's failures to perform their obligations hereunder shall constitute
a breach of the Lease. No such breach by Tenant shall become an "Event of
Default" until the giving of notice and the passage of the applicable cure
period specified in Article 14 of the Lease without cure (or without the
commencement of cure during such applicable time period and the prosecution of
such cure thereafter until completion if the cure cannot reasonably be effected
within the applicable cure period).
(f) Notices under this Workletter shall be given in the same manner as
under the Lease.
(g) The headings set forth herein are for convenience only.
(h) This Workletter sets forth the entire agreement of Tenant and
Landlord regarding the Work. This Workletter may only be amended if in writing
and duly executed by both Landlord and Tenant.
10. The terms and provisions of the Lease, insofar as they are applicable to
this Workletter, are hereby incorporated herein by reference.
11. All amounts payable by Tenant to Landlord hereunder shall be deemed to be
Rent under the Lease and upon any Event of Default, Landlord shall have all of
the rights and remedies provided for in the Lease.
12. The attachment "Construction Requirements" are incorporated herein.
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<PAGE>
IN WITNESS WHEREOF, this Workletter is executed as of this day of , 1996.
TENANT: LANDLORD:
PURE ATRIA CORPORATION TANDEM COMPUTERS, INC.
a Delaware corporation A Delaware corporation
By______________________ By: _________________________
Name: Name:
Title: Title:
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<PAGE>
ATTACHMENT TO WORKLETTER - A
CONTRACTOR REGULATIONS
1. Prior to commencement of construction, Tenant shall have all utilities (gas,
water, electricity, sewer, sprinkler monitoring, etc.) placed in its name for
billing and use purposes.
2. The landscaping and irrigation will be turned over to Tenant at the time of
construction. Maintenance and repairs will be the responsibility of Tenant and
Contractors.
3. Tenant, its consultants and contractors shall strictly observe Cupertino's
Noise Ordinance regarding start and cessation times of construction work, both
on work days and weekends.
4. Tenant should be advised that the parking lot and driveways will have been
recently repaired and resurfaced. Care should be taken in the placement of
construction trailers, storage containers, equipment and material, so as not to
damage this surface.
5. Construction materials not stored inside the building, may be stored at the
parking garage. However, the security of these materials is solely the
responsibility of Tenant and its contractors. A temporary security fence around
these materials is recommended.
6. Construction debris will not be allowed to remain outside the building for
longer than 24 hours. It must be removed or placed in a construction debris box
Owner's trash containers are not to be used for this purposes under any
circumstances. Evidence to the contrary will result in Tenant being backcharged
for dump fees of Owner's trash containers. Tenant should contact Los Altos
Garbage and make arrangements for debris containers and trash removal
7. It is strongly recommended that the newly installed elevator not be used
during construction, as access to both floors of the building can be reached
from the exterior without use of the elevator. Damage to the new elevator may
void the 1 year warranty commencing on or about 9/15/96.
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8. Tenant must notify and obtain prior written approval from Owner before using
any helicopter service for the purpose of lifting equipment onto the roof. A
crane is recommended for this purpose.
9. Deliveries to the building must not block the public streets of Forge or
Swallow drive longer than for the purpose of maneuvering the vehicles onto the
site.
10. All contractors must comply with federal and state OSHA requirements, as
well as have in placed and comply with a written company safety program.
11. Contractors working within the building must have and be prepared to furnish
Material Safety Data Sheets (MSDS) for all chemicals, solvents, glues, etc. used
during the course of construction.
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<PAGE>
EXHIBIT 10.19
KILN BROOK II
81 HARTWELL AVENUE
LEXINGTON, MASSACHUSETTS 02173
LEASE dated September 23, 1996
Article I
REFERENCE DATA
1.1 SUBJECTS REFERRED TO
Each reference in this Lease to any of the following subjects shall be
construed to incorporate the data stated for that subject in this Article.
LANDLORD: ADVENT REALTY LIMITED PARTNERSHIP
LANDLORD'S ORIGINAL ADDRESS: 45 Milk Street, Boston, MA 02109
TENANT: ATRIA SOFTWARE, INC.
TENANT'S ORIGINAL ADDRESS: 20 Maguire Road, Lexington, MA
TERM COMMENCEMENT DATE: September 23, 1996
RENT COMMENCEMENT DATE: November 23, 1996
TERM EXPIRATION DATE: December 31, 2001
ANNUAL BASIC RENT: $546,024.60 ($19.80 x 27,577)
TENANT ELECTRICITY COST: $23,440.45 ($.85 x 27,577)
TENANT ELECTRICITY RATE: $.85 per rentable square foot
BASE OPERATING EXPENSES PER SQUARE FOOT: Landlord's Operating Expenses for the
first twelve (12) full calendar months after the Term Commencement Date divided
by the Total Rentable Floor Area of the Building
LAND: The land on Hartwell Avenue in Lexington, Massachusetts and known as 81
Hartwell Avenue, shown on Exhibit A attached hereto.
<PAGE>
BUILDING: The entire office building on the Land.
TOTAL RENTABLE FLOOR AREA OF THE BUILDING: 76,440 Square Feet
PREMISES: The space on the third floor of the Building shown on Exhibit B,
attached to this Lease
RENTABLE FLOOR AREA OF THE PREMISES: 27,577 Square Feet
USEABLE FLOOR AREA OF THE PREMISES: 24,113 Square Feet
PERMITTED USES: General office uses consistent with a first-class office
building including without limitation software engineering and development,
software training, packaging and distribution, all to the extent permitted by
applicable law.
SECURITY DEPOSIT: See Article X
PUBLIC LIABILITY INSURANCE: $1,000,000
LANDLORD'S MANAGING AGENT: Graystone Corporation
ADDRESS OF LANDLORD'S MANAGING AGENT: 1100 Massachusetts Avenue
Cambridge, Massachusetts
02138
BROKER: McCall & Almy and Whittier Partners
TENANT'S AUTHORIZED REPRESENTATIVE: Chuck Bay
LANDLORD'S AUTHORIZED REPRESENTATIVE: John Kiger
Frederick Dupree
MAGUIRE ROAD LEASE: The Lease between Landlord and Tenant, dated
March 18, 1995 for premises located in Kiln Brook V, 20
Maguire Road, Lexington, Massachusetts ("Kiln Brook V
Premises").
ARTICLE II
2
<PAGE>
PREMISES, TERM, RENT, OPERATING
EXPENSES AND TAXES
2.1 PREMISES AND EXCLUSIONS
Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the
Premises in an "As-Is" condition, free of all occupants and in broom clean
condition and free of all personal property not owned by Tenant.
Notwithstanding the foregoing, Landlord agrees that, at the time the Premises
are delivered to Tenant, the electrical and mechanical systems serving the
Premises shall be in good working order and condition and, if required, Landlord
shall install a back-flow prevention device to prevent water in the fire
sprinkler pipe system from flowing into the Building's potable water supply.
The Premises specifically exclude the "Common Areas and Facilities", as
defined in Section 2.2.
Landlord shall provide Tenant with not less than 3.25 parking spaces per
1,000 square feet of rentable floor of the Premises in the parking areas
adjacent to the Building. Such parking shall be in common with Landlord, other
tenant's and occupants of the office Park and their respective employees,
customers and invitees.
This Lease is subject to all easements, restrictions, agreements, and
encumbrances of record to the extent in force and applicable. To the best of
Landlord's knowledge, there are no easements, restrictions, agreements or
encumbrances of record which would prohibit or materially interfere with the use
of the Premises by Tenant for the Permitted Use.
2.1.1. Space Planning. Intentionally Deleted.
--------------
2.1.2. Landlord's Work. Intentionally Deleted.
---------------
2.1.3. Tenant's Work. Tenant shall perform any construction work
-------------
necessary or desired for Tenant's use and occupancy of the Premises ("Tenant's
Work"), subject to Landlord's prior review and approval of the plans and
specifications for such construction work, which approval shall not be
unreasonably withheld or delayed. Prior to beginning Tenant's Work, Tenant shall
obtain "all risk" "builder's risk insurance," so-called, insuring both Landlord
and
3
<PAGE>
any overlessor, as well as Tenant, against any claims for property damage,
personal injury, death, and for any other type of loss or damage arising out of
or occasioned by or connected in any way with Tenant's Work, together with any
other insurance coverage which may be required by law. Tenant shall furnish
Landlord with certificates of the issuance of all insurance prior to beginning
Tenant's Work. All insurance shall be maintained in force until Tenant's Work
has been completed and shall be in amounts reasonably satisfactory to Landlord.
Tenant shall commence Tenant's Work promptly after receipt of Landlord's
approval of Tenant's plans and specifications (but not before the Commencement
Date) and shall diligently prosecute the same to completion. Landlord's
approval of Tenant's plans and specifications for Tenant's Work shall create no
responsibility or liability on the part of Landlord for their completeness,
design sufficiency, or compliance with all laws, rules and regulations of
governmental agencies or authorities.
2.1.4. Temporary Space. Intentionally Deleted.
---------------
2.1.5. Tenant Improvement Allowance. Landlord agrees to provide Tenant
----------------------------
with a "Tenant Improvement Allowance" for costs of construction related to
Tenant's Work of up to but not more than $14.00 per square foot ($386,078).
Such payment shall be made within thirty (30) days following Landlord's
receipt of third-party invoices for actual work performed in accordance with
the plans and specifications approved by Landlord in advance, together with
"as-built" plan(s) showing the completion of such work, lien waivers
reasonably satisfactory to Landlord from contractors or others performing the
work or supplying the labor or material, and reasonable evidence that such
work has been completed in accordance with all applicable laws, rules,
regulations and ordinances. For the purposes hereof, "reasonable evidence" of
completion shall be the issuance or a certificate of occupancy and any other
certificates of compliance or completion required by applicable governmental
authorities. Such work shall be performed by a contractor or contractors
selected by Tenant and approved in writing by Landlord (such approval shall
not be unreasonably withheld, conditioned or delayed). Tenant shall be
responsible for and shall pay directly and indemnify Landlord from and against
any construction costs related to Tenant's Work in excess of the Tenant
Improvement Allowance. Notwithstanding anything herein to the contrary,
Landlord agrees that, provided the Tenant Improvement Allowance exceeds the
total proposed cost and expense of Tenant's
4
<PAGE>
construction work on the Premises ("Tenant's Improvement Costs"), on the basis
of the construction budget formulated by Tenant and the Architect before the
commencement of construction (as amended from time to time), and approved by
Landlord (which approval shall not be unreasonably withheld or delayed), Tenant
may add to Tenant's Improvement Costs and Landlord shall reimburse Tenant for,
up to the limit of the Tenant Improvement Allowance, the cost of (i) fees of
architects and construction managers incurred in connection with Tenant's Work,
and (ii) furniture, fixtures and business equipment to be incorporated into the
Premises, including by way of example and without limitation, office cubicles
and voice and data cabling. To the extent that any such furniture, fixtures and
equipment are paid for with the Tenant Improvement Allowance ("Financed FFE"),
such Financed FFE shall be the property of Landlord for the duration of the
initial five-year term of this Lease. If this lease shall terminate prior to the
expiration of the initial five-year term, Tenant may remove the Financed FFE
only after paying to Landlord the unamortized and unreimbursed cost of the
Financed FFE, which shall be determined by multiplying the original cost thereof
by a fraction, the numerator of which is the number of months remaining in the
initial five-year term at the time of such termination and the denominator of
which is 60. Provided there are funds available under the Tenant Improvement
Allowance for any Financed FFE (based on the construction budget), then until
the Tenant Improvement Allowance is reached, Landlord shall pay funds available
from the Tenant Improvement Allowance for the Financed FFE to Tenant within ten
(10) days following Tenant's written request, which request shall include
invoices and other reasonable substantiating documentation. If Tenant elects to
use the Tenant Improvement Allowance for the Financed FFE to the extent
permitted herein, and change orders or other events result in the Tenant
Improvement Costs (inclusive of any Financed FFE) exceeding the Tenant
Improvement Allowance, Tenant agrees to promptly pay to or reimburse Landlord
for, as appropriate, any such costs in excess of the Tenant Improvement
Allowance, it being the parties intention and understanding that Landlord shall
not be required to go "out-of-pocket" in excess of the Tenant Improvement
Allowance. Tenant shall not be entitled to receive, by payment, credit or
otherwise, any unused portion of the Tenant Improvement Allowance. The payment
of the Tenant Improvement Allowance to Tenant shall be subject to the following
conditions:
5
<PAGE>
(1) The improvements shall be made to the Premises within twelve (12)
months of the date hereof. If Tenant fails to make such improvements within
said twelve (12) month period, the Annual Basic Rent hereunder shall be
appropriately reduced to reflect the actual total amount of the Tenant
Improvement Allowance that was not disbursed to Tenant. Such reduction shall be
calculated by amortizing the undisbursed portion of the Tenant Improvement
Allowance on a straight-line basis over the remaining Term of the Lease
beginning with the next succeeding calendar year. Landlord and Tenant shall
promptly execute an Amendment of Lease to incorporate such change.
(2) In the event Tenant is in default of this Lease (after the expiration
of any applicable notice or cure period) at the time Landlord's payment of
Tenant's Improvement Allowance is due to Tenant, Landlord shall have the right
to setoff and deduct from the Tenant Improvement Allowance due to be paid to
Tenant any sums then due from Tenant to Landlord.
2.1.6 HVAC UPGRADE. In accordance with Section 2.1.6 of the Maguire Road
------------
Lease, Landlord agreed that, upon Tenant's written request, if given within
eighteen (18) months after the Term Commencement Date of the Lease, Landlord
would perform an "HVAC Upgrade" (as defined therein) and provide the "Shared
Upgrade Allowance" therefor. Tenant has not requested an HVAC Upgrade under the
Maguire Road Lease. Landlord hereby agrees to extend the deadline for
requesting an HVAC Upgrade under the Maguire Road Lease to December 31, 1996,
and further agrees that, subject to the terms and conditions of said Section
2.1.6 of the Maguire Road Lease, Tenant may also request an HVAC Upgrade for the
HVAC system serving either the Kiln Brook V Premises or the Premises demised
hereunder, by written request to Landlord on or before December 31, 1996,
provided that Landlord's aggregate contribution to the cost and expense for any
HVAC Upgrade work, to either the Kiln Brook V Premises or the Premises, shall be
limited to the Shared HVAC Allowance, and Tenant shall pay the full amount of
any such cost in excess of $25,000 as specified in the Maguire Road Lease. If
any balance of the Tenant Improvement Allowance remains after the completion of
Tenant's Work, Landlord shall first apply such balance against the cost and
expense of the HVAC Upgrade before applying, or requiring Tenant to pay, any
portion of the Shared Upgrade Allowance.
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2.2 APPURTENANT RIGHTS
Tenant shall have, as appurtenant to the Premises, the right to use, in
common with Landlord and other Building tenants (subject to reasonable rules of
general application promulgated from time to time by Landlord), those portions
of the Common Areas and Facilities necessary for access to, or for the use and
enjoyment of, the Premises, such as all parking and loading areas on the Land,
all entrances, driveways, service roads, sidewalks and walkways providing access
to such parking areas or the Land or the Building, all lobbies, entrances,
corridors, elevators, stairways and stairwells providing access to the Premises,
all rest rooms located on the same floor as any portion of the Premises, the
shower facilities on the first floor of the Building, and all pipes, ducts,
conduits, wires and other fixtures and mechanical systems serving the Premises
in common with the rest of the Building) (collectively, the "Common Areas and
Facilities"). Tenant shall also have the right to use the cafeteria in the
neighboring building commonly known as 81 Hartwell Avenue, Lexington,
Massachusetts, provided Landlord reserves the right to relocate said cafeteria
to another location within 81 Hartwell Avenue or to the Building.
2.3 RESERVATIONS
Landlord reserves the right from time to time, upon reasonable advance
notice (except in emergency): (a) to install, use, maintain, repair, replace and
relocate for service to the Premises and other parts of the Building, or either,
pipes, ducts, conduits, wires and appurtenant fixtures, wherever located in the
Premises or Building; and (b) to alter or relocate any other Common Area and
Facilities. Installations, replacements and relocations referred to in clause
(a) above shall be located as far as practicable in the central core area of the
Building, above ceiling surfaces, below floor surfaces or within perimeter walls
of the Premises. No such installations, replacements or relocations shall (i)
result in a reduction of the leasable area of the Premises, (ii) materially
interfere with Tenant's access to the Premises, the Building or the parking and
loading areas on the Land, or (iii) reduce the number of parking spaces
available to Tenant below the number required under Section 2.1. and Landlord
shall at all times use reasonable efforts to avoid material interference with
Tenant's use and business activities at the Premises.
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2.4 TERM
The Term shall begin at 12:01 a.m. on the "Term Commencement Date".
Notwithstanding the Term Commencement Date specified in Section 1.1, if for any
reason Landlord cannot deliver possession of the Premises to Tenant on said
date, then, except as specifically provided below, Landlord shall not be subject
to any liability therefor, nor shall such failure affect the validity of this
Lease or the obligations of Tenant hereunder; provided, however, in such a case,
the Term Commencement Date shall be postponed until possession of the Premises
is tendered to Tenant, as provided in Section 2.1, and the Rent Commencement
Date shall be postponed for the same number of days as the Term Commencement
Date is postponed.
If part, but not all, of the Premises are ready for delivery on September
23, 1996, Landlord may deliver and Tenant may elect to accept such portion of
the Premises and Landlord agrees to reimburse Tenant for the reasonable and
documented increase in the costs and expenses of Tenant's construction resulting
directly from the staggered delivery of the Premises to Tenant. If it becomes
necessary to deliver the Premises in stages, Landlord shall use its best efforts
to deliver to Tenant the "Critical Area" shown on Exhibit B on September 23,
1996 or as soon thereafter as possible.
If Landlord fails to deliver all of the Premises to Tenant on or before
December 1, 1996, Tenant shall have the right, as its sole remedy therefor, to
terminate this Lease by giving written notice to Landlord on or before December
13, 1996 (and prior to the delivery of the Premises), and upon Landlord's
receipt of such notice this Lease shall terminate and the parties shall have no
further obligations or liabilities to each other hereunder.
Landlord and Tenant shall, at the request of either after the beginning of
the Term, execute and acknowledge a verification letter specifying the Term
Commencement Date, Rent Commencement Date and Term Expiration Date and other
basic lease information, in the form attached hereto as Exhibit C.
2.5 ANNUAL FIXED RENT
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Annual Fixed Rent shall be the sum of Annual Basic Rent plus any Tenant
Electricity Cost at the rates specified in Section 1.1. Tenant covenants and
agrees to pay Annual Fixed Rent as hereinafter defined to Landlord in advance in
equal monthly installments on the first day of each calendar month during the
Term beginning on the Rent Commencement Date. All payments shall be due without
billing or demand and without deduction, setoff or counterclaim except as
otherwise specified in this Lease. If the Term includes at its beginning or end
a portion of a calendar month, the monthly installment of Annual Fixed Rent
payable with respect to such portion shall be prorated based on the number of
days in such month occurring during the Term. All payments shall be payable to
Landlord c/o Landlord's Managing Agent at its address as specified in Section
1.1, or to such other entities at such other places as Landlord may from time to
time designate.
2.6 ADDITIONAL RENT - TAXES AND OPERATING EXPENSES
2.6.1 Additional Rent - General Covenant. Tenant covenants and agrees to
pay to Landlord, as additional rent in accordance with the method set forth in
Section 2.6.2, an amount equal to the product of (a) the Rentable Floor Area of
the Premises and (b) the excess (if any) of Landlord's Operating Expenses per
square foot allocable to Tenant over Base Operating Expenses Per Square Foot (as
specified in Section 1.1). Except as provided in the next sentence, Landlord's
Operating Expenses per square foot allocable to Tenant for any period shall be
the total amount of Landlord's Operating Expenses for such period (actual or
extrapolated, as described herein) divided by the greater of (i) the actual
percentage of rentable floor area of the Building actually occupied during such
period or (ii) 95% of the Total Rentable Floor Area of the Building provided
that if less than 95% of the Total Rentable Floor Area of the Building is
occupied at any time during such period and any components of Landlord's
Operating Expenses vary based on the degree of occupancy in the Building,
Landlord may extrapolate such components of Landlord's Operating Expenses as
though the Total Rentable Floor Area of the Building had been occupied at all
times during such period. If Landlord is not obligated to furnish electricity,
cleaning and janitorial services, or any other item services, the costs of which
are included in Landlord's Operating Expenses, to all rentable areas of the
Building or if Landlord furnishes amounts of any such item services to the
Premises in return for direct reimbursement of the cost
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thereof (any such item not furnished to all rentable areas or furnished to any
rentable areas on a direct reimbursement basis is referred to as a "restricted
item"), Landlord's Operating Expenses per square foot allocable to Tenant for
any period shall be the sum of the following amounts (x) and (y):
(x) For each restricted item included in Landlord's Operating Expenses and
furnished to the Premises, the cost of such item for the period divided by the
total Rentable Floor Area of all premises to which the item is then furnished,
or if such item is a directly reimbursable item (not payable under another
provision of this Lease), the amount of direct reimbursement divided by the
Rentable Floor Area of the Premises.
(y) For all other items other than restricted items included in Landlord's
Operating Expenses, the amount per square foot thereof allocable to Tenant in
accordance with the second sentence of this Section 2.6.1.
If the Term includes less than any portion of a calendar year, Tenant's
liability hereunder shall be prorated based on the number of days in such
portion of a calendar year occurring during the Term and the nature of the
expenses allocable to such period.
2.6.2 Payment. Additional rent for Operating Expenses under this Section
2.6 shall be paid for any portion of a month at the beginning of the Term and
thereafter in monthly installments on the first day of each calendar month in
amounts reasonably estimated by Landlord for the then current year. Within 90
days after the end of each calendar year, Landlord will provide Tenant with a
written accounting, certified by a representative of Landlord, of actual
Landlord's Operating Expenses and Landlord's Operating Expenses per square foot
allocable to Tenant for the then preceding calendar year and other data
necessary to calculate additional rent hereunder prepared by Landlord in
accordance herewith and otherwise in accordance with generally accepted
accounting principles, together with the amount of the estimated monthly payment
for the ensuing year. Landlord may from time to time revise such estimate based
on more current information relating to Landlord's Operating Expenses. Upon
issuance of Landlord's annual accounting, there shall be adjustments between
Landlord and Tenant for the applicable calendar year to the end that Landlord
shall have received the exact amount of additional rent due hereunder. Any
overpayments by
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Tenant hereunder shall be credited against the next payments of additional rent
due under this Section 2.6.2, subject to the last sentence of this Section
2.6.2. Any underpayments by Tenant shall be due and payable within thirty (30)
days of receiving such accounting. With respect to the calendar year in which
the Term ends, the adjustments shall be pro rated for the portion of the year
included in the Term, but shall take place nevertheless at the times provided in
the preceding sentences; and any overpayments by Tenant in such year shall be
refunded upon such adjustment at the time of the delivery to Tenant of such
accounting.
Tenant shall have the right to audit Landlord's books and records
concerning Landlord's Operating Expenses, provided Tenant exercise such right by
written notice to Landlord within sixty (60) days following its receipt of
Landlord's annual statement, and Tenant shall conduct such audit within ninety
(90) days after its notice exercising such right, time being of the essence.
Landlord's annual statement shall be conclusive, final and binding if Tenant
does not timely exercise its audit right and conduct its audit within the time
set forth above. Any such audit shall be performed during usual business hours
at the Building Manager's office, without unreasonable interference with the
conduct of business. Tenant shall be solely responsible for the cost of
Tenant's audit, provided that in the event Landlord annual statement overstates
Operating Expenses by five percent (5%) or more, Landlord shall reimburse Tenant
for the reasonable cost of the audit.
2.6.3 "Landlord's Operating Expenses" - Definition. "Landlord's Operating
Expenses" means all costs of Landlord in owning or leasing (as the case may be),
servicing, operating, managing, maintaining, and repairing the Building and
Land, and providing services to tenants, including, without limitation, the
costs of the following: (i) supplies, materials and equipment purchased or
rented for use in the operation, maintenance, management, security, cleaning or
repair of the Building or Landlord's total wage and salary costs paid to and on
account of any building manager or other employees of Landlord reporting to the
building manager to the extent such employees are engaged in the operation,
maintenance, management, security, cleaning and repair of the Building and Land,
including employment taxes and so-called "fringe benefits"; (i-a) payments under
service contracts to the extent relating to the operation, maintenance,
management
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security, cleaning or repair of the Building or the Land; (ii) building services
generally furnished to tenants of the Building at Landlord's expense (including
the types of services furnished to Tenant pursuant to Section 4.1 hereof) and
maintenance of and services provided to or on behalf of the Building performed
by Landlord's employees or by other persons under contract with Landlord or
Landlord's Managing Agent; (iii) utilities consumed and expenses incurred in the
operation and maintenance of the Building and Land including, without
limitation, oil, gas, electricity (including electricity serving Tenant in the
Premises and other tenants in their premises), water, sewer and snow removal;
(iv) premiums for insurance covering the Building or the Land; (v) management
fees not to exceed four and one-half percent (4.5%) of gross Building income
plus an imputed cost for any space in the Building occupied without charge by
the Managing Agent; and (vi) "Landlord's Taxes" as defined below. Operating
Expenses shall include only those capital expenditures incurred, and capital
items purchased, for the purpose of reducing or conserving the use of energy in
the Building, reducing Landlord's Operating Expenses, or to comply with
applicable laws, rules or regulations enacted or promulgated after the date of
this lease, and the amount of such expenditure or the cost of such item shall be
amortized over the useful life of such item in accordance with generally
accepted accounting principles, with interest at the so-called base rate from
time to time announced by the Bank of Boston at its head office in Boston,
Massachusetts, and the amount included in Landlord's Operating Expenses for any
calendar year shall be limited to the annual amortized charge (including
interest). Notwithstanding anything to the contrary contained herein, Landlord's
Operating Expenses shall not include any costs and expenses relating to the
following: (i) the construction and development of the Building; (ii) payments
of ground rent; (iii) salaries of executives or principals of Landlord (except
as the same may be reflected in the management fee for the Building or
attributable to actual Building operations); (iv) principal, interest and other
charges relating to indebtedness secured by a mortgage covering any portion of
the Building or the Land; (v) leasehold improvements which are made in
connection with the preparation of any portion of the Building for occupancy by
a new tenant or which are not provided generally for the benefit of all tenants
of the Building; (vi) costs, expenses or other charges properly chargeable or
attributable to a particular tenant or tenants, other than Tenant; (vii) efforts
to lease portions of the
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Building or to procure new tenants for the Building, including advertising and
leasing commissions and attorneys' fees; (viii) depreciation of the Building,
the Common Areas or any other improvements on the Land; (ix) repairs and
replacements arising out of a fire or other casualty occurring at the Building
or the Land, provided that Landlord may include in Landlord's Operating Expenses
the amount of any insurance deductible or retainage paid by Landlord but not
more than $25,000 per occurrence; (x) fees, fines or penalties arising out of
Landlord's breach of any obligation (contractual or at law), including
attorneys' fees; (xi) wages and benefits of any employee, contractor or agent to
the extent such employee, contractor or agent does not devote his or her time to
the operation, maintenance, security, cleaning or repair of the Building or the
Land, provided that Landlord may include in Landlord's Operating Costs the
Building's allocable share of the wages and benefits of employees, contractors
and agents engaged in the maintenance, security, cleaning or repair of all of
Landlord's and Landlord's affiliates buildings and property in the Kiln Brook
Office Park, as may be reasonably determined by Landlord; (xii) salaries of
executives or principals of Landlord; (xiii) compensation paid to employees or
other persons in connection with commercial concessions operated by Landlord;
(xiv) fees for licenses, permits or inspections that are not part of routine
maintenance or result from the negligence or willful misconduct of Landlord, its
employees, agents or contractors, or any other tenant or occupant of the
Building; (xv) environmental compliance, testing or remediation; (xvi)
compliance by Landlord with laws existing as of the date of this Lease,
including without limitation the American With disabilities Act (as such laws
apply to the Building generally and not as to any tenant's particular use); (xv)
sculpture, paintings and other works of art; (xvi) repairs necessary to cure
defects in the construction of the Building and (xvii) any capital expenditures
not specifically included in this Section 2.6.3.
"Landlord's Taxes" means all taxes, assessments and similar charges
assessed or imposed by any governmental authority upon the Building and Land
(and upon personal property situated thereon or therein and used in the
operation and maintenance of the Building and Land), reduced by any net amounts
received as an abatement or reduction of taxes to the extent any such abatement
applies to a tax year (or part thereof) occurring during the Term hereof. If
any such abatement or reduction of taxes has the effect of reducing
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Landlord's Operating Expenses which make up Base Operating Expenses per Square
Foot, then payments of additional rent under Sections 2.6.1 and 2.6.3 hereof
shall be recalculated reflecting the corrected Base Operating Expenses per
Square Foot, and any overpayments or underpayments will be dealt with in
accordance with Section 2.6.2. The amount of special taxes or special
assessments included in Landlord's Taxes for any year shall be limited to the
amount of the installment (plus any interest, other than penalty interest,
payable thereon) of such special tax or special assessment required to be paid
during or with respect to the year in question. Landlord's Taxes include
expenses, including reasonable fees of attorneys, appraisers and other
consultants, incurred in connection with any efforts to obtain abatements or
reductions or to assure maintenance of Landlord's Taxes for any year wholly or
partially included in the Term, whether or not successful and whether or not
such efforts involved filing of actual abatement applications or initiation of
formal proceedings. Landlord's Taxes exclude income taxes of general application
and all estate, succession, inheritance and transfer taxes. If at any time
during the Term the present system of ad valorem taxation of real property shall
be changed so that, in addition to or in lieu of the whole or any part of the ad
valorem tax on real property there shall be assessed on Landlord a capital levy
or other tax on the gross rents or other measures of building operations, or a
governmental income, franchise, excise or similar tax, assessment, levy, charge
or fee (distinct from any such tax now in effect in the jurisdiction in which
the Building is located) measured by or based, in whole or in part, upon gross
rents or other measures of building operations or benefits of or governmental
services furnished to the Building or Land, then any and all of such taxes,
assessments, levies, charges and fees, to the extent so measured or based, shall
be included within the term Landlord's Taxes, but only to the extent that the
same would be payable if the Building and Land were the only property of
Landlord.
ARTICLE III
CONSTRUCTION OF BUILDING; FINISH WORK
3.1 CONSTRUCTION OF BUILDING
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Intentionally Deleted.
3.2 CONSTRUCTION FOR TENANT - FINISH WORK
Intentionally Deleted. (See Section 2.1).
3.3 COMPLIANCE WITH LEASE
Intentionally Deleted.
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ARTICLE IV
LANDLORD'S COVENANTS
4.1 LANDLORD'S COVENANTS
4.1.1 Building Services. Landlord shall furnish services, utilities,
-----------------
facilities and supplies set forth in this Section 4.1.1. Tenant may obtain
additional services, utilities, facilities and supplies from time to time upon
reasonable advance request or Landlord may furnish the same without request if
Landlord reasonably determines that the same are required for the proper care of
the Premises as a result of uses, events or functions which are unusual or
excessive for general office space, and, in either case, the cost of the same
(including related expenses such as costs for meter installation and
maintenance) at reasonable and competitive rates from time to time established
by Landlord shall constitute a restricted item allocable to the Premises under
Section 2.6.1.
4.1.1.1 Water Charges. Landlord shall furnish hot and cold water for
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ordinary office cleaning, toilet, lavatory, kitchenette and drinking purposes.
If Tenant requires, uses or consumes water for any other purpose, Landlord may
either assess on Tenant reasonable charges for additional water, or install a
water meter to measure Tenant's consumption. (The cost of installation and
maintenance of any such meter shall be borne by Tenant.) If Tenant's water
consumption is measured by a separate meter, Tenant shall pay for all water so
consumed together with the sewer charges based on said meter charges as and when
bills are rendered. All piping and other equipment and facilities for use of
water outside the Building core will be installed and maintained by Landlord at
Tenant's cost and expense.
4.1.1.2 Elevator, Heat, Electricity and Cleaning. Landlord, at its
----------------------------------------
expense, shall: (i) provide necessary elevator facilities on Mondays through
Fridays excepting legal holidays from 7:00 a.m. to 6:00 p.m. (such hours on such
days being referred to as "business days") and have at least one elevator in
operation available for Tenant's non-exclusive use at all other times; (ii)
furnish heat reasonable and customary for first-class office buildings to the
Premises during the normal heating season from
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7:00 a.m to 6:00 p.m. Mondays through Fridays and 7:00 a.m. to 1:00 p.m. on
Saturdays (excepting legal holidays); (iii) furnish electricity to the Premises
sufficient for normal office uses, including work stations, personal computers
and other standard office equipment but excluding special uses such as raised
floor computer rooms, main frame computers and other machinery with high
electrical consumption (Landlord will furnish electricity for such special uses
provided Tenant pays extra costs associated therewith including costs associated
with sub-metering); and (iv) cleaning service to the Premises and Common Areas
and Facilities in accordance with the standards set forth on Exhibit D attached
hereto.
4.1.1.3 Air-conditioning. Landlord shall, through the Building air-
----------------
conditioning system, furnish to and distribute in the Premises air-conditioning
as normal seasonal changes may require on business days when air-conditioning
may reasonably be required for the comfortable occupancy of the Premises by
Tenant according to customary standards in first-class office buildings. If
Tenant requests air conditioning for times other than such business days,
Landlord may charge Tenant for such air conditioning at an hourly rate as
reasonably determined by Landlord to be the fair market rate for such service,
including reasonable administrative charges related to the provision of such
service, provided such cost shall not exceed $12.00 per hour during the initial
five year term of this Lease. If Tenant requires additional air-conditioning
for business machines, meeting rooms or other purposes, or because of unusual
occupancy or unusual electrical loads, any additional air-conditioning units,
chillers, condensers, compressors, ducts, piping and other equipment will be
installed and maintained by Landlord at Tenant's sole cost and expense, but only
to the extent that the same are compatible with the Building and its mechanical
systems.
4.1.1.4 Energy Conservation. Tenant agrees to cooperate with Landlord and
-------------------
to abide by all Building reasonable regulations applying generally to all
occupants of the Building which Landlord may, from time to time, prescribe for
the proper functioning and protection of the heating and air-conditioning
systems and in order to maximize the effect thereof and to conserve heat and
air-conditioning. Notwithstanding anything to the contrary in this Section
4.1.1 or otherwise in this Lease, Landlord may institute such policies, programs
and measures as may be in Landlord's
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reasonable judgment necessary, required or expedient for the conservation or
preservation of energy or energy services, or as may be necessary to comply with
applicable codes, rules, regulations or standards taking effect after the date
of this Lease, provided however, except for programs or measures required by
governmental or regulatory authority or otherwise beyond Landlord's reasonable
control, such policies, programs and measures shall not materially adversely
interfere with Tenant's business operations at the Premises.
4.1.2 Repairs. Except as otherwise provided in this Lease, and except for
-------
repairs to items referred to below necessitated by Tenant's negligence or
willful misconduct (which shall be Tenant's repair obligation under Section
5.2), Landlord shall make such repairs to the Building structure, roof, exterior
walls, floor slabs, and Common Areas and Facilities as may be necessary to keep
them in good condition, order and repair consistent with a first class office
building. Landlord shall remove snow and ice from the exterior portions of the
Common Areas and Facilities, consistent with similar service for a first class
office building. Landlord shall be responsible for complying with all laws,
regulations, orders, by-laws or ordinances applicable to the Building or the
Land generally, as opposed to laws, regulations, orders and the like applicable
to Tenant's or any other tenant's use and occupancy.
4.1.3 Office Identification. Landlord shall provide and install, at no
---------------------
expense to Tenant (for the initial installation), (a) letters or numerals on
entry doors to the Premises and on the directory in the lobby of the Building to
identify Tenant's official name and Building address and (b) letters and
numerals on the existing exterior monument sign to identify Tenant's official
name. Tenant's name shall be listed on said exterior monument sign with other
tenants of the Building, provided Tenant shall have the largest panel or
lettering, as the case may be. All such letters and numerals shall be in the
Building standard graphics and no other signs shall be used or permitted on the
exterior of the Premises. Tenant's exterior sign rights shall be subject to the
groundlessor's consent and compliance with applicable legal requirements.
Subject to Landlord's reasonable approval, Tenant shall also have the right to
install as sign bearing Tenant's name on the side of the Building of a size and
design and in a location that shall comply with all applicable laws.
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4.1.4 Quiet Enjoyment. Landlord covenants that Tenant, on paying the rent
---------------
and performing the tenant obligations in this Lease, shall peacefully and
quietly have, hold and enjoy the Premises, subject to all of the terms and
provisions hereof.
4.1.5 Access. Tenant and its employees, agents, contractors and
------
invitees shall have access to the Premises at all times unless due to causes
beyond Landlord's reasonable control. Landlord shall provide unrestricted
access to the Building by Tenant and its agents, employees, contractors and
invitees during business days. Landlord shall provide keys or access cards to
Tenant to permit access by Tenant to the Building during times other than
business days.
4.2 INTERRUPTION
Landlord shall not be liable to Tenant for any compensation or reduction of
rent by reason of inconvenience or annoyance or for loss of business arising
from the necessity of Landlord or its agents entering the Premises for any of
the purposes authorized in this Lease or for repairing the Premises or from
repairs by Landlord of any portion of the Building however the necessity may
occur, provided, however, that Landlord shall at all times use reasonable
efforts to avoid material interference with Tenant's use of, and business
operations at, the Premises, and Landlord shall remain liable for the negligence
and willful misconduct of its employees, agents and contractors. In case
Landlord is prevented or delayed in making any repairs, alterations or
improvements, or furnishing any services or performing any other covenant or
duty to be performed on Landlord's part, by reason of any cause reasonably
beyond Landlord's control, Landlord shall not be liable to Tenant therefor nor,
except as otherwise provided hereinbelow and in Section 6.1, shall Tenant be
entitled to any abatement or reduction of rent by reason thereof, nor shall the
same give rise to a claim in Tenant's favor that such failure constitutes actual
or constructive, total or partial, eviction from the Premises. In no event
shall Landlord be liable for indirect or consequential damages. Notwithstanding
the foregoing, if any interruption in services to the Premises persists for more
than five (5) days and has a material, adverse effect on Tenant's business
operations, the Basic Annual Rent due hereunder shall abate according to the
nature
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and extent of such adverse effect during the continuance of such interruption,
as Tenant's sole remedy.
Landlord reserves the right to stop any service or utility system, when
necessary by reason of accident or emergency, or until necessary repairs have
been completed; provided, however, that in each instance of stoppage, Landlord
shall exercise reasonable diligence to eliminate the cause thereof as promptly
as possible. Except in case of emergency, repairs Landlord will give Tenant
reasonable advance notice of any contemplated stoppage and will use reasonable
efforts to avoid unnecessary inconvenience to Tenant by reason thereof.
ARTICLE V
TENANT'S COVENANTS
5.1 RENT, UTILITIES
Tenant covenants and agrees to pay when due all fixed rent and additional
rent and all charges for utilities and services rendered to the Premises and for
all other matters for which Tenant is responsible hereunder.
5.2 MAINTENANCE AND REPAIR
Except for damage by eminent domain, fire or casualty and reasonable wear,
Tenant shall at all times keep the Premises clean and in as good repair, order
and condition as the same are at the beginning of the Term or may be put in
thereafter.
5.3 USE, WASTE AND NUISANCE
Throughout the Term, Tenant shall use the Premises for the Permitted Uses
only. Tenant shall not injure, overload, deface or commit waste in the Premises
or any part of the Building or anywhere on the Land, nor permit the occurrence
of any nuisance therein or the emission therefrom of any objectionable noise or
odor, nor use or permit any use of the Premises, Building or Land which is
improper, offensive, contrary to law or ordinance or which is liable to
invalidate or increase the premium for any insurance on the Building or its
contents or which is liable to render
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necessary any alterations or additions in the Building, nor obstruct in any
manner any portion of the Building or the Land. If Tenant uses the Premises for
other than general office purposes (without in any way suggesting or implying
that Tenant has the right to do so) and such use results in an increase in the
premium for any insurance on the Building or its contents, Landlord shall notify
Tenant of such increase and Tenant shall pay same as additional rent. Tenant may
not, without Landlord's consent, install in the Premises any water fountains,
water-connected coffee makers, water-connected refrigerators, sinks or cooking
equipment, provided that Landlord's consent will not be unreasonably withheld
with respect to items designed for the convenience of Tenant's employees and
further provided that Landlord determines that special venting or other matters
are not required in connection therewith. Landlord consents to the installation
of kitchenettes in the Premises as part of the initial construction, subject to
and in accordance with Section 2.1. and Landlord also consents to the use of
bottled water dispensers for the convenience of Tenant's employees.
5.4 RULES AND REGULATIONS
Tenant shall conform to all reasonable rules and regulations of general
application to all occupants of the Building now or hereafter promulgated by
Landlord for the care and use of the Premises, the Building and the Land. The
current rules and regulations are attached hereto as Exhibit E.
5.5 SAFETY APPLIANCES
Tenant shall keep the Premises equipped with all safety appliances and
permits which, as a result of Tenant's particular activities, are required by
law or ordinance or any order or regulation of any public authority, shall keep
the Premises equipped at all times with adequate fire extinguishers and other
such equipment reasonably required by Landlord law, and, upon notice by
Landlord, shall make all repairs, alterations, replacements, or additions so
required as a result of Tenant's particular activities. To the best of
Landlord's knowledge (having made no inquiry), neither the Premises, the
Building or the Land are in material violation of any applicable laws,
regulations, orders, by-laws or ordinances, and, to the best of Landlord's
knowledge (having made no inquiry), the Building contains adequate
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safety appliances (however, each Tenant is required to properly equip its leased
premises with safety appliances and Landlord makes no representation with
respect thereto).
5.6 INDEMNIFICATION AND INSURANCE
Tenant shall save Landlord, its partners, officers, directors, agents,
employees, mortgagees, ground lessors (collectively the "Indemnitees") harmless
and indemnified (and shall defend the Indemnitees with counsel reasonably
approved by the Indemnitees) against any claim or loss arising out of any
injury, loss or damage to any person or property while on or in the Premises or
in transit thereto or therefrom if not due to negligence or willful misconduct
of the Indemnitees, and to any person or property anywhere occasioned by the
negligence or willful misconduct of Tenant or of the employees, agents,
independent contractors or invitees of Tenant. In addition to the foregoing,
Landlord may make all repairs and replacements to the Building resulting from
the negligence or willful misconduct of Tenant's employees, agents, independent
contractors or invitees (including damage and breakage occurring when Tenant's
property is being moved into or out of the Building) and Landlord may recover
all costs and expenses thereof from Tenant as additional rent. Tenant shall
maintain in a responsible company or companies approved by Landlord, liability
insurance in form reasonably satisfactory to Landlord, insuring the Indemnitees
and other parties designated by Landlord, and Tenant, as their respective
interests may appear, against all claims, demands or actions for injury, death,
and property damage in amounts not less than those specified in Section 1.1 (as
such amounts may, from time to time, be reasonably increased by Landlord
consistent with requirements of similar tenants at similar properties). Such
insurance shall provide that it will not be subject to cancellation,
termination, or change except after at least 30 days' prior written notice to
the Indemnitees. The policy or policies, or a duly executed certificate or
certificates for the same, together with satisfactory evidence of the payment of
the premium thereon, shall be deposited with the Indemnitees at the beginning of
the Term (or upon Tenant's first entry onto the Premises to perform Tenant's
Work, if earlier) and, upon renewals of such policies, not less than 30 days
prior to the expiration of the term of such coverage. If Tenant fails to comply
with any of the foregoing requirements after notice (which may be by telephone
or facsimile transmission) and the expiration of three (3) business
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days, except in the case of emergency, Landlord may obtain such insurance on
behalf of Tenant and may keep the same in effect, and Tenant shall pay Landlord,
as additional rent, the premium cost thereof upon demand.
5.7 TENANT'S PROPERTY
All furnishings, fixtures, equipment, effects and property of every kind,
nature and description of Tenant and of all persons claiming through Tenant
which from time to time may be on the Premises or elsewhere in the Building or
in transit thereto or therefrom shall be at the sole risk and hazard of Tenant,
and if the whole or any part thereof shall be destroyed or damaged by fire,
water or otherwise, or by the leakage or bursting of water pipes, steam pipes,
or other pipes, by theft or from any other cause, no part of said loss or damage
is to be charged to or be borne by the Indemnitees, except that the Indemnitees
shall in no event be indemnified or held harmless or exonerated from any
liability to Tenant or to any other person, for any injury, loss, damage or
liability to the extent such indemnity, hold harmless or exoneration is
prohibited by law or to the extent the loss or liability is due to the
negligence or willful act of the Indemnitees, their agents or employees.
5.8 ENTRY FOR REPAIRS AND INSPECTIONS
Tenant shall permit Landlord and its agents, upon reasonable advance
written notice except in an emergency, to enter and examine the Premises at
reasonable times and, if Landlord shall so elect, to make any repairs or
replacements Landlord may deem necessary, to remove at Tenant's expense, any
alterations, additions, signs, curtains, blinds, shades, awnings, aerial
flagpoles, or the like not consented to in writing, and to show the Premises to
prospective purchasers and mortgagees and, during the twelve (12) months
preceding expiration of the Term, to prospective tenants, all during reasonable
business hours, provided, however, that Landlord shall use reasonable efforts to
avoid material interference with Tenant's use of, and business operations at,
the Premises.
5.9 EXPENSES AND ATTORNEYS' FEES
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Tenant shall pay as additional rent Landlord's expenses, including
reasonable attorneys' fees, incurred in enforcing any obligations of Tenant
under this Lease with which Tenant has failed to comply. Landlord shall pay
Tenant's expenses, including reasonable attorneys' fees, incurred in enforcing
any obligations of Landlord under this Lease with which Landlord has failed to
comply.
5.10 ASSIGNMENT, SUBLETTING
Tenant shall not assign this Lease, or sublet or license the Premises or
any portion thereof or permit the occupancy of all or any portion of the
Premises by anybody other than Tenant without obtaining, on each occasion, the
prior consent of the Landlord, not to be unreasonably withheld or delayed;
provided, however, that Tenant may, without Landlord's consent but, except as
provided below, with not less than ten (10) business days prior notice to
Landlord (i) assign this Lease or sublet any portion of the Premises to any
corporation, partnership or other business organization controlling, controlled
by or under common control with Tenant (and provided Tenant and such affiliated
entity remain affiliated), or (ii) assign this Lease in connection with the sale
of all or substantially all of Tenant's assets or (iii) assign this lease
pursuant to (a "Merger Event") a merger or consolidation of Tenant into any
other firm or corporation, or (iv) assign this lease pursuant to (a "Controlling
Stock Transfer") the transfer or sale of a controlling interest in Tenant,
whether by sale of its capital stock or otherwise (any of the foregoing referred
to as an "Affiliate Transfer").
Notwithstanding the foregoing, Tenant shall not be required to give
Landlord ten (10) days prior written notice of a Controlling Stock Transfer,
provided that Tenant shall use its best efforts to give such notice and Tenant
shall, in any event, give Landlord notice thereof as soon as Tenant has
knowledge thereof. For the purposes of this notice obligation, a Controlling
Stock Transfer shall be deemed to have occurred when one stockholder (or a group
of affiliated stockholders) shall own and hold more than 50% of the outstanding
voting stock of Tenant.
Notwithstanding the foregoing, (i) an assignment of this lease as a result
of a Merger Event shall only be treated as an "Affiliate Transfer" if such event
is pursued and completed by
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Tenant for a legitimate corporate business purpose and not to avoid Tenant's
obligations under this lease or to circumvent the need to obtain Landlord's
consent hereunder, and (ii) if the assignee subsequently elects to lease
additional space from Landlord pursuant to the provisions of Article XIII hereof
and Landlord provides Tenant with an improvement allowance or other funding for
tenant improvements for any such additional space, and the net worth of the
assignee at the time the assignee exercises its right to lease such additional
space is less than the net worth of the original named Tenant herein at the time
of the Merger Event, then as a condition precedent to Landlord's obligations to
fund such tenant improvements and as security therefor, Tenant shall obtain and
deliver to Landlord a Letter of Credit (conforming with the provisions of
Article X of the Maguire Road Lease) in an amount equal to one-third of the cost
of such tenant improvement allowance and other funding from Landlord, which
Letter of Credit shall be maintained by Tenant for the balance of the lease
Term.
Notwithstanding the requirement of prior notice to Landlord of an Affiliate
Transfer, Tenant shall not be required to provide Landlord with material non-
public information, provided that Tenant shall notify Landlord of a proposed
Affiliate Transfer as soon as reasonably practicable and in any event as soon as
any transaction which shall result in an Affiliate Transfer is announced to the
public.
Tenant's request for consent to an assignment or subletting and Tenant's
notice to Landlord of an Affiliate Transfer shall include a copy of the proposed
instrument of assignment or subletting, if available, or else a statement of the
proposed assignment or subletting in detail satisfactory to Landlord, together
with reasonably detailed financial, business and other information about the
proposed assignee or sublessee and, in the case of an Affiliate Transfer, its
relationship with Tenant.
Without limiting the reasons for which Landlord may withhold consent,
Landlord's withholding shall be deemed reasonable if Landlord determines that a
proposed assignee's or sublessee's financial condition would not be acceptable
to Landlord on a direct lease of the space in question, notwithstanding that the
original Tenant is required to remain primarily liable therefor hereunder.
Tenant shall not offer to make or enter into negotiations with
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respect to an assignment or subletting for use other than first class general
office use.
Except in the case of an Affiliate Transfer, if Tenant proposed to (x)
assign this Lease or (y) sublet any portion of the Premises for the balance of
the Term of this lease (inclusive of extension periods available to the
sublessee but not including unexercised extension periods under this lease),
Landlord shall have the option (but not the obligation) to terminate the Lease
(but only with respect to the portion of the Premises which Tenant proposes to
sublet in the case of a proposed subletting) effective upon the date of the
proposed assignment and continuing for the proposed term thereof by giving
Tenant notice of such termination within thirty (30) days after Landlord's
receipt of Tenant's request. If Landlord exercises its right to terminate this
Lease with respect to a portion of the Premises, Landlord will have the right to
demise such space and provide access thereto for the purpose of leasing such
space.
If Tenant does make an assignment (other than an Affiliate Transfer) of
this lease or in connection with any subletting of up to fifty percent (50%) of
the rentable floor area Premises, Tenant shall pay to Landlord, as additional
rent, fifty percent (50%) of the amount (the "Net Sublet Profit") by which the
aggregate rent and other charges payable to Tenant under and in connection with
such assignment or subletting (including without limitation any amounts paid for
leasehold improvements) exceeds the rent and other charges paid hereunder,
provided Tenant shall first be permitted to recover the reasonable costs
incurred in connection such assignment or subletting (the "Net Sublet Profit").
In connection with any subletting in excess of fifty percent (50%) of the
rentable floor area Premises, Tenant shall pay to Landlord, as additional rent,
one hundred percent (100%) the Net Sublet Profit.
Tenant shall pay to Landlord, as additional rent, Landlord's reasonable
legal fees and other reasonable out-of-pocket expenses incurred in connection
with any proposed assignment or subletting, including fees for review of
documents and investigations of proposed assignees.
Notwithstanding any such assignment or subletting, the original Tenant
named herein shall remain directly and primarily
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obligated under this Lease, notwithstanding any recognition (by acceptance of
rent or otherwise) or indulgence or waiver at any time granted to Landlord to
Tenant or any assignee or sublessee; and Tenant in the case of an Assignment
shall be deemed to have waived all defenses otherwise available to Tenant as
guarantor or surety. No consent to any assignment or subletting in a particular
instance shall be deemed a waiver of the obligation to obtain the Landlord's
consent in case of any other assignment or subletting. Any assignee of this
Lease shall have been deemed to assume all of the obligations and liabilities of
tenant, jointly and severally with Tenant, and any sublease shall be deemed
subject and subordinate to this Lease and to the Term hereof.
After any default by Tenant hereunder (and the expiration of any applicable
notice or cure period), Landlord shall have the right, upon written notice to
Tenant and any affected subtenant, to collect the rent and other charges due
under any sublease of the Premises directly from the subtenant and apply the
same to Tenant's obligations hereunder, without being deemed to have accepted
such subtenant as a direct tenant or to have waived any rights or remedies
against Tenant as the primary obligor under this lease.
5.11 ALTERATIONS, ADDITIONS, HEAVY EQUIPMENT, ETC.
Except as provided in Section 2.1 with respect to the initial improvements
to the Premises, Tenant shall not make any alterations or additions in or to the
Premises, nor erect or paint any sign or other identification on any window or
Premises entry door without obtaining Landlord's prior consent, which shall not
be unreasonably withheld, delayed or conditioned with respect to interior, non-
structural alterations. Notwithstanding the foregoing, after the completion of
Tenant's Work pursuant to Section 2.1, Tenant may make non-structural
alterations to the Premises of up to $25,000 in value without Landlord's prior
consent, but with prior notice to Landlord (which notice shall include an
estimate of the cost of such alterations and a work schedule). Tenant will not
bring into or install in the Premises any safes, or bulky or heavy furnishings,
equipment, or machines without the prior approval of Landlord as to methods of
transportation and installation (Landlord may prohibit installation if the
weight of any such item will exceed 125 pounds per square foot or if Landlord
reasonably decides that the same will cause vibration or noise to be transmitted
to the Building structure or to areas outside the Premises), nor shall
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Tenant move any furniture, furnishings, equipment or machines into or out of the
Building except by prior arrangement with and approval of Landlord which shall
not be unreasonably withheld, delayed or conditioned.
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5.12 SURRENDER AND LIEN FOR RENT
At the expiration of the Term or earlier termination of this Lease, Tenant
shall peaceably give up and surrender the Premises without the requirement of
any notice, including any alterations, installations or additions and all
replacements thereof, including carpeting, any water or electricity meters, and
all fixtures (other than Tenant's trade fixtures) and alterations (including
partitions) in anyway bolted or otherwise attached to the Premises (which shall
become the property of Landlord), except such non-building standard equipment,
fixtures, work and the like as Landlord shall direct Tenant to remove.
Notwithstanding any provision of this Lease to the contrary, Tenant shall have
the right to remove (i) any Financed FFE to the extent permitted and subject to
the terms of Section 2.1.5, (ii) Tenant's trade fixtures and personal property,
and (iii) any cubicles or fabricated office partitions other than Financed FFE.
The Premises and such alterations, installations or additions shall be in as
good order, repair and condition as exists as of the Term Commencement Date,
damage by fire, casualty, eminent domain and reasonable wear excepted. Tenant
shall, at the time of termination, remove the goods, effects and fixtures which
Tenant is directed or permitted to remove in accordance with the provisions of
this Section making any repairs to the Premises and other areas necessitated by
such removal and leaving the Premises broom clean. Should Tenant fail to remove
any of such goods, effects, and fixtures, Landlord may have them removed
forcibly, if necessary, and store any of Tenant's property in a public warehouse
at the risk of Tenant; the expense of such removal, storage and reasonable
repairs necessitated by such removal shall be borne by Tenant or reimbursed by
Tenant to Landlord. Notwithstanding the foregoing, upon Tenant's written
request prior to making any alteration or installation to the Premises, Landlord
will notify Tenant as to whether the removal of such item will be required or
permitted upon the expiration or earlier termination of the Term.
5.13 PAYMENT FOR TENANT WORK
Tenant shall pay within 14 days after request the entire cost of any work
undertaken by Tenant in the Premises, including equipment, furnishings and
fixtures, so that the Premises shall always be free of liens for labor or
materials. Tenant shall
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obtain all permits or licenses for such work. Tenant shall also indemnify and
save the Indemnitees harmless from all injury, loss, claims, liens or damage to
any person or property occasioned by or arising from such work. If any
mechanic's lien (which term shall include all similar liens relating to the
furnishing of labor and materials) is filed against the Premises or the Building
or any part thereof which is claimed to be attributable to work performed by or
at the request of Tenant, its agents, employees or contractors, Tenant shall
promptly discharge the same by payment thereof or filing any necessary bond.
5.14 PERSONAL PROPERTY TAXES
Tenant shall pay promptly when due all taxes (and charges in lieu thereof)
imposed upon personal property in the Premises, no matter to whom assessed
(including without limitation fixtures, equipment and any improvements which are
in excess of Building Standard).
ARTICLE VI
CASUALTY AND TAKING
6.1 DAMAGE BY FIRE OR CASUALTY
Landlord shall at all times maintain insurance covering the Building on an
all-risk basis with an extended coverage endorsement, in an amount not less than
80% of replacement cost of the Building. If the Premises or any part thereof
shall be damaged by fire or other insured casualty, then, subject to the last
paragraph of this Section 6.1, Landlord shall proceed with diligence, subject to
the then applicable statutes, building codes, zoning ordinances and regulations
of any governmental authority, and at the expense of Landlord (but only to the
extent of insurance proceeds made available to Landlord by any mortgagee of the
Building) to repair or cause to be repaired such damage, provided, however, all
repairs to and replacements of property which Tenant is entitled to remove shall
be made by and at the expense of Tenant. If the Premises or any part thereof
shall have been rendered unfit for use and occupation hereunder or access
thereto is denied (without reasonable substitute access having been provided) by
reason of such damage, the Annual Basic Rent or a
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just and proportionate part thereof, according to the nature and extent to which
the Premises shall have been so rendered unfit or access is denied, shall be
abated until the Premises (except as to the property which is to be repaired by
or at the expense of Tenant) shall have been restored as nearly as practicable
to the condition in which they were immediately prior to such fire or other
casualty. Landlord shall not be liable for delays in the making of any such
repairs which are due to government regulation, casualties and strikes,
unavailability of labor and materials, and other causes beyond the reasonable
control of Landlord, nor shall Landlord be liable for any inconvenience or
annoyance to Tenant or injury to the business of Tenant resulting from delays in
repairing such damage due to any of the foregoing causes.
(i) If the Premises are so damaged by fire or other casualty (whether or
not insured) at any time during the last thirty months of the Term that the cost
to repair such damage is reasonably estimated to exceed one-third of the total
Annual Fixed Rent payable hereunder for the period from the estimated completion
date of repair until the end of the Term, (ii) if at any time the Building
(whether or not including any portion of the Premises) is so damaged by fire or
other casualty (whether or not insured) that, in Landlord's reasonable judgment,
demolition or substantial reconstruction is required and the leases for all
similarly situated tenants shall be terminated a result thereof, or (iii) if at
any time damage to the Building occurs by fire or other insured casualty and any
mortgagee or ground lessor shall refuse to permit insurance proceeds to be
utilized for the repair or replacement of such property and Landlord determines
not to repair such damage, then and in any of such events, this Lease and the
term hereof may be terminated at the election of Landlord by a notice from
Landlord to Tenant within sixty (60) days, or such longer period as is required
to complete arrangements with any mortgagee or ground lessor regarding such
situation, following such fire or other casualty, the effective termination date
which shall be not less than thirty (30) days after the day on which such
termination notice is received by Tenant. In the event of any termination, this
Lease and the Term hereof shall expire as of such effective termination date as
though that were the date originally stipulated in Section 1.1 for the end of
the Term and the Annual Fixed Rent shall be apportioned as of such date. Tenant
shall in no event be entitled to compensation or damages on account of annoyance
or
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inconvenience in making any repairs, or on account of construction, or on
account of Landlord's election to terminate this Lease.
Notwithstanding the foregoing, Tenant shall have the right to terminate
following a fire or other casualty: (i) if the Premises (or access thereto as
the case may be) cannot reasonably be expected to be substantially complete (as
defined in Section 2.1.1) for Tenant's use within nine (9) months; or (ii) if
the Premises are not substantially completed to its condition before such fire
or other casualty within nine (9) months after notice to Landlord of such fire
or other casualty. Tenant may exercise such termination right, if at all, by
giving written notice to Landlord within thirty (30) days following the accrual
of such right, which notice shall specify a termination date not more than sixty
(60) days nor less than thirty (30) days after the day on which such termination
notice is received, and the termination shall be effective as of such date
(provided the Premises are not substantially restored prior thereto). Failure
of Tenant to exercise said election within said period shall constitute Tenant's
agreement to accept delivery of the Premises under this Lease, provided Landlord
thereafter pursues reconstruction or restoration diligently to completion,
subject to delays beyond Landlord's reasonable control.
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6.2 CONDEMNATION - EMINENT DOMAIN
In case during the Term all or any substantial part of the Premises or the
Building or material access thereto are taken by eminent domain or Landlord
receives compensable damage by reason of anything lawfully done in pursuance of
public or other authority, this Lease shall terminate at Landlord's election,
which may be made (notwithstanding that Landlord's entire interest may have been
divested) by notice given to Tenant within 90 days after the election to
terminate arises, specifying the effective date of termination. The effective
date of termination specified by Landlord shall not be less than 15 nor more
than 30 days after the date of notice of such termination. Unless terminated
pursuant to the foregoing provisions, this Lease shall remain in full force and
effect following any such taking, subject, however, to the following provisions.
If in any such case any portion of the Premises are is rendered unfit for use
and occupation and this Lease is not terminated, Landlord shall use due
diligence (following the expiration of the period in which Landlord may
terminate this Lease pursuant to the foregoing provisions of this Section) to
put the Premises, or what may remain thereof (excluding any items installed or
paid for by Tenant which Tenant may be required to remove pursuant to Section
5.12), into proper condition for use and occupation and a just proportion of the
Annual Fixed Rent and additional rent according to the nature and extent of the
injury and its effect on Tenant's business operations shall be abated until the
Premises or such remainder shall have been put by Landlord in such condition;
and in case of a taking which permanently reduces the area of the Premises, a
just proportion of the Fixed Rent and additional rent shall be abated for the
remainder of the Term.
Notwithstanding the foregoing, Tenant shall have the right to terminate
this lease following a taking by eminent domain (or other transfer in lieu
thereof): (i) if more than twenty-five (25%) of the Premises then occupied and
in use by Tenant are taken, or (ii) if access to the Premises is denied as a
result thereof and Landlord fails or is unable to provide reasonable substitute
access. Tenant may exercise such termination right, if at all, by giving
written notice to Landlord within thirty (30) days following such taking,
specifying a termination date not more than sixty (60) days nor less than thirty
(30) days after the day on which such
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termination notice is received, and the termination shall be effective as of
such date.
6.3 EMINENT DOMAIN AWARD
Except for Tenant's relocation expenses and damages to Tenant's trade
fixtures and personal property (which may be separately awarded to Tenant and
specifically so designated), Landlord reserves to itself any and all rights to
receive awards made for damages to the Premises, Building and Land and the
leasehold hereby created, or any one or more of them, accruing by reason of
exercise of eminent domain or by reason of anything lawfully done in pursuance
of public or other authority. Tenant hereby releases and assigns to Landlord
all Tenant's rights to such awards, and covenants to deliver such further
assignments and assurances thereof as Landlord may from time to time request.
6.4 TEMPORARY TAKING
In the event of any taking of the Premises or any part thereof for
temporary use, (i) this Lease shall be and remain unaffected thereby and rent
shall not abate, and (ii) Tenant shall be entitled to receive for itself such
portion or portions of any award made for such use with respect to the period of
the taking which is within the Term.
ARTICLE VII
DEFAULT
7.1 TERMINATION FOR DEFAULT OR INSOLVENCY
This Lease is upon the condition that (1) if Tenant shall fail to perform
or observe any of Tenant's covenants, and if such failure shall continue, in the
case of rent or payment of any sum due Landlord hereunder, for more than five
(5) days after written notice, or in any other case for more than thirty (30)
days after written notice (provided that if correction of any such matter
reasonably requires longer than 30 days and Tenant so notifies Landlord within
20 days together with an estimate of time required for such cure, Tenant shall
be allowed such longer period, but only if such delay does not increase the risk
of damage to person or
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property), or (2) if three or more notices of a default are given to Tenant in
any twelve month period; or (3) if Tenant shall abandon all or substantially all
of the Premises, or (4) if the leasehold hereby created shall be taken on
execution, or by other process of law, or if any assignment shall be made of
Tenant's property for the benefit of creditors, or (5) if a receiver, guardian,
conservator, trustee in bankruptcy or similar officer shall be appointed by a
court of competent jurisdiction to take charge of all or any part of Tenant's
property and such appointment is not discharged within 90 days thereafter or if
a petition including, without limitation, a petition for reorganization or
arrangement is filed by Tenant under any bankruptcy law or is filed against
Tenant and, in the case of a filing against Tenant only, the same shall not be
dismissed within 90 days from the date upon which it is filed, then, and in any
of said cases, Landlord may, immediately or at any time thereafter, elect to
terminate this Lease by entry or by notice of termination to Tenant at the
Premises and to recover possession of the Premises under and by virtue of the
provisions of the laws of The Commonwealth of Massachusetts or such other
proceedings, including notice, re-entry or possession. Upon termination of this
Lease by such entry or notice, Landlord shall be entitled to recover possession
of the Premises from Tenant and those claiming through or under the Tenant. Such
termination of this Lease and repossession of the Premises shall be without
prejudice to any remedies which Landlord might otherwise have for arrears of
rent or for a prior breach of the provisions of this Lease.
7.2 REIMBURSEMENT OF LANDLORD'S EXPENSES
In the case of termination of this Lease pursuant to Section 7.1, Tenant
shall reimburse Landlord for all reasonable expenses arising out of such
termination, including without limitation, all costs incurred in collecting
amounts due from Tenant under this Lease (including attorneys' fees, costs of
litigation and the like); all expenses incurred by Landlord in attempting to
relet the Premises or parts thereof (including advertisements, brokerage
commissions, Tenant's allowances, costs of preparing space, and the like); and
all Landlord's other reasonable expenditures necessitated by the termination.
The reimbursement from Tenant shall be due and payable immediately from time to
time upon notice from Landlord that an expense has been incurred, without regard
to whether the expense was incurred before or after the termination.
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7.3 DAMAGES
No termination or repossession by Landlord under Section 7.1 shall relieve
Tenant of its liabilities and obligations hereunder, all of which shall survive
such termination and repossession. In the event of any such termination or
repossession, Tenant shall indemnify Landlord for the loss of rent by a payment
at the end of each month which would have been included in the Term,
representing the difference between the rent which would have been paid in
accordance with this Lease (Annual Fixed Rent under Section 2.5, and additional
rent which would have been payable under Section 2.6 to be ascertained monthly)
and the rent actually derived from the Premises by Landlord for such month, if
any. (The amount of rent deemed derived shall be the actual amount less any
portion thereof attributable to Landlord's reletting expenses described in
Section 7.2 which have not been reimbursed by Tenant thereunder) (such damages
being referred to herein as "current damages"). At any time after any
termination or repossession by Landlord, whether or not Landlord has collected
any current damages pursuant to the foregoing sentence, Landlord may elect by
written notice to Tenant, as liquidated damages in lieu of all current damages
accruing beyond the date of such notice, a lump sum payment representing the
present value of the amount of rent which would have been paid in accordance
with this Lease for the remainder of the Term minus the present value of the
aggregate fair market rent payable for the Premises for the remainder of the
Term, estimated as of the date of the termination, and taking into account
reasonable projections of vacancy and time required to lease. (For the purposes
of calculating the rent which would have been paid hereunder for the lump sum
payment calculation described herein, the last full year's additional rent under
Section 2.6 is to be deemed constant for each year thereafter.) Should the
parties be unable to agree on a fair market rent, the matter shall be submitted,
upon the demand of either party, to the Boston, Massachusetts office of the
American Arbitration Association, with a request for arbitration in accordance
with the rules of the Association by a single arbitrator who shall be an MAI
appraiser with at least ten years experience as an appraiser of suburban
commercial real estate in the Greater Boston Area. The parties agree that a
decision of the arbitrator shall be conclusive and binding upon them.
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In lieu of any other damages or indemnity and in lieu of full recovery by
Landlord of all sums payable under all the foregoing provisions of this Section
7.3, Landlord may by written notice to Tenant within 2 months after termination
under any of the provisions contained in Section 7.1 and before such full
recovery, elect to recover, and Tenant shall thereupon pay, as liquidated
damages, an amount equal to the lesser of (i) the aggregate of the Annual Fixed
Rent under Section 2.5 and additional rent under Section 2.6 for the balance of
the Term had it not been terminated or (ii) the aggregate thereof for the 12
months ended next prior to such termination, plus in either case the amount of
Annual Fixed Rent and additional rent of any kind accrued and unpaid at the time
of termination and less the amount of any recovery by Landlord under the
foregoing provisions of this Section 7.3 up to the time of payment of such
liquidated damages (but not less any amounts of reimbursement under Section
7.2).
7.4 MITIGATION
Landlord shall use reasonable efforts to relet the Premises following the
termination of this Lease under Section 7.1, subject to the reasonable
requirements of Landlord to develop the Building in a harmonious manner with an
appropriate mix of uses, terms, tenants, floor areas and terms of tenancies,
etc.
7.5 CLAIMS IN BANKRUPTCY
Nothing herein shall limit or prejudice the right of Landlord to prove and
obtain in a proceeding for bankruptcy, insolvency, arrangement or
reorganization, by reason of the termination, an amount equal to the maximum
allowed by a statute of law in effect at the time when, and governing the
proceedings in which, the damages are to be proved, whether or not the amount is
greater to, equal to, or less than the amount of the loss or damage which
Landlord has suffered.
7.6 LATE CHARGE
If any payment of Annual Fixed Rent, additional rent, or other payment due
from Tenant to Landlord is not paid when due, then Landlord may, at its option,
without notice and in addition to all
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other remedies hereunder, impose a late charge on Tenant equal to 1.5% of the
amount in question for each month and part thereof during which said delinquency
continues. Such late charge shall constitute additional rent hereunder payable
upon demand.
ARTICLE VIII
MISCELLANEOUS
8.1 MEASUREMENT OF FLOOR AREA
The number of rentable square feet included within the Building has been
calculated in accordance with the methods of measuring rentable square feet, as
that method is described in the American National Institute Publication ANSI
Z65.1-1980, as promulgated by the Building Owners and Managers Association (the
"BOMA Standard"). The number of rentable square feet in the Premises has been
calculated by measuring the number of usable square feet within the Premises
calculated in accordance with the BOMA Standard and dividing the number of
usable square feet by .8744%. If Tenant leases the Expansion Space or Available
Space in the Building in accordance with Article XIII, or any other space in the
Building, the number of rentable square feet in such space shall be calculated
by measuring the number of usable square feet within such space calculated in
accordance with the BOMA Standard and dividing the number of usable square feet
by .8333%
8.2 HOLDOVER
If Tenant continues in occupancy of the Premises after the expiration or
earlier termination of the Term, such occupancy shall be deemed a tenancy at
sufferance, terminable at Landlord's election without notice to Tenant or anyone
claiming under Tenant, whether or not Landlord receives any payments for use and
occupancy of the Premises during such tenancy, and Tenant shall be liable for
any damages suffered or expenses incurred by Landlord as result of such holding
over. Tenant's liability for use and occupancy during any such holdover shall
be the fair rental value of the Premises, but not less than 1.5 times the
monthly installment of Annual Fixed Rent and Additional Rent due hereunder for
the last month of the Term (the "Holdover Rent"), and otherwise subject to all
the covenants and conditions (including obligations to pay additional
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rent under Section 2.6) of this Lease. Notwithstanding the foregoing, if Tenant
desires to holdover after the expiration of the Term, Tenant may notify Landlord
thereof in writing (a "Holdover Notice") not less than six (6) months prior to
the expiration date of the Term, in which case, unless Landlord objects to such
holding over in writing within thirty (30) days following its receipt of
Tenant's Holdover Notice (in which event any such holdover by Tenant shall be as
a tenant at sufferance), such holding over shall be as a tenant at will or
tenant by the month (requiring 30 days notice of termination by either party to
the other) at the monthly Holdover Rent. If at any time Tenant remains a tenant
at sufferance hereunder for a period of three (3) months or more, at Landlord's
election by notice to Tenant at any time during the continuance of any such
holdover period, Tenant shall lease the Premises for one additional year
commencing upon the date of such notice at the Holdover Rent and otherwise
subject to all the covenants and conditions (including obligations to pay
additional rent under Section 2.6) of this Lease. Notwithstanding the foregoing,
at any time while Tenant occupies the Premises as a tenant at sufferance,
Landlord may, at its option, forthwith re-enter and take possession of the
Premises or any part thereof without process or by any legal process in force in
the Commonwealth of Massachusetts.
8.3 ESTOPPEL CERTIFICATES
Within ten (10) days following the written request of either party, from
time to time, Landlord and Tenant agree to execute and deliver to the other a
certificate which, to the extent true, acknowledges tenancy and possession of
the Premises and recites such other facts concerning any provision of the Lease
or payments made under the Lease which a mortgagee or lender or a purchaser or
prospective purchaser of the Building or any interest therein or any other party
may reasonably request.
8.4 NOTICE
Any notice, approval and other like communication hereunder from Landlord
to Tenant or from Tenant to Landlord shall be given in writing and shall be hand
delivered, mailed prepaid certified mail (in either case whether or not accepted
for delivery), or delivered by Federal Express or another nationally recognized
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courier service which provides evidence of receipt, addressed as follows:
TO LANDLORD: Advent Realty Limited Partnership
c/o TA Associates Realty
45 Milk Street
Boston, Massachusetts 02109
Attn: Henry G. Brauer
With a copy to:
Graystone Corporation
1100 Massachusetts Avenue
Cambridge, Massachusetts 02138
Attn: Mr. John Kiger
and
Daniel O. Gaquin, Esquire
Sherin and Lodgen LLP
100 Summer Street
Boston, Massachusetts 02110
TO TENANT: 20 Maguire Road
Lexington, Massachusetts
With a copy to:
Kevin M. McKenna, Esquire
Testa Hurwitz & Thibeault
Exchange Place
53 State Street
Boston, Massachusetts 02109-2809
Either party may from time to time designate other addresses within the
continental United States by written notice to the other. Notices shall be
deemed delivered on the earlier of (i) the date of receipt or (ii) the date of
delivery if hand delivered, (iii) two (2) days after mailing if sent by Federal
Express of some other overnight courier, and (iv) three (3) days after mailing
if sent by prepaid certified mail.
8.5 LANDLORD'S RIGHT TO CURE
Landlord may, but need not, after written notice and the expiration of any
applicable grace period except in case of an
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emergency, cure any failure by Tenant to perform its obligations under this
Lease. Whenever Landlord chooses to do so, all costs and expenses incurred by
Landlord in curing any such failure, including, without limitation, reasonable
attorneys' fees together with interest on the amount of costs and expenses so
incurred at an annual rate equal to the so-called base rate of interest
announced at its head office in Boston, Massachusetts, from time to time by the
First National Bank of Boston plus two percentage points shall be paid by Tenant
to Landlord on demand and shall be recoverable as additional rent.
8.6 SUCCESSORS AND ASSIGNS
This Lease and the covenants and conditions herein contained shall inure to
the benefit of and be binding upon Landlord, its successors and assigns, and
shall be binding upon Tenant, its successors and assigns, and shall inure to the
benefit of Tenant and only such assignees of Tenant as are permitted hereunder.
The term "Landlord" means the original Landlord named herein, its successors and
assigns. The term "Tenant" means the original Tenant named herein and its
permitted successors and assigns.
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8.7 BROKERAGE
Tenant and Landlord each warrants to the other that it has had no dealings
with any broker or agent in connection with this Lease except for any broker
designated in Section 1.1, and covenants to pay, hold harmless and indemnify the
other from and against any and all costs, expense or liability for any
compensation, commissions and charges claimed by any broker or agent other than
any such broker with respect to this Lease or the negotiation thereof arising
from a breach of the foregoing warranty. Landlord shall be responsible for
payment of any brokerage commission to the Broker designated in Section 1.1.
8.8 WAIVER
The failure of Landlord or of Tenant to seek redress for violation of, or
to insist upon strict performance of, any covenant or condition of this Lease,
or, with respect to such failure of Landlord, any of the rules and regulations
referred to in Section 5.4, whether heretofore or hereafter adopted by Landlord,
shall not be deemed a waiver of such violation nor prevent a subsequent act,
which would have originally constituted a violation, from having all the force
and effect of an original violation, nor shall the failure of Landlord to
enforce any of said rules and regulations against any other tenant of the
Building be deemed a waiver of any such rules or regulations. The receipt by
Landlord of Annual Fixed Rent or additional rent with knowledge of the breach of
any covenant of this Lease shall not be deemed waiver of such breach. No
provision of this Lease shall be deemed to have been waived by Landlord, or by
Tenant, unless such waiver be in writing signed by the party to be charged. No
consent or waiver, express or implied, by Landlord or Tenant to or of any breach
of any agreement or duty shall be construed as a waiver or consent to or of any
other breach of the same or any other agreement or duty.
8.9 ACCORD AND SATISFACTION
No acceptance by Landlord of a lesser sum than the Fixed Rent and
additional rent then due shall be deemed to be other than on account of the
earliest installment of such rent due, nor shall any endorsement or statement on
any check or any letter accompanying any check or payment as rent be deemed an
accord and satisfaction,
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and Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance of such installment or pursue any other remedy
provided in this Lease. The delivery of keys to any employee of Landlord or to
Landlord's agent or any employee thereof shall not operate as a termination of
this Lease or a surrender of the Premises.
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8.10 REMEDIES CUMULATIVE
The specific remedies to which Landlord may resort under the Terms of this
Lease are cumulative and are not intended to be exclusive of any other remedies
or means of redress to which it may be lawfully entitled in case of any breach
or threatened breach by Tenant of any provisions of this Lease. In addition to
the other remedies provided in this Lease, Landlord shall be entitled to seek
the restraint by injunction of the violation or attempted or threatened
violation of any of the covenants, conditions or provisions of this Lease or to
a decree compelling specific performance of any such covenants, conditions or
provisions.
8.11 PARTIAL INVALIDITY
If any term of this Lease, or the application thereof to any person or
circumstance, shall to any extent be invalid or unenforceable, the remainder of
this Lease, or the application of such term to persons or circumstances other
than those as to which it is invalid or unenforceable, shall not be affected
thereby, and each term of this Lease shall be valid and enforceable to the
fullest extent permitted by law.
8.12 WAIVERS OF SUBROGATION
Any insurance carried by either party with respect to the Premises or
property therein or occurrences thereon shall, if it can be so written without
additional premium or with an additional premium which the other party agrees to
pay, include a clause or endorsement denying to the insurer rights of
subrogation against the other party to the extent rights have been waived by the
insured hereunder prior to occurrence of injury or loss. Each party,
notwithstanding any provisions of this Lease to the contrary, hereby waives any
rights of recovery against the other for injury or loss due to hazards covered
by such insurance to the extent of the indemnification received
8.13 ENTIRE AGREEMENT
This Lease contains all of the agreements between Landlord and Tenant with
respect to the Premises and supersedes all prior dealings between them with
respect thereto.
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8.14 NO AGREEMENT UNTIL SIGNED
The submission of this Lease or a summary of some or all of its provisions
for examination does not constitute a reservation of or option for the Premises
or an offer to lease and no legal obligations shall arise with respect to the
Premises or other matters herein until this Lease is executed and delivered by
Landlord and Tenant.
8.15 TENANT'S AUTHORIZED REPRESENTATIVE
Tenant designates the person named from time to time as Tenant's Authorized
Representative to take all acts of Tenant contemplated or required hereunder.
Landlord may rely on the acts of such Authorized Representative without further
inquiry or evidence of authority. Tenant's Authorized Representative shall be
the person so designated in Section 1.1 and such successors as may be named from
time to time by the then current Tenant's Authorized Representative or by
Tenant's president.
8.16 LANDLORD'S AUTHORIZED REPRESENTATIVE
Landlord designates the person named from time to time as Landlord's
Authorized Representative to take all acts of Landlord contemplated or required
hereunder. Tenant may rely on the acts of such Authorized Representative
without further inquiry or evidence of authority. Landlord's Authorized
Representative shall be the person so designated in Section 1.1 and such
successors as may be named from time to time by the then current Landlord's
Authorized Representative.
8.17 NOTICE OF LEASE
Landlord and Tenant agree not to record this Lease. Both parties will, at
the request of either, execute, acknowledge and deliver a Notice of Lease and a
Notice of Termination of Lease Term, each in recordable form. Such notices
shall contain only the information required by law for recording.
8.18 TENANT AS BUSINESS ENTITY
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Tenant warrants and represents that (a) Tenant is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which such
entity was organized; (b) Tenant has the authority to own its property and to
carry on its business as contemplated under this Lease; (c) Tenant is in
compliance with all laws and orders of public authorities applicable to Tenant;
(d) Tenant has duly executed and delivered this Lease; (e) the execution,
delivery and performance by Tenant of this Lease (i) are within the powers of
Tenant, (ii) have been duly authorized by all requisite action, (iii) will not
violate any provision of law or any order of any court or agency of government,
or any agreement or other instrument to which Tenant is a party or by which it
or any of its property is bound, and (iv) will not result in the imposition of
any lien or charge on any of Tenant's property, except by the provisions of this
Lease; and (f) the Lease is a valid and binding obligation of Tenant in
accordance with its terms.
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8.19 MISCELLANEOUS PROVISIONS
This Lease may be executed in counterparts and shall constitute the
agreement of Landlord and Tenant whether or not their signatures appear in a
single copy hereof. This Lease shall be construed as a sealed instrument in
accordance with the laws of the Commonwealth of Massachusetts. The titles are
for convenience only and shall not be considered a part of the Lease. The
enumeration of specific examples of or inclusions in a general provision shall
not be construed as a limitation of the general provision. If Tenant is granted
any extension or other option, to be effective the exercise (and notice thereof)
shall be unconditional; and if Tenant purports to condition the exercise of any
option or to vary its terms in any manner, then the option granted shall be void
and the purported exercise shall be ineffective. Nothing herein shall be
construed as creating the relationship between Landlord and Tenant of principal
and agent, or of partners or joint venturers or any relationship other than
landlord and tenant. This lease and all consents, notices, approvals and all
other documents relating hereto may be reproduced by any party by photographic,
microfilm, microfiche or other reproduction process and the originals thereof
may be destroyed; and each party agrees that any reproductions shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether or not
reproduction was made in the regular course of business) and that any further
reproduction of such reproduction shall likewise be admissible in evidence.
8.19 TENANT'S RIGHT TO CURE
If Landlord shall default in the performance of any obligation or
requirement on Landlord's part to be performed under any of the terms or
provisions of this Lease and Landlord fails to commence to cure such default
within thirty (30) days after Landlord's receipt of written notice of such
default from Tenant or to diligently pursue such cure, and such default
thereafter causes or results in an interference in the conduct of Tenant's
business, then Tenant may, upon reasonable advance notice to Landlord,
diligently proceed to cure such default on Landlord's behalf and Landlord agrees
to reimburse Tenant for the Tenant's reasonable actual out-of pocket costs
incurred as result thereof together with interest on the amount of such costs so
incurred at an annual rate
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equal to the so-called base rate of interest announced at its head office in
Boston, Massachusetts, from time to time by the First National Bank of Boston
plus two percentage points.
8.20 DELAYS
In any case where either party hereto is required to do any act, the date
(or the period) by (or in which) the act is to be performed shall be postponed
(or enlarged) by a period equal to any delay caused by or resulting from Act of
God; war, civil commotion; fire or other casualty; labor difficulties, shortages
of labor, materials, fuel, electricity (or other relevant form of energy) or
equipment; or resulting from government regulations or other causes (not
including financial inability to perform) beyond such party's reasonable
control, whether such date (or time period) be designated specifically (e.g.
"July 4, 1984"; "within 120 days after such filing") or described as (or with
reference to) a "reasonable time".
ARTICLE IX
LANDLORD'S LIABILITY AND ASSIGNMENT FOR FINANCING
9.1 LANDLORD'S LIABILITY
Tenant agrees from time to time to look only to Landlord's interest in the
Building for satisfaction of any claim against Landlord hereunder and not to any
other property or assets of Landlord. If Landlord from time to time transfers
its interest in the Building (or part thereof which includes the Premises), then
upon the written acknowledgement by any such transferee of its receipt of any
security deposit under Article X and its assumption of Landlord's obligations
under this Lease, Tenant shall look solely to the interests in the Building of
each of Landlord's transferees for the performance of all of the obligations of
Landlord hereunder. The obligations of Landlord shall not be binding on any
partners (or trustees or beneficiaries) of Landlord or of any successor,
individually, but only upon Landlord's or such successor's assets described
above.
9.2 ASSIGNMENT OF RENTS
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If, at any time and from time to time, Landlord assigns this Lease or the
rents payable hereunder to the holder of any mortgage on the Premises or the
Building, or to any other party for the purpose of securing financing (the
holder of any such mortgage and any other such financing party are referred to
herein as the "Financing Party"), whether such assignment is conditional in
nature or otherwise, the following provisions shall apply:
(i) Such assignment to the Financing Party shall not be deemed an
assumption by the Financing Party of any obligations of Landlord hereunder
unless such Financing Party shall, by written notice to Tenant, specifically
otherwise elect;
(ii) Except as provided in (i) above, the Financing Party shall be treated
as having assumed Landlord's obligations hereunder (subject to Section 9.1)
only upon foreclosure of its mortgage (or voluntary conveyance by deed in lieu
thereof) or the taking of possession of the premises and, with respect to
obligations regarding return of any security deposit, only upon receipt of the
funds constituting such security deposit;
(iii) Subject to Section 9.1, the Financing Party shall be responsible for
only such breaches under the Lease by Landlord which occur during the period of
ownership by the Financing Party after such foreclosure (or voluntary conveyance
by deed in lieu thereof) or taking of possession, as aforesaid;
(iv) In the event Tenant alleges that Landlord is in default under any of
Landlord's obligations under this Lease, Tenant agrees to give the holder of any
mortgage, by registered mail, a copy of any notice of default which is served
upon the Landlord, provided that prior to such notice, Tenant has been notified,
in writing, (whether by way of notice of an assignment of lease, request to
execute an estoppel letter, or otherwise) of the address of any such holder.
Tenant further agrees that if Landlord shall have failed to cure such default
within the time provided by law or such additional time as may be provided in
such notice to Landlord, such holder shall have thirty (30) days after the last
date on which Landlord could have cured such default within which such holder
will be permitted to cure such default. If such default cannot be cured within
such thirty day period, then such holder shall have such additional time as may
be necessary to cure such default, if within such thirty day period such holder
has commenced and is
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diligently pursuing the remedies necessary to effect such cure (including, but
not limited to, commencement of foreclosure proceedings, if necessary, to effect
such cure), in which event Tenant shall have no right with respect to such
default while such remedies are being diligently pursued by such holder.
In furtherance of the foregoing, Tenant hereby agrees to enter into such
agreements or instruments as may, from time to time, be requested in
confirmation of the foregoing.
ARTICLE X
SECURITY DEPOSIT
Tenant hereby agrees that the $250,000 letter of credit which has been
delivered to Landlord as the security deposit under the Maguire Road Lease (the
"Letter of Credit") shall also serve as the security deposit for this Lease to
the same extent as if such Letter of Credit was obtained and delivered as
security solely for this Lease, and the provisions of Article X of the Maguire
Road Lease are hereby incorporated herein by reference. In the event of a
simultaneous default by Tenant of this Lease and the Maguire Road Lease,
Landlord may elect to call and apply the Letter of Credit to the obligations
under either Lease in its sole and absolute discretion.
Tenant hereby further agrees that Tenant shall not, and shall not be
permitted to, make any reduction in the amount of the Letter of Credit, as set
forth in said Article X of the Maguire Road Lease, unless and until Landlord has
received the evidence of the completion of Tenant's Work necessary to trigger
the payment of the Tenant Improvement Allowance, including third-party invoices
and lien waivers, all in accordance with Section 2.5.1.
Upon Landlord's written request, Tenant agrees to split the Letter of
Credit into two separate letters of credit, each of which shall separately
secure this Lease and the Maguire Road Lease. The letters of credit shall
remain subject to the terms of Article X of the Maguire Road Lease (as affected
hereby), and the terms and conditions of such letters of credit shall be
identical to the Letter of Credit, except that Landlord may determine the
respective
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amounts of each letter (which in the aggregate shall not exceed that
then required amount of the Letter of Credit).
ARTICLE XI
SUBORDINATION
Before the execution of this Lease, Landlord shall provide Tenant with a
written agreement (a "Non-Disturbance Agreement") with the holder of any
mortgage or similar instrument encumbering the Land or the Building and any
lessor of any ground lease affecting the Land or the Building to the effect
that, in the event of a foreclosure or other enforcement of rights under such
mortgage, ground lease or other instrument, such holder or lessor shall
recognize Tenant's rights under this Lease and not disturb Tenant's occupancy of
the Premises under this Lease. Provided Tenant receives a Non-Disturbance
Agreement from each such holder or lessor, this Lease shall be subject and
subordinate to any mortgages or ground leases that may now or hereafter be
placed upon the Building and/or the Land and to any and all advances to be made
under such mortgages or ground leases and to the interest thereon, and all
renewals, extensions and consolidations thereof; provided that any mortgagee or
ground lessor may elect to have this Lease a prior lien to its mortgage or
ground lease and in the event of such election and upon notification by such
mortgagee or ground lessor to Tenant to that effect, this Lease shall be deemed
prior in lien to said mortgage or ground lease. This Section shall be self-
operative, but in confirmation thereof, Tenant shall execute and deliver
whatever instruments may be required to acknowledge such subordination or
priority in recordable form. Landlord represents and warrants that there are no
mortgages or, to the best of its knowledge, other monetary liens presently
encumbering the Land or the Building.
In addition, upon Tenant's written request, Landlord will use its best
efforts (without the payment of money) to obtain the ground lessor's consent to
the installation of a ground conduit for cabling between 20 Maguire road and 81
Hartwell Avenue. Such installation shall be at Tenant's cost and Tenant shall
restore any area disturbed by such installation.
ARTICLE XII
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OPTION TO EXTEND
Tenant shall have the option to extend the Term of this Lease for two
additional three-year periods upon the terms and conditions set forth in this
Lease, as amended from time to time, including without limitation any amendments
in connection with additional space leased under Article XIII, except that the
Annual Basic Rent during each such additional three-year period shall be equal
to ninety-five percent (95%) of the Fair Market Rent. For the purposes of this
Lease, "Fair Market Rent" shall mean the fair market rent being paid in the
vicinity of the Premises in Lexington, Massachusetts, for leases having a term
equal to the length of the applicable extension period commencing as of the
beginning of each such extension period, for space comparable to that of Tenant
under this Lease, with facilities and services comparable to those provided to
Tenant, the suitability of the Premises for Tenant's use, and the charges
payable by Tenant hereunder, and other relevant factors. Tenant may exercise
such option with respect to each such additional period by giving written notice
to Landlord no earlier than one (1) year prior to the first day of the purported
extension period and no later than nine (9) months prior to the first day of the
purported extension period (time being of the essence). Within ten (10)
business days following Tenant's written request given at any time after the
date which is thirteen (13) months prior to the first day of extension period,
Landlord shall advise Tenant of the Fair Market Rent for the Premises for the
applicable extension period as determined by Landlord. Should the parties be
unable to agree on a Fair Market Rent within thirty (30) days following
Landlord's receipt of Tenant's extension notice, the matter shall be submitted,
upon the demand of either party, to the Boston, Massachusetts office of the
American Arbitration Association, with a request for arbitration in accordance
with the rules of the Association by a single arbitrator who shall be an MAI
appraiser with at least ten years experience as an appraiser of suburban
commercial real estate in the Greater Boston Area. The parties agree that a
decision of the arbitrator shall be conclusive and binding upon them.
Tenant's rights under this Article XII shall be personal to Atria Software,
Inc., its successors and assigns under Affiliate Transfers and successors and
assigns succeeding to all or substantially all of the business and assets of
Atria Software,
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Inc. by way of merger, consolidation, or acquisition, but not to any other
assignee of the Lease or any other successor to Atria Software, Inc.
Tenant shall have no right to exercise any such option, and any exercise of
any such option shall be rendered voidable at Landlord's election, if either at
the time Tenant exercises any such option or at the time any such additional
period shall commence (i) Tenant shall be in default under this Lease, after
written notice and the expiration of any applicable grace period, or (ii) Atria
Software, Inc. has then subleased more than seventy-five percent (75%) of the
rentable floor area of the Premises (other than pursuant to an Affiliate
Transfer).
ARTICLE XIII
OPTION TO EXPAND/RIGHT OF FIRST OFFER
13.1 OPTION TO EXPAND.
Tenant shall have the right, by written notice to Landlord on or before
March 1, 1999, time being of the essence, to lease approximately 8,000 rentable
square feet of space on the second floor of the Building, shown as the Expansion
Space on Exhibit B-1 attached to this Lease, for occupancy on or about September
1, 1999 (the "Delivery Date"). If Tenant timely exercises its right to lease the
Expansion Space, such Expansion Space shall be incorporated into the Premises on
the terms and conditions set forth in this Lease, except that (i) the Annual
Fixed Rent shall be equal to the Fair Market Rent determined in accordance with
Article XII (plus Tenant's Electricity Rate) and (ii) the Expansion Space shall
be delivered to Tenant on or before the Delivery Date in an "As-Is" condition,
free of all occupants and in broom clean condition and free of all personal
property not owned by Tenant. Landlord shall not be liable to Tenant for failing
to deliver the Expansion Space on or before the Delivery Date as a result of the
existing tenant's failure to vacate or vacate timely, provided Landlord shall
use its best efforts to vacate such tenant upon the exercise of Tenant's
expansion right as set forth herein, which best efforts shall include
prosecuting legal actions to evict, if necessary. Upon the request of either
party, Landlord and Tenant shall execute and deliver an amendment of lease for
the purpose of
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incorporating the Expansion Space into the Premises on the terms and conditions
set forth in this Lease.
13.2. RIGHT OF FIRST OFFER
Tenant shall have the right to lease any space in the Building which
becomes available for occupancy ("Available Space") during the Term of this
lease, subject to and in accordance with the terms hereof. If at any time
during the Term of this lease there shall be any Available Space, Landlord shall
notify Tenant thereof in writing ("Landlord's Available Space Notice"), which
notice shall include the date upon which such Available Space shall be available
for occupancy by Tenant. Tenant shall have the right to lease such Available
Space only by giving written notice to Landlord within ten (10) business days
after Tenant receives Landlord's Available Space Notice, time being of the
essence. If Tenant fails to timely exercise such right with respect to any
Available Space offered to Tenant by Landlord, Landlord shall then be free to
market such Available Space for leasing. Landlord shall then notify Tenant in
writing ("Landlord's Letter of Intent Notice") when Landlord receives a letter
of intent or written offer to lease all or any part of such Available Space
which Landlord desires to accept (a "Letter of Intent"), which notice shall be
subject to the Confidentiality Requirements set forth below, including the
identity of the prospective tenant. Tenant shall then have the right to lease
the Available Space offered to Tenant by Landlord's Letter of Intent Notice only
by giving written notice to Landlord within ten (10) business days after Tenant
receives Landlord's Letter of Intent Notice, time being of the essence. If
Tenant fails to timely exercise such right with respect to such Available Space
offered to Tenant by Landlord pursuant to Landlord's Letter of Intent Notice,
Landlord shall then be free to lease such Available Space to the Tenant named in
the Letter of Intent and in accordance with the terms and conditions of the
Letter of Intent (which lease may include terms, conditions and provisions which
are not inconsistent with the Letter of Intent and not more favorable to the
prospective tenant than those under which Tenant may lease such Available
Space). If Tenant exercises its option to lease any Available Space pursuant to
the terms hereof, such Available Space shall be incorporated into the Premises
on the terms and conditions set forth in this Lease, except that (i) the Annual
Fixed Rent shall be equal to the Fair Market Rent determined in accordance with
Article XII (plus Tenant's Electricity Rate), and (ii) the
54
<PAGE>
Available Space shall be delivered to Tenant in an "As-Is" condition, free of
all occupants and in broom clean condition and free of all personal property not
owned by Tenant; provided however, the Annual Fixed Rent and other terms
applicable to any Available Space leased pursuant to Landlord's Letter of Intent
Notice shall be governed by the terms of the applicable Letter of Intent and, to
the extent not inconsistent with such Letter of Intent, the terms hereof. Upon
the request of either party, Landlord and Tenant shall execute and deliver an
amendment of lease for the purpose of incorporating any such Available Premises
into the Premises on the terms and conditions set forth in this Lease. If
Landlord fails to consummate a lease according to the terms of the Letter of
Intent, such space shall once again become Available Space subject to the terms
hereof. For the purposes hereof, space shall be deemed "available for occupancy"
when any lease (including extension periods) has expired or is due to expire
within six (6) months and any prior options or rights to lease have expired or
been waived and Landlord is free to lease such space to third parties without
restriction.
For the purposes hereof, the "Confidentiality Requirements" shall mean
either (i) Landlord is not prohibited by the terms of the Offer or the letter of
intent, as the case may be, from disclosing the identity of the prospective
tenant, or (ii) if Landlord is so prohibited from disclosing the identity of the
prospective tenant, Tenant shall agree to defend and indemnify Landlord from and
against any loss, cost, damage, expense, claim, or liability arising out of such
disclosure. In either case, if Landlord discloses the identity of the
prospective tenant to Tenant, Tenant shall keep such prospective tenant's
identity confidential.
13.3 NO CONFLICTING AGREEMENTS.
Landlord shall not grant options, rights of first offer or first refusal or
other rights which conflict with, or have a priority more senior than, Tenant's
rights and options under this Article XIII. The foregoing sentence shall not be
deemed to prohibit or limit Landlord from leasing space for a term and with such
rights to extend the term as Landlord may desire provided Landlord has complied
with the terms of this Article XIII.
13.4 LIMITATIONS.
55
<PAGE>
Tenant shall have no right to exercise any such option with respect to
Expansion Space or right with respect to Available Space, and any exercise of
any such option or right shall be rendered voidable at Landlord's election, if
either at the time Tenant exercises any such option or at the purported delivery
date of the applicable space, as the case may be (i) Tenant shall be in default
under this Lease, after written notice and the expiration of any applicable
grace period, or (ii) Atria Software, Inc. has then subleased more than seventy-
five percent (75%) of the rentable floor area of the Premises (other than
pursuant to an Affiliate Transfer). Tenant's rights under this Article XIII
shall be personal to Atria Software, Inc., its successors and assigns under
Affiliate Transfers and successors and assigns to all or substantially all of
the business and assets of Atria Software, Inc., by way of merger,
consolidation, or acquisition.
13.5 WARRANTIES CONCERNING EXPANSION SPACE.
Landlord represents and completely sets forth a list of all tenants of
the Building. Landlord further represents and warrants to Tenant that said
Exhibit F accurately and completely sets forth the expiration dates of the
leases or occupancy agreements under which such tenants presently occupy
portions of the Building and all rights to extend such expiration dates and all
rights of first offer, rights of first refusal, options and the like held by
such tenants.
56
<PAGE>
ARTICLE XIV
LANDLORD'S REPRESENTATION AND WARRANTIES
Landlord represents and warrants to Tenant that:
a) Landlord is the lessee of the Land and the Building under the Kiln Brook II
Amendment and Restatement of Ground Lease dated October 27, 1988, between
Thomas H. Dupree and Frederick Dupree, as Lessor (the "Ground Lessor"), and
Landlord, as lessee (the "Ground Lease").
b) The Ground Lease is in full force and have not been amended;
c) Landlord has provided to Tenant a complete and accurate copy of the Ground
Lease, which represents the entire agreement between Ground Lessor and
Landlord with respect to the property at 81 Hartwell Avenue.
d) To the best of Landlord's knowledge, neither the Ground Lessor nor Landlord
is in default under the Ground Lease, nor has any event occurred which,
after any applicable notice or the expiration of any applicable grace
period, will become a default under the Ground Lease; and
e) All rent, additional rent and other charges due under the Ground Lease
has been paid through August 30, 1995.
ARTICLE XV
HAZARDOUS SUBSTANCES
15.1 HAZARDOUS SUBSTANCES.
Tenant shall not cause or permit the release of any hazardous
substance/material or oil (other than the Excepted Materials as hereinafter
defined) into the septic, sewage or other waste disposal system serving the
Demised Premises, the Building or the Land, nor cause or permit the use,
generation, release, disposal or storage of any hazardous substance/material or
oil (except only the use and storage of immaterial quantities of cleaning fluids
and office supplies used in the ordinary course of the Permitted Uses
57
<PAGE>
which may be deemed hazardous by law, provided the same are used and stored in
compliance with any and all federal, state, and local laws, ordinances and
regulations governing the same (the "Excepted Materials")), nor commit or suffer
to be committed in or on the Demised Premises, the Building or the Land any act
which would require Tenant to obtain from a governmental authority any license,
permit, approval or authorization pursuant to applicable law. In addition,
Tenant shall not cause or permit the transportation of any hazardous substance/
material or oil (other than Excepted Materials) to or from the Demised Premises,
the Building or the Land without the prior written consent of Landlord, and then
only in compliance with any and all federal, state and local laws, ordinances
and regulations governing such transportation. The phrase "hazardous substance/
material or oil" as used in this Section shall include all "hazardous
substances" as defined and used in 42 USC (S)9601, et seq., as the same may be
-- ---
amended from time to time, or as defined in any other federal, state or local
laws, ordinances and regulations applicable to the Demised Premises, the
Building or the Land. Tenant shall forthwith give Landlord notice of the
accidental or other introduction of any such hazardous substance/material or oil
(other than Excepted Materials), or the release or threat of release from the
Demised Premises, the Building or the Land of any such hazardous
substance/material or oil (other than Excepted Materials).
15.2 TENANT'S INDEMNITY.
Tenant shall indemnify, defend, and hold Landlord, any parent, subsidiary
and affiliate of Landlord, any Ground Lessor, and their respective officers,
directors, beneficiaries, shareholders, partners, agents, and employees harmless
from all fines, suits, proceedings, claims, and actions of every kind, and all
costs associated therewith (including attorneys' and consultants' fees and
remediation costs, if applicable) arising out of or in any way connected with
(i) any deposit, spill, discharge, or other release (or the threat of release)
of any hazardous substance/material or oil (other than Excepted Materials) which
arises at any time from Tenant's use or occupancy of the Demised Premises, the
Building or the Land (including the act or negligence of Tenant or any of
Tenant's agents, employees, licensees, sublessees, concessionaires, contractors
or invitees), or (ii) from Tenant's failure to provide all information, make all
submissions, and take all actions required of Tenant by all governmental
authorities under all laws,
58
<PAGE>
ordinances and regulations applicable to any hazardous substance/material or
oil.
15.3 LANDLORD'S INDEMNITY.
Landlord shall indemnify, defend, and hold Tenant, any parent, subsidiary
and affiliate of Tenant, and their respective officers, directors,
beneficiaries, shareholders, partners, agents, and employees harmless from all
fines, suits, proceedings, claims, and actions of every kind, and all costs
associated therewith (including attorneys' and consultants' fees and remediation
costs, if applicable) arising out of (i) any hazardous substance/material or oil
located in, on or under the Building or the Land as of the date hereof, and (ii)
any deposit, spill, discharge, or other release (or the threat of release) of
any hazardous substance/material or oil arising out of the act or negligence of
Landlord, its agents, employees, or contractors, or from Landlord's failure to
provide all information, make all submissions, and take all actions required by
all governmental authorities under all applicable laws, ordinances and
regulations related thereto.
15.4 SURVIVAL.
Tenant's and Landlord's obligations and liabilities under this Article
XV shall survive the expiration or earlier termination of this lease.
Executed to take effect as a sealed instrument.
LANDLORD: ADVENT REALTY LIMITED PARTNERSHIP
by: Advent Realty GP Limited Partnership (its general partner)
by: TA Realty Group Limited Partnership (its general partner)
By: ________________________________________
Michael A. Ruane, General Partner or
Arthur I. Segel, General Partner
TENANT: ATRIA SOFTWARE, INC.
59
<PAGE>
By: ________________________________________
Chuck Bay, Chief Financial Officer
60
<PAGE>
EXHIBIT 10.20
Pure Atria Corporation
1309 South Mary Avenue
Sunnyvale, California 94087
August 26, 1996
Mr. Aki Fujimura
1220 North Fair Oaks Avenue, No. 4306
Sunnyvale, CA 94089
Re: Termination of Employment Relationship
Dear Mr. Fujimura,
This letter will constitute an agreement between you and Pure Atria Corporation
("Pure Atria") regarding your resignation from Pure Atria in connection with the
recent merger involving Atria Software, Inc.
During the course of your employment as the Vice President of Pure Atria, you
have been involved with all aspects of the business of Pure Atria and have had
direct access to information, much of which is confidential and the disclosure
of which could be extremely damaging to the business of Pure Atria. You have
also been uniquely instrumental in developing Pure Atria's research and
development and marketing plans and policies.
Accordingly, for good and valuable consideration, the adequacy of which is
acknowledged, the parties agree as follows:
1. Employment Termination Date. Effective as of the date of this letter (the
---------------------------
"Termination Date") you have resigned as Vice President, of Pure Atria.
2. Compensation and Benefits. In connection with the termination of your
-------------------------
employment with the company, you will receive the following payments and
benefits:
1
<PAGE>
(i) You will be paid your base salary, variable compensation, and any
accrued but unused vacation or other paid time off, owed to you
through to the Termination Date.
(ii) You will be paid a lump sum severance payment of equal to salary and
variable compensation at 100% of target for the period from the
Termination Date until January 7, 1998 (the "Transition Period").
(iii) Pure Atria shall, at its expense, continue your coverage on Pure
Atria's medical and dental insurance plans until November 25, 1997,
pursuant to provisions of the Consolidated Omnibus Budget
Reconciliation Act (COBRA) of 1985, and subject to the completion of
the appropriate form by you. Thereafter you may continue, at your own
expense, medical insurance coverage to the extent permitted by COBRA.
(iv) You will receive accelerated vesting of your stock options that would
have vested during the Transition Period, notwithstanding any terms
in your applicable stock option agreement. All such options must be
exercised in accordance with the terms and conditions of the stock
option agreements and plans pursuant to which such options were
granted. As you may be aware, the terms of the Pure Software Inc.
1992 and 1995 Stock Option Plans allow optionees to continue to
exercise their options while in service to the company as a director,
and for a period of ninety days after ceasing to be a director.
3. Required Deductions. The payments and benefits under Section 2 shall be
-------------------
paid or credited net of any applicable withholding taxes which Pure Atria
is required to deduct under any applicable federal, state or local law.
4. Non-Solicitation Provisions. You agree that, during the Transition Period,
---------------------------
you will not, directly or indirectly recruit, or solicit to hire or
otherwise to retain the services of any person who is then or has within
the past six months been an employee of Pure Atria.
5. Non-Competition Provisions. You agree that, during the Transition Period,
--------------------------
you will not, directly or indirectly, as an employee, consultant, agent,
director, officer, joint venturer, stockholder, investor, or in any other
capacity (other than as the holder of not more than one percent of the
combined voting power of the outstanding stock), without the prior written
consent of an officer of Pure Atria:
(i) provide any services of any kind to Continuus Software Corp.,
Rational Software Corporation, Segue Software, Inc., SQA Inc.,
Platinum Technology Inc., Intersolv, Inc., Mercury Interactive,
Parasoft Corporation, Centerline Software, Inc. NuMega Technologies,
Inc., StratosWare Corporation, Abraxas Software, Inc., SQL Software
Ltd., MainSoft
2
<PAGE>
Corporation, Microsoft Corporation, or any other business engaged in
the development, marketing, distribution or re-sale of software
configuration management, software development process, software
change request management, software defect detection, or software
testing products, in any state within the United States, or in any
state or province within any other country (or, if any such country
is not divided into states or provinces, within the country itself)
in which Pure Atria develops, supports, markets, distributes or re-
sells its products during the Transition Period;
(ii) develop, design, produce, market or sell (or assist any other person
in developing, designing, producing, marketing or selling of) any
software configuration management, software development process,
software change request management, software defect detection, or
software testing products; or
(iii) engage in or render services that would result in your use or
disclosure of "Proprietary Information," as defined in the
Proprietary Information and Inventions Agreement signed by you (the
"Employee Agreement"), or result in your use of the good will of Pure
Atria.
The foregoing shall not prohibit you from using the phrase "Quality on
Time" or using the materials contained in the "Quality on Time"
presentation you have prepared, including using these materials in a book,
which may be entitled "Quality on Time", that you are planning to write.
6. Proprietary Information and Inventions Agreement. This letter agreement
------------------------------------------------
does not effect your obligations under, and you continue to be subject to
and obligated to comply with, the Proprietary Information and Inventions
Agreement you entered into with Pure Atria (the "Inventions Agreement"),
and any other agreement entered into with Pure Atria regarding the
assignment or other transfer of intellectual property, or any undertaking
on your part to hold information confidential.
7. Restrictions Reasonable. You acknowledge that the area of business Pure
-----------------------
Atria engages in is highly competitive, that the confidential information
and the goodwill of Pure Atria in the marketplace are among their most
valuable assets, which you have uniquely helped to develop and maintain in
the course of your service to Pure Atria, and that Pure Atria has relied on
your willingness to restrict your ability to compete with Pure Atria or to
disclose confidential information in agreeing to the provisions of Sections
4 and 5 above. You represent and warrant that your skills and abilities
and your financial resources are and will be sufficient to permit you to
maintain a satisfactory livelihood during the Transition Period
notwithstanding the restrictions set forth herein. Accordingly, you agree
that the
3
<PAGE>
restrictions contained in this letter agreement are reasonable and that
such restrictions will not cause you undue hardship.
8. Confidentiality and Related Terms. In addition to and without limiting
---------------------------------
your obligations of confidentiality set forth in the Inventions Agreement,
you agree that all terms and conditions of this letter agreement shall be
held confidential by you and shall not be publicized or disclosed to any
person (other than an immediate family member, legal counsel or financial
advisor, provided that any such individual to whom disclosure is made
agrees to be bound by these confidentiality obligations), business entity
or government agency (except as mandated by state or federal law). The
foregoing restrictions will not apply to information that has been publicly
released by Pure Atria.
9. Remedies. It is specifically understood and agreed that (i) the
--------
restrictions imposed on you under this letter agreement are necessary for
the protection of the business and goodwill of Pure Atria, and are
reasonable for such purpose, (ii) any breach of the provisions of this
letter agreement is likely to result in irreparable injury and substantial
and irrevocable damage to Pure Atria, and (iii) any remedy at law alone
will be an inadequate remedy for such breach. Accordingly, you agree that,
in addition to any other remedy it may have, Pure Atria, shall be entitled
to enforce the specific performance of this letter agreement by you and to
obtain both temporary and permanent injunctive relief (to the extent
permitted by law), without the necessity of proving actual damages.
10. WAIVERS AND RELEASES. In consideration of the amounts to be paid to you
--------------------
pursuant to this letter agreement, you waive and release and promise never
to assert any claims or causes of action of any kind or nature, whether or
not presently known, against Pure Atria, or its predecessors , successors,
subsidiaries, affiliates, officers, directors, agents, employees or assigns
(including, without limitation, any claims for any payments, notice periods
or other benefits under the Retention Policy enacted by Pure Atria, any
claims for discrimination under Title VII of the Civil Rights Act of 1964,
as amended, the California Fair Employment and Housing Act, the California
Constitution, the Equal Pay Act of 1963, the Age Discrimination in
Employment Act of 1967, the Civil Rights Act of 1964, or the Employee
Retirement Income Security Act; any claims for wrongful discharge, breach
of express or implied contract, breach of a covenant of good faith and fair
dealing, violation of public policy, defamation, interference with
contractual relations, intentional or negligent infliction of emotional
distress, misrepresentation, deceit, fraud, negligence; or any other
statutory or common law claim relating to or arising under any state or
federal law or regulation relating to employment).
You expressly waive and release any and all rights and benefits under
section 1542 of the Civil Code of the State of California, or any analogous
law of any other state, which reads as follows: "A general release does not
extend to claims
4
<PAGE>
which the creditor does not know or suspect to exist in her favor at the
time of executing the release, which, if known by her must have materially
affected her settlement with the debtor."
The foregoing provisions of this Section 10 shall not apply to any claim or
action by you (i) to enforce your right to receive any of the payments or
benefits set forth in Section 2 of this Agreement, or (ii) arising from any
act, omission or other occurrence or event that occurs after termination of
your employment with the company.
11. Severability and Interpretation. The provisions of this letter agreement
-------------------------------
are severable, and the invalidity of any provision hereof shall not affect
the validity of any other provisions hereof. Not withstanding any other
provision of this letter agreement, in the event that any court of
competent jurisdiction shall determine that any provision of this letter
agreement or the application thereof is unenforceable because of the
duration of such provision or the scope thereof, the parties hereto agree
that said court in making such determination shall have the power to reduce
the duration and scope of such provision to the extent necessary to make it
enforceable, and that letter agreement in its reduced form shall then be
valid and enforceable to the full extent permitted by law. If any
restriction set forth in Section 4 or 5 is found by any court of competent
jurisdiction to be unenforceable because it extends for too long a period
of time or over too great a range of activities or in too broad a
geographic area, it shall be interpreted to extend only over the maximum
period of time, range of activities or geographic area as to which it may
be enforceable.
12. Successors and Assigns. This letter agreement shall bind and inure to the
----------------------
benefit of the parties hereto and any and all successors and assigns of
Pure Atria; your obligations under this letter agreement are personal,
unassignable and may be performed only by you.
13. Captions and Headings. Captions and headings in this letter agreement are
---------------------
for convenience of reference and do not define or limit any term in this
letter agreement.
14. Limited Services Contract. Except as specified in Section 2 above, (A)
-------------------------
neither Pure Atria shall not have any obligation or liability to pay any
salary, bonus, commission or other compensation to you (other than any
compensation payable to directors generally, and to which you are entitled
in compensation for your service as a member of the Board of Directors of
Pure Atria), and (B) Pure Atria shall not have any obligation or liability
to provide any employee benefits of any kind or nature. You acknowledge
that, except as specified in Section 2 above, you do not have any rights in
any stock compensation plan or agreement (other than any compensation
payable to directors generally, and to which you are entitled in
5
<PAGE>
compensation for your service as a member of the Board of Directors of Pure
Atria).
15. Waiver of Rights; Amendment. No delay or omission by a party to this
---------------------------
letter agreement in exercising any right under this letter agreement will
operate as a waiver of that or any other right. A waiver or consent given
by any party to this letter agreement on any one occasion is effective only
in that instance and will not be construed as a bar to or waiver of any
right on any other occasion. This letter agreement may not be modified or
amended except in writing, signed by both parties.
16. Effect of Agreement. Except as specifically modified by this letter
-------------------
agreement, the Retention Policy and the Inventions Agreement, and each of
their respective terms and conditions shall continue in full force and
effect.
17. Notices. Notices under this letter agreement shall be sent to the parties
-------
at respective addresses above by certified mail, return receipt requested,
by overnight courier service, or by personal delivery, and will be deemed
effective upon receipt. Notices to Atria and Pure Atria, shall be sent to
the attention of the General Counsel. Postage, delivery and other charges
must be paid by the sender. A party may change its address for notice by
written notice complying with the requirements of this section.
Pure Atria Corporation
By:_______________________
Name:
Title:
My agreement with the above terms is signified by my signature below.
Furthermore, I acknowledge that neither Pure Atria, nor any of its respective
agents or representatives have made any representations inconsistent with the
terms or effects of this letter agreement, and that I have read this letter
agreement carefully, understand its terms and effects, and am voluntarily
executing it with full appreciation that I am forever foreclosed from pursuing
any of the rights I have waived.
Signed _________________________________ Dated _________________, 1996.
6
<PAGE>
EXHIBIT 10.21
SECOND AMENDMENT OF LEASE
This Second Amendment of Lease made this 23rd day of September, 1996, by
and between ADVENT REALTY LIMITED PARTNERSHIP, a Delaware limited partnership,
having a mailing address c/o TA Associates Realty, 45 Milk Street, Boston,
Massachusetts 02109 ("Landlord") and ATRIA SOFTWARE, INC., a Delaware
corporation, having its principal place of business at 20 Maguire Road,
Lexington, Massachusetts 02173 ("Tenant").
R E C I T A L S:
- - - - - - - -
A. Reference is hereby made to a certain lease (the "Maguire Road Lease")
dated March 18, 1995, by and between Landlord and Tenant, demising the first and
second floors of the building known as and numbered 20 Maguire Road, Lexington,
Massachusetts, containing approximately 44,161 rentable square feet of floor
area (the "Premises"), as amended by a certain First Amendment of Lease dated
January, 1996.
B. Reference is further made to a certain lease (the "Hartwell Avenue
Lease") dated on or about the date hereof, by and between Landlord and Tenant,
demising premises located in the building known as and numbered 81 Hartwell
Avenue, Lexington, Massachusetts.
C. Landlord and Tenant now desire to amend the Maguire Road Lease in
certain respects.
A G R E E M E N T S:
- - - - - - - - - -
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Landlord and Tenant hereby agree as
follows:
The following paragraph shall be added to Article XII:
"Subject to the terms and conditions of this Lease, including specifically,
but without limitation, the terms and conditions of this Article XII, Tenant
may, at the time and in
<PAGE>
the manner for the exercise of Tenant's first extension option pursuant to this
Article XII, and in lieu thereof, extend the Term of this lease to December 31,
2001 so as to be co-terminus with the Term of the Hartwell Avenue Lease. Such
extension shall be upon the terms and conditions set forth in this Lease and the
Annual Basic Rent during such additional period shall be equal to the Fair
Market Rent as determined pursuant to this Article XII."
Except as amended hereby, the Lease remains in full force and effect and
the Lease, as amended hereby, is hereby ratified and confirmed.
EXECUTED under seal as of the date first written above.
LANDLORD: ADVENT REALTY LIMITED PARTNERSHIP
by: Advent Realty GP Limited Partnership (its general partner)
by: TA Realty Group Limited Partnership (its general partner)
By: ________________________________________
Michael A. Ruane, General Partner or
Arthur I. Segel, General Partner
TENANT: ATRIA SOFTWARE, INC.
By: ________________________________________
Chuck Bay, Chief Financial Officer
2
<PAGE>
EXHIBIT 11.1
PURE ATRIA CORPORATION AND SUBSIDIARIES
COMPUTATION OF NET LOSS AND PRO FORMA NET INCOME (LOSS) PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net loss $ (21,731) $(13,244) --
========= ========
Pro forma net income (loss) after pro forma income taxes $ 1,959 -- $ (3,740)
======== ========
Weighted average number of common
shares outstanding................................. 40,008 35,969 39,706 33,836
Weighted average number of preferred
shares outstanding on an as
if converted basis................................. -- 2,281 -- 4,930
Number of common stock equivalents as a result of
stock options outstanding using the treasury
stock method....................................... -- 4,096 -- --
Number of common shares issued and stock options
granted in accordance with Staff Accounting
Bulletin No. 83 (2)............................... -- -- -- 86
------- -------- ------- --------
Shares used in per share computation 40,008 42,346 39,706 38,852
-------- -------- ------- --------
Per share amounts $ (0.54) $ 0.05 $ (0.33) $ (0.10)
======== ======== ======= ========
</TABLE>
- -----------------
(1) This exhibit presents the primary and fully diluted per share
computations. There is no material difference in the per share amounts
when applying either method.
(2) Common shares issued by the Company during the twelve months immediately
preceding the initial public offering date plus the number of common
equivalent shares which were issued during the same period pursuant to
the grant of stock options (using the treasury stock method and offering
price) have been included in the calculation of common equivalent shares
pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (Identify
specific financial statements) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 38,450,000
<SECURITIES> 55,340,000
<RECEIVABLES> 21,706,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 124,575,000
<PP&E> 10,566,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 136,892,000
<CURRENT-LIABILITIES> 64,012,000
<BONDS> 0
0
0
<COMMON> 4,000
<OTHER-SE> 88,802,000
<TOTAL-LIABILITY-AND-EQUITY> 136,892,000
<SALES> 94,714,000
<TOTAL-REVENUES> 66,777,000
<CGS> 1,762,000
<TOTAL-COSTS> 9,719,000
<OTHER-EXPENSES> 101,998,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (14,527,000)
<INCOME-TAX> (1,283,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,244,000)
<EPS-PRIMARY> (0.33)
<EPS-DILUTED> 0
</TABLE>
